Holding The Bag With Thousands Of Vacant Homes
The Ouray News reports from Colorado. “County Treasurer Jeanne Casolari told county commissioners that the number of homes in foreclosure, as of January, has already matched the number of foreclosures for the entire year of 2008. Commissioner Keith Meinert asked whether the homes were in the ‘high end’ category. Casolari said the trend is broader. ‘They’re all over the place,’ she said. ‘Some are for a couple hundred thousand; all but one are residential.’”
“In the past, Casolari said, three to six foreclosures in a year was a lot. In fact, she conducted just two foreclosure sales in 2008. But come October, the national sickness hit home. ‘What started as a slow year all of a sudden magnified,’ she said. ‘All of a sudden, I was getting three foreclosures in a week.’”
“‘Another sad thing – certain individuals went into foreclosure on more than one property,’ Casolari noted. ‘With some of these loans, it’s just amazing anyone would have signed on the dotted line, with the kind of interest that’s accumulating,’ she said.”
The Arizona Republic. “Just four years ago, jobs were plentiful, credit was easy and housing values were skyrocketing. Back then, when people wondered how much their homes were worth, it was often a precursor to pulling out equity to finance a lavish lifestyle. Now the answer to the same question could indicate how underwater you might be on your mortgage.”
“Steve and Jennifer Maize of Chandler found themselves with between $25,000 and $30,000 in credit-card and student loan debt, a rising interest rate on their mortgage and a cut in pay when Jennifer quit her teaching job to have a baby, then switched to working in child care at a lower income. ‘The biggest factor was the ARM that adjusted on our house,’ said Steve. ‘That brought a big spike in our mortgage bill of $700 a month.’”
“Michael Sullivan, director of education at (a) Phoenix debt-counseling firm, said several factors can frustrate a mortgage modification, from lender policies to borrowers who are too far gone to help. ‘If it takes 70 percent of a borrower’s income to meet even a diminished payment, the lender will probably figure the person won’t make it,’ he said.”
“Joann Hauger, executive director of a non-profit organization that provides one-on-one mortgage default and pre-purchase counseling, said that the homeowner bailout plan will be a challenge in Arizona because of the large number of lost jobs on top of the significant drop in home values - 34 percent in the fourth quarter alone, according to the Case-Shiller Home Price Index. ‘There is a tremendous amount of consumer debt that could leave people unable to make payments even at a lower amount,’ she said. ‘In reality, there are an awful lot of people that no matter what, their homes won’t be saved.’”
“The Obama administration is staking a claim that most homeowners facing foreclosure should be able to pay 31 percent of their gross income for a mortgage. Not 50 percent or not 60 percent, as is the case with many strapped homeowners. But 31 percent of income still is a hefty number.”
“With car payments, credit-card debt and everyday expenses, Phoenix-area mortgage brokers, bankers and others say that 31 percent still is too high for many homeowners. ‘They would wind right back in default,’ said Paul Klimke, president of the Central Arizona chapter of the Arizona Association of Mortgage Brokers.”
“Librada Martinez hopes the mortgage relief promised by the Obama administration will help her. She makes $40,000 per year and has a $200,000 mortgage on a two-bedroom southwest Phoenix home that she bought for $180,000 in 2005. Her $1,400 mortgage payment is 47 percent of her gross income and 60 percent of her take-home pay. She was able to make the payments until an illness created unexpected medical bills.”
“‘I tried to sell the house or get a roommate,’ she said, adding that she finally just stopped making payments. Martinez is hopeful she will be able to restructure her loan under the Obama plan but is concerned that homes in her neighborhood similar to hers now are selling for $70,000.”
“‘I want to stay in my home - it’s perfect for me,’ Martinez said. ‘But I don’t want to make payments on a $200,000 loan when my house is worth $70,000.’”
The Yuma Sun from Arizona. “Homes in the Yuma area continue to decline in value, to the tune of about a 3 percent loss per quarter, totaling a 12 percent loss over the last year, the Yuma County assessor says. Assessor Joe Wehrle said ‘the bubble burst in Yuma County in the third quarter of 2007′ when home values went from $233,067 in the second quarter of 2007 to $205,812 in the third quarter of 2007.”
“Then, he said values rebounded in the fourth quarter of 2007 and in the first quarter of 2008, when home values rose to $217,673. From there, it’s been about a 3 percent loss per quarter, going as low as around $190,000 in the fourth quarter of 2008.”
The Salt Lake Tribune from Utah. “Utah’s home-price appreciation, among the highest in the country less than three years ago, now is 16th worst among all states. Some owners, such as Jeff Chatelain of Salt Lake City, are being cut off by worried lenders from their home equity line of credit. Chatelain said he’s also trying to sell a home he and a friend had built in hopes of selling at a profit. When it was finished early last year the property appraised at $1.2 million; today he thinks he’d probably get about $850,000 — if he found a buyer.”
“So he’s renting out the home, waiting for a recovery. ‘Maybe next year, things will be better.’”
“‘We know at some point home prices will stop falling, we just don’t know when,’ said Ryan Kirkham, president of the Salt Lake Board of Realtors. ‘At this point, we’re just hoping for the best.’”
The Reno Gazette Journal from Nevada. “Stimulus help can’t come soon enough for Washoe County’s housing market, housing experts said, as home values continued their downward slide in January, while the number of foreclosed homes jumped up from the same period last year.”
“Washoe County reported 221 foreclosed homes in January, up 25 percent from the previous year. Sales of foreclosed homes rose by more than 196 percent to 172 units compared to 58 units in January last year. New homes were hit especially hard last month, only managing 11 unit sales compared to 91 units in January 2008.”
“‘There is almost no market for new homes so long as foreclosures continue to flood the market,’ said Brian Kaiser, a housing and real estate analyst with the Center for Regional Studies.”
From Channel 2 News in Nevada. “There are options and avenues you can follow before you lose your home. The credit crisis, high unemployment numbers and the reduction in home values are leaving homeowners feeling helpless. But the Washoe County Senior Law Project is trying to help, by handing out free advice on foreclosure prevention.”
“‘Ease my burden. Like I said, I’m unemployed,’ says Washoe County homeowner, Bill Sickmiller.”
