April 3, 2010

Was Quality Compromised During The Housing Bubble?

This guest post is contributed by Nicole Adams, she writes on the topic of Construction Management. She welcomes your comments at her email id: nicole.adams83@gmail.com

The great American dream of owning a home has come crashing for many of this country’s citizens with the housing bubble collapsing and leaving them without a roof over their heads and a basic bank balance. All they’re left with is a pile of debt that they have no idea how they’re going to pay off. They’ve been forced to leave behind their homes or have it foreclosed because the recession made it hard for them to keep up with payments.

Today, with the way the real estate market is, it’s hard to believe that it was just a few years ago that the housing sector was booming – homes were in great demand because mortgages were available cheaply and you did not even have to prove the ability to pay back before you were given a loan to buy a home. The demand led to investors too jumping into the market, hoping to make a quick buck by buying and selling homes quickly or flipping them after a few renovations. And because homes were selling like hotcakes, many more were being built as quickly as possible.

Now the words demand and haste don’t really go well together – ever heard the clichéd saying that Haste makes Waste? That’s what happened finally – with people eager to jump on this money-making bandwagon, quality fell by the wayside. According to this article in the New York Times, owners of sleek condos built during the first decade of this century are now up in arms against the shoddy construction that is beginning to tell through leaky windows and roofs and faulty heating/cooling units. The number of complaints is expected to rise because many more condo units were built during this period when the housing bubble hit its peak.

We can see what really happened:

* The high demand fueled builders to build more homes and condos;
* They compromised on the quality of materials used because they wanted to make a huge profit and knew that people would buy at any cost;
* With the amount of construction taking place across the country, there was a shortage of skilled manpower and quality building materials. This led to construction companies making do with just about anybody or anything to build their condos and homes, which in turn led to the demise of quality.
* Municipalities did not have the time to inspect and certify all the new homes that were popping up by the dozen.

So all in all, while there was rise in quantity, the quality of homes fell significantly during the housing bubble. Today, there are some people with no homes at all because of the recession. And then there are the others who thought they were sitting pretty only to see their homes falling apart and deteriorating by the day because of poor construction quality.

These links added by Ben Jones:

New York Magazine. “Brooklyn would look very different today without Robert Scarano. The architect of hundreds of buildings, Scarano was incredibly prolific during the aughts building boom, especially in Williamsburg. He became known as a developer’s best partner, a man who could squeeze every salable square foot onto a lot. He’s also been widely criticized for his blocky, bulky designs, creative parsing of the building code to get approval for uncommonly large projects, and working with developers who run shoddy construction sites.”

“Earlier this month, the City Department of Buildings barred Scarano from filing permits and plans because he ‘repeatedly submitted false documents in an attempt to circumvent the law.’ Suddenly, the neighbors aren’t the only ones wringing their hands: New Yorkers who’ve bought Scarano apartments—particularly those angling to sell—are grappling with his downfall.”

“One East Williamsburger who has had her ceiling replastered is fatalistic. ‘Until the leaks are fixed, I can’t worry about selling this place,’ she says. Another North Brooklyn owner says the ductwork in her apartment’s HVAC system doesn’t meet code and adds that the six-story building has no wheelchair access. Others single out ’sweaty’ windows—possibly a sign of poor insulation—and misrouted cables.”

“Attorney Adam Leitman Bailey, who represents disgruntled owners at eight Scarano projects, says some clients had bedrooms that didn’t meet city specifications and therefore were called closets. When your two-bedroom abruptly becomes reclassified as a one-bedroom, the resale value will likely be downsized as well.”

The Register Citizen in Connecticut. “A proposal to complete the second phase of the Mountain Ridge condominium complex has some downhill residents concerned about an increase in water run-off. There are currently 32 units in the development. Twenty-five years ago, there were supposed to be a total of 99 units built in two phases, but a downturn in the economy meant the project was abandoned after the first phase was completed.”

“Mike Godburn lives downhill of the condos, and though he says he ‘certainly understands’ the position the condo owners are in, ‘I only own one property, and I can’t take a chance that this could have a negative impact on it.’”

The Sun Sentinel in Florida. “Chinese drywall problems in Parkland could soon lead to even lower property values for homes in the city. The Broward Property Appraiser’s Office has received applications for property value reduction from 115 homeowners in Parkland dealing with Chinese drywall. If all the homeowners get the reduction they are looking for — 89 have already had their building value reduced 50 percent — the total value of the homes will go down more than $30 million.”

“‘This is affecting every Parkland resident,’ said John Willis, a member of the Chinese Drywall Task Force. ‘The Broward Property Appraiser’s Office reduces building value by 50 percent for homes that have Chinese drywall. The total value of the homes was $74,285,860. The value after reduction, if all applications are approved, will be $43,917,800 [so] the total loss of taxable value will be $30,368,060.’”

From WINK News in Florida. “The Cape Coral city council has agreed to an exception to its laws to help a family remove toxic drywall from their home. Richard and Larene Tullo can’t stay in their home during the reconstruction; they say the toxic fumes from chinese drywall are just too overwhelming. But sleeping soundly in their own RV outside was also against city laws.”

“‘We used to come down here on weekends and do stuff, now we’re coming down here on weekends and removing everything,’ said Richard Tullo. But his dream vacation home in Cape Coral now is his nightmare remodel project.”

“‘The entire house, all the sheetrock has to come out, all the electric has to come out,’ Tullo explained.”

