patrick.net

Sorry to hijack this thread, but I had to post this story I found on another blog. The story takes place in the city where I live. Once again, I apologize to Randy, and others, but this story just sums up the stupidity and deceit that goes on in today's RE market.

Bitter Buyers say William’s Lyin’
Mar 24th.

"Today was a beautiful, blue-sky kind of day, the kind of day that reminds me why I love Irvine so much. My little boy and I played for quite a while at “Bob the Builder Park” (aka, Colonel Bill Barber) as well as a small pocket park in Westpark. But first, on our way over to Bob the Builder park, I couldn’t resist making a short detour. I pulled into Columbus Grove and saw the line-up of protest signs along the main thoroughfare, Sweet Shade. I pulled up to the curb, put on my blinkers, gave my boy his Clifford Reading game on his Leapster, and chatted for a few minutes with homeowner Bob Spillar. He was sitting in a beach chair with, at the time I was there, two other men whom he identified as neighbors. I told Bob I was a blogger, writing for a blog on the local housing bubble, and Bob didn’t quite seem to get what I was referring to. (First clue, right? Too bad Bob hadn’t spent some time here, or over on
Ben’s housing bubble blog or on Rich’s site…) Bob was very eager to share his story with me. Here it is:

This is their second weekend protesting William Lyons Homes, Inc. He and 17 other buyers of Phase I Lantana homes plan on sticking it out for the foreseeable future, until Lyons makes appropriate restitution. They have clearance from the Irvine police to hold this protest; they are on public land and Lyons has no recourse to remove them. Bob said that Lyons has not tried to make them leave.

Mid-2005 Bob decided to buy one of the homes in Phase I. He closed in May 2006. He received lots of assurances from the salespeople that prices would not drop in future phases. He said that he feels “coerced, manipulated.” Bob acknowledges that he should not have signed the contract without reading it in its entirety (no kidding!), however he said the sales team promised him he didn’t have to do so. After the purchase, he and his 17 neighbors read “Addendum G” in their contracts which apparently states the standard legalese stuff about this written contract being the only legal agreement, that any verbal agreements not included in the contract would not be considered valid, etc.

So now, Lyons has dropped asking prices significantly in newer phases, and he and the neighbors are hoppin’ mad. Bob told me that he put 20% down when he purchased this home - he said that it was a requirement and you couldn’t buy the house from Lyons unless you put 20% down. (I don’t quite believe this could be true, however this is what he told me). He further told me that he took out a 100k second mortgage to pay for landscaping, etc., and that its rate is going to adjust in August and he is going to be forced to refinance in order to afford his payments. He believes that most of his neighbors also took out seconds that will be adjusting and they are all in the same boat. The whole “I put 20% down but took out a 100k second” just didn’t quite sit right with me, but I didn’t push it since my boy was itching to get going to the park!

He handed me a copy of the protest letter he and his neighbors wrote, letter to Lyons (new information: here’s the back of the petition)as well as a one-page flyer they are apparently giving to would-be new homebuyers who come to check out the models. Take a look: Experience the Lies

In their letter to Patrick McCabe, Project Manager for Lyons Homes in Newport Beach, the neighbors have this to say, “The undersigned phase I residents in the Lantana neighborhood are writing to you today to ask for your consideration to make things right…During the selling process, given the real estate market uncertainties, we had numerous conversations with the sale staff (Nancy, Jennifer, etc) about prices and we were reassured that the home purchase prices would remain stable throughout the development of our community. We believed in the community and you. We understand fluctuations and economics, but a $75,000-$200,000 price reduction? What does that say to your phase I buyers?…Given all the startup problems we endured through the first phase of development, we are asking for William Lyons to consider some type of compensation to all of us. Afterall, when we think of the sub-contractors and laborers that completed work; the quality was average at best. We trusted in you and now feel like we were misled and betrayed…”

So I asked Bob what exactly he wanted from Lyons. He stated that he does NOT want a “refund.” He wants Lyons to refinance the Phase I owners into lower-rate loans; he wants a “small stipend” and he wants free upgrades, retroactively. He said Lyons had already met with the protestors and informed them that the contracts they signed were completely legal and they had no intention of giving the homeowners anything they were asking for now.

