Monday, March 31, 2008

"The Naysayers Have Been Silenced"

From the Sacramento Bee:

Jose Espinosa worked his way out of the strawberry fields of Central California in the early 1990s, determined to learn a profitable trade. He did, and as a craftsman in stucco and walls, he enjoyed 12 straight years of handsomely rewarded construction work. Six months ago he was laid off and now may lose the house he and his wife bought a couple of years ago in Stockton. They had saved $30,000 for a down payment. "That was my life savings," said the 38-year-old legal Mexican immigrant.
...
His mortgage is $2,700 a month, he said. When he bought the house, he was earning at least $1,000 a week building houses....It was enough to make him feel secure. "Everybody said it was a good idea to buy a house. So we got excited and did it," Espinosa said. "My problem now is not a subprime loan. My problem is there is no work."
From News 10 (video):
Due in large part to the mortgage crisis, the demand for new homes -- and new lumber -- is down. The [84 Lumber] Florin Road store became expendable, and [Auggie] Aleman, along with about 20 co-workers, were told without warning that they were out of a job.
...
For Aleman, his wife and two kids, it means they join the ever-growing group of people who are suffering from the slow housing market. "I had a big home," said the 27-year-old husband and father of two. "Now, I gotta find a small home, because I can't afford to live in my home anymore."
Forbes: America's Riskiest Real Estate Markets
7. Sacramento, Calif.

With a 3% foreclosure rate, the country's fifth worst, Sacramento is still a long way from working out its lending difficulties. More problematic? Construction was one of the city's biggest drivers of job growth, and jobs have slumped in line with stalled building. The good news, according to Radar Logic, is that transaction volumes are up, something that could have a lot to do with the city having the nation's highest rate of homeowners reducing prices, based on data from ZipRealty. Sacto's biggest risk is whether or not it can add enough jobs to bring money and buyers into the city.
From the Sacramento Business Journal:
[B]uyers hesitate to commit for fear the market is still falling. Carmen Micsa, a broker associate with Re/Max Gold in Fair Oaks who specializes in condos, helps persuade prospects with an offer of a seven-day cruise. "I started doing this two years ago when the market turned," said Micsa, who offers the deal to both buyers and sellers. "You do anything possible so that you can motivate people to become homeowners."
...
Such tactics get mixed reviews, however. "We used to do a lot of that wacky stuff," said Cohee at Pacific West. "Nobody is going to buy a home based on that. Maybe it will get them out to talk to you."
From the Sacramento Bee:
Most folks agree that times are tough in the real estate business. But don't say that out loud if you work at the local brokerage offices of Cornish & Carey Commercial. Annoyed by the negative comments of co-workers, one employee suggested a $1 fine be collected from anyone uttering a discouraging word about the current real estate market.

"He was tired of it," C&C boss John Frisch says of the semi-serious proposal. "It doesn't help your (work) attitude to be around negativity." The idea was first adopted in the firm's Roseville office. Then it spread to Sacramento. Since then, Frisch says, the naysayers have been silenced. Not a single dollar has gone into the C&C kitty.

Has all that positive thinking helped boost sales? "It hasn't trickled down to the market yet," Frisch says.

42 comments:

KTM 300 said...

Can someone please tell me how a $4,000 per month gross income pays for a $2,700 per month mortgage?

Richard said...

Can someone please tell me how a $4,000 per month gross income pays for a $2,700 per month mortgage?

Only way I know of is his wife makes 10,000 a month

bubblemachine said...

"Everybody said it was a good idea to buy a house. So we got excited and did it," Espinosa said. "

This is the classic case of someone who has little knowledge of finance being hoodwinked by an unethical RE agent. Any agent that proposes mortgage payments of 67% of your gross income should have his license revoked.

Jacob said...

When I read the title I thought that the naysaysers were the people saying the market was turning around and they had all been silences by reality, lol.

"You do anything possible so that you can trick people to become homeowners (except lower the price, or our commission)."