“Ben Alsasua is a housing counselor for the Washoe County Senior Law Project and is offering his knowledge to homeowners. Alsasua says those options vary from lender to lender and when it comes to advice for homeowners, workout options are availble on mortgages.”
“‘That’s probably what I’m going to do is loan modification. I don’t want to move out. But, the value of the house isn’t worth what it used to be. I owe more than the house is worth.’ says 20-year Sparks resident, Stephen Lord.”
The Las Vegas Sun from Nevada. “The steep drop in home prices and newly approved $8,000 tax credit for first-time homebuyers will help pave the way for a recovery of the Las Vegas housing market in 2010, according to the chief economist with the National Association of Realtors. Lawrence Yun said he expects that foreclosures will continue at their elevated levels in 2009, but is optimistic that inventory will be whittled down given the increase in existing home sales in Las Vegas over the past several months.”
“‘You have gone through some very tough times, but any further decline, if any, would be minimal,’ Yun said of median prices that have fallen $138,000 over the past two years to a price of $150,000 in January. ‘Given $150,000 is very affordable for such a dynamic metropolitan region, once the economy recovers, you are in good shape. But it is just getting over the short term.’”
The Review Journal from Nevada. “The long-term prospect for Las Vegas is bright because baby-boomers reaching retirement age are migrating to cities with warm climates and favorable tax structures, the economist said. The homebuyer tax credit accounts for less than $10 billion of new $787 billion stimulus package, a rather small amount, but nonetheless sufficient to help spark a comeback, he said.”
“‘I’m a little disappointed that it didn’t address as much as it could have, given the size of the bill,’ Yun said.”
“Housing is the source of the national recession, Yun said. The boom from 2000 to 2005 was an ‘artificial boost’ to home values and the general economy as well. Now, with declining home prices, consumers are more cautious about spending. The second part of that is the ‘bleeding’ of bank balance sheets, he said. Tightened credit flow is hampering the economy.”
“‘We have to go through recession to take exuberance out of artificial growth,’ Yun said. ‘Now I’m afraid the economic downturn could be snowballing and hard to stop without the stimulus package.’”
“ZIP code 89109, home to luxury high-rise Turnberry Place and its new sister property, Turnberry Towers, lost $185,000 on median prices. Another big loser was the inner-city 89101, where median prices dropped 57 percent, or $105,000. ‘My, my, how times have changed,’ said SalesTraq President Larry Murphy, who reported 40 percent and 50 percent ZIP code appreciation rates in 2004. That fell to 20 percent in 2005 and 4 percent in 2006, then turned negative in 2007, down 4 percent.”
“Just as homes in Las Vegas were overvalued a few years ago, Murphy thinks they’re equally undervalued now. ‘First of all, we recognize there’s no such thing as absolute value,’ he said. ‘However, regardless of what these homes are selling for, what is the replacement cost? I would say it’s undervalued when you can’t re-create it for that price. There are homes selling at less than it costs to build.’”
“Realtor Robin Camacho posts an online list of top 10 real estate values in Las Vegas and came up with a three-bedroom, 1,400-square-foot home near Boulder Highway and Sahara Avenue for $32,900. It last sold for $225,000 in 2005. She just added her No. 3 pick, a four-bedroom, 4,500-square-foot home in the southwest valley for $349,000. It has granite countertops, upgraded tile, cherry cabinets, a spacious loft and master suite with a Roman tub and custom shower, all on a huge lot, Camacho said. It sold new in 2007 for $1.2 million.”
“‘I showed a home that backed up to Desert Rose Golf Course … $59,900,’ she said. ‘It will go for about $75,000 and needs at least $30,000 in repairs to be a decent home, on a golf course on the east side, for $105,000.’”
In Business Las Vegas from Nevada. “Foreclosure filings in Nevada dipped in January, but no one should take that as a sign the housing market is closing in on a recovery. Nevada continues to hold the top spot in foreclosure filings. One in 76 Nevada homes faced a foreclosure filing in January. California was a distant second with one in every 173 homes; Arizona was third with one in every 182 homes.”
“‘At the current levels, I am convinced that there is little more that we can go to from a pricing standpoint (of lower-priced homes),’ says Bob Hamrick, chairman of Coldwell Bank Premiere Realty. ‘Some of those properties are priced lower than when I got into the business in 1980. Some of it to me is quite surprising. There is a debate whether some of the lenders are dumping properties below what they need to get them sold.’”
“Sales are up substantially (his firm’s sales rose 58 percent in 2008), dropping inventory from 28,000 to 20,000, Hamrick says. The reason is the affordability that prospective buyers are finding in the marketplace, Hamrick says. Someone buying a 1,535-square-foot home in 2006 - the median size of those bought - had a monthly payment of $1,606 if they put 10 percent down. Today, the monthly payment on a similar sized home, given price drops and better interest rates, is $852 a month.”
“‘If anything, 2008 showed us that housing markets are working with prices moving toward their long-term trends,’ Hamrick says.”
“A new report from Forbes found that for sheer volume of abandoned apartments and homes, Las Vegas beats all national comers. Detroit ranked second. Las Vegas also enjoyed some of the nation’s strongest housing demand and price increases in 2004 and 2005, said Brian Gordon, a principal in the economic-research firm Applied Analysis. The higher market peak meant a steeper tumble when the bubble finally burst, Gordon said.”
“‘If you look at the amount of housing demand that took place, we were constructing more homes than net population growth required,’ he said. ‘We were artificially inflating end-user demand, and today, that has us holding the bag with thousands of vacant homes.’”
‘“ZIP code 89109, home to luxury high-rise Turnberry Place and its new sister property, Turnberry Towers, lost $185,000 on median prices.’
Most of you that were on the Vegas bus tour probably didn’t hear the driver when he said that these Turnberry projects had kicked off the condo mania there.
“luxury high-rise”
Um, a high-rise is a really big apartment complex, right? I used to live in the “Holiday Living Aparments” on 73rd street in San Diego. Those were luxury too. Right next door to the welfare office and stuff (but we had a gate). It was like being on holiday because you had to use the community laundry room and the swimming pool was full of druggies and their kids, just like a hotel.