So I thanked him and drove away, not having the heart to tell this poor, sweet guy that the carnage had just begun and his equity evaporation was just going to get worse over the coming several years. Best of luck to you and your Lantana Phase I neighbors, Bob."

>eburbed, can they explain the inventory/price roller coaster?

Nope.

It looks like he pulls data from realtor.com - maybe they had a hiccup?

Still, 4,985 homes on the market seems kind of low...

eburbed,

Low inventory with low sales suggests sellers who are holding out until the market stops being 'soft.'

Some people who don't have to sell their homes would rather wait until their house is worth whatever it was at the 'peak' before they sell because they have already mentally accepted the peak price as what their house is 'worth', and so selling now means 'losing' that money that was never really there in the first place. If they really don't need to sell, but were thinking about it to 'change houses' or something, they will represent the 'sticky' side of pricing. The houses that would have been on the market if it hadn't turned soft.

Any above water seller that really needs to sell their place, but is holding out for peak prices is really playing chicken with the buyers. Hoping the market will improve soon enough for him to unload the house, he'll hold out until 'panic' sets in for the whole market or until he absolutely cannot avoid selling anymore. These people include job transfers, estates, etc. These are the 'slow lister' types. They may be on the market, but overpriced, and many will 'chase the prices down,' at least for awhile.

Now... the FBs are going to hit the market with forclosures. If they sell, they'll realize their horrible losses. Sooner or later they're going to be in pain.

I sure hope he did not buy many investment properties with I/O loans.

I hope he did. Live by the sword, die by the sword. I'd be more disgusted with a Realtor who knew it was a bubble and happily sold people down the stream, saving up their commission checks to get in on the foreclosure action in the next 5 years.

Newsfreak,

I agree that holdouts that NEED to sell are doing the wrong thing right now. I'm just speculating as to why there hasn't been a lot of 'spring listings' and what might be motivating some sellers right now.

Best Buy's return policy sucks.

FAB says:
What I can’t figure out is how people who were not able to save a penny while renting think they can somehow afford to buy a home with no money down paying more each month than they were paying while renting…

That's silly. Obviously, they managed to make regular, reliable weekly payments while they were renting to keep a landlord happy. I don't see they have to prove they can scrape together a 20% deposit just to keep the banks happy. I don't see why housing can't be brought into line so that it is affordable at the same rates that people are currently paying for rents. a la 'rent to buy' or shared equity schemes.

I still don’t see any right to home “ownership”. I can understand a right to housing, so people have a roof over their head, though I don’t even like that kind of government intrusion into the market place.

hmmm, spoken like a true progressive liberal... markets are still god, even if they double the price of entry overnight...

DS, you are still invited to join our club of small-L libertarians. :)

FAB says:
Most people that have not been hard working and responsible enough to save up a down payment are not hard working and responsible enough to own a home…

I still don't agree. If a median priced home is $500K, the banks now expect you to have saved $100K deposit to cover the BANK's ass. A decade ago, the requirement would have been half relative to earnings.

Not many Gen Y's I know can save that sort of money, particularly if they are in the rent trap, where much of their income is going into rent, leaving very little for savings. Besides, the cost of serving a loan twice as large as their parents had will be the next hurdle. The best off people under these circumstances are southern Europeans and similar who group together as a family to pay off a place before sending their kids into the harsh wide world, unlike the north-west European neolocal settlement small nuclear family model...

Travelling (and enrolling) are English spellings, as any well-travelled person would know. England is not just the home of Morgans and Aston-Martins you know...

the lowliest peasant in Vietnam can afford their own dwelling, by the way. of course, it may be a relatively humble abode...