Ok, so you make $1k/week, I assume that is tax free. So you make $4k a month and pay 67.5% for the mortgage alone. Do you heat the home and have lights and eat food?

Too bad he put down his own money, and too bad there isn't as much work as there was, but he had 12 good years.

Given his payment, his house was over $500k. I am sure there were gomes closer to what he could have afforded more easily. And been able to save for times like this.

aqius5 said...

how are any $1.00 fines to be collected if no one has any sales? that office is so effed up & doesnt even know it yet.

yeah sure, great idea ... make the whole office suffer in silence while the manager sticks his ostrich neck in the sand to ignore reality. lovely. I would have quit the moment that douchebag even looked at me the wrong way.

no use going down with that doomed ship.

siflsockpuppet said...

They don't say if his income is gross or net, so like others I'll assume it is net. I'll also assume that he has no other debt, since he was able to put $30,000 aside to buy the home in the first place. Maybe they have very simple, frugal needs. And everyone is forgetting that (a) $1,000 a week = $4,333 a month, and (b) at least $1,000/wk means he often made MORE than $1,000 a week. His house payment was high, but I believe within guidelines if he has good credit and no other debt.

Gwynster said...

Makes zero sense.

If you think about it, how many of us make over $1000 net a week? I'd guess most of us.
How many of us would sign up for a $500k mortgage? As someone who just went through the financing grill, with a mid 700s fico and zero debt, we couldn't get approved for $500k nor would we want to. A $2700 month mortgage would be financial suicide.

Jacob said...

yea thats crazy. I make more than that and $3k a month to rent from a bank is just nuts.

If they have limited needs then they sure as hell didnt need a house that expensive.

They gambled and lost.

siflsockpuppet said...

Here's the problem I have with how everyone is reacting. There's nothing indicating that he didn't have $2,000 every month AFTER paying his mortgage. He'll likely lose his house, but not because he couldn't afford it - it's because he lost his job. It doesn't matter if his monthly payment is $2,700 or $1,500 - if he's got no income, he's losing the house. What difference does his previous debt to income matter when now there's no income?

smf said...

"What difference does his previous debt to income matter when now there's no income?"

His income was directly related to the housing market.

In other words, many saw their income rise as a direct result of the bubble. Their incomes rose to unsustainable levels.

A lot of these immigrants prior to the bubble were happy to work for $10/hr and spent accordingly.

But several RE types took advantage of them (and they also gambled) and made them do something that they would normally not have done.

Construction, prior to the bubble, was quite the cyclical business. It was very weather dependent as well. So many would save for their yearly lean time and await for the high season that would have them work non-stop for weeks at a time.

This bubble sent everything out of whack. People simply spent more money. And businesses got used to the higher revenues.

Governments did the same thing. They spent all of their extra revenue and then some.

If he had stayed within what was normal prior to the bubble, I could guarantee that his predicament would not have existed.

Not to say that there weren't slimy brokers and agents that took advantage of their clients lack of financial knowledge. I know because we witnessed this first hand.

Buying Time said...

$2,700 a month will get you a palatial rental home.

Heck $2000 gets you around 3000sq feet rental, which is still huge.

Jacob said...

It doesn't matter if his monthly payment is $2,700 or $1,500

Well at $1500 he could have saved $1200, plus any taxes, maintenance, HOA and had a nice savings to help weather this downturn while he finds work.

What ever happened to saving 6 months of expenses and keeping it in the bank for emergencies?

And I am sure he can find work, at $10 and hr. But that is no longer good enough.

I get tired of hearing from people that make less $$ than I do and who buy more "things" than I would ever buy and then complain how they can't afford it. Tough.

yeah it sucks to lose your job. It happens, and is going to happen a lot more as more and more business close stores, or go out of business altogether. Nothing will change that, so try to find another job, try a new industry (which also sucks, but what else can you do).

wrong moves said...