In a highrise, for example, outside as well as inside walls are thicker, after all, you want the 40 floors above you to stay where they are. The apartment’s square footage includes the wall space. Interior walls can be 2 feet thick, and that easily reduces the actual living area by 70 square feet in a larger one bedroom. (This hardly matters in a small building where walls are a few inches thick). You have these 16 inch window sills and think ‘ah, nice’, and forget that you have that much less room, because the measurements are from the outside of the wall. At the same time, walls that divide the different apartments can be very shoddy, and thin, unless it is a *real* luxury building. Apartment size includes half of shared walls.
In a high rise, I’ll take thick walls over a little more square footage anyday. Not being able to hear your neighbors is infinitely more valuable than a little more space that won’t really be used anyway.
Here’s an entire town of pissed off realtors:
http://www.circlingvulture.com
Absolutely hilarious!
My utmost “Thank You!” for posting that link.
I used to know some suits from Short Hills.
Imagine they take the train, not the limo now, if they are still there.
Trautman: It was a bad time for everyone, Johnny. It’s all in the past now.
Rambo: For you! For me civilian life is nothing! In the field we had a code of honor, you watch my back, I watch yours. Back here there’s nothing!
Trautman: You’re the last of an elite group, don’t end it like this.
Rambo: Back there I could fly a gunship, I could drive a tank, I was in charge of million dollar equipment, back here I can’t even hold a job pumping Gas!
“Librada Martinez hopes the mortgage relief promised by the Obama administration will help her. She makes $40,000 per year and has a $200,000 mortgage on a two-bedroom southwest Phoenix home that she bought for $180,000 in 2005. Her $1,400 mortgage payment is 47 percent of her gross income and 60 percent of her take-home pay. She was able to make the payments until an illness created unexpected medical bills.”
There are millions of “Librada’s” out there just hanging on to hope. Sorry won’t work, this women should throw in the towel and move on in life.
Martinez wants to stay in her house but thinks the bank should forgive $130K of her loan, because the house is only worth $70K now. You can tell from the way she says it that she thinks that’s only reasonable and fair.
Presumably if her house had doubled in value and was now worth $400K, she would’ve insisted on paying bank the difference between what she paid and its current value. Right?
As the used car salesmen laughingly Ooops..Realtywhores laughingly say, “She’s in the Bucket Now” and merely having a little touch of “Buy’s Remorse”
It’s a common feeling IN BUSINESS when you ALLOW yourself to get SCREWED
This whole idea that people can’t lose money speculating has warped the nation’s idea of “fairness” to an extreme. I remember a year ago when we were discussing the theoretical impacts of moral hazard. This example makes it all very real to me.
Agreed. And yet I have a most simple solution for the Libradas out there, and one that doesn’t even involve more taxpayer bailouts or legislation: rational default.
Of course, that would mean Librada must lose “her” house (*gasp*, the Horror!) and go back to being a renter (double *gasp*!). Perhaps the taxpayer could fund emotional counseling for these folks, to ease their transition from being genius RE tycoons back to being second-class renter-serfs.
She… has a $200,000 mortgage on a… home that she bought for $180,000 in 2005.
So what did you do with the $20K HELOC money, Librada?
Oooohhhhh… you got an “option arm” didn’t you? And you paid less than P+I. And everything you paid in was a tax deduction.
And now you’re crying for a “bailout” when you really deserve a joshua tree.
DING, DING, DING. A $1400 payment on a $200k loan can only be neg-am.
I don’t agree with you on that, stewie. At 6% on $200K, an interest-only loan would require only $1000 a month. So her loan is probably amortizing. But I agree she’s an FB, owing five times her annual gross income.
Also note that the remark that $1400/mo is 47% of her $40K/year income is also incorrect: it’s “only” 42%.
Have you ever seen a 100% loan at 6%? The second mortgage(the 20% part of the 80-20) would have to be at a higher rate than 6%.
Maybe she spent that $20K on medical bills? I realize that medical records are supposed to be private and such, but trillions of dollars are at stake. I don’t think it’s unreasonable for a reporter to request the proverbial note from the doctor.
Looks like she wasn’t even paying for the house before she got sick. 5 times income in morgtage debt, of course she will default, why is the reporter even talking to her?
“Chatelain said he’s also trying to sell a home he and a friend had built in hopes of selling at a profit. When it was finished early last year the property appraised at $1.2 million; today he thinks he’d probably get about $850,000 — if he found a buyer.”
“So he’s renting out the home, waiting for a recovery. ‘Maybe next year, things will be better.’”
“‘We know at some point home prices will stop falling, we just don’t know when,’ said Ryan Kirkham, president of the Salt Lake Board of Realtors. ‘At this point, we’re just hoping for the best.”
Ben’s plucked out some jewels today IMO! The list of folks who just do not get it, is undoubtedly limitless.
My little brother lives along the Wasatch, and he seems to desperately wish to be a knifecatcher. I’ll talked him down off the ledge just this week, I gave him rent/own multiples that he can use for lowballing.
This whole thing is so perverse, with what Bernanke said today about bailing out FBs who knows? Maybe the knifecatchers will inherit the earth after all?
we don’t know it yet, but the NAR, like the banks, is too big to fail.
The goal is to either reward the knifecatchers or take the whole place down with them. ANYTHING to prevent the prudent from “inheriting the earth” so to speak.
You would think that if someone makes that big of an investment, they would have a clear idea exactly who their target buyer would be for such a home
Honestly, outside of Wall Street circa 2006, who could afford a house in the range of 800,000 to 1.2 million? It’s such a small, small slice of the homebuying universe, that only a few such homes would need to be built each year, IMO.
I know a couple of fellows who are multimillionaires. Both of them stayed married to the same women, continued to be devoted to their children, and, get this, they stayed in the same house they’d lived in all along.
So much for the argument that when you get really rich, you’re supposed to ditch Old Faithful (the wife) for a hotter, younger version, and to properly house her, get one of those fancy-dancy $1.2 million houses.
Your observation is supported by the book “The Millionaire Next Door” - lots of the millionaires studied drive old cars, live in modest houses and enjoy a lovely net worth, (which their kids often don’t know the extent of)
I should mention that after one of the two fellows had his liquidity event, he decided to celebrate by buying a new car. He decided on a VW Beetle. And his 8-year-old daughter picked out the color.
I hate to rain on everyone’s parade here, but I know a bunch of millionaires in my business.
