Saturday, May 01, 2010

Not having much luck...

Look at Redfin's listing of homes under $450K in Santa Clara County. Look at the number of short sales on that list -- it's all either short sales, or a (very small) sprinkling of REO's, whether we're talking condos, townhouses, or single family doesn't matter. And most of those short sales have been on the list for six months or more -- one has been on the list for over 500 days (!!!!) and when my broker contacted his broker, my broker found out that bank had just started (finally!) the foreclosure proceedings on this empty vacant home but the owner just declared bankruptcy as yet *another* delaying tactic (since everything is frozen by bankruptcy). This is why I'm not having much luck looking for a new home. We contact a selling broker, and find out that yes, it's listed for X, but either a) the owner isn't *really* trying to sell and is just doing this as a delaying tactic to avoid eviction, or b) the bank wants $X+$50,000 (i.e., much more than the property is listed for) before they'll actually agree to the short sale, and the second lender wants $10,000 to release his lien.

I don't think we're going to be able to get back to normal until those short sales have been turned into REO's (foreclosed bank-owned homes) and turned over to responsible people who can afford them. I've been absolutely baffled by the Obama and Governator administrations' focus on keeping people in homes they clearly can't afford and clearly were irresponsible to purchase in the first place. Whatever happened to the notion of allowing people to suffer the consequences of their own poor decisions? It's not as if they are going to be homeless if they're foreclosed on, after all. They just have to rent for the next five years or so as they rebuild their credit and their cash reserves, hopefully to make a more responsible decision next time.

I moved here to the Bay Area in December 2003, selling a modest home in Scottsdale Arizona to do so. I looked at the housing market and it was clearly demented. No sane person would have bought (rather than rented) at the prices in December 2003, they simply were not sustainable under the median income of the typical Bay Area resident. And they just went higher from there. I'm not an economist (I don't even play one on the Internets), but I can look at the equation, "price of mortgage = X, price of rent = 40% of X, why is anybody buying?", and make the rational choice. Others did not. So be it. Now it's their turn to be renters and let the more responsible people be buyers, and it is extremely frustrating to me that everybody from the President of the United States on down to lowly bank property managers is trying to interfere with the rational operation of the market and keep that from happening.

-- Badtux the Responsible Penguin


  1. I reckon you're seeing "extend and pretend" at work. If the banks don't actually SELL as a short sale, then they don't show a loss on their books. It's just an "underperforming" loan that can be marked-to-fantasy and carried as though it would sell at a profit someday. Perhaps they're counting on that happening when inflation (actually, degradation of the currency) makes the dollar figures for each house sale go higher. Unfortunately, a loaf of bread will be selling for $50 by rhen for the same reason.

  2. Fuck the market - The PAIN is very real for these homeowners.

    "...let the more responsible people be buyers.." OK - who exactly is that?

    I usually like your blog but it seems that you are moving closer to a gated community than an equal distribution of wealth which is where I come from. If managers didn't make 400 times more than their workers, the workers could AFFORD the Goddamn payments. Are you in favor of destroying the middle class?

    Geeze - get a grip Tux. Income inequality is what has caused this mess along with deceptive business practices due to lax regulation. You know that!! WTF?

  3. Dude, if we were talking about people whose income had declined between the time they bought the home and now, we wouldn't be having this conversation. But we're not. We're talking about people who knowingly bought homes they knew that they could not afford with liar loans that had rate resets within three to five years, in hopes that when their liar loans came due and reset, they could flip the home and extract out the equity. They lost the bet. Oh well. Time to be renters again, not try to bail out people who gambled and lost. And that applies to the little guys who took out liar loans just as much as it applies to the banksters who handed out those liar loans. It was a two-party fraud, and both parties need to be forced to take their lumps, otherwise the houses are going to be held off the market and the market can never get back to normal with homes selling at prices people can actually afford again.