"One employee suggested a $1 fine be collected from anyone uttering a discouraging word about the current real estate market"

Same employee "If I just ignore it and think rosy thoughts it will all Go Away! I shant think about it nor plan in any way for a possible terrible outcome for my current line of work."

Yeah, why be realistic or proactive. Who actually saves money any more? 6 months living expenses in the bank? No way, My F450 Super Crew Duty 4X4 six wheeled statement of my virility and bacon bringing capacity needs new 36 inch rims and tires so I don't look shabby next to Bubba next door. And yes, I NEED that big 'ol truck to pull my new Momba ski boat.

siflsockpuppet said...

Everyone is playing armchair quarterback. It is easy to look back now and say "you shouldn't have done that", but it's impossible to fully prepare for the loss of your job. You can put six months aside, but what about after six months? Eventually it will catch up with you.

There are a bunch of people who did really stupid things, getting IO NA loans that they couldn't possibly repay and sucking out equity to buy BMWs and Hummers. While he may have done these things, we simply don't know from the article. Eveyone seems to be assuming he made mistake after mistake. The only mistake he made was assuming his job wasn't going to go poof.

siflsockpuppet said...

And for those who say "you can rent a nicer place for less", you're right, but there can be extenuating circumstances that make it much closer than you think. Also, we don't know the size of his home, do we? We're assuming it's small. And some people think it's worth more to own than to rent. That's what we're force-fed as the "American Dream", isn't it?

Maybe his and my situations are different, but as a high(ish) income, recently Single filing status, I can't deduct for IRA contributions and I don't get the full $1,000 child tax credit. I can't take the higher education deductions and I lose most of the one-time tax rebate. If I had a huge itemized deduction, I would get more of those. It might work out to where a $2,700 mortgage payment is cheaper than a $2,000 rent payment.

G Spot1 said...
This comment has been removed by the author.
siflsockpuppet said...

g spot - thank you for resorting to name calling. That's very mature.

First, you added his income incorrectly. I made the following assumptions, which may be false, but the article does not make it clear. IF his NET income is AT LEAST $1,000 per week, then he was likely grossing about $75,000. You are off by 50%. IF his GROSS income was $50,000, then you are correct that he made a mistake in buying that house.

By your logic, he should have rented an $800 two bedroom apartment for himself, his wife, and one child. That would have let him save thousands of dollars for an emergency fund. Does that make this a better choice than a $1,500 rental?

And you completely ignore the facts that I presented that show that a $2,700 mortgage payment wouldn't cost me much if any more than $2,000 in rent.

My point is people is ASSUMING facts NOT IN EVIDENCE. You may be right, you may be wrong, but you cannot say conclusively that he made the mistakes implied in these comments.

I'm not saying that in retrospect he made the best choices, just that his choices weren't particularly wrong given the circumstances at the time. He was not necessarily setting himself up to take a fall, like those who qualified only for the teaser intro payments.

If all you can do is insult and regurgitate the same diatribe without addressing what I've said, then I suppose our discussion is done. As they say, there's no point in my fighting a battle of wits against an unarmed opponent.

siflsockpuppet said...

And yes, I realize I committed a Bush-ism with "My point is people is assuming...", That's what my sloppy editing gets me, I suppose. If I could edit the comment, I would.

OntheSidelines said...

This is a little off topic...but can anyone tell me where I can get the median home price per square foot in Folsom (95630) as far back as 1980.

I want to create a graph showing these trends from 1980 through 2007.

Thanks in advance.

Gwynster said...

the article says "at least 1000". If was making a lot more, I'm sure the reporter would have said "almost 2000 on average".

G Spot1 said...
This comment has been removed by the author.
Lander said...

Please refrain from name calling.

Thank you.

siflsockpuppet said...
This comment has been removed by the author.
rocklin renter said...

pull my new Momba ski boat.

Moomba.

And if the person buys a Moomba, they are seeking value, not bling/shiny toy.