Scripps News on Florida. “Within the first six months of buying their new Vero Lake Estates home in 2007, the air conditioning unit in Bradley and Alyse Simons home mysteriously stopped working. Shortly after that, the couple began to experience nosebleeds, stinging in their eyes and sensed a foul odor in their single-family home. They soon started coughing up blood and noticed certain fixtures in the home were showing signs of corrosion.”

“‘We lived without air conditioning for six months because (repair companies) would try to repair it and replace the parts, but it never got fixed,’ Bradley Simons said. ‘They replaced five different parts and the coils, twice.’”

“Dozens are taking their builders and drywall manufacturers to court. Some, like the Simons, are simply walking away from homes, risking foreclosure, while some homeowners are considering paying for expensive repair procedures that promise to fix the drywall problems and salvage the home. Dreams the newly married Simons had of raising a family in the home quickly turned into a nightmare when they confirmed their new $170,000 Mercedes Homes residence was built with Chinese drywall. ”

“‘I called Mercedes Homes as soon as I found out and asked for help, but they said they were in bankruptcy and weren’t liable for anything,’ said Bradley Simons. ‘It was pretty upsetting because we only lived in the home for a year.’”

The Daily Press in Virginia. “Local politicians are lobbying for President Barack Obama to visit area homes affected by toxic Chinese drywall while the president is here for his Hampton University commencement address on May 9. State Del. Glenn Oder, R- Newport News, and local resident Eric Bailey are part of a state task force that’s working on solutions to the Chinese drywall issue. Homeowners have complained that gases emanating from the drywall cause numerous health problems that force them from their homes. Meanwhile, they still have to pay their mortgage. The gases have also corroded metal and wiring in many homes with Chinese drywall. The drywall was mostly used during the mid-2000s housing boom, when there was a shortage of building materials.”

“Bailey, whose Hollymeade home is affected by Chinese drywall, said he was discouraged by the meeting. ‘I don’t think it went well at all,’ said Bailey. ‘We heard a lot of ‘We can’t do this’ and ‘We can’t do that.’”

The Arizona Daily Star. “When Richard Hanson drew up the design for his $45,261 resort-style pool, he envisioned a horseshoe-shaped masterpiece, complete with a swim-up bar. What he got came up far short of what he expected - and of what the Arizona Registrar of Contractors said he had a right to expect.”

“Although the pool looks good from a distance, it’s plagued with problems that make it almost unusable. Hanson was protected. By using a state licensed contractor, he is eligible to collect from a special fund for victims of shoddy work. But nearly three years after filing his initial complaint he has yet to receive any money - nor is he likely to anytime soon - because the fund is all but broke. And he’s just one of more than 700 Arizonans waiting to recover from that fund.”

“Hanson’s pool sits in disrepair, rust gathering on the bottom ‘like measles spots,’ the vents and plaster stained and corroded. The swim-up bar is ‘drastically off-center,’and an underwater abutment can scrape or bruise swimmers, Hanson says.”

“The water in the pool may look pretty, but that’s ‘very deceptive,’ he adds. Because of problems with a non-chlorine system he bought from Whitewater, ‘they told me to put 53 gallons of muriatic acid and 104 pounds of calcium in the pool,’ says Hanson. ‘I have some very serious pH problems.’”

“Rachel Hopkins and her husband custom-designed their dream home in 2005, only to find that a stucco-like substance used on the exterior was giving way in 2007. Hopkins filed an initial complaint with the registrar in June 2007. But by the time her investigation was complete, it was 2009 and her contractor had had both his commercial and residential licenses revoked. ‘We have cracks on the corners of our windows,’ said Hopkins. ‘There’s a parapet that’s cracked on the top of the house.’”

The News Tribune in Illinois. “Chris Luke and partner Brad Brueckner of DeKalb have begun building 10 spec homes in the Illinois Valley. While other developers have been reported as saying the local housing market is saturated with new homes, reducing the need for more construction, Luke believes the problem isn’t the amount of homes available but the type of homes.”

“When moving to the area Luke ran into a problem he thinks is common for people his age. The homes in his price range were old and new homes were too expensive. To address this issue, Brueckner & Luke Builders are planning to price the five homes they’re building in the $150,000-$200,000 range to reach home buyers looking for a quality first home or an easy step up from their starter home.”

“Along with building some homes in a price range younger shoppers can afford, Brueckner and Luke plan to build homes that are sized for families to actually live in, unlike the oversized homes that were selling before the housing bubble burst. We push big kitchens and family rooms,’ Luke said, noting he believes the housing trend is going toward focusing on the rooms people use most often, rather than building living rooms that rarely, if ever, get used.”

“He wants to bring the energy efficiency benefits of green building innovations to the area. He said some new technologies could lower energy bills by up to 25 percent. ‘We view indoor air quality and energy efficiencies as more important than flashy items,’ Luke said.”

“That means less focus on granite countertops and more eco- and potentially wallet-friendly technologies, such as recycled cellulose insulation, air exchangers and high efficiency HVAC systems. To make sure those steps are effective, Luke said they perform blower door tests to determine how airtight a home is and infrared tests to find any breakdowns in insulation before homeowners move in. Luke foresees these energy efficiency testing steps as becoming market norms in a few years and plans to stay ahead of the curve.”

“‘We believe in the structure of our homes,’ Luke said. ‘You can always change light fixtures or carpets but you can’t go back and build a tighter home.’”

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Comment by pressboardbox
2010-04-01 07:48:02

Nahh. Why would you think quality was compromised? These McMansions are built to last -like the Parthenon. The stryrofoam columns are guaranteed to last as long as the real thing, just not one piece.

