More Homeowners Behind On Payments: Sacramento
The Sacramento Bee has this update on area defaults. “A new survey released Tuesday confirms what steadily has become more obvious to local real estate experts: More homeowners in the four-county Sacramento region are drifting toward foreclosure. That means the area ranked higher than every other California metro area except neighboring Stockton-Lodi.”
“‘We’re not seeing a lot of people at that foreclosure stage yet, but we’re sure seeing a lot of people who are headed that way,’ said Jeff Tarbell, president of Sacramento-based ATM Mortgage. Tarbell said that many people can’t afford both rising mortgage payments and their cars, credit cards and other amenities. ‘We’re starting to see the beginning stages of a little panic about not controlling your spending,’ he said.”
“After a five-year boom that saw many homes double or more in value, the Sacramento-area housing market has cooled significantly. Sale prices of existing homes remain below their 2005 peaks in all four counties, while inventory of homes on the market climbed to 11,344 last month.”
“Housing experts said some level of foreclosure activity at 2,514 homes in the four-county area during January, February and March likely stems from households struggling with adjustables. Last year, about three-fourths of Sacramento homebuyers used adjustables, and two-thirds of buyers were still using them in March.”
“‘The difference between a payment that’s $1,700 a month and an adjustment that brings it up to $300 more is huge,’ said Linda Bennett, a real estate agent in Sacramento. Agents are seeing more homes listed by people who are struggling with payments, she said.”
“It’s a similar story in the Stockton-Lodi metro area, which has swelled in recent years with Bay Area commuters priced out of their hometowns. ‘It’s not like it’s some adverse turn in the economy,’ said Sean Snaith, at the University of the Pacific. Snaith attributed the region’s foreclosure activity to ‘people getting caught in transition’ as rising interest rates hike their monthly payments.”
“‘I’m not sure what else it could be at this point,’ he said. ‘It’s not massive declines in jobs.’”
A report on what’s booming. “The California Department of Real Estate announced today that there are about 500,000 real estate licensees in the state, which means that one in every 52 adults in California has a real estate license.”
“In 2005, the number of licensees grew 14 percent over the previous year to a then-record 476,000 licensees. That total represented a 57 percent increase compared to the number of California real estate licensees in 2000. The number of licensees reached 495,000 as of April 2006.”
“To accommodate the demand for licenses, the department has conducted several ‘mega-exams’ in which thousands of applicants took the real estate license examination, according to the announcement.”
“Jeff Davi, commissioner for the Department of Real Estate, said in a statement, ‘The level of interest in real estate licensure is unprecedented. With so many new licensees, the DRE has also increased its consumer protection efforts.’”
A related report:
‘Real estate sales dropped 15 percent in first-quarter 2006 and the listing inventory grew 65 percent compared to the same period last year in the San Francisco Bay Area, according to a report released this week by Prudential California Realty.’
if you have a california real estate, and you know who you are if you do, don’t you have to work for a broker and pay a yearly fee of $300 or so to NAR?
500,000 times $300.00 is a lot of money going to NAR! I wonder what they pay their economist David Lereah.
I am a realtor. However after this year I will not be renewing my subscription. You can still get access to the MLS via a monthly fee or use your broker’s access. No need to have your own. You can be a real estate agent without the realtor designation. Also I am shocked to see so many realtor trumpeting the it is still a good time to buy BS. I have clients who wants to buy. I always advised them that we can go slowly on the process to find the house they really want at prices they are comfortable with. Also I advised them that they will need to live in this house for the next 10 years or so to see any real appreciation. None of the get rich quick schemem being pushed by other realtors. I can live on $3000/month in income so I don’t need to push these people to buy anything. Having no debts helps. Also I am a renter. No need to carry a mortgage at this time.
That 150 million is just California! Holy Snikes!!! You can be sure they pay David Lereah alot of money to keep his frigen mouth shut about what is really going on.
Your buyer is in good hand!
good to see a honest real estate agent, may you prosper on your honesty
…”said Jeff Tarbell, president of Sacramento-based ATM Mortgage”
ATM Mortgate? Awesomely appropriate name. I guess they’re in competition with my new ventures: FB Mortgage and Noob RE Agency (and used car dealership)!
LMAO!
Darn, you beat me to it!
Beat me too! Of course when I hear ATM in this context there is a second very bad meaning…and that might be what the borrowers start feeling & tasting.
Check out this name
http://www.247negamloans.com/
That 24-7 Neg-Am Loan site is just shocking to me. In no other area of financial services could someone make those kinds of claims and not get arrested or sued into oblivion. If you’re wondering whether there’s a lot of pain coming, look no further than sites like this.
There should be a deathwatch for knuckleheads like this.
Both business and homicide from former clients.
“households struggling with adjustables”
Well, well, well… you know that the adjustments aren’t really that much, maybe $250 per month on an average house. What this means is that those households were living paycheck to paycheck to begin with and also shows they didn’t have any savings.
I think this is the tip of the iceberg. Who woulda thunk it ? Oh, I guess we did !
House prices haven’t moved down that much . Foreclosures will change that. I am shocked to hear of this so early after the market peak. I expected it, but not so quickly. These people must have been extended pretty far and had no savings.