None of them drives anything less than a 7-series BMW, or whatever the current top of the line Lexus/Mercedes/Audi is. One of them bought a brand-new Jeep Cherokee as his “winter rat”.
None of them will utter a peep about paying $125-150/hour for someone to fix their Euro-trash……but bit#h to high heaven paying $100/hr to their local airplane fixing shop.
I especially love the guys who watch what I’m doing, then go upstairs and pull the maintenance manual to see if I’m troubleshooting “by the book”. Then they come down, and start interrogating me about whether I’m doing things right.
I tell them, “You want this thing fixed today, or do you want us to go step-by-step per the manual, and maybe get out of here the day after tomorrow?”
But once again, I digress……..
Have you seen the net worth statements of any of these BMW/Leuxs/Mercedes owners?
In Texas they have an expression: “Big hat, no cattle”.
Not saying there aren’t a lot of wealthy trophy car drivers, but there are also a lot of “how-much-a-month” car leasers with fantasy lives based on what people see them drive.
Made my millions over four decades by driving only small Fords.
OTOH it now takes TEN million to be actually Rich.
Great book. I’m only a thousandaire yet, in these times, I feel like Mr. Drysdale.
“A new report from Forbes found that for sheer volume of abandoned apartments and homes, Las Vegas beats all national comers. Detroit ranked second. Las Vegas also enjoyed some of the nation’s strongest housing demand and price increases in 2004 and 2005, said Brian Gordon, a principal in the economic-research firm Applied Analysis. The higher market peak meant a steeper tumble when the bubble finally burst, Gordon said.”
Ok, a translation:
1. Las Vegas is doomed.
2. Lots of speculative jobs and buying in 2004 and 2005.
But why the driving through the rear view mirror?
Ask:
1. What fraction of Las Vegas jobs were to build/decorate/sell the surplus inventory?
2. What has the job situation looked like for 3,6, or even 9 months?
a four-bedroom, 4,500-square-foot home in the southwest valley for $349,000. It has granite countertops, upgraded tile, cherry cabinets, a spacious loft and master suite with a Roman tub and custom shower, all on a huge lot, Camacho said. It sold new in 2007 for $1.2 million.”
Question: How many nearly identical homes are on the market?
Asian bond buyers are already net sellers of Fannie and Freddie bonds. The law of ‘unintended consequences’ is starting to strike. Will we wake up in time?
Bloomberg link (googled “asian fannie bond”, 2nd link in News):
http://www.bloomberg.com/apps/news?pid=20601087&sid=azObP8_4deuI&refer=home
Got Popcorn?
Neil
What is the economic base of Las Vegas? My impression is that it is almost exclusively entertainment, conventions and supporting businesses. Can a city really sustain stable growth and economic stability from one primary industrial base?
Detroit tried and failed. Sounds like a gamble to me.
The economic base of Las Vegas is sin. The unintended consequence is misery. It’s not really a gamble when the odds are against you, it’s just self destruction.
Well spoken.
“Can a city really sustain stable growth and economic stability from one primary industrial base?”
You call that an industrial base???
Las Vegas is, was and always will be a gambling/resort town. You have the casino employees, support and service business employees, some retirees and some wealthy folks. That is what will be left in my opinion. Long term I don’t think LV will be any better/worse off than if the bubble had never happened. Just some banks and FB’s taking it on the chin (I guess I should add taxpayers). I certainly don’t think it will end up like Detroit.
wonder what the cost would be to MOVE these overbuilt , seemingly nice houses, to a more suitable part of the country. Shift them around like they do excess car inventory.
Sounds like some nice houses! I can plant a ‘used’ one right here in Tampa. Sure beats out the other choices around here, these houses all suck!
rusty,
Don’t laugh, some of the builders talked about “mothballing” entire developments. We openly wondered if that involved enveloping them in shrink wrap or what? Would that stop squatters and vandals? Likely not.
Well if we were so damn eager to employ people to put them together, why not employ people to take them apart!? When I think of the billions of dollars rotting away in the desert ( and elsewhere ) I get ill.
If the banks are interested in a good faith effort, coordinate ‘this’. Why aren’t we at least talking about it? They can get bids from Pulte etc.
Mothballing & shrink-wrap is not a bad idea in some climates. In Vegas, the dry desert environment will help preserve the houses a lot better than in FL, so long-term storage can make some sense.
It would also be easy to figure out whether squatters are getting in of the house is covered with shrink-wrap.
And with sufficient private-police patrols and prompt action, they could probably preserve a lot of the economic value of the houses.
Prime,
I don’t know -what- the answer is here. Put a damn “rubber” on ‘em where you can and de-construct the ones you can’t.
When I read the stories about suppliers and vendors that got led down a dark alley by these risk-love builders I could puke. When there was a chance they might sell I could see letting them stand but now?
We can pull the windows, fixtures and useable lumber and return them to the suppliers in bulk or wait around for more government handouts. They’re going to have to come down anyway? I’m really serious about this.
Return used windows, cabinets, plumbing fixtures and framing lumber to the suppliers? You gotta be kidding. Why would they take them back? Where would they get the money to “buy” them back? Oh, make them bailout recipients!
Bill,
Uh… because they’re not paid for? The suppliers have been getting stiffed all along. Many probably even during the height of the boom! Here in Portland the builders have made a practice of at least attempting to stay current on their bank lines of credit and thrown their vendors under the bus.
I realize full well it’s not the most convenient thing to do. It’s not even the easiest thing to do. But it is the RIGHT thing to do. This is where the chain of defaults began.
Isn’t Las Vegas where all of those empty hotels and casinos are?
Those Las Vegas homes priced at under $100K that are on the “Top 10″ lists are real pieces of junk in what look to be terrible neighborhoods.
Check out this charmer:
http://las.mlxchange.com/Pub/EmailView.asp?r=1561888069&s=LAS&t=LAS
Note the smashed-in walls. Obviously the previous “owners” were, shall we say, displeased with the foreclosure process?
And here’s a real beauty:
http://las.mlxchange.com/Pub/EmailView.asp?r=1472209494&s=LAS&t=LAS
Yes, the prices are low, but who on earth would want to live in them? I guess the idea is to purchase them to rent them out to people who can’t afford to live anywhere else. Then what makes you think they will be paying their rent on time? Silly slumlord, trix are for kids!