Comment by In Colorado
2010-04-01 09:16:31

Of course the quality was compromised. This is America after all. What do you think, this is Germany or something? We all know that Corporate America has no use for quality. Quality costs $$$ and that could affect next quarter’s bottom line for heaven’s sake!

Speaking of German products, ever notice how the Chinese made “American” electric shavers cost as much as the German made Braun shavers? My Braun is almost 10 years old now, and works fine.

Comment by pressboardbox
2010-04-01 11:02:43

Your Braun is probably now made in China like everything else.

Comment by In Colorado
2010-04-01 14:00:58

Nope. It says its made in Germany.

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Comment by 2banana
2010-04-01 17:01:40

I have a comb I bought in East Germany (GDR) about 25 years ago. I do not know what kind of plastic it is - but it is indestructible. I keep it as a collectors item. How many things do you have that say GDR and still work? :-)

Comment by palmetto
2010-04-03 09:20:26

I bought a vintage German made Seth Thomas eight day wind desk clock and baromter with thermometer at Goodwill the other day. Three bucks. Takes a licking and keeps on ticking. Someone had a similar one on ebay for twelve bucks, still a good deal, but no takers. Hell, no, they’ll spend fifteen or twenty on a piece of crap from China at Wal-Mart. Self-destructs in sixty seconds.

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Comment by Curt
2010-04-03 10:20:34

My Braun is almost 10 years old now, and works fine.

As the “Slap-Chop, Sham-Wow” guy says. “The Germans make good stuff.”

Comment by potential buyer
2010-04-01 11:19:47

Built in obsolescence is the name of the game in this country, at least on the left coast, where houses aren’t built of brick.

Comment by Pondering the Mess
2010-04-02 09:20:18

Consume, Consume, CONSUME!!!

Good thing this planet has infinite resources and room to feed the CONsumer frenzy! Oh, wait… it doesn’t…

Comment by AmazingRuss
2010-04-03 10:38:10

This is why we need to consume as quickly as possible, so we get as much as we can before it runs out.

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Comment by scdave
2010-04-03 09:30:28

where houses aren’t built of brick ??

Not built out of brick for a good reason…Earthquakes…

Comment by Zeus Matuze
2010-04-01 19:57:10

“Was Quality Compromised During The Housing Bubble?”

Hahahahaha!! OMG, that’s a goooood one! I vote… {while wiping the tears from my eyes}… the BEST April fools joke!

Did you make that up yourself? I mean..it WAS a joke, right?

Seriously…it was a joke, right?

Comment by Professor Bear
2010-04-01 07:58:40

“The demand led to investors too jumping into the market, hoping to make a quick buck by buying and selling homes quickly or flipping them after a few renovations.”

That was then, and this is now (from an article with the following text string built into the HTML link: first-time-home-buyers-bank-owned-properties-housing-bubble):

Pace of house flipping picks up

Investors snapping up foreclosures, helping to revive neighborhoods but shutting out some first-time buyers
March 30, 2010|By Robert Selna, Chronicle Staff Writer

Comment by awaiting wipeout
2010-04-01 08:32:29

Being in the market for a sensible one-story, I’ve seen some of the work from these infestors. Cheap, trendy (”salad bowl” on flat surface bathroom sinks), and some really tacky redone kitchens. I’m not impressed. I’d rather indivuidualize the house myself, save oodles of $, and keep the infestors at bay.

How many deja vu infestor fliping episodes do we have to endure?

Comment by Sagesse
2010-04-03 18:55:00

That salad bowl is Philippe Starck design. It is impractical like hell, and no one that ever cleaned a sink him/her-self would install one, imo.

Comment by cobaltblue
2010-04-01 08:08:46

“But by the time her investigation was complete, it was 2009 and her contractor had had both his commercial and residential licenses revoked. ‘We have cracks on the corners of our windows,’ said Hopkins. ‘There’s a parapet that’s cracked on the top of the house.’”

Another crack house, another neighborhood down the tubes.

If only she had heard her parapet’s cry for help in time, she could have gotten him into a rehab program.

Let’s hope the rescue workers are able to talk him off of that roof before it’s too late.

Comment by joeyinCalif
2010-04-01 08:08:49

“Everyone warm and comfy in your sleeping bags? Good. Now I’m going to tell you a little tale.. a scary tale.. about fuming sheet-rock… and stucco-like coatings.”

Comment by Ben Jones
2010-04-01 08:38:54

‘‘We have cracks on the corners of our windows’

I don’t know if it’s normal with stucco, but just about every one I see has cracks at the corners.

Comment by joeyinCalif
2010-04-01 08:55:05

I did lots of things but never stucco, except a little patch here and there. Cracks do seem to be common over the long term.

My guess is a NEW construction with cracks either had the wrong mix ratio, or some part of the system was applied incorrectly. Maybe the window frames or structural framing had a problem.. the house is settling… who knows.

Then again, since they referred to it as “a stucco-like substance used on the exterior” it may not be stucco as we know it.

Comment by Zeus Matuze
2010-04-01 20:12:08

The problem with the term “stucco” is that it refers to modern synthetics. “old” stucco was chicken wire nailed to lath (wood strips) over tar-papered studs and properly layered with mortar-like concrete .
“New” stucco might be any number of synthetic products..a popular one being “DriVit”.
This product is good if applied according to the manufacturer’s recommendations.
Problem is…as the post link queries…was quality compromised?

If NOT, get ready for OSB soaked dryrot.

In fact, there is so much of it in new construction that I’m officially copywriting the name…DriRot(tm).

