I've been watching for years. my regret is in not having taken time lapse snapshots. Housing-Watch has been tracking asking prices for those same years. http://housing-watch.com/home.aspx?d=180
Most are also at 12 mo lows. Anybody who is still thinking this is "local" needs a new excuse.
45 comments:
First!
Related... I've noticed something and I was wondering if anyone else could confirm it (or kill the theory with ugly fact).
It's all anecdotal evidence, but...
What I've noticed around here (SF Bay Area) is that the outlying areas (cheap areas > 30 miles from SF) built up fast in the last boom and are now tanking hard. SF has (mostly) held value and the closer in, the better off you are. That part is backed by the numbers.
My theory though - the people buying in the outlying areas were predominantly "working poor" and/or new home owners - those at the bottom of the economic heap. They bought there because it was what they could afford. The speculators in that bunch were also buying there - they couldn't afford to spec in better areas.
If this holds true elsewhere, I'd say it's the lower rungs of the ladder that are getting hit the hardest in this down turn. Ties back to middle class discussion the other day - the lower end of the middle class getting hit hard in this will tend to erode it further.
Oh yeah... Murst!
BTW: What's the over/under for CS starting yet another blog? I'm thinking 15 January.
Dear Rob Dawg and the Dawg Pack,
I post today in sadness and in search of some help for a couple of my employees, help which I believe you all are qualified to extend.
The situations are all very similar, so I will use that of “A” to illustrate their predicament. “A”, a single Hispanic mom, purchased a single family detached residence in 2005 for $490,000 using as financing a no-doc, I/O ARM. She also used a piggyback 2nd loan to bring her LTV to over 100%. Essentially not only did she bring no money to closing, she was paid $10,000 to purchase the house. Her relatives acted as her RE agent and her mortgage broker, as they evidently did for many other of their relatives and friends. “A” used the bulk of the cash back to put on a new pair of titties, but I digress.
The payments have recently adjusted from $2,000 to $4,500 per month, which she cannot afford, and refinancing is impossible as the house now appraises at $420,000. I advised her to consider stop paying anything at all to either of the lenders, stall foreclosure as long as possible (become a squatter), and then move into a rental ($1,200 per month) after foreclosure. In essence, just milk the free housing until she is foreclosed on, accept the credit rating hit, and walk away.
Obviously I am not familiar with foreclosure, bankruptcy, or the intricacies of mortgage lending. She informed me that she could in fact just “walk away” from the lender in first place, but that the second baseman was problematic in that the piggyback loan was really little more than a HELOC or a refi, which she says is a “recourse” loan, as opposed to the first lien holder, who is a “non-recourse” lender.
What advice would you give to SOMEONE YOU CARED ABOUT who had gotten themselves into this situation?
Thanks much to the Dawg Pack.
Where to begin?
Okay, I know what should be done. I also know that what should be done is no longer a reasonable baseline of civil behavior. To be honest, ever since "The Donald" got to be worth $3t after being worth -$4t there just isn't any reason to push the responsible path.
To make the best of a bad situation your theoretical persons should immediately stop paying absolutely everything. Hear me out. That seems extreme but in their predicament it is important to flush out the weak players. Shortly after ceasing all payments your theoretical will have all the info necessary to make the best choices. In short your advice is best; delay and don't pay. This is the moral hazard.
Damn - just typed in a long thing and then lost it. :(
FCB - Normally I'd be all over the snarky comments about personal resposibility (and fake tits), but you have a history of very good posts - I'll skip that.
Short version (I don't want to retype it all):
Stop paying on either loan immediately. 2nd will come after her when its repossessed no matter if she is current or not. Save the $2k/month. In a year (this will take that long), she'll have $24k +interest. She can then try to negotiate with the 2nd.
Alternate is to simply stop paying and not save - what can they do if there is nothing to collect? She'll deal with creditors calling for many years, but...
Another alternate - if she is decent looking, use the fakes and work a strip club. Good money, should be able to earn enough to keep the house. Definitely NOT for everyone, but then again, the house is gone otherwise.
