The Housing Bubble

From the weekend topic suggestions thread, I posed this question: “In each region I posted on this past week, I found references to the expiration of the tax credit for buying houses, and how that would result in lower comparable sales numbers. Are we entering the post-tax credit double dip in housing?”

A reply, “I think we are entering the let’s-get-real-the-RE-fantasy-has-ended-and-the-FBs-are-really-screwed dip.”

Another said, “I did see something posted on line about a “double dip” recession, but I didn’t even bother to click on it, I just laughed. Wasn’t aware we’d come out of the first “recession”, if you could call it that. What we are looking at, IMO, is massive failure of global and national systems, across the boards. Housing is just a part of that, added to failed wars, failed education, failed legal systems, failed political parties, failed legislation, failed immigration policies, failed economic policies, failed products, failed energy policies,etc. I think there is massive systemic failure, across the boards, nationally and internationally.”

A reply, “I agree with you. There is massive systemic failure. We probably disagree on why that is, but I do think it leads to a good topic as you suggest. There’s “Where do we go from here?” in a political sense/as a country. I think it’d be interested to talk about it in a more individual sense.”

One said, “The breakdown of government was exactly that — the breaking down of governing. Governing includes, but is not limited to:

1. Regulating the heck out of corporations who take advantage of human needs.
2. Breaking up monopolies before they become too-big-to-fail.
3. Ending the public/private partnerships which coporations use to rob the taxpayers and enrich themselves.

In other words, if you want to break down the breakdown of government, you need to restore government. See how that works?”

One replied, “You’re assuming the failure is simply a result of the government not effectively regulating private entities. Failed education. Failed foreign policy. Failed wars. Failed regulating agencies (they simply didn’t do their job)…”

“Failure of government is simply failure to deliver on its promises and responsibilities. If it can’t deliver on what it’s promised to do right now, why would one expect it could deliver on EVEN MORE? A strong, centralized government simply isn’t capable of doing all the things the citizens of this country demand. And when it fails, for some reason the citizens demand even more.”

“Think if you were running a company…if an employee failed in their daily tasks, would you give them additional, more important tasks to do as well? Or would you fire them/lighten their load to re-evaluate what they really were capable of delivering on?”

And finally, “The robo-signing debacle and ensuing slowdown in foreclosures has muddied the picture a bit. But simple consideration of an ongoing high rate of mortgage defaults (the front-end of the foreclosure process) coupled with a slowdown of NODs, evictions, etc (the back-end) suggests a case of constipation which will eventually produce a larger-than-expected dump of for-sale inventory.”

The Monterey County Weekly. “Bankruptcy court in Salinas is a decidedly unceremonious place. The courtroom offers no indication from the outside that it’s federal space. But even for its informal nature, the courtroom is tense. Debtors who have filed for bankruptcy appear unsure whether to dress up or down, mixing casual attire with a pair of heels or a button-down shirt. The room is hushed but for the chatter of familiar attorneys sharing new bankruptcy statistics, or those who advise their clients in whispers about what to say when they are called up to the stand by the bankruptcy trustee.”

“After Shannon and Steve couldn’t find a buyer for their Seaside home in late 2007, they declared bankruptcy in 2008 to stay up to date on mortgage payments, planning to wait out the recession. This month, they received foreclosure notification after the bank denied a modification to lower their monthly payments on their second mortgage. (Bankruptcy filings are public record, but the Weekly agreed to use only first names for some who shared their stories.)”


“The couple shed some $60,000 of credit card debt in their Chapter 13 bankruptcy, which allows debtors to pay back part of what they owe to keep some property. They used that credit card for a major addition to the house they bought for $300,000 in 2003. Steve, a carpenter, spent weekends adding a second floor and backyard, doing what he says is $170,000 worth of labor himself. They planned to sell the house, hoping to make $300,000 for themselves and their adopted infant daughter. The adoption cost them $18,000 – and despite their financial plight, they hope to start the process anew this year to adopt a second child.
”

“But even bankruptcy didn’t save their house, despite what they describe as conservative spending habits. ‘With the equity we pulled out, we didn’t buy a Hummer. We adopted a baby,’ says Steve, 31. ‘We bought a home that we could comfortably afford. Our mistake was the addition, but we didn’t know it was a mistake at the time.’”


“Carlos filed bankruptcy this month, three years after defaulting on his East Salinas house. As a car salesman for Ford, his commission-based income fell by more than half in 2008 to $30,000. ‘I wasn’t making enough money to pay the mortgage,’ he says. His parents, sister, girlfriend and newborn daughter all lived in the home he bought for $739,000 in 2006, when business was good – and when stated-income loans, which didn’t require applicants like Carlos, then 21, to prove they made enough money to afford a huge mortgage, flowed like water.
”

“But still saddled with debt obligations, ‘I was depending on my credit cards,’ Carlos says. To recover the $45,000 he owed, the credit card company began garnishing wages from his new job with Verizon. With 30 percent being withdrawn from each paycheck, Carlos went bankrupt. ‘I had no other choice.’” 


“Salinas attorney Magnolia Zarraga has found bankruptcy to be surprisingly rewarding. ‘You truly are helping people to move forward,’ she says. 
Zarraga takes on about three pro bono cases a year, and is partnering with Legal Services for Seniors to establish a legal clinic for seniors who need to declare bankruptcy. ‘It used to be loss of job or medical debt were the big reasons [for bankruptcy],’ Zarraga says. ‘Now the majority of cases I’m seeing are foreclosures.’” 


“‘It’s the bottom, when they’re in front of me. They perceive this as the worst,’ says Marc Del Piero, one of three Chapter 7 trustees assigned to Monterey County residents. ‘In truth, it’s the beginning of the rest of their lives. The opportunity to have their financial obligations absolved is the opportunity to restore hope to people who have lost all hope.’”