FB’s need to contact me for licensing rights for their contractor/FB lawsuits.
Contact: Zeus @ Joshuatree4u.com

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Comment by Sagesse
2010-04-01 21:15:08

… the foundation settled, just maybe?

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Comment by pressboardbox
2010-04-01 09:43:28

The chip-board sheathing underneath the stucco has not been adequately protected from moisture (rain) and as the wood expands (swells with water) and contracts as it dries the stucco cracks. Very common with modern shoddy construction in FL. The best part is the black mold that forms in the wall between the backside of the sheathing and the drywall.

Comment by palmetto
2010-04-01 16:37:28

pressboard, I’ve seen that black mold firsthand in one of the bubble developments around these parts. In fact, during the major part of the collapse, I took a little tour of a couple of the developments that were still in progress. It was like they were frozen in time, with some of the stucco houses only partially stucco’ed, and the chipboard exposed to the elements.

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Comment by Pondering the Mess
2010-04-02 09:21:36

Is black mold a “feature” these days in post-sanity Amerika?

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Comment by mikey
2010-04-03 09:22:16

I toured a couple of spec houses a couple of years ago with a smaller developer I know. One was framed and they were working on the sub flooring and on the other they were laying the basement block walls.

Afterwards he asked me what I though after the walk through.

Now I’m no carpenter or mason but my Dad and I built and renovated enough houses including our own to teach me to drive a few nails straight and to measure twice and sometimes three times before sawing and cutting. I also know enough to watch the block and concrete subs closely.

The overall quality of workmanship and some of their construction grade materials sucked. The wood products had to be seconds or thirds from some cut rate place.

I just said that the guy running the nailgun in one missed 20% of the floor joists and beams(the roofing was worse) and and they better move the basement window at least 2 feet from the basement garage load bearing I beam sill plate and reinforce those blocks with rebar and cement in the other one.

Sheesh…did I ever get a dirty look. Good thing I drove my own truck to the site.

The next day I saw the subs tearing out and re-doing the concrete block basement window level.

That developer hasn’t really spoken to me since our little visit and I should imagine he’s hanging on with his teeth today.


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Comment by scdave
2010-04-03 10:11:23

but just about every one I see has cracks at the corners ??

Ben…Sorry in advance for the long post…

It is likely a “two coat” application in the houses you suggest which is the cheapest stucco installation you can do..Believe it or not, the building departments consider the paint a third coat…Stucco contractors have saved the developer even further money by Color Coating (putting dye in the cement) on the second coat..

A two coat application starts with black paper backed chicken wire nailed with staples because its “fast” with a nail gun and “bad” because the staples “pin” the chicken wire to the stud,
there-by prohibiting the cement to flow through and around the wire giving this first coat (”Scratch Coat”) some structural integrity..

The second coat (Finish Coat) is then applied, ONLY after the first coat is fully cured (2 days in warm weather)…There are other reasons this application will lead to cracking like contaminated sand but the point I am trying to make is that this application is cheap and fast and almost guaranteed to crack..

Now, a “quality” stucco installation would go something like this;

First, the exterior is sheered with 1/2 inch plywood nailed off with 8 penny nails, six inches on center on the perimeter and 8 inches on center in the field of the plywood…

Then the wire backed paper is installed by “Hand Nailing” with spacer nails there-by insuring that there will be area behind the the wire for the cement to flow…

The first coat (Scratch) is then applied and allowed to cure…The second coat (Brown) is then applied and allowed to cure…The third coat (Finish) is then applied and allowed to cure..The last coat is the paint…

This is how the stucco was applied to my own residence…Its now 30 years old..No cracks…

Comment by awaiting wipeout
2010-04-01 08:42:34

First off, great visual :)
Yep. Add Granite (radon), Pergo flooring (toxic fumes), Chinese drywall, and you don’t need to worry about the SS and Medicare dilemma. More like, sooner than later, we’re all dead.

Comment by palmetto
2010-04-01 16:39:52

LOL, wipeout, doncha know it’s on purpose? Better Living through Population Culling by Poison Houses.

Comment by palmetto
2010-04-01 16:44:41

Poison Pointe: If you lived here, you’d be dead by now!

Countertop Commons: Don’t take your neighbors for granite!

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Comment by Carl Morris
2010-04-01 10:01:03

stucco-like coatings

Can you get stucco-like coatings? Oh can you get stucco-like coatings.

Comment by pismoclam
2010-04-01 19:15:41

Where is Get-stucco to dfefend him/herself ???

Comment by Carl Morris
2010-04-02 13:31:23


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Comment by Professor Bear
2010-04-03 07:39:09

Just try not to get stucco, and you won’t have to worry about cracks or underwater problems…

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Comment by SanFranciscoBayAreaGal
2010-04-03 10:22:18

Ahhhh, now I know why you used your other alias GetStucco ;)

Comment by Ben Jones
2010-04-01 08:36:00

FYI, we are still waiting on a reply from the FDIC to our questions regarding shadow inventory.

Comment by pressboardbox
2010-04-01 09:02:03

One thing I am sure of is you will be “less satisfied than expected” with the details of their response.

Comment by Captain Credit Crunch
2010-04-02 07:34:42

You know, once I called the FDIC and managed to get some sort of district manager to answer a few questions. She was very helpful. I was kind of surprised that someone took the time to help me understand deposit insurance rules =).

Comment by Pondering the Mess
2010-04-01 09:19:31

Good luck… remember, the shadow inventory doesn’t exist…

Thanks for putting up this post. It’s a good reminder about what our economy has become: swapping crumbling dumps at absurdly high prices using toxic and nonsensical loan products.