    By propping up the scams, frauds, morons, and banksters who refuse to allow these houses to get back on the market at market prices, all you do is extend the pain, since as long as they're being held off the market the market for low-end houses is basically *frozen*. Yes, *frozen* -- nothing selling, because everything for sale is being knowingly held off the market when you check because nobody wants to accept that they goofed, that they bought (or financed) a home at way more than it was worth and it's time to take their lumps.

    Like I said, it didn't take a fucking genius to figure out even in late 2003/early 2004 that shit was fucked up. When I could *rent* a townhouse for 1/3rd the monthly rate at which it was *selling*, it was a "doh!" thing to figure out that it made no sense to buy. Yet people did. And until those houses come back on the market, we're stuck -- all the economic activity that usually revolves around buying and selling homes is at a standstill.

    - Badtux the Real Estate Penguin

  4. OK - I accept your business logic. But that does not ease the empathetic pain that I feel for these people with children who are going to be homeless because they bought the package that "everyone should be able to own their own home" sold in the late 90's and through the 2000's until the crash. I understand the business logistics, I just can't reconcile the amount of human suffering - (much of it in my own suburban neighborhood) that goes with it. On paper, corrections are numbers -the real life inplications with real people suffering the consequences is another story altogether. -True?

  5. They're not going to be homeless, Greendayman. They're going to be renters -- with far more money in their pocket at the end of the month, because rents here are *still* only 2/3rds of what mortgage payments would be. Have I been homeless for the six years since I refused to buy overpriced real estate in late 2003/early 2004? *NO*. And neither will these families be homeless, they'll just be renting, big fucking deal.

    - Badtux the Renter Penguin

  6. Tux
    We lost our home because I had no money. Our home of 23 years. A had s stroke and no health insurance. Boo fucking Hoo for me. It's been almost 4 years and were looking for a small home. Now the kids are all on their own, we don't need much. I want a garden, a dog, and my cat back. We had to get rid of the cat cause now we rent. I want to play my guitar using my amp. Can't now.
    I've a pretty good down payment but am looking all over the country because we don't want to ever be house poor again. So I'm trying for that great deal everyone else is trying for to.
    Right now were thinking Tennessee.
    Low Taxes!!

  7. Tim, that's the sort of situation where I wish we had real mortgage insurance here in the United States like they do in England. That is, if you have a temporary disruption to your income caused by unemployment or temporarily illness, your mortgage insurance (for which you pay a monthly premium that protects *you*, not the lender) pays the mortgage until you find a new job (within limits).

    But that's not the vast majority of the "short sale" homes I see here in the San Francisco Bay Area. The vast majority of these people make at least as much money today as when they "bought" these homes. They couldn't afford the homes when they "bought" them, and they *still* can't afford the homes. We don't have any guarantee written in our Constitution that you are entitled to a home you can't afford, last I checked... and by trying to enforce that sort of socialist mandate in the marketplace, all that's happening is that the marketplace is having a huge steel bar rammed into its wheels, causing it to come to a screeching halt that has completely frozen the local housing market. We can't get normal buying and selling happening again until those homes are back on the market for market prices, rather than being held off the market under a variety of strategies intended to keep buyers and bankers from having to accept the consequences of their irresponsibility. And until normal buying and selling is happening again, all the normal economic activity associated with buying and selling is at a screeching halt too.

    - Badtux the Market Penguin

  8. Dear Market Penguin - Step away from you calculator and say hello to the real people who are experiencing the devistating consequences of not being able to afford to live in their homes that were sold to them with 30 or 40 pages of explicit reasons why they would be fine. This is not their fault. I do not understand how you can disregard this pain unless you are a closet republican with no empathy. Renting is not the answer for most of these people. Geeze. Grow a heart.

  9. P.S. The "Market" can kiss my ass. I have NEVER been a beliver in unfettered capitalism.

  10. So renting is fine for me, but not for thee? Wow. Talk about an unwarranted sense of entitlement!

    If you're been reading my blog for a while, you'll notice that I am *not* a fan of unfettered capitalism. However, I *am* a fan of regulated markets. What we have right now in the housing industry is not a regulated market, but, rather, lemon socialism, where people who made bad bets are being bailed out by the government and in the process are destroying the market for the rest of us.

