Sunday, September 30, 2007

"Inevitably, the boom turned to bust"

From the Sacramento Bee:

In the Sacramento region last year, about one of every six homeowners spent more than half his or her gross income on housing, according to a Bee analysis of new census data. That's 30 percent higher than the 2005 rate, and almost double the 2000 rate.
...
Shortly after they bought their Orangevale home, in 2001, increasing housing prices presented that opportunity to use equity in their home to supplement their income. It worked well for several years. The family refinanced their house at least twice, David Cavaness said, as its value increased. Their cycle became build equity, cash out, repeat. "We paid off two cars," Christina Cavaness said. "We paid off some credit cards. We were just trying to survive."
...
Then the housing market started to tank. The Cavanesses' home value dropped and their cycle of refinancing ended. Meanwhile, the rate on their loans, including a small second mortgage, crept upward. Last year, for instance, as their monthly loan payments grew, their income remained stagnant or worse as David Cavaness switched jobs a few times. Recently, Countrywide sent a letter telling them their rate would adjust again -- property taxes and insurance included -- to almost $3,000, Christina Cavaness said. That's almost all their monthly gross income.
From the Stockton:
Seven years ago, the Stockton area's population was growing, city officials were making big plans and property values were on the rise...It seemed like only better times were ahead in San Joaquin County, California and the country. Heavily impacted by Bay Area earning power and the migration across the Altamont Pass, home values became artificially inflated. Inevitably, the boom turned to bust.

Housing became overbuilt and over-leveraged. Too many homes were financed with risky lending and mortgage practices, often at the expense of gullible individuals who either were misled or were unable to understand the process. Too many sellers wanted too much for property. Some real-estate agents were all too willing to share that wealth. Predatory lenders moved in to exploit the demand that traditional lending practices couldn't support...The situation was compounded by speculators and investors who purchased property because it was cheaper, could be resold for a quick profit, used for rental or even nefarious purposes (marijuana growing).
...
Some politicians are recommending a federal bailout of deceptive, predatory lenders. Just as in the disastrous savings-and-loan bailout of the 1990s, they don't deserve it. Taxpayers, most of whom had nothing to do with creating this mess, shouldn't have to pay to clean it up. A bailout only encourages this kind of bad business behavior.
From the Stockton Record:
If there's a constant drumbeat of bad, heavily reported news, does that news begin to take on a life of its own, become a self-fulfilling prophecy?

It's a reasonable question, this time coming from a reasonable guy, Carl Isaacs, who's been selling real estate in Stockton for decades. He complains about what obviously has been article after article - doom and gloom, he calls it - about the real estate market here. The relentless coverage undermines confidence and makes consumers question whether they should even own a home, he worries. (Of course, few, save a few naysayers and often-ridiculed economists, fretted about the relentless coverage as the market zoomed skyward.)
...
[The] market plunge that began in early 2006 and seems to accelerate with the release of every new sale/price report seems to have no bottom. CNBC, CNN, USAToday, "60 Minutes" and The New York Times are among the major American news outlets that have parachuted into this area in recent weeks to record the squirming population at ground zero of the nation's market collapse.

25 comments:

Diggin Deeper said...

"Shortly after they bought their Orangevale home, in 2001, increasing housing prices presented that opportunity to use equity in their home to supplement their income."

And someone's supposed to feel sorry for stupidity? This couple had the full run of the real estate boom, threw caution to the wind, and now they're about to leave the keys under the doormat.

"He complains about what obviously has been article after article - doom and gloom, he calls it - about the real estate market here. The relentless coverage undermines confidence and makes consumers question whether they should even own a home, he worries."

So what do you want Carl, bogus and baiting media stories to bring "stupid buyers" back into a falling market? You weren't complaining when prices over inflated and pushed your commission through the roof. Now you take issue with negative sentiment created by the buying public...not the media! And to answer you're question:

"No the public shouldn't buy or own homes in this market under these conditions" Not unless they they'd be happy to own a home with heavy negative equity by this time next year.

Gwynster said...

It's time to subscribe to a foreclosure site. There is so much that is about to hit the the areas I'm looking at. What are people's advice on services - RealtyTrac or Foreclosure.com?