I foresee many many people walking away from their contracts / mortgages over the next two years … even with the economic policies and failed rescue attempts of our new Obama-nation.
I wonder when the government will stop punishing the prudent and those who decided not to join their path of destruction. Why should those who opted to take the difficult route pay for those who blindly or intentionally took the easy one?
The number has even been quantified by researchers. A recent HBB story mentioned a SDSU professor who said that when home prices drop 20% below what a person owes, then one-third of people will walk away from their mortgages. When you consider how many mortgages are 20% underwater in CA, then you understand how much trouble we are in and why there is so much focus on preventing home values from falling further.
Preventing home values from falling (impossible) would prevent an economic recovery. Prices need to reflect what LOCAL WAGES afford.
BubbleViewer,
That is funny and sad.
People who had to save 20% down to buy had a reason to stick around with a house. The time/cost of building up a 2nd down payment made it worth holding onto an ‘underwater’ home. Remember when ‘cash out’ refinancing was a red flat that raised the interest rate? ugh…
Now its all zero to 10% down (the median down payment in CA has been 10% forever, down from 20% a long time ago). So for 50%+ of the population, a 20% drop means they’re under more than their down payment (don’t get me started on those that were PAID to buy a home…).
With all the impediments to foreclosures being put up, I’m shocked banks will lend at all. For every 30 day impediment to a foreclosure, why wouldn’t they demand 1% more down?
I’m curious if the Screen Actors Guild (SAG) will really do anything. At this point its possible no one cares if they strike other than their own members. If a long strike happens, watch California take another knee to the nuts economically.
Got Popcorn?
Neil
When I was a tween, one of our neighbors did a cash-out refi. But at the time, it was not a cause for celebrations and toy-buying. No, the grown-ups spoke about it in whispers, that “*psst*… Jack had to take out a “second mortgage” to pay for his daughter’s college…poor guy, we didn’t realize he was so strapped…”
It was a source of shame.
I’m not sure banks want foreclosure, that means angry owner damages house, then leaves it, drug addicts move in and vandalize the place, the lawn dies, they get sued for not shoveling the sidewalk or paying homeowners dues ect ect.
‘However, regardless of what these homes are selling for, what is the replacement cost? I would say it’s undervalued when you can’t re-create it for that price. There are homes selling at less than it costs to build.’”
First we were running out of land, now we can’t even build these houses for this cheap? I’m picking up three of these houses today!
‘First of all, we recognize there’s no such thing as absolute value,’
What the hell does that mean? No value based on rental income? Pah.
I seem to recall studying absolute value in math class. It was a way of describing a number’s distance from zero. Didn’t matter whether it was a positive or negative number — it had an absolute value.
On the PDX Blog we have a similarly logic-challenged person that seems to want to use 2005 for everything from lot prices to lumber to copper wire when establishing a base line.
Oh they get it, they just prefer not to.
Replacement cost is irrelevant when there is a vast pool of already-built, available units. Do hermit crabs worry about replacing their shells? Nope, they just go out and find another one.
“I would say it’s undervalued when you can’t re-create it for that price.”
What an insipid comment.
Replacement cost has nothing to do with market value.
When inventory is high and demand is low, replacement cost being higher than market value just means new producers (e.g. builders) are screwed and should produce zero new units.
Used houses should sell for less than the cost of building new ones. Why else would builders build?
“‘At the current levels, I am convinced that there is little more that we can go to from a pricing standpoint (of lower-priced homes),’ says Bob Hamrick, chairman of Coldwell Bank Premiere Realty. ‘Some of those properties are priced lower than when I got into the business in 1980. Some of it to me is quite surprising. There is a debate whether some of the lenders are dumping properties below what they need to get them sold.’”
And this guy is a chairman of something? And people don’t laugh?
I mean, you know…he’s a moron and all. No gettin’ around it. *shakes cold and wet Olyhead in wonderment *
Today I feel grouchy and something else. I been sitting here like a busted mug and trying to identify the unpleasant sensation, and I’m coming up with ‘melancholy’. I’m not familiar with it, and I can’t say I care for the experience. I’m going to restrain myself, though, and not kill anyone, even if I really really want to. Maybe I’ll cry or something. That’s always fun.
You should do what I did yesterday afternoon: Rip someone a new one. It’s more satisfying than murder because the other person has to live with what you said.
Hahahaha good call. I’ve had that pleasure a few times recently also.
Alright…I held my tongue long enough !
I hear NO ..gambling stories.
I hear NO ..Ben has bunny PJ’s with feet stories.
I hear NO ..great shows stories.
I hear NO ..pretty girl stories.
I hear NO ..the restaurant food was great stories.
I hear NO ..the food in the Vegas pokey sucked stories.
You guys WERE ALIVE, WELL and in Los Vegas, NEVADA…Right ?
…and DON’t give me that “What happen’s in Vegas, stays in Vegas” hogwash !!
Yeah, why aren’t people posting their pics? What’s wrong with everybody?
One more day. Have to edit the porn pics still.
There’s rarely a day that I don’t wake up angry about important aspects of my work/financial/family situation that remain beyond my control, but I make it through by lowering my expectations and plotting revenge on the rest of the planet…hopefully by ultimately making a success of myself.
Oh, by the way, I made a fantastic gumbo last night…one of the best dishes I’ve ever created. I nearly ruined it by adding those packaged raw oysters from the seafood counter. NEVER add packaged oysters to anything when you can do raw. I was amazed how their “off” taste totally permeated the dish. With a little extra seasoning and creative spicing, one bad ingredient didn’t manage to totally ruin the dish.
Hearing about gumbo, even if I didn’t get to eat any, cheers me up. Now I only half want to kill someone. Thanks!
Oly, my offer to rip someone a new one still stands.
You mean I don’t even have to do it? You’ll do the ripping, while I sit here morosely and petulantly, deliberately leaking rain down the back of my sweater from my soggy head, refusing to mop it up, or even stir myself from where I am wallowing in ennui and gloom?
Awesome!
Mmmmmmmmm…
Gumbo.
Beer Oly, beer. It always helps.
Would it help you feel better if you took Mr. Data and gave him a good lick?
That’s a good idea. I’ll try it, just as soon’s I find him.