England is not just the home of Morgans and Aston-Martins you know…

How about cucumber sandwiches, scones, and devonshire cream?

my family used to own a scone mine in the yorkshire dales, with a cream well nearby...

A scone mine?

I love Yorksire Pudding. Can't resist lard! :)

yes, scones are mined mostly in the yorkshire dales (like welsh slate comes from wales) and geologically, where there are scones in the ground, huge underground cream reserves are usually found nearby...

Peter P Says:
DS, you are still invited to join our club of small-L libertarians.

hmm, OK, I haven't been to a satan-worshipping orgy in a while... altho they just deprogrammed me out of scientology, and my head still buzzes occasionally...

Still, 4,985 homes on the market seems kind of low…

Maybe, but at least compared to this time last year according the the same site, there were only 4,381 homes inventory on 4/2/06 (a week later into the "Spring Season" yet).

hmm, OK, I haven’t been to a satan-worshipping orgy in a while… altho they just deprogrammed me out of scientology, and my head still buzzes occasionally…

Libertarians are very passionate people.

Sen Christopher Dodd seems to have gotten the message about the idiocy of bailing out the subprime FBs:

http://money.cnn.com/2007/03/26/real_estate/Dodd/index.htm?postversion=2007032618

Maybe our emails to him (along with others) actually made a difference!!??!!

newsfreak Says:
I did want to mention, I saw a t-shirt–
THINK
It is still legal

Isn't it THINKâ„¢ -- and it's only legal with the written agreement of IBM -- you implicitly obtain the right after you buy one of their fine products...

the lowliest peasant in Vietnam can afford their own dwelling, by the way. of course, it may be a relatively humble abode…

Would it look like this?

http://www.burbed.com/2007/03/26/affordable-starter-home-or-fallujah-replica-in-the-bay-area-you-decide/

Would it look like this?

funnily enough, very similar...

however, that house has a superior 6-panel door at the side (which might be the front).

DS,

The day when American Progressives decide to ask your opinion about the definition of progressivism, will be the day that I join the Satan worshipping party of something that falls short of DS's definition of progressive liberalism.

That's my last word on this matter.

(Don't lose hope, I haven't tried my sour dough bread yet)

I can sell you shares in a scone mine, astrid...

DS,

LOL! Thank you very much for the offer, but I'm investigating renewable alternative to mined scone. However, I am very interested in the cream well.

DS,

LOL! Thank you very much for the offer, but I'm investigating renewable alternative to mined scone. However, I am very interested in the cream well.

DS says: the lowliest peasant in Vietnam can afford their own dwelling, by the way. of course, it may be a relatively humble abode…

And the lowliest American can afford a home in Flint, Michigan or Upper Left Buttcheek, Texas. Don't extrapolate the Bay Area to the vast rest of the United States. The lowliest peasant in Vietnam is not equivalent to an Electrical Engineer with a Master's degree working in Silicon Valley.

hmm, very Freudian...

My family also hoped to find a rich seam of jam on the property and brought in a jam dowser, but alas, to no avail.

I can sell you shares in a scone mine, astrid…

They're not making any more scone mines. Don't be priced out forever!

(BTW, are they scones as in ice cream cones, or scones as in yawns?)

And the lowliest American can afford a home in Flint, Michigan or Upper Left Buttcheek, Texas.

Let's only hope...

Don’t extrapolate the Bay Area to the vast rest of the United States.

Perish the thought. Who would dare. Further, it was generous of the Mexicans to surrender the Bay Area to Anglo settlers, not to mention generous of the indigenous people to surrender the whole continent to same, in order to parcel it up into land titles.

The lowliest peasant in Vietnam is not equivalent to an Electrical Engineer with a Master’s degree working in Silicon Valley.