This is going to be one nasty bubble pop.
Well,
Not so surprising. I know the orthodoxy a few years back was that overleveraging yourself was a great way to make money in a rising market. Good in theory, but life gets in the way.
I know we took out a fixed mortgage when we arrived in our overpriced town, expecting my wife to get a job, but decided to keep the upper loan limit to payments I could cover alone, just in case. That decision saved my A#$! She had a baby instead and did not go back to work for years. I wouldn’t change a thing, but after sailing with water at the gunnels for a long time, I can appreciate how easy it is to get in to deep with overheated housing and limited income. Had a good wave come, we would have been sunk. If you couple all that with serious consumer debt, it is a bomb with a short fuse, even without serious mortgage jumps.
Truth is the people hurting in the Ca. Central Valley are often poorly educated folks or poor saps that have to commute into the Bay Area. Poor saps. I do hope the flippers roast, but I feel for the other folks…
Those chumps you feel sorry for are responsible for the furious runup… and they saw $$$$$$ signs in their eyes. I for one, can’t feel sorry for anyone that gets hosed because of poor financial decisions. If someone gets seriously sick… that’s another story. It’ll be 1 in 10,000 that get sick. The rest were too stupid to pay attention. We should feel sorry for ourselves because guess what??? The US Taxpayers will end up holding the bag and the FBs won’t have enough $$$$ to pay any taxes…
Amen, brother. It’s like feeling sorry for a dog that runs out into the street to bite a tire, and gets run over. Sad, but whose fault is it? People who have taken on irresponsible levels of debt becuause they just “had” to buy (driving the prices out of reach for more prudent would-be homeowners) get no sympathy from me.
Thanks I needed that. Mercy not allowed here….
I meant only to say that even with pretty good sense, unforeseen things happen. I guess the prudent know that. Perhaps if enough folks get burned, the firehose of bad advice will dry up…what am I saying..these people are swine…
I loved the dog analogy-almost as good as the one about Wile E. Coyote!
Not everyone shares the kind of callous philosophy described by the above posts. For those who are greedy and get burned its all good but anyone who has been around the block enough knows you can make all the right (smart) moves and still get screwed royally. To claim otherwise is naive. I agree with your outlook Mr. Fester.
“you can make all the right (smart) moves and still get screwed royally”
Right. But what we’re talking about are “households struggling with adjustables”. Anyone who got an adjustable mortgage while rates were at record lows and prices were at record highs was hardly making “the right (smart) moves”. Where I come from, we call that “screwing YOURSELF”.
Abstract
In 2001, 1.458 million American families filed for
bankruptcy. To investigate medical contributors to bankruptcy we
surveyed 1771 personal bankruptcy filers in five Federal courts,
and subsequently completed in-depth interviews with 931 of them.
About half of debtors cited medical causes, indicating that
between 1.850 and 2.227 million Americans (filers plus
dependents) experienced medical bankruptcy. Among individuals
whose illness led to bankruptcy, out-of-pocket costs averaged
$11,854 since the start of illness; 75.7% had insurance at the
onset of illness. Medical debtors were 42% more likely than
other debtors to experience lapses in coverage. Even middle
class, insured families often fall prey to financial catastrophe
when sick.
http://tinyurl.com/omvx9
sometimes reality has a nasty way of intruding on our assumptions
I’m sure there are quite a few people who filed BK due to medical bills. But I still call B.S. on that survey. A far more likely scenerio was that they were trying to place the blame to anything other than themselves in that they were spending like a drunken sailors. I personally know 12 people who have filed…that I am 100% sure of. I know others that I suspect. Exactly 1 out of twelve was for medical bills and that was a 45 year old that had plenty of money to go on fishing trips but none for health insurance. Go figure. Of the remaining 11 only one was really justified. His business partner ran off with the bank account and left the bills behind. And he STILL tried to make a go of it to pay everyone off. How many people actually do that today? The other 10-every last one of them lived high on the credit cards. No spending restraint whatsoever. And after BK they STILL have no self control. I have zero sympathy for all of those clowns out there with $$$ in their eyes who spent 5,6,7,8,9 times their income on a house they obviously couldn’t afford. How damned hard is it to multiply ones income by three to figure out how much one can reasonably afford to spend on a house? Not very hard, is it?
you want to hear god laugh? tell him your plans….
Some asking prices here in Wash, DC area appear to be 20% less than 05 peak. Other sellers though have n’t a clue.
They really need to teach personal finance in high school and make it mandatory to pass before graduating. Poor budgeting if just a $ 300 increase in payments makes someone have to sell and be strapped for funds. You take all those other classes in school that aren’t as useful or useless. The educational system is a national disgrace.
They are starting to in Virginia, from what I read in the Washington Post the other day.
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/23/AR2006052301773.html
crap, that’s not the article, just a comment. well, i’m sure someone else with more time can find it.
I am not sure if the logic that better education will yield better borrowing decisions holds water. The areas where we are reading about about these questionable decisions tend to be the better educated areas in the country i.e. San Francisco, Seattle etc. If it were primarily an issue of education I would think we would here more from Mississippi, Alabama etc. In my view, it is more a question of whether one values money in a convervative or liberal way.