Cmyst said...

You all have GOT to read the comments from readers (and there are nearly 100) on the SacBee story. There is actually a woman posting that claims that she makes over 100K a year and is now renting a "room" in San Diego because she had to leave her Elk Grove home due to a haunting!!

I also love the pictures. Especially the sad, pensive shot of the father hugging his son in their (presumably) horrible "rental" home. I wish someone from the Bee would come up here and take some shots of me and the doggies romping
in our private park "rental", comparing our rent payment on this place to the mortgage payment that the house for sale up the street would be even 50K below their asking price.

Rob Dawg said...

Shortly after they bought their Orangevale home, in 2001, increasing housing prices presented that opportunity to use equity in their home to supplement their income. It worked well for several years. The family refinanced their house at least twice, David Cavaness said, as its value increased. Their cycle became build equity, cash out, repeat. "We paid off two cars," Christina Cavaness said. "We paid off some credit cards. We were just trying to survive."

Somebody get a rope. I'm not out of line to suggest mandatory sterilization for these people. Just because you can do something doesn't mean you should do something.

Gwyny,
It's still too early. There's gobs of stupd and idle liquidity that needs to be fleeced before we swoop in.

HOUSE2008 said...

gwynster..

My breif free 7 day trial period was good w/Realtytrac. Rather pleasent.I had to submit my credit card & info and cancelled prior to the seven day trial without a hitch. No extra charges after the trial ect. No horror stories here. The original subscription of $50 a month? (somewhere around there) was a little steep. The good news is that a C.S.R called me after the cancellation & offered me a good package deal afterwards like $300 for the whole year & a four month deal for like $100. I'll join them for sure but waiting till after x-mas. Sorry the details($)are sketchy I have real short attention span to C.S.R agents. Even less for real esate agents:)

SacramentoCrash said...
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smf said...

"equity in their home to supplement their income"

Did they not realize that equity withdrawals have to be PAID?

Housing as ATMs? I mean, when I go to the ATM, I take out money that I already had.

When you use your equity as ATM cash, it is a LOAN.

Get it?

BTW, Real, went to see a house in GR, a nice house. Bought in 2005 for $655K. On the market now for $635K. And some renovations were done.

buying time said...

Its been a long time since I saw a high school curriculum, but it would be nice to see a mandatory class on real world personal finance. For instance, how to balance a checkbook, make a budget, learn about debt and interest rates, credit scores etc. In otherwords, learn about finanical responsibility. Then people couldn't keep say they didn't know what they were getting into.

buying time said...

continued from previous comment....

Wishfully thinking...and then perhaps our bubbles wouldn't get so frothy.

Is it me or do bubbles seem to grow faster and pop louder than prior to the information age?

Gwynster said...

Rob, I'm not planning on buying. Just want the data for tracking since lots of homes here are bank owned but the MLS listing doesn't mention it.

$50 a month for a subscription though? No way Jose' - I'll get my data the old fashioned way.

Gwynster said...

Buying,

After reading the SacBee comments about the ghost, I think we can forget FICOs. People need to submit their IQs scores when applying for a loan.

Diggin Deeper said...

"Why not put a plastic garbage bag over your head and pull the drawstring tight until you pass out?"

Love the line!!!! Hate the outcome. For every one of these wingnuts, there are lterally tens of thousands that await their place in line for "dumb ass" forehead tatoos. Kind of like the guy recently who spent about $100K doing a backyard tuneup with flat panel high def and a beer dispenser so he could watch baseball games in 108 deg. comfort. To him the market couldn't go down and he was going to take every last nickel out that home until to prove it.

Interesting times lie before us. I just hope everyone will be able to afford a loaf a bread and a gallon of milk, much less the true cost of mortgage.

Gwynster said...

OMG! remember that house in Woodland I was watching that went for 262k at auction last July? It's back on the market for 424k. Some idiot put lipstick on the pig and is trying to flip it!

I have to telling you I cam laughing myself silly here. That's two new flips from former REOs on the market in Woodland in less then 2 weeks.