The long version was so much better... :(
FCB - is KC has proven anything it is that the recourse and penalties suffered by those who DO NOT pay their mortgages or bills are actually survivable. I am not American so I do not know what the long term penatly is for a bad credit rating but in Australia it is survivable provided you have decided to never attempt taking out another housing mortgage loan.
Thanks for the mostly snarkfree advice, as these are people I know and care for very much. People who get up every day and go to work (for me and my company). I had no idea they had even purchased homes as the no-doc loans meant no employer verifications. Obviously they fibbed about their income.
Rob, I agree that all easy-lending bubbles end with hard assets transfering from weak to strong hands, a circumstance both of us dinosaurs have benefitted from in the past as we will in the future.
Property Flopper, as I am completely unfamiliar with bankruptcy or the consequences of loan default: What action will the 2nd lien holder initiate - a civil suit resulting in a judgement and then attach her wages? Can this debt be discharged in bankruptcy?
I am unfamiliar with all of this.
A Funny Circus Bears sed:
I advised her to consider stop paying anything at all to either of the lenders, stall foreclosure as long as possible (become a squatter), and then move into a rental ($1,200 per month) after foreclosure. In essence, just milk the free housing until she is foreclosed on, accept the credit rating hit, and walk away.
Yep. It pains me to say this, but that is exactly what she should do. The lenders were irresponsible. She has no hope of repaying anyway. Water under the bridge.
Anyone watching CFC and FNM stock prices? Bernanke better start bailing faster, the rats are leaving the ship.
I would consider continuing to pay the mortgages through December and then quit. There is a chance that congress will pass some legislation next year that might help her escape the recourse. This is a long shot and depends on whether she has the cash to delay jumping. Some of the people her are far more intune with what Congress is doing, but I expect them to pass at least some sort of fig leaf help foreclosees legislation
[link]
@FCB
I respect you as a fellow investor but sheeeeit....
This lady comes upon a 10K bonus and she spends it on tits?!?!?! Not, "I better save this for a rainy day, or a college fund..but TITS?" Sounds to me like she FELT she was going to get rich as real estate always goes up?
Anyways, yeah, get short sale, stop paying, get into foreclosure ASAP with the other million people..no stigma at this point, and move on. Did she actually qualify for the laon or was it income inflated?
Legion,
I have NO IDEA what ratio lenders were using back then to qualify borrowers. The initial $2,000 per month (the sum of the payments on both loans), represents almost 50% of her gross monthly salary. I would assume they all lied about their income on those no-doc loans.
These people are really just regular working people. I don't think they were looking to get rich, flip houses or anything like that. They never even mentioned to anybody at work that they had purchased homes. They are now just completely humiliated, mortified and scared.
Sounds hopeless. But on the bright side I'm sure those relatives who helped her into this situation will be more than happy to put her and kids up at their place rent free. After all they pocketed some big commission checks.
@FCB
Well, I'm sure I won't know the entire story...unfortunately, despite them being working class people, they got suckered into a typical ploy where everybody gets rich except for them. Unfortunately, they signed for the entire amount, they didn't realize it would reset, and they didn't know real estate would tank.
At this point the best thing they can do is get it over with as fast as possible. Don't drag it along like Serin did, it all ended up the same for him anyway.
The last thing they want to do is drag it along as more and more people foreclose whereby you finally have banks that say "enough of this bullshit already..screw these people"
She should definitely keep in close contact with her lender and ask them what her options are..at this point most lenders are still trying to avoid foreclosure proceedings if necessary.
Wait..50% of GROSS? So in other words..unless hubby is earning about the same as her...they are screwed even if the lender stays at 2000 per month right? better tell her to get out now, before banks decide they are just going to charge her 2K per month for the rest of her and her firstborn's natural life.
Oh...just gotta add this snarky comment:-) So um...can she get a refund on her tits? Maybe sell em on ebay..slightly used?
Went long on CFC for a measly 500 shares today...c'mon,,they can't get any lower can they!?!?!?
Oh, and there was no ratio used by lenders back then..what they were checking for was a heart rate...
@FCB
Oh and the second mrotgage makes it a toughie. As Serin showed, even with a short sale..the 1st mortgage hodler loses a bit, but it is the 2nd mortgage holder that tends to lose it all, and that is why they usually refuse the short sale.
by stopiing payment immediately, it allows the bank to get the foreclosure ball rolling that much faster...any money she shells out at this point is just pissing into a typhoon....
