Friday, May 18, 2007

'It's Hard to Find the Positive Spin'

From the Sacramento Business Journal:

Sal Guevara burned through $50,000 in savings to keep current on his adjustable-rate mortgage, but with a monthly bill hundreds of dollars more than his $2,500 in workers' compensation income, he expects this month to miss a payment for the first time on his Elk Grove home.

Guevara, 37, is out of work with a back injury, going through a divorce and praying he can escape foreclosure by working out a "short sale" deal with his lender.

But if the lender rejects a short sale, he will become one of hundreds whose homes have been foreclosed upon in Elk Grove, a Greater Sacramento city that has among the highest concentrations of foreclosure proceedings.

"I have just my faith to keep me going," said Guevara, who owes $400,000 on the four-bedroom house he bought in 2003, likely more than buyers are willing to pay. "I feel like I'm starting from scratch."
Guevara, a custom flooring installer...was working seven days a week and pulling in more than $100,000 a year during the construction boom. He knew what he was doing when he cashed in equity on his Elk Grove home to buy other property, fix it up and sell it. It worked when the market was strong. That was until his last purchase, a three-bedroom home in the Meadowview neighborhood he bought for $289,000 at the market's peak in 2005.

Then, he was hit with a perfect storm: a work-related injury, divorce and two mortgages, one with a rate that will float above 9 percent in October.

Both homes have been on the market since January, and neither has drawn much attention from buyers.

He had planned to use the proceeds from the fixer-upper as a college fund for his boys, aged 13 and 7. "Now, I'm telling my boy he's got to get straight A's," Guevara said of his eldest son. "It's putting a lot of pressure on him."
Foreclosure proceedings initiated during the first three months of the year -- default notices, auction notices and properties reverting to bank ownership -- are more than triple what they were during the same period in 2006. But in Natomas, Elk Grove and south Sacramento, those proceedings have multiplied even more, up by 400 percent to 700 percent, according to RealtyTrac.

"It's hard to find the positive spin," said Karen Berkovitz, an agent with Lyon Real Estate with 14 years of experience who's trying to sell Guevara's home..."It's really a shame," she said. "These people are walking away with zero."
"If you look at the listings, half of them are short sales," Berkovitz said as she scrolled through a screen showing listings in the Elk Grove area. "That's scary."
Brokers don't know how long it will be before the tide of foreclosures recedes...Across the Sacramento area, the inventory of homes set for foreclosure sale stands at 2,175, with another 5,274 homes owned by banks or mortgage companies. Another 7,000 homeowners are at least 60 days late with their mortgage payments.

"It's going to be a rough year and a half," said Michael Lyon, chief executive officer of Lyon Real Estate. He predicted the effects might reach into 2009. [2012 anyone?]
A client asked me to do a comparative market analysis of her home. There have been no sales in that subdivision over the past six months except for a foreclosure, which makes that sale the only comparable sale. Now, appraisers can pull comps outside of that subdivision and adjust for value, but the likelihood is that foreclosure is going to affect this client's market value. Throw into the mix that nine out of 10 homes are not selling in any given month, and it's not a pretty picture.


anon1137 said...

Here's the positive spin:

Guevara's eldest son is now going to work extra hard to get straight A's and he'll get a scholarship, a college education, and a real job, so he won't have to be a crook, I mean a RE agent.

BIll said...

I feel nothing but disgust toward this uneducated flipper! No one told his menial labor self to buy the house, no one told him to buy the second house, and if the mortgage were just $100 per month this crybaby would find a reason to whine anyway.
He didn't get screwed, he screwed the bank by not making the prescribed payment.
So you thought you were smarter then everyone else? Welcome to the pyramid. Those of us who garner peripheral knowledge win, those of you who read USA Today like is was the WSJ lose!

I'm so sorry that 'flip that house' inspired you. Getta job. If you can make the comments you made in the article, you can work as a telemarketer or motel receptionist.
Tough break. Next!

Sippn said...

1/2 mill home on a flooring installer income? plus another home?

Usu just a divorce causes people to loose their homes.

Sure he hurt his back installing floors and not working on his side jobs or side flipper.

norcaljeff said...

I won't speculate as to the legality of this "custom flooring installer's" status in this country, but how in the hell did the mortgage company think he could sustain a $100K salary?? I'm sure his back injury had nothing to do with the flooring work drying up. Not only will $2500/month not cover that mortgage, it won't cover his alimony or child support. And you gotta know she probably has a mortgage she can't afford either! Amazing, I always wondered how all these people could afford these homes and $50K SUVs, vacations in the Caribbean, now we're all seeing they really couldn't. Look out for the falling debris!

Lionel said...

I think the chances that this guy spawned a kid capable of pulling straight A's are pretty slim.

Gwynster said...

He could start talking rents like these people


$500 Room for rent in great house :) Available now

CL is full of ads like this where the FB is renting out the extra rooms for $500 each.

smf said...

Working hard for your money, what a concept, huh?

This is the hidden side of the bubble, the people who were directly involved and believed their own hype. $100K/yr is good money, and those who are about to lose that income will get their just rewards.

But a bubble per definition is speculation. Speculation by definition carries high risk. High risk means that you have a great chance of making a LOT of money, or losing a LOT of money.

He lost.

Perfect Storm said...

"Guevara, a custom flooring installer...was working seven days a week and pulling in more than $100,000 a year during the construction boom."

I am absolutely, positively 100% know without a doubt in my mind that his stated income loan documents indicated he made $100,000 a year or more.

Perfect Storm said...

"Then, he was hit with a perfect storm"

I have no idea what the hell he is talking about.

Perfect Storm said...

If I remember right last time the housing market took a big dive 1990/1991 tha state was getting hit by a drought. Well guess what it did not rain all that much this year and if we have another dry winter next year our state will be rationing water. We forget so easy how important water is and to ensure a steady flow is not as easy as everyone thinks.