    - Badtux the Regulated Market Penguin

  11. I have been a reader of your blog for some time. And I have noted that you are a bit of a capitalist centrist - not that that is a bad thing - at least not all the time.

    And Agreed - socialize the losses and capitalize the gains is a problem on a macro scale.

    True and very, very wrong - but, this does not change the fact that families were sold a package of goods that promised the world and delivered ... well...

    And now, you want to ship them out of their homes, sell their pets, put their belongings into storage so they can rent. How much stock do you have in Property Management? Oops, that wasn't fair, and I do like you and do not want a flame war - honest. But we do disagree here on a basic socialistic (humanistic?) vs. capitalistic level.

    So - Let's just take some of that trillions of dollars to bail out AIG etc. and funnel some of that into the "bad" housing market, get some radical CRAMDOWN going here and get payments to an affordable level. Below Rent which is where most were when they bought.

    Radical? I think not. Look at the numbers... get your calculator out.

  12. Uhm, I have pets, I have belongings, and I rent. And the price of mortgage payments may have been below rent at some point in time in *your* housing market, but that was *not* the case here in 2005-2006 when most of the current homes that are in default here in the Bay Area were "sold". Even with the option ARM liar loans, the price of mortgage payments in 2006 was over twice what it would have cost to rent the exact same home.

    The result of the "lemon socialism" here in the Bay Area is that the entire housing market has come to a screeching halt. I'd like to buy a home right now. But there are no sales happening at the low end other than a few forlorn REO's which get swiftly snatched up by cash investors who don't have to worry about the home appraising out (because, duh, they're paying *cash*). If all these homes in default were foreclosed on and put on the market, I -- and others like me who can afford a home that's at market prices as vs. the inflated bubble prices of the mid-00s -- could finally buy *our* home. But you appear to think that irresponsible people are more important than us responsible people who refused to buy a home that we couldn't afford...

    -- Badtux the Market Penguin

  13. Ouch! Market Penguin - I would never wish any harm on your buying power. I have visited the Bay Area some years ago and witnessed the inflated RE pricing. Things are different here on the east coast. Tux, I would never wish you lesser buying power for the home of your dreams, but at the cost of lesser folk.... not so much. I am a socialistic SOB and I make a shitload of money and give a lot of it away as I do my services or I would make a lot more money.I just don't give a shit. I just don't care. I have seen it both ways and I prefer to see people with less advantage than me get ahead. Gives me a little woody. I bet it does you too or you wouldn't be a blogger - you just won't admit it to your capitalistic friends. I yell at those mutha-effers all the time!! Does no good - but I give away my services to those less advantaged than me all the time. Drives my kids crazy - they want the money!

    In the meantime... greedy fucks take advantage of forclosed homes and lots of kids hit the streets.

    Money is not the answer. Building community and society is the answer.

    You are a good man - just a product of the Reagan years... not your fault. -g

  14. So you're saying housing should be allocated based on who was most willing to lie their way into a home they could not afford? Dude. That's the most fucked up way of allocating society's resources that I've *ever* heard of. Crap, even a fucking *LOTTERY* would be fairer than that.

    Here is how "homeless" the family in that 3 bedroom townhouse they bought for $650K with a liar loan in 2006 would be if they were foreclosed upon and evicted:

    $1850/3br - Newly remodeled single home on corner lot. Spacious with hardwood floors and ceiling fans. Recently remodeled bath with tile floor and shower over tub. New cabinets and granite slab countertops in kitchen equipped with less than 2-year-old refrigerator and stoves. Detached 2-car garage and plenty of off-street parking behind moving iron gate. Small pets are okay. (Listing from Craigslist, 5-1-2010, 11:53AM).

    So: Should a family be attempting to spend $3500/month on mortgage payments they can't afford, or should they be renting for $1850/month? You make your own call, but I don't think we're doing them a favor by saying we ought to "keep them in their home".