*paws halfheartedly at hidjusly messy desk *
perfect timing- my ‘Mr. Data’ also needs a good… ah forget it…
here’s a joke to cheer your gloomy day, olygal:
I rented a hotel room and said to the receptionist:
“I hope the porn channel is disabled.”
She got all upset and said:
“No it’s regular porn, you sick bastard!!”
Or a gumbo?
“Today I feel grouchy and something else. I been sitting here like a busted mug and trying to identify the unpleasant sensation, and I’m coming up with ‘melancholy’.”
You know, I was going to post Dr. Grizzly’s diagnosis, but it might’ve sent Oly through the roof of her abode, so I won’t.
Insensitive!
Frowny frown! And reproachful sniff!
“I been sitting here like a busted mug and trying to identify the unpleasant sensation, and I’m coming up with ‘melancholy’.”
Chin up, Olygal! Hope you feel better soon…
If not, I’ll make you a nice chicken gumbo–one of the few things I can make pretty darn well (and yes, I do want to expand the repertoire, even if I might never be an FPSS in the kitchen…)
Thanks, Primey. You’re a pal. I appreciate it.
Oly, what’s the weather been like recently? Has the sun made an appearance in the last two weeks?
That’s probably the issue. Everyone knows that those from the PNW get grouchier than Dracula at sunrise when the overcast clears.
my post to cheer up olygal got punted - it was either the racy double entendre or the dirty joke. Or both! Here’s another attempt at the dirty job for you o.g.:
I checked into a hotel and said to the receptionist, “I hope the p0rn channel is disabled”.
She got all mad and replied, “No its regular p0rn, you sick b@stard!!”
When we bought our first home in 1980, we had a combined $42,000 income. The house was $46,500. We were lucky to get a mortgage with only 5% down through a state program; most mortgages wanted 20% down. How, how, how, does a single woman with a $40,000 income get $200,000 financing on a $180,000 home? We had no car loan or credit card debt, either and I would bet Librada Martinez has plenty of both.
When I was in college in NYC, I worked a Christmas season at Macy’s Herald Square. That was in the early 70’s and credit cards were a new thing. It was hard to put through a credit card sale, actually, because the machine wouldn’t work and you’d have to call someone over. One weekend I worked the men’s glove counter on the main floor and you couldn’t help but notice it: The people using credit cards never bought the less expensive gloves. Its something about human nature and this all has been a long time coming.
I can remember working a temp job in a college bookstore back in 1987. Seems like everyone and his brother paid by check. Well, that was 1987.
In 1995, I had a temp job with that bookstore’s closest competitor. Paying by plastic was the rule of the day. Ditto for my temp jobs there in
[Oops! Hit the "enter" key too soon.] Ditto for my temp jobs there in 1996 and 1997.
“I don’t want to make payments on a $200,000 loan, when the house is worth $70,000″
“We’re just hoping for the best.”
I was feeling kinda optimistic a couple of days ago. I apologize to everyone on HBB land.
I read stuff like this, and I’m reminded that no amount of money can fix this much stupid.
I can’t wait until someone from the goverment steps up to the microphone and says something like:
“After detailed examination of hundreds of thousands of mortgages, only about 5% met our guidelines as a “save-able mortgage”. The program was discontinued when all our examiners failed to exercise discipline and insisted on shoving Joshua Trees up mortgage holders keesters.
They have all been charged with simple assault, and violation of the Endangered Species Act.”
“After detailed examination of hundreds of thousands of mortgages, only about 5% met our guidelines as a “save-able mortgage”.
Really, it looks like that’s the way it’s shaking out, just that they aren’t saying that out loud.
My reaction exactly.
“I read stuff like this, and I’m reminded that no amount of money can fix this much stupid.”
_Well_ put!
Which one is endangered? The mortgage holder or the JT?
The tree.
From the looks of things, we need to clip the nut-sacks of all the F’d Mortgage Holders. Like white-tail deer, we have plenty to go around already.
Around 2025, after Lake Mead has run dry and Vegas has no water, I wonder what that 1.2million/399K McMansion will be worth?
Who knows?
But don’t worry, Bob. Hordes of retiring boomers will save your local economy. Ben’s post just said so:
The Review Journal from Nevada. “The long-term prospect for Las Vegas is bright because baby-boomers reaching retirement age are migrating to cities with warm climates and favorable tax structures, the economist said. The homebuyer tax credit accounts for less than $10 billion of new $787 billion stimulus package, a rather small amount, but nonetheless sufficient to help spark a comeback, he said.”
O.K we’ve all had our share of fun at LV’s expense, but again, what percentage of those “1 in 76″ loans in default belong to natives?
What percentage belong CA’s? Wasn’t there a ‘few’ articles during ‘05-’06 where the Equity Locusts felt LV was getting over priced and moved the swarm over to PHX?
Bonfire of the Inanities.
“Bonfire of the Inanities.”
Laddie, is that you???
I do miss his punning an awful lot… He had some of the best ever.
“‘That’s probably what I’m going to do is loan modification. I don’t want to move out. But, the value of the house isn’t worth what it used to be. I owe more than the house is worth.’ says 20-year Sparks resident, Stephen Lord.”
Oh, Lord, at age 20? Is this what the average 20 year old is doing now (and I imagine he bought this a year or two ago)? At age 20 I think buying a house was #97,867 on my list of things to do. Right after becoming a celibate priest.
just ignore me, I noted my mistake. Ignore all my posts. I can’t read anymore.
(20-year vs 20-year old)
Emily Latella moment?
“I tried to sell the house, or get a roommate…..”
I’ve been pondering this…….as a 50-something, single, straight guy with a somewhat old fashioned world view……would it be ethical for a tenant/roommate in a situation like this to suggest that the landlord supply additional “amenities”, especially if the landlord was, how shall we say, “hot”?
If I was a George Clooney look alike, this would probably not even come up………but I’m speaking as a average looking, overweight, middle-age guy with an average paying job, but financially stable.
“Tenant, with Benefits”
You may have hit on the next big housing fad to replace the condo-hotel: the condo-brothel! Who needs granite countertops when you get a live-in personal assistant?
This kind of question would normally be put in “Penthouse Letters”, but I figured I’d get a more realistic answer on this forum, instead of a answer from a 19 year old college-freshman/virgin, with an overactive imagination.