Real "ballers" will rock something higher end, not "value" priced offerings from Skier's Choice.

Go price a MasterCraft, Malibu, or CorrectCraft. How about $100k for a (well equipped) shiny parts wakeboat? No I'm not joking.

Anyhow, my wife and I laugh at these folks every damn day. It is unavoidable in Rocklin. I stopped short of LOL'ing at some soccermom in her new H2 the other day. My wife literally had to make me shut up. I did get the "how's it feel to lose 20k within sight of the dealer lot" out.

Looking down your nose at other people can be fun sometimes. Just ask Hilary. :)

Gwynster said...

"I stopped short of LOL'ing at some soccermom in her new H2 the other day. My wife literally had to make me shut up. I did get the "how's it feel to lose 20k within sight of the dealer lot" out."

Are we married? LOL
(couldn't be, that was in Rocklin)

Jacob said...

lol, its always funny watching those Hummers at the pump.

Everybody has to buy crap to keep up with everyone else who is trying to keep up with everyone else. lol

Patient Renter said...

I stopped short of LOL'ing at some soccermom in her new H2 the other day.

Ick, I don't get over to Rocklin/Roseville that much but I was kinda hoping the oversized-chromy-wheeled SUV driving soccer mom thing was unique to EDH and Folsom. I guess there's not many places to hide, which sucks.

its always funny watching those Hummers at the pump.

Ah man, don't get me started. It's out of control around here, the oversized SUV thing.

The problem is, at the gas station there might be 2 or 3 or 4 pumps in a row where one or more unused pumps are completely blocked from access because of the size of the SUVs at the adjacent pumps. It's ridiculous. Two days ago I was blocked out of access from a pump for this reason, and after waiting for a while when one of the SUVs went to backup, I kid you not, it made the BEEP-BEEP-BEEP sound, just like a tractor trailor or bus backing up. My wife and I got a good laugh, but I think we were the only ones since everyone else at the gas station was in a similarly oversized SUV.

sacramentia said...

Why would you yell at someone for buying a new car? That just makes you look like a jealous little person. And the fact that you know Skier's Choice makes Moomba makes it sound like you want a boat too.

The person with a new H2 might just have a lot more money than you.

Siflsockpuppet - I think you made some good points today.

Cmyst said...

Happy, happy, happy in my Toyota Matrix.
Add GPS - $200.
Add Sirius radio - currently, Best Buy has the Stratus 4 model for free if you purchase a $30 prepaid plan card. The cost is a little over $12/month. That's about 2 to 3 fast food lunches.
I get a warm feeling all over when passing Hummers, and feel positively giddy when gassing up next to them.

alba said...

I had the time of my life, a few years back in Scottsdale, watching my neighbor across the street trying to back in his H2 into his 1-car gargage (also had a 2-car garage). Back and forth. He was a lawyer, and you'd think he'd measure...he didn't succeed.

Here in Rocklin, there are 4 Hummers on my block. I just don't get that.

Seems like Lander should institute the $1 foul language fine here!

Rich Wilson said...

My problem with Hummers and their kin is the ridiculous tax break they get. If you want to waste your money on something like that, then, well, this is America. You're free to do something I think is dumb. But I sure hate paying for it.

Diggin Deeper said...

Interesting comments...

A few years back we saw oil prices sitting at $40 per barrel, then $60, $80, and now over $100. Who could've known that buying any SUV yesterday would end up being such a loser today?

We're just beginning to settle into the realization that oil prices are high, will remain high, and are tending to go higher... recession or no recession. A bubble? Imho, supplies are falling faster than the rate of decline in demand. This will continue to pressure oil prices higher, which will force products tied to oil higher, and will create inflation that can only be controlled by a complete switchout to other forms of energy (or some magic strengthening of the USD), neither of which appears to be feasible option in the forseeable future.