    - Badtux the Supply and Demand Penguin

  15. Mr. Tux: There are very few fucking geniuses in this country, as I'm sure you're aware. However, after (at least) 30 years of income redistribution up to people who don't need it, much of it by nefarious means, I have no problem with a cramdown into the mouths of those knowingly selling liar loans from the fists of those without a real raise in all that time, many of whom are now unemployed and subsisting on benefits, benefits not of the trillions shoved their way at no cost variety.

    I'm happy to see people, even stupid people, get one over on The Man, when The Man has had everything handed to him on a platter by the govt no matter how many times he screws up.

    Your argument is persuasive so far as it goes, but in this real world the people behind the liar loans deserve to get kicked down the road with nothing in their pockets.

  16. Tux
    The England thing sounds like we should have it too. In my case it took me over a year to walk and use my arm again. So that probably is to long a period even for their help.
    A guess my point was, people that are down and out have to find ways to get back on top. I'll have a house again.
    As far as east coast and west coast prices, I feel bad for you. Damn cost are nuts on the west coast.
    Renting here is by far more expensive than buying. I'm just a cheap bastard and don't want to pay the exhobitant taxes here. Example..$100,000 home in Tenn.average taxes are about $800.00 per year. ALL TAXES.
    Here Village taxes are about the same. Good luck in your Venture..
    PS In the imortal words of Joe Dirt
    Keep on keeping on

  17. Also in the real world, I think that banks are slow to foreclose because they are already sitting on large inventories of properties they don't want. And they don't want to release them into the market all at once, because that will drive prices down still further.

    So there is a massive "extend and pretend" going on. Greece might be back on its feet before the real estate mess is liquidated.

    I bought my house 12 years ago, and it's worth 1bout 15% less than the purchase price. Which means my property taxes have gone down. Which means that cash-strapped local government is taking a hit.

    And that's only the residential story. The fun is just starting in commercial real estate.


  18. Greendayman
    Your sentiments are heart felt. Far to many people who bought the bullshit loans are in despair. They feel like they let their family's down. Even though things were a bit different for me, I still felt like a failure. I once even thought of suicide. That I wasn't a man who could provide. Thank you, you got it.

  19. Dope: It didn't require a genius to see that paying $1800/month in rent for a 3 bedroom townhouse was less money than paying $3500/month in mortgage payments for a 3 bedroom townhouse.

    As for the fact that the little guys are putting it over on the banksters: Yes, but they're putting one over on *me* too. I kept renting, knowing that housing prices were unsustainable and that sooner or later the market would undergo a correction as the Ponzi scheme of flipping homes to the next sucker finally ran out of suckers. Now it's my turn to own a home, and WTF?

    Tim: Taxes here average about 1.3% of the sale price. So if I bought a home for $400K (quite doable on an average Bay Area two-earner-family income), I'd pay $5200/year in taxes.

    Jazz: Prices here still haven't fallen back to 1998 levels, much less below there. They're being propped up via collusion between all the parties involved in the liar loan scam, both the lenders and the borrowers, holding those properties off the market. I'm just curious how much longer they can manage to keep a lead balloon up in the air...

    - Badtux the Housed (in a rental!) Penguin

  20. I'm dealing with the same problem here (NE Mass). My price range is under $200K, small SFH only, no condos/townhouses. There's some, and I even went under contract for one til the inspection revealed some serious structural problems so I exercised my right to cancel the deal. For now I'll keep renting. All these short-sales and foreclosures have got to end up as REOs at some point when the banks realize they need to mark this shit to market and take the losses.

    Around 150K, buying is cheaper than renting here, but there's damn few options. A condo with the HOA fee puts it over renting, and I hate HOAs.

  21. Hi Market Penguin,

    "Whatever happened to the notion of allowing people to suffer the consequences of their own poor decisions?"

    "...everybody from the President of the United States on down to lowly bank property managers is trying to interfere with the rational operation of the market..."

    Can you see that unicorn yet? Over there, next to the cotton candy tree. Damn, BadTux, you just might make a libertard yet. I loved the comment where the fellow accused you of being brainwashed by Reagan. That was hysterical. I'm enjoying reading your blog again.



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