patrick.net

Photos aside, I’d still like to get the juicy details, if any

All will be revealed -- in a series of tantalising excerpts revealed in stages designed to maximise traffic and revenues to my site... I'm going tabloid -- and monetising every opportunity from now on... you will have to tune into my next (first) podcast...

latest blog post:

Surge in families forced to sell their homes

HUNDREDS of families have been forced to sell their homes, or lenders have repossessed and auctioned them, in Sydney's west and south-west in the past year, property experts say.

There were a record 1400 auctions in the region in the year to March 31, nearly double the number in 2005, Australian Property Monitors figures show.

Michael McNamara, an analyst with the company, said the spate of auctions pointed to a big rise in distressed sales and repossessions in the region. Mostly, sellers in Sydney's cheaper property markets were going to auction because they had to, not because they wanted to, he said. "The big rise in the number of auctions isn't because the market is going well," he said.

"It's jumped because auctions are the preferred method of sale of trustees in bankruptcy and mortgagees in possession. I think that's a very disturbing figure."

The median price for an auction in south-western Sydney in the March quarter was $318,000, $22,000 less than the overall median house price in the region.

"This just brings home the fact that most of these are distressed sales," Mr McNamara said.

Mr McNamara and Mr Dhillon estimate that hundreds of families in western and south-western Sydney had been forced to sell their homes, or had had homes repossessed and auctioned by lenders, over the past year.

Meanwhile, the total debt burden on Australian households topped $1 trillion for the first time last month, Reserve Bank figures published yesterday showed.

Debt on housing accounts for about 86 per cent of household debt, with the remainder personal debts like credit cards and personal loans. The ratio of household debt to household income has reached 160 per cent, one of the highest in the world. Interest payments now soak up a record 11.9 per cent of household income, nearly three percentage points more than in 1989 when mortgage rates were 17 per cent.

I don't go to open houses (yet). Due to the slow deflating of the bubble, I don't plan to buy before 2009, and there is plenty of time to getting used to look at houses.

HARM Says:

> Oh, I don’t know. I think D.S. gradually toned down
> a bit and started listening a little more, if not always
> agreeing with everyone else.

I really did think that D.S. was a trust fund kid and DNC staffer when he first started posting and I’m impressed that he does listen to what we have to say.

Different Sean’s Latest BLOG post Says:

> Surge in families forced to sell their homes
> HUNDREDS of families have been forced to sell their
> homes, or lenders have repossessed and auctioned
> them, in Sydney’s west and south-west in the past
> year, property experts say.

Last time I was in Sydney (about two years ago) I was sitting with a bunch of Australians (a friend that works for a railroad and his 30’something friends that were mostly IT professionals) watching the people walk by on the big open area in Darling Harbor after dinner when my friend mentioned that I was “in Real Estate”. I was surprised to find out the Australian Real Estate bubble was even bigger than the Bay Area Real Estate Bubble. Compared to the Bay Area Australian’s seem to make about half as much for comparable jobs BEFORE you factor in that the A$ is worth a lot less than the US$ ($0.75 a couple years ago and $0.85) today and BEFORE you factor in that Australians pay more taxes than we do. With huge numbers of people in Australia making A$35K (before paying high taxes) that were buying homes for A$450K two years ago (12.9x income) I’m not surprised that Australia (like the US) is having a “surge” in families forced to sell their homes…

For the last couple of months my wife and I have been halfway serious lookers at real estate. Mostly I am trying to convince her that we can afford to get something bigger, though to tell the truth, to get anything that would be worth moving for, we would have to sell our present place, which neither of us really wants to do.

We were not serious shoppers though: we are not pre-qualified or anything and our timeline is years, not months, but we would have bought the right house at the right price in the right neighborhood. This was almost close to being true in Claremont, in Berkeley, but nowhere else.

Now my wife has decided to move on from her present job, so we are definitely back out of the market.

Peter P

We are staying away from Open Houses also. I have a tendency to fall in love with certain homes so it makes no sense to pine after a grossly overpriced object.

By the way, I had family visiting from the East Coast and introduced them to another lifestyle - renting. They were stunned at first, but within a few days, liked the rent-a-townhouse lifestyle - especially when the landlord showed up to do the gardening.

Yes, it's a little known fact that my (imaginary) middle name is curmudgeon.

FAB,

Is that $35K each or $35K per family? The latter would indeed be scary high. (though perhaps not quite as high as Scandinavian beer prices...)

@D.S.,

:lol: So. I see you've turned to the Dark Side (naked capitalism).

@Bap33,

Most CDs and bank or credit union accounts are federally insured for up to $100K per account, per tenant (account-holder) and are considered one of the most conservative investments out there. The NCUA covers credit union accounts, while the FDIC covers bank accounts. U.S. Treasuries are even safer --backed by the people who also happen to print the money, so, yeah, I'd rest easy.

Average salaries in Oz are something like $40K or $45K per annum, I haven't checked for a little while. The breakdown of women in the workforce is that something like 1/3 are FT, 1/3 are PT, and 1/3 aren't working at all, but worplace participation can vary over time within a family's trajectory due to children's ages, etc.