Sac_Sol said...

Gwynster, do you have an mls # for that fip in Woodland? Should be amusing.

Diggin Deeper said...

Bill Gross speaks...

Pimco's Gross: Housing to dominate Fed for years.
http://news.yahoo.com/s/nm/20071001/bs_nm/pimco_outlook_dc_1

Here's a little diddy from the article.

'Traditional banking activity -- lending out deposits backed by a certain level of reserves -- was the accepted vehicle for liquidity creation.

"But financial innovation has done an end run around the banks," Gross said. "Derivatives and structures with three- and four-letter abbreviations -- CDOs, CLOs, ABCP, CPDOs, SIVs (the world awaits investment banking's next creation; perhaps IOU?) -- can now take a 'depositor's' dollar and multiply it 10 or 20 times." '


Yea, and where have they sold this paper????? Back to the banks!
It appears that "dumb ass" applies to even the brightest who are willing to take a chance on the likes of the people we're reading about today on this blog.

Apparently greed never stops one from rolling the dice one more time.

smf said...

"That's two new flips from former REOs on the market in Woodland in less then 2 weeks."

Didn't I tell you!? Even these REOs are not really being eliminated from the inventory pool, they are being prepared to be reinserted into the MLS.

buying time said...

Not to lose complete credibility... which I probably will....but I actually know of 2 other instances of houses with paranormal activity (haunted)....in both cases these were educuated rational folks. One was a conservative military family (bad haunting)...and the other was a young couple living in a house passed on to them by a relative (just kinda creepy haunted..but not bad).

Gwynster said...

MLS #: 70096097
This sold at auction for 250K. Was previously listed for 324K REO. Interestly, the listing agent is the same both pre and post purchase.

MLS #: 70100528
REO sold for 230K. Can't remember the previous asking. It almost looks reasonable from the picture. That neighborhood is cpmarable to the worst parts of Rio Linda. They are scarily similar in economic, cultural, and racial make-up.

Neither of these were big fixes. These were both cheap cosmetic flips.

SacramentoCrash said...

"That neighborhood is cpmarable to the worst parts of Rio Linda. They are scarily similar in economic, cultural, and racial make-up."

You mean a neighborhood where my cousin is my wife and my mother is my father's second cousin?

Where sheets are bleached and sprayed with starch for the weekly Saturday night lynching?

Where my two front teeth are used to open beer bottles?

Where meth lab explosions are just another day in the neighborhood?

Gwynster said...

How about we leave it at the meth labs.

The city of Woodland has crime maps of the area my type of offense and date. So does Davis but they don't like people knowing that. Davis is by no means a crime free or even a reduced crime area. Woodland has less crime then Davis. Check the FBI annual stats if you doubt me >; )

SacramentoCrash said...
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SacramentoCrash said...
This comment has been removed by a blog administrator.
Gwynster said...

OMG someone at work just passed this to me!

http://www.davisenterprise.com/articles/2007/09/30/news/102new1.txt

Yep, in Davis it's all about the kids.

Cmyst said...

BT, I'm pretty open-minded, myself.
And both the Sig and I have (separately) lived in houses that could be called "haunted". But those houses were very old, we didn't have any real choice in the matter, and we learned to live with it. In his case, he stayed out of the back basement coal room. In my case, we turned an upstairs bedroom into a storage room and the kids slept in one room.

It seems a bit convenient to me for someone to blame their need to abandon their home on it being haunted, unless it's the Amityville
Horror, and even in those instances it usually takes quite a period of time for things to escalate and there are usually priests and psi investigators involved.
Sheesh, what wimps....

And one can never underestimate the actual POSITIVE selling value in having a haunted house. Perhaps "Ghost Hunters" will investigate and you will be on TeeVee. Or, you could sell it to one of the majority of people that do appear on "Ghost Hunters" and are very upset that they can't substantiate their claim to a haunted house.

buying time said...

I certainly wasn't making excuses for any stupid moves she might have made (didn't read the details if she bought at the top).....just saying she's not loony for thinking the house is haunted. (the ones I knew of were not in Sac...one was in San Diego, and the other in D.C.)