But the bankers, real estate agents, and lucky flippers got rich, so who cares, I guess…

Comment by awaiting wipeout
2010-04-01 10:03:55

The flip to riches seminars are in full swing in So Ca. Even talk radio has hired the flip to riches”professionals” as talk show hosts. I need an aspirin.

Comment by In Montana
2010-04-01 12:42:30

Oh, goody, maybe the Real Estate Insiders will come back on the air here. Last time I heard them they were wondering what was going to happen with ARMs started to reset.


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Comment by Ben Jones
2010-04-01 10:51:28

‘the shadow inventory doesn’t exist’

I don’t think anyone denies it exists. But it’s interesting that you rarely if ever hear it mentioned by the government or the lenders themselves. It’s bound to be a sensitive subject, but it is still my opinion that something isn’t being enforced or there is some collusion involved. And the biggest scandal would be if the government is somehow directing that this be done. But I am skeptical about that last part.

Comment by joeyinCalif
2010-04-01 12:11:24

There is at least one plausible explanation for why they avoid talking about it:
Letting it be known that some huge amount of supply exists in the banks’ back rooms would causes prices to fall, aggravating the problems the feeble RE market is suffering, and decreasing it’s utility as a means of economic recovery.
(I don’t think the feeble market presents a problem. They do.)

OREO is “other” real estate owned. Banks are allowed to own RE.. buildings.. land needed to conduct business. They just can’t use RE for investment purposes.
Nothing I know of prevents them from holding foreclosures off the market for as long as they like, so long as they don’t profit from it. Profiting proves an investment was made, whether accidental or not.

How might they profit from just holding it? Suppose they hold a house for 50 years, it’s value naturally increases and they sell it for 5 times the value of the original loan. Would they be allowed to keep the profit or would it be forfeited?

My guess is whoever defaulted on the loan or the heirs have rights to any money over and above what was owed.

As for collusion between banks and govt/regulators, I see no sense in them taking that risk because there’s no need for it. Aside from things like issuing executive orders, which can permit or legalize almost anything under the sun, they can change laws to suit their purposes with the wave of a pen.

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Comment by denquiry
2010-04-03 06:59:45

But I am skeptical about that last part.
the fed has a PPT (Plunge Protection Team) for stocks. It would not surprise me if there was a PPT for housing.

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Comment by Professor Bear
2010-04-03 08:08:27

Why would you assume a separate PPT for housing? Wouldn’t the same PPT for stocks be able to reallocate effort towards propping up the housing market, especially considering the motives and integrity of the players involved?

Comment by oxide
2010-04-01 11:23:04

remember, the shadow inventory doesn’t exist

In 10-15 years, it probably won’t.

Comment by Bill in Carolina
2010-04-01 12:22:35

Economists will be telling us the large shadow inventory was “unexpected.”

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Comment by Pondering the Mess
2010-04-02 09:23:47

And that will help drive prices up?!

I’m pretty sure that if they could get away with it, they’d demolish whole towns of perfectly decent houses just to create a housing shortage to increase prices. It is insanity, but that is what the modern eCONomy runs on…

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Comment by WHYoung
2010-04-01 12:27:19

What evil lurks in the minds of men… the shadow knows.

Comment by mikey
2010-04-01 16:29:54

The Gubbermint may claim to be clueless and in the dark, but…

“The Shadow Knows… and The Shadow Grows.”


Comment by Professor Bear
2010-04-03 07:43:51

Do you guys have a FOIA in play? (Not sure whether you additionally need Bloomberg’s billions and political clout to elicit a response…)

Comment by edgewaterjohn
2010-04-01 09:36:27

“When your two-bedroom abruptly becomes reclassified as a one-bedroom, the resale value will likely be downsized as well.”

In the spring of 2006, out of morbid curiosity, I accompanied three separate groups of friends to condo open houses as they shopped.

Fully two-thirds of the places they looked at pushed the envelope in what could be considered a “bedroom”. But no one really cared and the agents deftly answered any concerns with quotes like: “this would make a great home office”, “this is good for a baby’s room”, “this would make a great guest room”. Those answers were always enough for my friends - the agents knew their audience well.

Oh, should I have spoken up? I did, but all three went ahead and bought anyway.

Friend # 1: bought a “one bedroom” that was essentially a former hotel room in a S.R.O. (flop house). No kidding! To make the “bedroom” they split the main room - the bedroom was small - but the living room is so small that he cannot put even the tiniest coffee table between a very narrow futon and his TV! With finishes he paid $215k - probably worth $90K now.

Friend # 2: bought a “two bedroom”. The second bedroom is now houses a hooka and some small furniture. With a twin bed it would be very crowded. Paid almost $300k - probably worth $190k now.

Friend # 3: bought a “two bedroom”. The second bedroom is used for storage and they’ve talked about tearing out the wall to make if more usable. Paid around $190k - probably worth $120k now.

Heckuva way for these people to start out, huh?

Comment by SanFranciscoBayAreaGal
2010-04-01 10:47:04

Do you ever feel tempted to say to your friends “I told you so” or nananana, nananana, nananana.

Comment by MacAttack
2010-04-01 11:47:48

Yeah, fortunately I don’t work with them any more.

Comment by ET-Chicago
2010-04-01 11:12:00

Oh, should I have spoken up? I did, but all three went ahead and bought anyway … Heckuva way for these people to start out, huh?

I’ve had a similar experience.

To a person, all my late-buyin’ condo-owner friends are shocked by the size of my apartment. I kinda feel bad for the condo suckers that live in the condo next door, though — the ones that didn’t buy the bigger front-facing units barely have any windows, let alone square footage. There are all too many condos in our town that look like prisons. They are, of course, but I doubt that’s what the architects originally intended.