Americans prefer energy fix to cancer cure: poll

http://news.yahoo.com/s/nm/20080403/tc_nm/usa_poll_energy_dc;_ylt=Ah4M5NosTqVz_o6XGj0jkz5Z.3QA

This will further affect the price of real estate locally, first to the downside as we've seen, but eventually levelling off as home replacement costs are driven higher by higher inflated costs due to oil and products tied to oil.

As far as real estate is concerned, people are beginning to realize that energy costs are important, and they will eventually force actions that will attempt to curb these costs on an individual basis. It's beginning to make perfect sense that moving closer in, where amenties and jobs are closeby with good public transportation available, will command a premium at some point. Maybe that's already occuring if you watch how real estate pricing in the city appears to hold up in value while places like Rocklin, Roseville, Lincoln, and EDH are beginning to fade.

I really doubt those Hummers and SUV's will ever make sense again as energy prices will drive our economy until we change from being an oil based society. If you're paying over $100 per tank today, be thankful, because it's likely to go much higher in the future

rocklin renter said...

Why would you yell at someone for buying a new car? That just makes you look like a jealous little person. And the fact that you know Skier's Choice makes Moomba makes it sound like you want a boat too.

The person with a new H2 might just have a lot more money than you.


Jealous, AHAHAHAHAHAHA not quite.

They "might" have more money, but they "probably" just have a hell of a lot more debt.

The SO and I have two reasonable cars that are high on value and low on cost. We've done the high-end SUV thing, and we are quite over it thank you very much. Next time I get the urge for a cavernous vehicle, I will be at the Subaru or Audi lot looking at wagons.

I have always been in to watersports. The "Skier's Choice" knowledge is just a projection of that. I have been a boat owner numerous times. I find it much easier to have friends with boats, and money is not the issue. If you've owned a boat, you understand.

No gwnyster, we are not married. I think two overly cynical folks in the same house would be big trouble!

Patient Renter said...

I will be at the Subaru or Audi lot looking at wagons.

Ditto, I just wish Subaru would get their Hybrids out already!

Jacob said...

Most people that are truly rich, still live well within their means.

The problem is the people that think they are rich or want other people to envy them.

rocklin renter said...

Or give us the new Boxer diesel.

The car rags have been RAVING about it. 148hp/258tq -> 60mpg!

Edmunds first drive:
http://tinyurl.com/26nmzk

Patient Renter said...

The problem is the people that think they are rich or want other people to envy them.

Reminds me of a phrase I learned this week: Fake it till you make it.

Rocklin Renter, WOW! I had heard a bit about the Diesel and that it was going to Europe, but I didn't realize the mileage was that great. I'd be all over that!

sacramentia said...

Diesels make so much sense - I wish there were more to choose from here in the US too. I have an Excursion that gets 20mpg average on highway trips. That is really impressive for a car that size. I can't wait for a diesel Tahoe, est 28mpg. The excursion is just too damn big when you get to a parking lot.

STOP ROSEVILLE CRIME said...

You guys are all talk. Put ur money where ur mouth is. I've been trying to sell my hybrid for 9months now, get lots of looks, but no one buys. Still seeing people pay over $50 to fill up their vehicles. Guess they want the airline miles. It's just a fad, where were all of you 10 years ago??? If it's good enough to get a hybrid at $3/gallon, why not $1.50? It still gets the same gas mileage at any price, right??

Diesels? Why? They smell and put out black smoke, hardly environmental. And loud! Sounds like a tractor. At least you don't ever have to get it smogged.

sacramentia said...

Maybe you're asking too much for your hybrid. I hear diesels have good resale.

rocklin renter said...

Diesels? Why? They smell and put out black smoke, hardly environmental. And loud! Sounds like a tractor. At least you don't ever have to get it smogged.

100% incorrect. Modern "clean" diesels exhibit not of the above characteristics.

And yes, diesels do have very strong resale values.

I'd guess the same as sacramentia - you are probably asking too much.

norcaljeff said...

Clean diesel? Sounds the same as a conservative liberal to me.