IJ. If you throw food at hamsters they will just make more hamsters. If you throw money at people, as a group, they will find a way to spend it.
Education could change the way people think about money. But it is a tough job.
‘Educated’ need not necessarily edcuated in _everything_. Education about money is from 2 sources - parents or the hard-knock school. Most of the educated have no clue about money, because they never got educated about money through either.
Having educated parents, I think is a strike against kids learning about money. Educated parents -> well off parents -> kids needs always met.
So less chance of learning at the hard knock school.
The problem has to do with being well-off, rather than being educated. Well off parents have to deliberately teach the kids about money and _scarcity_.
In Miss, Alabama etc - the hard knock school is prevalent, at least by observing (misfortune of others). In well off enclaves, even that is absent.
I teach my kids about money. Earning in 6 figures this is a hard thing to do. At one time I had to chose between eating once, or not finishing college , so I’m kind of heard hearted. And I’m sure they’ll learn what is need and what is want.
But will my kids they teach their kids? I dont know. I dont have the heart to make them go hungry. As it is I dont want to repress their needs too much, that they go on a binge when they start earning. As they grow up I will try to instill that this is a skill that they need to pass down, just like manners and hygiene.
This is all quite unoriginal. Wesley (of the Wesleyan Church) pondered over it long ago. His problem was thus -
Religion breeds thrift and industry, which breeds wealth, which breeds luxury, which breeds decadence, which destroys religion.
The more it changes, the more it remains the same.
I have the same “problem.” How do I teach good financial sense to a child who comes from three generation of savers and will never be hungry or need clothing?
Maybe you juice their allowance for 6 months and then take it all away? How arbitrary and seemingly mean, but such is life.
The Richest Man in Babylon
There’s a missed step in your loop…
Religion breeds thrift and industry, which breeds wealth, which breeds luxury, which breeds decadence, which destroys religion, which destroys thrift and industry, which breeds poverty, which breeds suffering, which breeds religion.
“Religion” in this case being more along the lines of “humility”. I’m not a religious person.
Bubble mania’s aren’t about “education”
Even the most educted in finance and money buy the top and sell the bottom…Do you think the Dot com bubble was just high school drop outs? The emerging market melt -down now in progess are played by “the highest paid, brightest and most arrogant on the planet!”
ITs all phsycology fear and greed….and the only education for this is like someone posted “school of hard knocksand discipline”. We seem never to make the mistakes of our fathers but the errors of our grandfathers are another thing
Read the 4th Turning (don’t have the authors handy but perhaps Strausse?). It deals with this issue and is a pretty good read, talks about the generational changes and how each generation changes, in predictable ways, the generation it raises, predicts a depression this year as well if I remember correctly (it was written in 1995 as I recall). A search on yahoo should turn it up.
Great book. Authors are Strauss and Howe. Written in 1995. This book was so pivitol in my understanding of my own past and probable future that I never viewed life the same way again.
My parents were pretty big on not buying us anything over a certain price tag, except maybe for Christmas. So if we wanted something - like a Nintendo, back when that first hit American soil - we had to save up our paltry $5/week allowence… so at $200, that’s a lot of saving, as you can imagine.
Worked wonders for me. My brother, on the other hand, had too high a goal - he wanted a horse! So he saved for over a year and had close to $300 before saying, “Screw it, I can’t save that much, so what’s the point?” I’m sure that’s not the only reason he’s a spender/in credit-card debt now, but it’s an interesting anecdote nevertheless.
Agreed - there isn’t one part of the country that has a monopoly on stupid people, by a long shot. I grew up in Seattle in one of the more highly-regarded school districts. We had our fair share of Ivy-league-ers, but definitely that was a minority. I remember one day in 8th-grade a student who was picked at random by the teacher couldn’t find Seattle (or Washington State, or the USA, Mexico, or Canada) on the huge world map on the wall. These people probably represent a big number of the folks who only look at initial monthly payments as the primary criteria for evaluating a loan and who are contributing to the ever expanding bubble up there.
Idoubt education will temper the level of greed that’s been fueling a lot a this. If you’ve bought into the “real estate always goes up” argument, then you think an ARM/IO/100% loan isn’t risky because you’ll just use the house ATM to bail you out.
I agree that better education won’t lead to better decisions, especially when you are teaching a teenager. By the time that person gets to the point in their life they are buying a house, they will have forgotten the lessons.
Furthermore, how many of these house buyers have taken an economics class ? It doesn’t take an Einstein to realize that bubbles can’t continue forever. And yet they buy at the top of the market, at outrageous valuations. Somehow they always think “its different this time”. It doesn’t help that the media urges them on.
You said it. At the end that does good to EVERYONE. The bubble might not have reached this big with common people acting with caution and doing the math…
More education, especially in High School, won’t fix basic human greed and stupidity. The entire Baby Boomer/Gen X set faces a wrenching lesson in the virtues of frugality and not living beyond your means.
Re: teaching personal finance in highschool: I believe many “economists” started declaring it “the new economy” where the old rules didn’t apply. I believe we’ve discussed here before that even the well educated started to believe that. I know I’ve read many links to this blog that have stated that even other countries have stared on in disbelief as the American markets seemed to defy the fundamentals.