Comment by potential buyer
2010-04-01 11:37:35

The ones I’ve looked at have tiny living rooms and large bedrooms.

Don’t know about you, but I sleep in my bedroom, so I don’t really care how big it is as long as it holds everything I want it to. Try entertaining in a tiny living room.

Comment by Wickedheart
2010-04-01 11:56:02

Maybe their living room is not where they do their *ahem* entertaining.

Comment by WHYoung
2010-04-01 12:29:51

If you look at floor plans for a lot of NYC apartments a too small room will sometimes be named a “chamber” instead of a bedroom.

Comment by Jimmy Jazz
2010-04-01 14:35:10

The second bedroom now houses a hooka

I hope she’s paying rent.

Comment by oxide
2010-04-01 15:31:33

She probably is, just not in cash.

btw, the funny not-quite bedroom is a “den,” basically a room with no windows because the architects had extra space that they couldn’t fill in right.

Comment by 2banana
2010-04-01 17:07:46

The second bedroom is now houses a hooka

That could be worth something! ;-)

Comment by Pondering the Mess
2010-04-02 09:26:29

How could this end badly?

After all, “real estate only goes up!” and no price is too high! Don’t let your income or reality get in the way of buying something that doesn’t make sense at a price you can’t afford!?

Here in Maryland, we do a similar thing, except it is usually with dumpy old rowhouses in bad parts of Baltimore or falling apart, Post-War shoeboxes in the suburbs.

Comment by denquiry
2010-04-03 07:11:39

Looks to me like your friends got “Gumped.” Sorry Forrest.

Comment by Mo Money
2010-04-01 10:06:26

My personal experience:

1. “Quality” Carpet, worn out in 5 years down to backing in places. Padding useless. Cost to fix $4600.
2. Central AC- Shoddy or cheap compresser, $1800 in repairs
3. Cheap Plumbing fixtures, faucets rotting out in 5 years, $110 each to replace

Comment by Bill in Carolina
2010-04-01 12:24:50

Rotting out? From the inside I presume. You must have acidic water.

Comment by Sagesse
2010-04-03 19:01:02

That’s the (sad) joke about some older hotels/ motels. Badly built decades ago. Plumbing starts to leak and stink, but rooms are renovated. Surface looks stylish, rooms stink. New surface, rates go $$$$.

Comment by Bungalowball
2010-04-01 10:11:56

At some point in the future (I’m not sure how many years from now), it will probably be conventional wisdom that one should not buy a home completed between 2001-2010.

Comment by Ben Jones
2010-04-01 10:32:51

I’ve seen some fairly well done houses built in that time range, but it isn’t often. I’ve also seen foreclosures that were very nice, but expensive as well. I also think that poor construction can be found in houses of all ages.

Comment by m2p
2010-04-01 11:06:52

Agree, the CA house we purchased in ‘84, not so much shoddy but cheap. The builder must have purchased every discontinued item from every store going out of business. Bathroom counters and doors just a little larger or smaller than the norm. And don’t get me started on the windows, never could buy window treatments unless they were custom ordered.
Fast forward, or backward, to house we purchased in 2005. Third generation builder with a handshake contract. I still walk around amazed at the workmanship.

Comment by Ben Jones
2010-04-01 12:02:20

This brings up a good point that HBBers might consider. I have heard of people here buying foreclosed lots and having houses built. I was told that framing crews will come up from Phoenix and work very cheap.

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Comment by palmetto
2010-04-01 14:30:08

“I was told that framing crews will come up from Phoenix and work very cheap.”

We’ve got some cheap framing crews here in Fla as well.

Comment by Pondering the Mess
2010-04-02 09:29:50

My grandfather (rest his soul) had a place build in southern NJ in the mid 1970’s (or maybe a bit later.) It looked nice, except for the small problem that the whole place was built on fill from the construction area. Only the sleazy builder knew this, and they happily “went out of business” after completing the development, thus escaping liability for the damage to the house as it started to sink. It’s been years and several fixs later, and the house still needs foundation work.

But, somebody got rich by screwing over somebody else, so that means it’s “all good” in the modern eCONomy.

Comment by JackRussell
2010-04-02 14:22:00

It may be true that there is poor construction in homes of all ages, but with time the defects become obvious and are repaired. Or if the defects are too severe, the house is ripped down - so the stock of old housing effectively becomes just that which was well built - a sort of Darwinian self-selection, I guess..

It always struck my as odd that there were people who insisted on buying a new house. I suppose there is the “excitement” of getting to deal with builders and so forth, but most of the new houses are really spec houses and all you are really choosing is stuff like the color of carpet and whether a jacuzzi goes in the master bath. The stuff that I would want to upgrade isn’t on the option sheets, so you are stuck with the “builder grade” crap. Some people evidently believe that when you buy a new house, that since everything is new that you don’t have maintenance headaches. Yet they never consider all of the shortcuts that the builder took that need to be corrected after the fact. Some of the issues are really just more of a nuisance than anything else. And some of the issues are real deal breakers (settling of a foundation, for example).

Comment by oxide
2010-04-01 12:06:08

If we wait enough years, we won’t need such wisdowm, as there won’t BE any houses from that time period. Windsor Castle they ain’t.

Comment by Bill in Carolina
2010-04-01 12:28:51

Our Florida house was finished in ‘02. No problems in the three years we lived there except the gas water heater in the garage developed a leak, apparently in the flue stack. Replaced under warranty. No drywall, stucco, electrical or A/C problems.

