Friday, February 09, 2007

SL's Water Cooler - February 2007 (part 2)

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Lander said...

Post off-topic links, observations, and stories here. Please read the comment policy before posting.

Lander said...

Construction Layoffs Entering Into Public Consciousness?

I heard an interesting ad on the radio yesterday for Paul Blanco Chevrolet. It went something like this: A satisfied customer (don't know if he was real or not) said he was a construction worker who had lost his job due to Sacramento's slowing housing market and had taken a hit to his credit. But thanks to Paul Blanco Chevrolet, he was able to buy a truck even with bad credit.

Patient Renter said...

I guess this is worth mentioning:

I recently posted a wanted ad on Craigslist for a rental house and was flooded with e-mail from realtors practically begging for me to buy a home, despite my ad clearly saying that I DID NOT want to buy a home at this time.

A lot of the e-mails I got were interesting though. Here's an example:

"I know you said you were not looking to purchase at this time, however you mentioned you were saving and had good credit. Would you be interested in purchasing if someone would put up a down payment for you and covered you closing costs? I work for a group of developers and we have a few properties where we are offering very creative/flexible financing. This could include paying your mortgage for a year, buying up to 40k in furniture, down payment, or closing costs. You sounds like good candidates."

Flexible financing eh? You'll pay my mortgage for a year? How nice of you! Where do I sign up!?

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

Here's another e-mail I got from my ad:

"I saw your ad on Craigslist and was wondering why you were looking for a place to rent when the real estate market is so low right now. Homes are up to $100K cheaper than they were a year ago. Even with bad credit or if you cannot show proof of income, there are many loans available that can help you."

Translation: We offer many ways for you to f*** yourself via loans you might not be able to afford.

Can you sense the desparation?

Gwynster said...


It's crazy out there isn't it? I hope can find a place you really like at a good price. Rental prices are dropping steadily in Davis. I can only imagine how nice of a deal you'll get out east.

Patient Renter said...

I did end up finding a very nice place at a nice price. There seemed to be a decent amount of homes for rent, but almost all of them were either for sale, recently purchased (underwater flipper), overpriced, or some combination of these. I had a lot of interesting interactions talking to owners looking to rent their places.

When talking about price with one owner, he said he would have trouble lowering his price because his mortgage was already much higher than his asking rent price. He's in a tough spot, and so were lots of others...

Gwynster said...

That's what I ran into. So I decided to get some concessions from my current LL and stay put. Some people don't realize just how dead in the water they are.

Embdddsgnr said...

Hey Gwynster, Patient, and other renters out there,

I rent also, and like many of you, we make great salaries and are biding our time (Ms. E. likens us to vultures circling) while saving obscene amounts of money.

So as we look around at the rents in the E. Sac/Midtown areas, we realize that what we pay now or a bit more could get us a much nicer place. But what we're paying isn't quite high enough to make us move; that's a pain in the ass. Furthermore, our landlord is a family trust that probably isn't hurting even though our rent is far less than what a mortgage would be for this place (I'm sure they bought it outright).

So, what specific strategies have any of you used to bargain or make concessions with your homeowner? In my case I tried, when the one-year lease was up, to negotiate another year at a modest increase. The bastard wouldn't budge and raised it twice that amount. We're month-to-month now, and keeping our eyes open. To be fair, these are nice folks from the bay area who have invested in real estate for the long-term, not get-rich-quick me-toos. It's just the spoiled son who "manages" the properties out here that gets my goat.

I'd like to find another place, get as close as almost signing, then try to get our homeowner to agree to another lease at a slightly reduced amount; I'm sure he won't get what we're paying now if it goes back on the market. If he balks, we walk. But as I said, it's a pain in the ass to move, and I'm not sure it's worth not more than $100/month saved, even for something slightly bigger.


drwende said...

One of our locals in Phoenix has done a music video called "Defaulting," to the tune of Tom Petty's "Free Falling."

His singing is lousy, but you must hear the lyrics. Go to and then in the center column, under Video, you want the link for Valley's Real Estate Market Parodied in Song.

Looking_in_EDH said...


The cost of moving a 3400sq ft home locally is approx. $1500

You can whack out some more of this cost by moving some items yourself.

I agree that there is a hassle factor in moving. It is a major pain.

On the other hand, there is an advantage too -- you get to shed un-needed junk. Having moved twice in the last 3 years, I can safely say that we've actually enjoyed the change of settings.