Yes, I have degrees from not one but two of the top ivy league schools, and yet I lost my shirt in the nasdaq bust. It’s the hard-knocks education that keeps me out of the real estate market, not the Harvard one.
Know a number of very bright people that went to Harvard. They have made numerous mistakes. A couple of them, too bright for their own good.
Have worked with several with Harvard credentials. Unfortunately more focus on bottom line than taking care of their co-workers’ futures. One did teach me a lifelong lesson that anything is negotiable, even if the offeror says it’s not. Seen it, been there, done that, will apply it to RE in the future.
Robin, your story reminds me of a resume I recently received for a position I’m trying to fill at work. Resume looked decent, but salary requirements in bold capital letters was about 35k more than I am willing to pay followed by “NON-NEGOTIABLE”. I told the recruiter two words: “I’ll pass”. A week later the recruiter comes back to me saying the candidate had changed his mind and would consider my upper limit for salary. Definitely gave me a good laugh for the day.
Anyone old enough to buy a house today is old enough to remember the last house price crash in the early 1990s. To believe that it was going to be different this time is simply willful ignorance.
But the house price crash of the early 1990s was local to a just a few markets (most areas only stagnated), and even in them lasted only a few years, with prices soon recovering and then going on to previously undreamed of highs. So in fact it acted to reinforce the belief that real estate is a sure thing in the long run — that as long as you’re not a “flipper” and are planning to stay in the house for five or more years, you can’t lose by buying. And therefore people have now bid prices up so high that in the future that won’t be so.
There should be a 12 step program for spendaholics.
1. We admitted we were powerless over spending money - that our lives had become unmanageable.
In addition to ARM adjustments, people have been racking up massive credit purchases and financing them by equity-mining their homes. Now that appreciation has decreased and the housing ATM no longer produces amounts they’ve come to expect, they can’t pay the bills.
“equity-mining”….first time I’ve come across that one. Nice.
“Strip mining”: Taking everything but the roof and walls and selling it all just before that house goes into foreclosure.
How about $3.50 a gallon gas for the SUV to make the 100 mile round trip daily to live in those over priced, over leveraged, adjustable rate homes. Who budgeted for another $200 for gas
when the took on the ARM???
“‘I’m not sure what else it could be at this point,’ he said. ‘It’s not massive declines in jobs.’”
Not yet, anyway.
Snaith is a perma-optimist on the housing market and economy in general, but even he may be cracking:
Despite a statewide economy that is continuing to grow at a healthy pace, University of the Pacific economist Sean Snaith pointed to “several little black clouds on the economic horizon, which individually should not bring the expansion to a halt, but if they gather together, they just might form the perfect storm.”
High energy costs and rising interest rates are working to put the brakes on the state economy, the director of Pacific’s Business Forecasting Center said.
“This deceleration should be slow and steady, but another sharp jump in energy prices or interest rates could send the economy into a tailspin,” Snaith said.
Strong words for Mr. Souffle.
Sacramento Land(ing) blog
I love the quote at the end: “Foreclosure is not a serious problem yet, though I expect it will be more down the road,” he said. “That will not be enough to break the economy, but it will hurt the slice of people who are exposed.”
Let’s see… slice of people exposed:
500,000 RE agents & brokers
900,000 construction workers
lots of people in foreclosure
Just a small slice.
Projects are getting scrapped right and left we should be hearing about the construction layoffs very soon.
how do you report accurate numbers on illegals that get paid under the table? not trying to be smarmy, just asking…
a ton of contractor work in nova/dc is done by illegals that are not paid on the books. i have no source except for my own eyes and what my friends tell me about the labor hired to do their add-ons, remodeling, landscaping, etc.
It is probably very widespread here in Scal for a lot of Construction work to be done “off the books”. A general contractor could have dozen’s of subcontactors doing a single project. All these Subcontactors are Idependent contractors,small business DBA’s. Inturn they will hire out gangs of illegal construction workers off the street and pay them cash. If anyone has operated as an I/C it will be apparant how easy it is to pay hired help under the table. Often an illegal alien himself will set up as an I/C Small business owner using of course fake work identity documents, fake S.S number and get a Federal ein no. He can then hire out as many illegal workers as he can transport in his pickup to the job site and since the alien I/C owner/operator is the only documented contractor on the job he can of course pay his crew all cash.
I have heard that home owners doing remodeling are the biggest employers of I/C illegal construction workers in Scal. LA times had a story on this recently.
I have two family members in HVAC in Northern San Diego.
They both have been out of work for 4 months now.
One works residential and the other works Public Works prevailing wage jobs.
There is no hope for continued HVAC employment in the near future.
More than scary.
Oh, it *was* 940,000 construction workers. Its dropping quick. KB, Dr. Horton, and others have warned their office people locally so that they have a chance to get out before massive layoffs.
Also, don’t forget California has a disproportionate share of the mortgage business. While some of this won’t go away (maintenance), the run up in origination jobs is going to go “poof!”
IIRC, 40% of all new jobs in california were the while collar jobs that support real estate transactions (title insurance, mortgages, realtors, etc.) When the transactions drop… this state will hurt for jobs.