However, I read in the Sarasota paper that our builder said he will have to declare BK if he can’t get his insurer to pay to replace the Chinese drywall he put in some of his later developments.
Good luck with that!

Comment by Timmy Boy
2010-04-01 15:09:04

Didn’t that place catch fire a decade back?

Comment by oxide
2010-04-01 16:03:41

It did, but I think the walls stood.

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Comment by Arizona Slim
2010-04-01 10:21:06

Fun little data point from Tucson: For several years, I’ve been attending the local edition of Green Drinks. This is a monthly gathering of people interested in all things green. (I’ve been tempted to go just to say that I’ve suddenly developed a passionate interest in frogs.)

Any-hoo, attendance at Green Drinks seems to have closely correlated with the rise and fall of the Tucson housing bubble. The gatherings were jam-packed with people back in ‘06 and ‘07. These days, not so much.

Yesterday evening, I made the trek to Downtown Tucson for the second gathering of Green Drinks at its new-new restaurant location. It had moved out of its longtime location last fall, and the new location was such that hearing the person next to you was impossible. I wasn’t the happiest of Green Drinkers at this new location, and I let one of the co-organizers know.

This new location did have a private room that was a lot quieter than the bar in the lobby, and I suggested that as an alternative. The co-organizer nixed it on the basis of cost, which was $800 for the evening. Or so she was quoted. (I was of the opinion that the price could have been negotiated down. After all, it’s better to get something for the space instead of letting it sit there empty. But I didn’t say anything. After all, I’m not a co-organizer.)

Time for the new-new location, which was filled to overflowing with restaurant-goers. Mind you, this one of Downtown’s most popular eating and drinking establishments. Another wannabe Green Drinker and I were told to go wait in the bar for 10 minutes.

Well, the bar overlooks a courtyard without a vacant table to be seen. Mr. Wannabe wondered just where in the heck the Green Drinks table would be. I didn’t see any possibility of one opening up, so I left.

Got on my bike and headed over to my alltime favoritest radio station, KXCI. Needed to pick up some CDs to audition. I hadn’t done that lately.

There was where I ran into the co-organizer of Tucson Green Drinks. Apparently, she had some sort of business to conduct with KXCI. I told her about the lack of space available — and the lack of attendees — over at the restaurant.

Well, that was the spark that lit her fuse and she went off like a rocket. Quite an impressive rant was launched about my unhappiness over recent Green Drinks locations, and why didn’t I just take the whole thing over and organize it, et cetera, and so forth, and I picked up and left the KXCI building. Not without the lone staff member on duty bidding me a cheerful goodbye.

As for Green Drinks, I don’t know how things are in other areas, but in Tucson, the sustainable builders and the green real estate agents aren’t flocking to it anymore. It’s circling the drain.

As for me, I got on my bike and rode a little circuit around central Tucson. Then I went home and poured a nice drink of water to go with my dinner.

Comment by 2banana
2010-04-01 17:12:32

And people think tea parties are nuts…

Comment by michael
2010-04-01 11:53:28


Comment by Doug
2010-04-01 11:54:34

I don’t think you can generalize about all homes built in the 2000-2007 range. Many were compromised in quality, but it really depends on the zip code. The place I live was built around 2002 and is very high in quality materials.

Comment by octal77
2010-04-01 12:02:48

I wonder where the city builder inspectors
were during all of this?

I’m sure all applicable codes were rigidly enforced. {grimace}

Is it even thinkable that they were asleep or paid off? <;{

Tell me it ain’t so.

Comment by joeyinCalif
2010-04-01 12:21:49

People must be paid for there to be any hope they will do a good job. It’s not necessary to pay them to do a crappy job.

Comment by exeter
2010-04-01 12:49:39

Relating to Octals post above…

I feel obligated to comment considering construction management/contract administration is my stock in trade. The fundamental issue with residential construction is the fact that *nobody is watching*. The expertise at city and village bldg depts is very limited and besides…. they aren’t paid to be on site 8 hours a day. There is no architect/engineering representiation on site and in the case of developments, there is no owner(yet). Much like Wall St, nobody is there to hold someone, anyone responsible for defective and non-conforming work.

I’ve driven around developments where materials are getting delivered. RCP pipe rolled off the truck instead of picked off, chipped bells and spigots, cracked pipe, backfilling pipe trench with boulders, SDR pipe laying out in the sun for weeks, running out of concrete in the middle of wall placements(cold joints), formwork blowing out because whalers take an extra hour to install, etc. Alot of small contractors (most if not all residential guys are small contractors) are take the money and run people. No accountability, just get in-get out as quickly as possible.

I have to say that once you’re out of the ground, it’s all down hill and the cost of the work gets cheaper. It’s what’s in the ground that is the high dollar cost work and determines the ease of construction once out of the ground. When you see evidence of differential settlement (vertical cracks anywhere on any floor), you’ll know a structural defect will be found somewhere below. Wows and bows in gyp board and other architectural and finish systems are relatively easy to fix.

Comment by X-GSfixr
2010-04-01 14:24:12

I’ve always wondered how it would be received by residential contractors, if you wrote up a very specific set of specifications for a house……like thickness of the concrete in basement floors, good windows vs. crappy windows, plywood instead of OSB, copper instead of plastic, etc.

To be verified by a QC inspector that you are paying.

My experience is that if a contract isn’t specific, the contractor will cut corners wherever they can. Not such a big deal with carpet or faucets, but the stuff you never see until it breaks.