So figure, $1500/12 as the "switching cost" of a rental. In my area (El Dorado Hills) there are so many new homes coming up for rental that it seems like cherry picking time.

anon1137 said...

I also agree that moving is a huge pain, but it can also be a great opportunity to check out a new neighborhood or micro-hood. In the dt/mt/e-sac area, just moving 4-6 blocks can be a big change - the traffic is different, maybe you don't hear the freeway noise as much, maybe you find out about a problem multi-family residence, maybe now you're within walking distance of a park or grocery store or transit stop. If you end up liking the area, you can put out the word to neighbors that you're interested in buying.

lexi said...

one of our locals in Phoenix has done a music video called "Defaulting," to the tune of Tom Petty's "Free Falling."

Hey, that was pretty funny!
I watched another video on
there, where a home builder
in Queen Creek was selling
a brand new home for 175K and
no one had bought it in the
4 months it's been marked down
to that price. They're getting hit
hard in Queen Creek and over
a hundred home owners were selling
at auction (they hope) next
month. Seems like yesterday
they were having bidding wars
and waiting lists. With Sacramento
on everyone's list as one of the
the most overpriced markets (per
income) it's like looking
into a crystal ball...

Lander said...

Cue the lawyers...

Do you have a mortgage which allows you to choose how much you pay each month? So begins a radio spot I heard today for a law firm that is seeking clients with option ARMs who were "mislead" by their lenders.

Gwynster said...

Lander, I heard that one back in Dec. I remember the word "mislead" myself and was so disgusted.

In the good news department, Centex is starting another development in Woodland with prices in the low 300s. What I predict is that we'll see the builders continue building but the homes will significantly cheaper due to smaller footprints and the decline in labor costs and materials.

Finally something for us first time home buyers. The bad news is that people who are trying to sell exsiting starter homestock are going to continue to get hammered.

I hear tell that KB has a similar plan slated for Woodland too along the Westbury lines. They'll need to price below Centex they normally do. Very interesting.

Diggin Deeper said...

Patient Renter

One of the key things to keep in mind when searching for a rental is the type of note the mortgage holder has. The last thing you want to do is move into a home only to find out the owner is upside down and bleeding from an interest only note. If the landlord has a fixed rate mortgage you don't face the unforseen.

noodle said...

I toured a new home near Woodland yesterday, snapped some pictures etc. At $600,000 it is still out of reach of most people, but they were begging buyers to come in.

Read about it here:

Gwynster said...


That was one of the bigger Centex offerings. I laughed like crazy when I viewed because all I could think of was "who in the hell can addord this?"

KB has some homes that start in the lower 300s and those were selling. KB did a big push to offload inventory in Nov and offered some crazy discounts. Now the rest in languishing.

The best part is that these homes are 5 min outside the Davis city limit. Now, imagine you have the money for 500k home. Would you buy a old 3/1 1200 sqft house in Davis or a 5/3 3200 sqft place in one of these new development?

Davis doesn't realize the beating it's about to get.

paranoid renter said...

Take your home equity and run.

Jeff said...

I was out looking at new homes in Roseville and Lincoln again this weekend. They've done another major cut on pricing but they are still bleeding badly. Stay put a while longer renters, prices are still pushing lower despite what the realtors and home reps will admit. And it's need nice out in the month of the rains pours, people will stay home and renters will still gain more ground.

Patient Renter said...

Found this in a Bloomberg article:

``Housing and housing-related employment made up a little over 40 percent of all payroll employment from November 2001 to April 2005,'' she says. ``Employment in residential construction declined in nine out of the 10 months ended January 2007,'' with 104,000 jobs in residential specialty trade contracting lost since the February 2006 peak, according to the Bureau of Labor Statistics.

40 percent! You can guess what will happen as things unwind.

Diggin Deeper said...

40% is a huge number if one considers how many jobs were created during the time period. Even if we used a conservative figure of 1.2 million jobs per year this equates to between 1.6 and 1.7 million real estate related jobs. They won't all go away but the impact will be significant even with 10-15% correction in the making. Not saying it will devastate the economy but it definitely will put the breaks on economic growth.

Jeff said...

yoo who, sippin, where are you? so much for your high end homes going like water....and no nore "location location location" rebuttles, these million dollar homes, er busts, are in auburn and gb. one is off 30% the other is 20% and probably falling even more.

Gwynster said...

KB Home posts quarterly net loss after charges

“Net orders fell 38 percent in the quarter to 6,059, KB Home said. The cancellation rate was 48 percent in the fourth quarter, up from 31 percent a year earlier.”