I’m watching the “Starbucks index.” As soon as the coffee shops start reporting a drop in same store sales, you know these people are hurting. Why? Coffee is the easiest discretionary expense to reduce (go from starbucks to Mr. Coffee at home).
Neil
What city are you in Neil?
I live near LAX, but I’m consulting out in Lancaster until August (reverse commute). Its the builders out in Lancaster that are warning right now.
Neil,
You are all wet. Anyone who thinks that Starbucks coffee is the easiest discretionary expense to reduce does not know my wife. And there is no such thing as a reverse commute in Los Angeles!
Starbucks Index…I like it. My own canary in the coal mine index is the short term airport parking. I work for an airline and fly out of Phoenix. The airport finished a major addition to the short term parking garage in 2004 and it added something like 5000 covered spaces. I saw yesterday in a USA Today article that the airport now has over 9,500 covered short term spaces. Right after completion the place was deserted and finding space was a joke. The airport gave airline employees a great deal and for 18 months it was a great benefit to just park and go straight to my plane. But sometime around the beginning of 2005 I noticed the garage becoming increasingly full. Last summer it was jammed packed every day; nothing but shiny new SUVs, Mercedes, BMWs, and more than a few cars with the “R” Realtor logo on the bumper. Last August the parking authority summarily booted all employees because, as they put it, the garage is now reaching peak capacity far more than antiicpated by management. Gotta be the housing bubble I thought to myself. The home ATM is allowing all kinds of consumption never before possible. Plus, our planes have been packed and I cannot figure out how this is possible. Oil is at 70 bucks, the home ATM adjustable rate mtgs are going up, gas is through the roof…yet the parking garage is packed and so are the planes! WTF??? But I do believe the gig is just about up. Wait for another three months, September-ish, when all those houses are still sitting from the previous winter, spring and summer. It’s going to be bloody in Phoenix and I think the parking garage at the Phoenix airport will be yet another canary in the coal mine indicating that the economic empire built on easy credit is imploding.
I like your meter too. As an aviation fan… unfortuntely, I see business dropping.
Just one nitpick… I think the floor will drop in October.
I agree, pretty soon the ARM ATM goes dry.
Anyone want to bet that fancy used SUV’s are pretty cheap next year?
Neil
Yep, I will be targeting a pickup later this Summer. That will represent a pretty good buying opportunity.
A different kind canary here in Honolulu. Driving to work this morning passing downtown Waikiki, low and behold a Mercedes 500 that sounded like it was in dire need of auto maintenance and repairs in addition to the rear end being weighed down by a bunch of stuff protruding out of the trunk. I wondered if it would make the next stop light.
I was about to offer help when low and behold the stuff in the trunk was the largest collection of “FOR SALE” signs that I have ever seen in Hawaii, Lived here for 13 years.
I gentleman in the Mercedes 500 did not look happy. Needless to say I moved over several lanes as not to make eye contact and made my way to work. A happy renter in Honolulu not making my living in Real Estate.
Not sure coffe will be that easy to give up. I’ve always thought the XM/Sirius radio promo subscriptions they gave away with the suv purchases would be the first thing that lapsed as money got tight. The radio stocks have been trending down since the end of 05 which is when I think the market hit the top.
i dont know how easy coffee is to reduce. those people are ADDICTED FANATICS.
Housing experts said some level of foreclosure activity at 2,514 homes in the four-county area during January, February and March likely stems from households struggling with adjustables.
This shouldn’t surprise anyone considering Sacramento 8:1 price to salary ratio.
Here’s one for you:
Casket Factory, Left for Dead in Seattle, Reborn in Realty Boom
Sounds like a great place for speculating spectres!
I don’t think there will be much downward pressure on prices anywhere until the comps start coming in from the foreclosures.
I’d think that just two or three low closing prices per 100 homes in a neighborhood will screw the comps. We don’t need to get to foreclosure for that to happen — the less-stupid of the overextended (who can) will bail before foreclosure. These appraisers are looking out for their hides now and I’ll bet far fewer of them are intimidated, by the lenders, into over-appraising.
I’ve actually looked at this scenario a bit on my blog:
Flipper Inventory & Flippers in Trouble
Right now, the median profit margin flippers are asking for in Sac is 18% over previous sale. The flipper price reduction data shows that flippers are more willing than the market to make a price reduction, but the magnitude of the reduction is way less than the market.
In other words, don’t expect the flippers to drive down the market below previous-sale-price levels. You’ll have to look to the banks to do that.
That could well be, Max, but I’d have thought flippers will gauge their probability of success and, if necessary, take a net loss and play another day. Same as the flippers-to-be around here in Florida who walk away from increasingly large deposits rather than close on a dropping property. Some will try to hold out and rent, but those don’t strike me as the brilliant portion of the bunch.
Try to find out what the flipper paid for the house (title company, country recorder, realtor). Offer the over extended flipper his purchase price plus 3% for the realtors commission + plus 2% for closing costs + $2,000 for wwalking away money. I am look at a house built in 2005 listed for $350,000, purchased for $265,000 in 11/04 and has been on the market 112 days Vacant, with out of state owner. This has got to be one motivated seller.