This has been a scandal in Paris. Rent reduced for ‘equivalent services.’ Looking at the average American the last few years, I’m not sure this scheme would be ‘attractive’ here…
Got Popcorn?
Neil
As in “last tango in Paris”?
“Who needs granite countertops when you get a live-in personal assistant?”
I’m sure the HOA dues would be on the high side. And so would half the residents!
Go google “Mikes Apartment”
Been there. Yeah, that kinda thing happens all the time around here.
“You have not because you ask not.”
I have a buddy in the Air Force who owns a house. He has a paying roommate and a non-paying roommate. The non paying room mate every once in a while has some “benefits” with the AF guys. He seems to like the set-up. He can easily afford his place with the paying roommate and has a close commute booty call.
I asked him (being a dumb army guy), you do realize that she is basically a prostitute.
He looked at me with a dumb look and said he never thought of it that way.
Oh well, as long as the AF shows up when you need them…
One way or another you always end up paying for it.
Stock Market is in 1997 level and the hosing should have been at the
same level… it is still in 2003 level…
Did you mean to say “housing”?
I think 1997 is just a way-station to the place the stock market is headed. Housing probably isn’t far behind.
“Stock market” and “hosing” in the same sentence sounds about right.
“The long-term prospect for Las Vegas is bright because baby-boomers reaching retirement age are migrating to cities with warm climates and favorable tax structures.”
Those who stayed married might want to stay near their kids, given what is going to happen to senior benefits and the absence of pensions for the second half of the baby boom.
Those whose kids may not feel obligated to take care of them all things considered? I wouldn’t want to be in the the state stuck with that bill (actually, in NY I kind of am).
Sixty-five year olds are a great deal. They pay taxes, create little trouble, have few needs, have health insurance, and can even still work — unless they are ex-public employees.
Eighty-five year olds not so much.
Those who stayed married might want to stay near their kids, given what is going to happen to senior benefits and the absence of pensions for the second half of the baby boom.
Those whose kids may not feel obligated to take care of them all things considered? I wouldn’t want to be in the the state stuck with that bill (actually, in NY I kind of am).
I’ve often wondered about this. There are a number of regulars here and elsewhere who have posted stories about their their Prodigal parents (typically Boomers or Silent Gens), and the running theme seems to be, “I couldn’t possibly afford to support my family AND reckless, spendthrift parents even if I wanted to… and I emphatically *don’t* want to.”
Retirement’s not the *only* rude awakening prodigal Boomers may be in for.
With the inevitable cutbacks in 401k’s, pensions and entitlement spending, I suspect there will be a lot fewer and a lot poorer retirees than they are today…and they will all pretty much be baby boomers.
Well,
My mom is living with us right now. We wouldn’t have it any other way. It’s worked out just fine. We are all saving money.
BTW, My mom has never been a spendthrift.
You’re lucky. The thought of my mother living with us makes me want to run away screaming. I will do everything necessary to ensure that it never happens.
Yeah, me too. She can have her own apartment.
My Mom is a smart, strong, independant, wonderful woman who has seen fit to LOCK HORNS with me since I was a little bitsy kid.
That said, I try to keep her at least a safe 500 miles away from me and the other women in my life.
I have on occassion, considered dueling pistols, a 3 man pygmy Ninja hit squad and a restraining order but my older brother and younger sister always manage to talk me out of it.
Hi Mom…waves lovingly….from a safe distance
I live with my daughter and we all love it. We have our own lives that intersect when we choose. We all save money and help each other out. I was never a spendthrift except for taking care of others.
I don’t think it would be a bad idea for people to build a Katrina Cottage in the back yard for aging parents. They have their own little place, but in shouting distance.
My mother can tell you all about the Prodigal Parent thing. Because her mother was one.
Seems that Grandma decided to move to Florida after a lifetime of hard winters in Buffalo, NY. Grandma moved in with her sister, and the deal was that sister would put Grandma up until she found a place of her own.
Well, Grandma settled in at Aunt Louise’s place, and guess what? Aunt Louise eventually had enough.
So, where do you think Grandma came? If you guessed “eastern Pennsylvania,” you’re right.
But, for the sake of her sanity, and to preserve her marriage, Mom refused to let Grandma come live with us. Instead, we set her up in a nearby apartment, and, oh, brother, did the games ever begin.
Mom and Grandma mixed like oxygen and phosphorus, and, I’m told, that’s how Grandma got along with everyone else on Planet Earth.
I asked my 18 year old last night if she was going to help me change my man-diapers in my old age.
Won’t go into details, but the short version is “NO”.
LOL. I’m thinking it was quite a colorful “NO”.
Dude when you have to resort to man diapers… its time for you, the shed, your shotgun and your mouth to have some sit down time.
Testify! Quality of life trumps longevity of life every time.
My granddad and dad both had Alzheimer’s. Wasn’t pretty in either case. I’ve decided there is something to be said for clocking out a little too early, than a little too late.
Speaking of struggling in old age? Over lunch someone mentioned that Annie Liebovitz ( photographer gal ) had to hock her entire life’s work just to stay current on her mortgages.
http://www.drudgereport.com
The int. rates at “ArtCapital” range from 6 to 16%. I guess she also had to agree to give them the rights to anything she does in the future. Why wouldn’t she just go ahead and sell these mansions for what the mkt. will bear? So much for the stereotype of a “subprime” borrower.
Annie Liebovitz evidently is an idiot with $, since she has made some serious dough with all the merchandising she’s done. She deserves her fate. When we were doing well, we lived on 1/2 on our net and socked the rest away.
We have a Larry Yun sighting! How does this guy still have a job?
Well, the job description must state “world’s biggest dumbas$ liar”, so I’d think he’s safe…
I wonder if that is on his business card.
I love people keep calling the bottom; like cramer. yuke
“Steve and Jennifer Maize of Chandler found themselves with between $25,000 and $30,000 in credit-card and student loan debt, a rising interest rate on their mortgage and a cut in pay when Jennifer quit her teaching job to have a baby, then switched to working in child care at a lower income. ‘The biggest factor was the ARM that adjusted on our house,’ said Steve. ‘That brought a big spike in our mortgage bill of $700 a month.’”