Isn't this the firm that had all their contractors cut their costs by 10% or get their contracts cancelled?

Jeff said...

Similar to the unhappy buyers of the JTS homes in Lincoln Crossing who overpaid, some SD buyers aren't happy either.

Gwynster said...

I saw that on Ben's blog - they found the family photo album online.

Patient Renter said...

Some realtors are getting real. Here's an interesting bit from an LA Times article as posted on Ben's blog.

Bosch (President of Home Center Realty) thinks the residential real estate market will soon revisit the horrible days of the mid-’90s - and then get worse. ‘I have no doubt that we are entering the next phase of an unprecedented market,’ he says. ‘One that Southern California has never seen.’

You can see that the trend of the last several months has been one that's moved from thinking "there is no bubble, or if there is/was, we've already hit bottom" to "there is/was a giant bubble and we won't hit the bottom for a very long time".

Basically, common sense is slowly starting to peek through.

Gwynster said...


That was a great article. I loved the quote from the president saying that the realtors were getting side jobs at McDonalds. wow

drwende said...

And anyone who still doesn't believe bad real estate investments can lead to murder and mayhem, here's the news from Philadelphia:

Sippn said...

Jeff - right here buddy!

Looked at it, 1 custom home but way, way, way in BF Auburn - looks like they didn't waste much time after they bought to try to flip the property - too bad.

The rest are high end production homes - a major source of speculation and depreciation. Many of these were bought a year prior to completion and never lived in.

When I say location, I usually say something about type.

But you're trying!

Patient Renter said...

There was some excellent guest commentary on the subject of forclosures posted on Piggington's blog. Definately a good read:

Patient Renter said...

Anyone have comments on GDP being revised downward? Does this mean we're officially in recession? All signs including the inverted yield curve seem to point to yes.

Gwynster said...


The PP Ramsey piece was a good read - thanks for the tip.

I didn't see anything about the GDP yet. Been a busy morning.

I'm going to be in KY and TN in April scouting property and doing interviews. If we are heading into a formal recession like everyone predicted, I wonder what the economy is going to look like when we land. This could be really interesting.

Patient Renter said...

Mish has a good post on the GDP, and lots of other blogs have reported on it (Roubini, Calculated Risk, etc.), but MSM is largely ignoring it so far.

So you actually are leaving the area eh? I envy you, although I don't really know much about KY or TN except that KY is nice and green.

Gwynster said...

The DH wants OUT NOW! He's lived all over the US but the last 2 yrs were his first time on CA and he's appalled by Californians and what they put up with.

If anyone can throw me some good news on disaster coming to Yolo county, I'll be happy to show him and hope I can stretch us out a few yrs longer. But he does have a point, we're career staff at UCD, late 30s, significant savings, mid 700s scores and we can't afford a starter house unless we do some voodoo loan. Most other places in the US, we'd be doing well.

Patient Renter said...

Gwyn: So the decision to leave would be driven at least partially by home prices? This would be enough to make me leave, if I could convince my wife, but in all the other areas we'd consider moving to there are bubbles as well, even though the areas are more affordable. In that case, I'd still want to wait this thing out before buying, even though I'd have more buying power elsewhere. Have you guys considered this much?

Gwynster said...

Been considering it for 4 yrs - seriously. Every time we get ready to bail, UCD offers me a reason to stay. Our first target was NC. I came so close to accepting at Duke and now I kick myself for not jumping.

Unfortunately, the parts of NC I was targetting are as bubbly as Sac. I used to travel all over when I was a business analyst in 97 to 00 so I've gooten a good look at the US in all it's seasons.

The nail in the coffin was that my position at U of K for example is 8k more per year in salary while housing there is incredible -

Remember when we could find deals like that in Sac? 1997

The kicker? we'd be putting 52K down and the DH could stay home all day and finish my honey-do lists >; )

Patient Renter said...

Wow! I'd be out of here if I were you too. Judging from that ad, it doesn't look like KY is very bubbly? Wow, godspeed!

Gwynster said...

Sadly, Zillow is dead space in KY but you can find some MLS databases for searching for properties in the area. It's amazing what you can get for as little 100k.

Isn't it weird how little 100k seems to us now when just 7 yrs ago that was "real money".

I was also super surprised to find that wages there almost the same as here except when you get into the upper brackets. So CA really is special as long as you are in the that 33+% tax bracket.

lexi said...
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