"Another alternate - if she is decent looking, use the fakes and work a strip club. Good money, should be able to earn enough to keep the house. Definitely NOT for everyone, but then again, the house is gone otherwise."
Lol property flopper! You couldn't resist could you? I think FCB could have had some serious discussion about this..until he mentioned the fake tits..I mean c'mon..:-)
But the $2,000 a month payment doesn't even cover the interest. Hard to see how a lender is going to be able to help here, even if they wanted to help.
how much titquity does she have?
Sorry couldn't help it....
That chart is conspicuously missing not only New York City (a reasonably notable city ;-p ), but any city within NY State.
We've been spared! Sweet deal... ;-)
That chart is BULLSHIT, Robert. We had a very well-educated economist visit our city recently. He was an Asian gentleman who wears glasses, so he must be smart. He represents an important trade group. He says that Houston is different, and the local newspapers printed his comments. Who can argue with that?
The fine folks at the HAR have also launched a new radio campaign, complete with a dedicated website, that PROVES WITH SCIENTIFIC PRECISION that it has never ever been a better time to buy a home here. Not house, home.
“A”, a single Hispanic mom, purchased a single family detached residence in 2005 for $490,000 using as financing a no-doc, I/O ARM. She also used a piggyback 2nd loan to bring her LTV to over 100%. Essentially not only did she bring no money to closing, she was paid $10,000 to purchase the house.
Repeat a couple hundred thousands times and this is where we are today. I'm telling ya, people are gonna demand that heads roll very soon. Not housing bubble followers like us, but average Joe's. That's when you'll see Orangello's mugshot.
What the heck are you talking about? Of course this is loco, it's been crazy for over two years now...
Oh local.
Well, that's something completely different.
Never mind.
Those $10,000 twins are just the tip of the problem. It is too late to nip this in the buds so we might as well milk the inflated assets for all they are worth. My shirt off my back to all my bras who are abreast of the situation. Sadly the way forward has been pointedly clear. Trying to hang on is only a long shot from Congress that probably won't help. Squirrel cash and renege on any debt. Stay in the property as long as possible even to the point of possibly being offer money to leave. People are getting uppity about making people like this pay. Don't be the last rat off the ship.
Hey Rob nice job slipping in every single possible titty innuendo into that last post! Tits the season to be jolly after all:-)
Hey Rob nice job
Awww gee my chest is all puffed up and swollen with pride.
http://www.netjeff.com/humor/item.cgi?file=Bazongas
Illustrated!: http://www.grupthink.com/topic/336
Sadly no one has managed to use "sweater puppies."
I feel an Akubipalozza coming on.
"Awww gee my chest is all puffed up and swollen with pride."
You sure that's your chest there?
Nothing says I'm not superficial like blurting out "Nice bozongas" on a first date.
This is the biggest bust in recent mammary. Those twins need unflagging support.
Miracle 400 point rally on the Nikkei late in the day. Expect big things tomorrow!
re: the situation described by funny circus bears - yup, what Rob Dawg said - right down to giving that advice holding our nose, but keeping Le Trump firmly in the picture.
Calling them regular working people is rather extreme though - if you take the entire USofA or the whole planet into your reference frame - points of contention - single mom, 500K house buy, money BACK on purchase ( o c'mon where you born that you don't smell something fishy there even if YOU are the recipient of it ), money spent on implants. Calling that regular is err, irregular - IMO.
-K
@Edgar
It damn well better be a good day tomorrow! I lost like 150 dollars on that at the bell decline of CFC! I think Mozillo was flooding the market with another dump of 1.3 million of his shares...
I tell you tomorrow is gonna be colder than a witch's tit if I don't see a huge pendulous motion by the market of mammarian proportions! Then again..I don't know how much longer I can keep milking CFC for more profits.
or keep milking the titty jokes for that matter....
or keep milking the titty jokes for that matter....