Comment by Pondering the Mess
2010-04-02 09:33:49

Alot of small contractors (most if not all residential guys are small contractors) are take the money and run people. No accountability, just get in-get out as quickly as possible. ”

I think that sums up the entire Bubble Economy in which we live.

Comment by JackO
2010-04-01 13:35:21

None of this is new! It has been going on for years. I was a Real Estate Appraiser for Cal Vet home loans from 1954 to 1972, and during that time, while I was also a fee appraiser for FHA, you would find it difficult to believe the poor quality of the work that I would see in the State of California.
Turned down, rejected , about 1500 homes in Southern California because the concrete slabs were 2″ instead of the nominal 4″, and got away with it. We would require core samples of poured slabs!
Did a FHA house in San Jose, in 1970, where I had to call in the FHA supervisor, and the building inspectors supervisor in San Jose, because the house I was looking at, final inspection, was so badly framed.
Another home there, the foundation wall in the garage, had a 4 inch slope from to back , 20′ and they had packed the sills with 4″ of grout to get the wall level.
Another KB construction , on adobe , had post and beam subfloor , and when I went in the front door there was a 2″ gap under the adjacent wall to the front entry. Another entire group of homes rejected.
Home in Santa Rosa, had ungraded lumber in all of the horizontal stress bearing beams.

It was nice to work for CalVet as they backed up the inspectors and the appraisers.

OK, enough of that!

Problem lies in , not the inspectors, but in the politicos that pay the inspectors. They don’t want the building stopped, they don’t want the builders to spend more money, they want happy builders, not upset builders.

LA had the best building codes, and enforcement in the areas I worked in. FHA had the best details for construction methods, and it is a crime that that has all disappeared.

Basis tenet of appraising and inspecting. Better building techniques mean that there is more money to be made by the builders , as it simply means cheaper methods of building, not better quality.


Comment by oxide
2010-04-01 16:05:15

Thank you for this new information!!

Comment by ET-Chicago
2010-04-01 18:48:33

Great comment w/ a lot of detail.

Is it comforting or disturbing to find out this stuff has been going on forever …?

Comment by palmetto
2010-04-01 14:39:39

“A proposal to complete the second phase of the Mountain Ridge condominium complex has some downhill residents concerned about an increase in water run-off.”

My sis lives in one of the outlying towns in Fairfield County, Connecticut, and it is not uncommon for homes downhill of development, or even just downhill of higher ground, to have problems with runoff. It seems to be a big issue up there. You want to be on higher ground in these areas.

Comment by Dave
2010-04-02 00:24:24

My day job is in the engineering field…and I once went on an as-built inspection of a project we did the civil design for.

The finished product was a complete mess…in downtown Huntington Beach, CA. Half a million dollar condos with construction defects everywhere you looked. A typical “boner” on these projects was obvious in the tile on the fireplace.

Tiles that didn’t stick…fell out and were put back with wood screws.

The cause? Day labor, trained for one specific task because they had no skill set to speak of. They got shown how to do one thing, and they did it all day. Badly.

Comment by Pondering the Mess
2010-04-02 09:37:08

Ah, what Amerika has come to… illegals who can’t communicate with us or even install tiles correctly building crummy houses so other people can overpay for them so that still more people can get rich by swapping toxic loans as they destroy the economy.


Comment by renzo
2010-04-02 02:56:01

I can remember watching oceanfront condos being built here in Central East Coast Florida during periods of heavy surf and onshore winds. When conditions are like that, one’s car sparkles with the daily growth of salt crystals. I can wash my car and within an hour it will be coated with salt water from the heavy mist in the air. Piles of rebar sat around construction sites during these conditions soaking in the brew and rebar protruding from each ongoing building was also being constantly coated with this heavy salt air before the concrete was poured. It’s no wonder that concrete renovation is one of the booming businesses here. Once the rebar starts rusting and expanding, cracking the concrete, the bandaid is to jackhammer all cracked concrete away from the rusting rebar before it is treated and new concrete poured. These projects can take up to 3 years on larger buildings while the owners are subjected to the noise of jackhammers every day, construction crews crawling all over their balconies and pools covered with tarps against the concrete dust. Expensive, too. Not all buildings have the same level of issues. Sort of the luck of the draw, whether these conditions existed during construction. All other things being equal, a building whose shell went up during the calm summer months probably will be less prone to issues.

Comment by reuven
2010-04-03 07:46:10

People were talking about this here even before the bubble burst! I think it’s safe to say that, especially a few years from now, people will know to avoid buying used houses build from 2001-2009. That is if they’re still standing!

Comment by Professor Bear
2010-04-03 08:05:02

The shoddy construction of crappy McMansion tract home developments is a natural but largely untold consequence of the Fed’s “bubble and burn” approach to stimulating economic growth. The real wealth costs due to a protracted churn of financial instability is one of the great stories of the Greenspan bubble era. I look forward to reading about it over the course of the next several decades. I expect the Fed to forever maintain their no mea culpa stance going forward.

Comment by Professor Bear
2010-04-03 13:49:11

Thanks a lot, China.

The LA Times
Consumers told to gut Chinese-drywall homes
Wallboard, wiring, sprinkler systems — all of it should go, two federal agencies say.
April 02, 2010|By Alana Semuels

Homeowners who may have hazardous Chinese drywall in their homes should remove it, two government agencies said Friday, in effect advising thousands of people from Florida to California to gut their homes.

Consumers should remove “all possible problem drywall” and replace their electrical wiring, sprinkler systems, smoke alarms and carbon monoxide alarms, according to new guidelines issued Friday by the Consumer Product Safety Commission and the Department of Housing and Urban Development.

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