Also remember that a flipper will not sell the house for less than they purchased it (unless they took out a home equity loan from the house they live in). This is because most mortgages are non-recognizant. They can just throw the keys on the bankers desk. Of course, their credit rating goes to hell, and they lose the deposit, but they won’t have to pay extra to get out of their loan.
But I thought everybody wanted to live in Sacramento/Stockton/Lodi?
Seriously, some of the prices in these cities are unbelievable. Yes, many people want to live in California (*actually, they want to live in the TV depiction of California, not the real California). But when they say that they really mean that they want to live in SF, LA, SD or surrounding metro areas. They don’t want to live in Sacramento/Stockton/Lodi!!! I’m sure those places are nice, but surely they’re no more desirable and interesting than say, Little Rock Arkansas, are they? (not to insult any of those cities… they all seem plain and vanilla and forgettable, nothing wrong with that)
The second/third tier Californian cities (Sacramento, Bakersfield, Fesno, Lodi, etc) were the first victoms of the equity locusts from the major Cali markets… later replaced by LV and PHX and Seattle and Portland, and now lately I’m seeing a lot of “investor” activity in Salt Lake City and Albequerque and Dallas and Boise/Coeur d’Alene.
this will not end well. I can think of very few places that are as of yet untouched… sad.
clouseau
Actually the “first tier” cities are long out of favor. SF, LA, SD are too urbanized and increasingly resemble traditional cities. It is their second tier cities that attract the California Dreamers. What you are calling second/third tier are actually 3rd/4th tier. The pile in California is exceptionally high and deep.
Your point is well-made. Sacramento/Lodi/Stockton are midwestern in culture and feel, and very similar in weather (o.k. a little less snow). But the income tax in California is another downside no one is talking about.
Everyone wants to live here. Just not at the same time.
https://www.prosper.com/public/lend/listing.aspx?listingID=13292
__________________________________________
Looks like our realtor will have to go back to the drawing board, er… strip club to get her $5,000.00 loan.
lol
I’m confused. She appears to be offering 20%+ per annum to borrow $5,000, but doesn’t want to tap the equity she says that she has in her home. Are HELOCs over 20%? If not, why would she be dealing with loan sharks?
Expecting depreciation I guess.
Yup, whether she knows it or not.
https://www.prosper.com/public/account/common/image_view.aspx?subject_type=0&object_id=32402&image_id=47581
lmfao!
This can’t be real… did she really paste her head onto a red “realtor” jacket. Who would give money to this lady?
Dude, she looks like a San Francisco homeless woman with crap photoshop skills.
That’s no lady! That’s a MAN, baby!
Does anyone remember the guy last year in Sacramento who took out something like 100K from his house to open a bar/pool room on his house? I thought it was incredible at the time…it was a good article, I wonder how his decision to do that is looking to him now…
Yes, sounds very familiar. If I recall, there were photos.
Yep, they had some photos, and I think his wife was against it. I remember thinking at the time that this is a train wreck in the making.
Yep, $100,000 taken out in equity to build a bar to watch baseball from.
http://tinyurl.com/f7bky
“Bill Arnold and his wife, Jan, relax in their backyard patio after work. Jan was nervous about borrowing against their equity to build the patio, but Bill said the decision was obvious.”
Obvious?? Obviously we need to cash out our equity while we still have it!! Mind-boggling.
Obvious after having about 5 beers. At least with a RV you can live in it.
$100K to watch baseball. Hmm. Well, if it’s worth to him extra $600-700 dead presidents a months, I say go for it. I wouldn’t, but that’s just me.
Try here
During baseball season, Bill Arnold sometimes watches his beloved Dodgers from a private luxury box: the backyard of his Rocklin home. Covered patio, 32-inch television, beer tap, grill and swimming pool - all paid for by borrowing $100,000 against his ever-increasing home equity. “We continue to be amazed about the value of our house,” Arnold says.
Sacramento Land(ing) blog
I’ve been to Rocklin for baseball games, it’s ungodly hot to be sitting outside even with a covered Patio. One depressing identical cookie cutter subdivsion after another. At least the beer tap will come in handy when he realizes he just lost $100K in equity and is driven to drink.
I just purchased a 37-inch TV for $1800 (first TV in ten years.. it’s a lot… but forgive me!) And then including a pool is what? $40K? A grill $4K? I don’t know how he spent that much money! That’s a lot of beer.
!!!!!!!!!!!! CASKET CONDO’s FOR EVERYBODY !!!!!!!!!!!
The North Coast Casket Factory, a red timber building used to assemble and store caskets for 71 years, was scheduled for demolition until the Port of Everett decided to seek bids from developers. Now the factory may become meeting space or artists’ living-and-working lofts as part of a $300 million, 600- condominium redevelopment of the Everett waterfront, 29 miles (47 kilometers) from Seattle
I had to share this one with everyone, this is what 800K will get you here in San Diego. I went to this open house the first day that it was listed. The owner was acting as the agent, bought it back in 08/05 for 630K. This guy was so smug and confident it was sickening. I was thinking about offering him 550K for it just to piss him off. It really is not even worth that though. He wished us good luck after we walked out the door. He is the one that is going to need it though.
http://www.listingssandiego.com/search/homeview.asp?id=1517745&p3=-1&ix=13
They have been doing that same type of thing here in Grand Rapids, Michigan. Except here they convert the old furniture factories into these yuppie developments. We used to be the furniture capital of the US way back, but now our leading employers are businesses for taking care of sick people followed by educating the kids and lending money . Nothing wrong with these industries per say, but leading industries? Unfortunately, I believe my city is just a small example of what is going on in the economy at large.