Uh, no, the biggest factor was when your chickiepoo quit her full time job with likely decent benefits to stay at home with the young ‘un. You could have handled the “big spike” then, probably. Did you not analyze all this ahead of time???
I was thinking the same thing. She got a four-year degree in education (for which she is still paying off the student loans), passed her examinations, got the teaching license (which is more of a hurdle than most people think), then after a year or two she quits to “work in childcare.” Does that mean she’s opened her own daycare? Or is she working someplace for $6 an hour alongside 20 year olds with only a certificate that cost them virtually nothing?
Teaching doesn’t pay terribly well for the first five years or so, but if you stick with it you can wind up doing pretty well by the time you retire…I’m talking six figures if you get a graduate degree and stick with it at least 20 years.
Why on earth would somebody throw all that away?? And more to the point, why would anyone assume there would not be financial fallout from such a boneheaded decision?
“With car payments, credit-card debt and everyday expenses, Phoenix-area mortgage brokers, bankers and others say that 31 percent still is too high for many homeowners. ‘They would wind right back in default,’ said Paul Klimke, president of the Central Arizona chapter of the Arizona Association of Mortgage Brokers.”
FUNNY - we’re these mortgage brokers selling loans at 40% just a few years ago?????
Roger H,
Pffftt… You’re kidding, right? Yeah all of a sudden these guys are getting all prim proper and uptighty whitey over this stuff. All ex-post-facto damage control. If we want to get serious about prosecuting fraud, start w/ ‘these’ clowns.
Not about LV, but what do you guys think about this article?-http://www.washingtonpost.com/wp-dyn/content/article/2009/02/24/AR2009022403793.html
There is an ‘absolute price’ of housing and it is certainly not the cost of building. A house is actually worth 120 times its monthly rent. At this price, an investor who purchases the property and rents it out will make a return of around 7% per annum. House prices will descend until they hit the120x rule. If rents are falling, as they are in LV, then house prices will have further to fall. Everybody in the housing industry will always tell you that ‘now is the time to buy’, they always have and always will. The banks (like the ones I have worked for) know exactly when house prices are going to recover; Answer – after 3 months of consecutive rental rate increases. The question is, when will rental rates recover. Rents are related to supply and demand but they are ultimately tied to wages. Even with the greatest demand in the world, you can’t rent a property where the rent is more than you can afford. Rents will increase when wages increase. Wages will increase when the employment pool tightens. The employment pool will tighten when the percentage of unemployed reaches its long term medium for the region.
“Rents will increase when wages increase.”
No, I think rents will increase when we no longer has so much excess rental supply. We currently have the highest vacant inventory in history. In other words, it will be a while.
Sorry English, but both rents and prices are, eventually, set by replacement costs. If rents are high more rental units will be built or converted, just as high prices will encourage overbuilding in owner occupied housing. If rents and prices are low the existing housing stock will be deteriorate and shrink until regular maintenance and new construction again becomes profitable. Of course, this all takes a while so both prices and rents under- and over-shoot a lot. Look now for undershoot and several years of prices well below replacement costs untill the excess supplies are run down.
This is a very bad time to invest in rental units, but you gotta live somewhere so a good purchase deal might be worth while. Certainly primary buyers will come back before “investors” because they can get extra value from the “right” house.
The banks (like the ones I have worked for) know exactly when house prices are going to recover; Answer – after 3 months of consecutive rental rate increases.
Sheesh! Don’t you know they’re not building any more land?
Rents are dropping *fast* where I want to buy.
July 2008: $2,600/month
Dec 2008: $2,300/month (when we rented)
Feb 2009: $2,000/month
This is for equivalent homes in nice areas of the south beach. Ok, we cherry pick the best deals and ignore the majority of rental offers.
No quick recovery in sight.
Got Popcorn?
Neil
good metric, Neil. Do they say that in print, or is that just ‘what they say’?
I decided to look up the Steve and Jennifer Maize in Chandler.
1/2004: Home sales price: $231,396, Loan: $219,800
8/2005: Refinance, Loan: $291,750
10/2006: Refinance, Loan: $375,000
Why should we feel bad for them?
Jacob,
Where did you find this data? Can you post a link?
thanks in advance.
“Why should we feel bad for them?”
Feel bad for them??? H*ll. It looks to me as though they won the lottery.
What do you think about this article?
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/24/AR2009022403793.html
My dad was in the Army for 20 years, during which time my parents owned 2 homes over the course of all his years of service, PRECISELY because of frequent re-locations. So, we rented for the most part. My folks didn’t buy a home again until my dad’s last assignment before retiring from the military, when they knew they would stay put.
Again, no one puts a gun to your head and makes you buy a house. Anyone in the military knows (or should know) that frequent moves are a way of life.
“If it takes 70 percent of a borrower’s income to meet even a diminished payment, the lender will probably figure the person won’t make it,’ he said.”
Gee, you think?? This has to be the quote of the day.
“Given $150,000 is very affordable for such a dynamic metropolitan region, once the economy recovers, you are in good shape. But it is just getting over the short term.”
From no less than Mr.FunYun, whose unbelievably bad track record at predicting, prognosticating, and mistaking tops for bottoms, should qualify him only as an amateur buffoon to be laughed at by children of all ages.
Now, Mr. FunYun, what specifically make you think the economy will recover in your lifetime?
What specifically makes you think anyone or anything in Las Vegas is “getting over” the short term?
(sounds of crickets in empty half finished mall)
Maybe everyone can get security jobs guarding all of the empty buildings.
CA extends foreclosure I wonder if changing rules like this will get banks lending again ?
“2923.52. (a) Notwithstanding paragraph (3) of subdivision (a) of Section 2924, a mortgagee, trustee, or other person authorized to take sale shall not give notice of sale until at least 90 days after the lapse of three months as set forth in paragraph (2) of subdivision (a) of Section 2924, in order to allow the parties to pursue a loan modification to prevent foreclosure if all of the following conditions exist:
Has anyone had any good mystery shop stories?
OurayCO - where CW McCall and his Convoy legend lives.
Page 1 of the WSJ today, Obama attacks the MTG interest deduction for high income households. That’s sure to get the market moving again! What are they thinking; worst housing market in modern history, that’s a GREAT time to scale back the deduction. Great for most of us, but still a really bone-headed move.