House prices are plummeting faster than a speeding motorboat! :-)
Sorry to hear the story PF, but I'll throw in my two cents. They're throwing good money after bad. Unless they can both find additional jobs to make up the deficiency, it's time to move on to plan B. They potentially made one bad financial decision by doing business with a family member. For sure made a mistake with that member doing both the real estate and financing portion of their deal.
My experiences with family members has been mixed, having done business with some members and not with others. I will not assist with the financing but will review financing numbers with them, explaining pros and cons of different programs, etc.. Also, I will not work with them if they are buying a 'home' and do not plan on staying in it for atleast five years. Did not make sense in the past and surely does not make sense right now. If they wanted to buy an investment property, it was a different ballgame as there are many different investment strategies, but again I would not get them financing. I want my clients to have another opinion on a financial matter of this importance.
Good luck to your friends.
Sac Re - It's FCB's friends, not mine.
Edgar - Only partially snarky. I have a friend who actually did turn to stripping when she got behind on bills. It worked, she made very good money. Had a hard time getting out, she got used to the money. The whole experience messed her up quite a bit in the end. Not the best option (but come on... buying tits?)
FCB - If it is a recourse loan (likley), then they can go for a civil judgement, take any bank account and garnish wages. Are they likely to? Only if they think they can get the money - why go through all that if there is no money to take.
Bankruptcy can discharge the debt, but given the changes last year it is likely to only reduce it.
Best bet is to stop paying now, save the money and try to negotiate when the time comes. Faced with a choice of some money handed to them vs. fighting and possibly getting money, they are likely to be willing to talk
Funny Circus Bears:
I don't suppose your company would be in a position to buy her house and hold the note?
They could deduct %50 of her gross as the mortgage payment.
Just until the market improves enough that they can sell the property off at a very modest profit, and she can once again afford to make her nut.
Coming from a long Organized Labor background, and as much as I detest the idea of "Company Housing",(seeing as how it has been abused in the past), I'd observe that the company keeping it's employees in their homes would generate employee loyalty like nobody's business.
Back in the day, the Commies would win lots of supporters when the Red Self-Help showed up to beat the shit out of the eviction agent and his movers.
A tactic that might come to pass again, if the Burst follows it's worst-case scenario course track.
Other than that, perhaps she can take in family members as lodgers.
Other than that, perhaps she can take in family members as lodgers.
I've long factored this phenomenon into my long range predictions. If just one out of ten households takes on one more person there is an additional 4 million house surplus in the US. and it doesn't really mean an extra person joining a permanent household, it will be things like kids home from college moving back in for a few extra months or taking in a newly divorced sister and her kids for a few months or two guys who share an apartment that in better times they might be living alone. This is also why my small rent increases prediction will hold.
Rob:
"If just one out of ten households takes on one more person there is an additional 4 million house surplus in the US."
We certainly have arrived at a peculiar place, and one that we have foreseen.
We don't have a housing shortage, but a money shortage.
But in this, FCB's instance,we're considering the angle from the end of keeping working people in their homes.
I just threw out two ideas that I haven't seen proposed yet.
Anyway I look at the Big Picture, though, it seems like the only way out of this mess without evicting whole swaths of America and/or ruining our economy is to devalue the currency.
And we can see that already happening.
If Casey had bought 4,000 dollars worth of 87 octane unleaded gasoline instead of his stoopid Gold Mining stocks, he'd have a lot more money today.
The same gallon of gas that was 2.25 eight months ago is now 3 bucks.
Property,
Thanks for that.
Bilgeman,
Thank you as well. Buying their homes isn't something I would do as I have ALOT of other employees and no idea who is getting themselves into deep doo doo. It was a good thought, though, and thanks.
We don't have a housing shortage, but a money shortage.
Correction. We had a money surplus and now we don't. Money went all kinds of places but mostly to debt housing.
You all are forgetting what is important here.
She made wise choices and should stop paying the mortgage and hoard money to rent with.
A foreclosure will eventually pass, her credit will be restored and her life will go on.
She made the choice to INVEST IN HERSELF FIRST!
Just a regular working person who will forever have a GREAT RACK!
*Above comment deleted because of no edit capabilities - typo corrected here.
How pliable was it that she needed this solid transaction? Now she's experiencing a loss of elasticity of her funds. Looks like she's going tits up.
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