Before the stupid speculation that drove this bubble to insanity, I was considering a transfer from Bay area to Sac (Fall 2000). Looked at homes in Elk Grove (new $130K up), and seeing lists of condos for around $75K. Now, same ones would be probably $500K for home and $350K or so for condos. Sure wish had the crystal ball then. Wages didn’t go up 400%, so this foreclosure stuff is highly expected. No sympathy for the idiots.
So this SD chick begging for money used to peddle herself in the seedy area of downtown SD to marines? FROM HER OWN STATEMENT. My credit issues are from almost 6 years ago, when I got lay off - before getting into real estate, but they are still affecting my credit rating
Too old and used to appear in the ‘gentlemens clubs’ in SD. Face now looks like a prune and stressed. Wouldn’t hire her to be my realtor.
And look at this picture , both of them appear to have her head photoshopped on. I guess to make her look more “business-savvy”? LOL
She looks like she should be giving $20 hand jobs in alley ways.
She is the one that wants to borrow $5000 from a previous post.
OMG! Too funny!
It is amazing how in the midst unprecedented prosperity people are borrowing and spending their way to poverty. Even on the average income with a small house or apartment most Americans can live debt free in a manner in which kings of the past would be envious. There really is no excuse for all of this debt for any reason other than emergency medical.
Didn’t someone mention that new homes that are cancelled are not added back into inventory?
the only reason for this poverty insanity is greed and unrealistic expectations that people and society has led everyone to believe they have earned, deserve, or can’t live without (eg, McMansion, SUV or H2, big boat, expensive vacations, fine dining, clothes from Nordstroms etc). We could all do without those - modest living quarters, reliable (but used) vehicle, eat at home w/family - home cooked, vacation near where we live, modest clothing) and then live within our means. Nuts for most people.
Good post, Climber
Crispy&Cole. I take it you agree with my assessment? LOL
THIS IS AN EYE OPENER.
READ IT. READ IT. READ IT. READ IT.
SOMEONE SEND TO BEN TO POST IT ON TOP OF THE BLOG
http://www.moneyweek.com/file/10891/six-months-to-housing-hell.html
Not sure how credible a site that is, but the article did contain one absolute gem:
If you really needed to make ends meet while living in this so-called Housing Heaven, all you had to do was buy a vacation home, rental property, or second-home and proceed to “install your own ATM on the side of your financed house” with your bank’s help, of course. Who needs to work, when you can simply go to the bank and rob your own house? It’s easier than robbing the bank!
What great imagery: The bubble has caused millions of Americans to rob their own house. I planning on running this metaphor into the ground next week once I get back, so be prepared.
i liked this gem -
“In resort areas – given the number of days people actually use their second home – staying at the Ritz for $500 a night could be a much better deal. Do the math; it’s not pretty.”
Yep, I calc’d it out for a $250K condo.
Over 20 years of taking every vacation day at the same place to break even without any appreciation.
whats your math?
WOW, intersting!!!
Yeah,
That was great! Never heard of Money Week, but a crisp, evocative article!
Some observations regarding people we know in California -
First acquaintance rencently got his RE license to do a little RE on the side. He and his wife live in a small town where the largest employers are the school district and the county. Both have long-term, steady, full time jobs and have been in their house for twenty years. They own four rental properties - two inherited free and clear, another probably break even or a little better, and the fourth recently bought for the kids to live in while in college. They keep their house well maintained, but he is quite skilled and does most upgrades himself. They recently refinanced and pulled out some money to put in new kitchen cabinets, GCT and stainless steel applainces even though the kitchen had been remodeled less than ten years before and was in pretty nice condition. One day they mentioned that they had a hard time making ends meet, even with the stream of cash flow positive rental income. I was shocked. I had figured they must be totally set financially.
Second person is in southern California - is older, her hubby was laid off from the aerospace industry around 1990, so they had to make adjustments to thier financial lifestyle in order to stay put. I found out recently that part of this adjustment was taking out a loan on their house in order to do upgrades and maintenance (like a new roof). These folks are in thier 60’s and are taking money out of their house while already strapped for $$ and basically at retirement age.
Third story - a couple we know has a lovely large home in a very desireable area with a great view, but in the same small town mentioned above without much of a job base. They bought around the mid 90’s and got the place at a great price. They have both been only semi-employed the past few years and have been pulling equity out of their house over and over to finance this kind of semi-retired state while in their forties. They were going to sell last year, but decided to continue to ride the market up till the house was worth $1.3 million as they were enjoying the equity financed lifestyle AND besides “RE always goes up”.
The common thread here is the wealth effect of RE, and in all three cases the people have stayed in their homes and extracted equity in order to finance a better lifestyle - at what looks to me like the cost of preparing for retirement.