So the peasant is getting a better deal from his or her society?

http://en.wikipedia.org/wiki/Scone_%28bread%29

According to Merriam-Webster, the word scone derives perhaps from the Dutch schoonbrood (fine white bread), from schoon (pure, clean) and brood (bread). The scone closely resembles a North American biscuit (many recipes are, in fact, identical) — itself not to be confused with the English biscuit, which equates to the American cookie. In the United States, there is a growing tendency to refer to sweet variations as "scones" (perhaps under influence from espresso bars, where they are popular fare), while savory ones are known as "biscuits".

amazing

More Gawker NYT Wedding section scoring. I find this endlessly fascinating, though none of these people beat skibum's wedding announcement (a belated mazel tov to you crazy overachieving kids!).

"@RaiderJeff
Thats good news!
THe same thing has happend in Moorpark,CA (ventura county) and the builders are not budging either."

Really? I guess this is just another sign of things to come.

"Do these people picket Walmart every week everytime they ‘lower prices’ on crap they already bought?!?"

Exactly, that's what some other posters said about this story on the other blog. The general consensus among the poster was - too f'n bad, you didn't do due diligence, you deserve this.

"Perhaps there will be a new ballot initiative in CA making it illegal to sell a house for less than the comps sold for….that would be pass EZ here in Communiforna."

The builders would have a fit. Could you imagine telling William Lyons that they can't lower their prices/give incentives in order to unload their inventory.

Oh wait! The link http://gawker.com/news/altarcations/altarcations-martha-flach--austin-wilkie-247159.php

More OTness. I'm still alive. My sourdough is a success! These taste better than any bread I've ever paid for. Ignoring time and labor and electricity, they come out to cost about 25 cents a loaf.

Different Sean says: Perish the thought [of extrapolating a peasant to an engineer]. Who would dare. Further, it was generous of the Mexicans to surrender the Bay Area to Anglo settlers, not to mention generous of the indigenous people to surrender the whole continent to same, in order to parcel it up into land titles.

It was awfully nice of the Aborigines to surrender Australia to the British as well. What's that got to do with housing affordability for peasants?

The lowliest peasant in Vietnam is not equivalent to an Electrical Engineer with a Master’s degree working in Silicon Valley.

So the peasant is getting a better deal from his or her society?

I would probably rather live in a modest single family home in Flint, Michigan than in a hut in Vietnam. I am biased towards first world countries, of course. I like potable water, good medical care and a passable education system.

Anyway, I think you missed my point. Rural areas are massively less expensive than cities. To further strain any comparison, San Francisco is in the top 10 most expensive cities worldwide. Could your average blue collar guy afford a house in San Fran? Probably not. But I bet most peasants in Vietnam couldn't afford a 2500 sq.ft. in Hanoi, either.

Vietnamese culture does have one thing going for it in terms of housing. Many generations live under the same roof, and their idea of required personal space is much reduced compared to North America, Europe and Australia. Maybe if they were Americans, they could afford a house in the Bay Area simply by housing 10 people in the same modest house.

Brand,

Don't be ridiculous, I have a Constitutional right to a Viking convection oven (with steam injection for bread baking), walk in Subzero fridges, and at least 500 sq ft of personal bathroom space.

"Wow, RJ, that’s a not surprising but still fascinating situation that seems to be occuring quite a bit these days.
As for those protesters, it’s a mix of sad and pathetic. You feel for them because they’re about to get hit hard. You wonder if their actions are desperation, selfishness or both. But expecting the developer to pay because the market turned? Because the salesperson “sold” them a house? WTF are they thinking?"

WTF indeed. I have no sympathy for this guy. Bob (or boob) didn't read his contract. Bob didn't do his homework. Bob took the word of a sales rep from Willaim Lyons. Bob is S.O.L.

While making a promise that prices would not drop without any real intention of standing behind that promise seems unethical, and possibly serves as a cause of action for negligent misrepresentation, Bob has to realize who he's dealing with. The good people of William Lyons couldn't give two shits about what was said outside of the contract and the deed, or what "puffery" was used to make the sale. Bob should have realized this before going into the deal. So sorry Bob, but no soup for you.