Your 3rd story is the scariest.
As these semi-retired people’s resumes will look like sh!t when they have to get a job again.
Hope they like Walmart.
What Do You Get For Yard Work?
The homeowner got into his grubbiest clothes on Saturday morning and set about all the chores he’d been putting off for weeks.
He’d cleaned the garage, pruned the hedge, and was halfway through mowing the lawn when a woman pulled up in the driveway and yelled out her window, “Say, what do you get for yard work?”
The fellow thought for a minute, then answered, “The lady who lives here, lets me sleep with her.”
For you homeowners out there…
Melody, that was SO funny. It hit a nerve with us as my husband recently received a phone call from someone in the next town over asking him to bid on a project of hers. I don’t know who provided his name or phone # but my husband is an engineer and hasn’t worked on anything but own home(s) for over 10 years.
A man was sitting at a bar enjoying an after-work cocktail when an
exceptionally gorgeous & sexy young woman entered. She was so striking that the man could not take his eyes away from her. The young woman noticed his overly attentive stare & walked directly towards him. Before he could offer his apologies for being so rude, the young woman said to him, “I’ll do anything, absolutely anything, that you want me to do, no matter how kinky, for $100 on one condition.” Flabbergasted, the man asked what the condition
was. The young woman replied, “You have to tell me what you want me to do in just three words.” The man considered her proposition for a moment, withdrew his wallet from his pocket & slowly counted out five $20 bills, which he pressed into the young woman’s hand. He looked into her eyes & slowly, meaningfully said, “Buy my house.”
A client bought a new home and the broker wanted to send flowers for the occasion. They arrived at the home and the owner read the card; it said “Rest in Peace”.
The owner was angry and called the florist to complain. After he had told the florist of the obvious mistake and how angry he was, the florist said. “Sir, I’m really sorry for the mistake, but rather than getting angry you should imagine this: somewhere there is a funeral taking place today, and they have flowers with a note saying, “Congratulations on your new home”.
I know, couldn’t resist.
OH, how true.
realtor ™ is a registered trademark of a trade group…i doubt that even 10% of real estate licensees are “realtors”.i got a license,hey i was learning about real estate anyway,nice to have access to more info…took the u.s.p.a.p.and 75 hour appraisal course this year,just to learn a bit more…i intend to keep learning as much as i can,especially from other people’s mistakes…real estate is fascinating to me with all the economic,social ,and physical factors to consider,not to mention all the bizarre and aberrant people involved in the biz.it’s fun,and darn tootin i rent
I have a good friend who I’ve known for about five years. He, up until recently, would comment that he thought Monterey, California’s home prices were too high, and refused to buy.
He got married recently and has just put an offer of $750K on a house in Carmel Valley with less than 5% down; partly because the wife desperately wanted a house after renting there so long; partly because the “deal” seemed good: the initial price of the house was $849K, but was reduced to $805K. The two make good incomes (about 170K/year combined), but I kept telling him that this was still way too much debt and that he would have to wait at least 10 years until he possibly made any money on it, and that if he’d be patient another two years, prices would be a couple hundred thousand lower. I don’t think it helped that the seller was a realtor who has had the house listed for 3 months without any nibbles and was impressed that there was actually someone in Monterey with a good job, high credit, etc.
In the end, I think, it was this idea that Monterey is somehow immune from a bursting bubble, because it is “different” there.
Was I wrong for standing by my opinion based off my selling a house and seeing first hand how fast the market is dropping? Does anybody really think that places like Monterey will merely hold stagnant in prices and not drop?
The answer is clear enough for the central valley…but what about “luxurious” places? Any thoughts, or is this guy another FB?
This guy is a FB. This guy makes a good income but he is not smart.
Tell him I told you so… later.
When prices slide down, ALL prices will, IMHO.
Well, SAME logic I heard from my brother in law in Bay Area. Purchased a 3 BR condo for about $600k. His logic, there is no new construction here, there is no bubble here, ONLY 2 condos available in the market.( peak Aug/Sept of 2005)
That was a year back, now in the same price range there are six. He will say just 4 more and I can say up by 200% more. Though small…price reduction has started….
He could not see the logic: when the next city will dip 30% which buyer will come to his great city. And only way the seller in his city will sell is by lowering his price 20%. (10% being premium to live in his city)
That is how prices expected to get contaminated, weaken..
When prices slide down, ALL prices will, IMHO.
TRUE.
My husband and I make around $190k and have been renting for the past 2 years since we moved to S.Cal. We definately do not want to buy until at least next year probably ‘08. I was thrilled when my landlord renewed the lease on my rental house for another year! I was really afraid that he would want to sell to get the $300k equity out of his house. Thank God he wants to keep it! I am would really like to sign a 2 year lease as I think this thing has a few more years before prices come into reality. My only fear is income taxes. We don’t have any children and are scared of what our tax bite is going to be. Our tax system is so unfair and biased to the real estate community! It really sucks! We are maxing out our 401k’s, etc., but what else is there? I really do not want to buy and risk”losing” a couple hundred thousand dollars! I enjoy our carefree lifestyle going to dinner whenever we want and having fun! Homeownership right now SUCKS! I definately do not want to be “house-poor”!!!