There was a time when a police sergeant's family on 1 wage with 4 kids could buy a Californian bungalow close to the city, now 2 doctors can't afford to buy the same place 60 years later...

Which reminds me of another recent posting to my blog, they seem to come in bursts -- check out the related articles if you follow this link, e.g. 'families forced to live in flats', 'poor isolated in outer suburbs as car costs rise', etc

Housing costs squeeze budgets
SOARING housing costs are squeezing family budgets in Sydney, even though incomes in the city are higher than almost everywhere else in the country, figures from the 2006 census show.

Mortgage repayments in Sydney are 40 per cent higher than the national median and rents 31 per cent more, even though incomes in the city are only 12 per cent higher.

In the central valley of California it is Section 8 welfare that is forceing the rents and housing through the roof / or helping the bubble float down vs bursting. IMO

I see...

@DS--
Section 8 welfare is a strange beast. Section 8 essentially guarantees rent payments to landlords who accept Section 8 tenants--so, for example, the tenant might pay $600/month, and the government might pick up the other $850 that would bring the rent up to market rate ($1450, not atypical for where I live). The government will also give extremely favorable loans (1%, say) to potential landlords to remodel a space, finish a basement, or whatever--so long as the landlord agrees to rent the space to Section 8 tenants for 25 years.

So Section 8 does have the potential to impact the market by pulling housing units out of the market (creating scarcity) and by holding rents at an artificially high level (if nurse's aides can really only afford $600/month, but Section 8 will kick in another $850 for those lucky enough to qualify, that distorts the market, yes?).

For the record, I do think that everyone deserves a place to live. I'm not sure that this kind of interference is the answer, though, since slightly-less-poor people who do not qualify for Section 8 end up paying big taxes in order to subsidize the program that is keeping market rents painfully unaffordable for them, and Section 8 tenants are discouraged from improving themselves and their lives for fear that they might lose their homes by making too much money. I mean, why work harder to make an extra $500/month if you would then face moving and a rent increase of $850?

There must be some better way to do this.

Oh, one other impact of Section 8. I used to work with a woman who was in Section 8 housing with her kid and her boyfriend. She could not formalize the relationship with the boyfriend because she would lose her Section 8 housing--that is, if they were married or domestic partners, their family would look too rich and too stable, and they would have to go out and pay market rate rent, which they could not afford. This clearly represented a strain in that particular relationship. So there are social impacts, as well.

On the other side, you get couples that don't marry in order to keep their Section 8 housing, but perhaps they actually *are* doing well enough to afford market rate or better. So they end up taking up Section 8 housing that someone else might really need and having their housing subsidized by everyone else's tax money. There are problems in the way Section 8 housing is assigned.

Different Sean Says:

> Which reminds me of another recent posting to my
> blog, they seem to come in bursts — check out the
> related articles if you follow this link, e.g.
> ‘families forced to live in flats’

I laugh whenever I read families “forced” to live in flats.
No one is “forced” to have a family.
I “want” to own a McLaren F1 (just like some people “want” a family).

If I “choose” to buy a $1.5mm toy car (just like some people “choose” to have a family) I will have a lot less money to spend on housing and may have to live in a flat.

No one is forcing anyone to have a family and the government (and groups like Planed Parenthood) will actually go out of their way to help people not have kids…

astrid Says:

> FAB, Is that $35K each or $35K per family?

When I was in Australia I was hearing about individuals that made A$35K buying homes for A$450K…

Then Different Sean Says:

> Average salaries in Oz are something like $40K or
> $45K per annum,

At $0.85 to the USD that is only $34-38K in US money before paying taxes…

Eliza Says:

> So Section 8 does have the potential to impact the market
> by pulling housing units out of the market (creating scarcity)
> and by holding rents at an artificially high level

Section 8 just keeps getting bigger and bigger every year. The more people they put on the program the more new people they get to hire and the workers get promoted and make even more money. The people that run Section 8 don’t care what the rents are since they don’t pay them (the taxpayers do). Smart landlords can play the Section 8 game and fill a building with people paying 50% above market rents. Landlords also like Section 8 since the program will pay for damages. If a Section 8 tenant has a boyfriend thrash the place Section 8 just pays to repair the place again and again (it would be wrong to take away the free rent and welfare of a single mom just because she brings home crack addicted gang members who thrash the unit breaking windows and putting holes in the walls every couple months). Section 8 is also a way for politicians to “give back” to their donors. In San Francisco over half the people on Section 8 have some connection to a politician (e.g. cooks, nannies or cleaning ladies of big donors or relatives of political organizers).

Hey, does anyone still have the link to that great rent-vs-buy calculator posted a few weeks ago? The one that allowed you to enter about a zillion variables, including rent increases and the like? I'd appreciate it if you could post it again.

Ah, here it is:

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?ex=1183435200&en=708854c361919ea7&ei=5070

And I always thought section 8 meant someone kicked out of the military for belonging in a looney bin. Now I find out it's yet another govt program to discourage people from improving themsleves and becoming self sufficient. The country is heading more and more toward section 8 on a daily basis... Do you know if that is a Federal or local Program?

After reading the various posts about the "section 8" program, it occurred to me what is going on:

Section 8 is a scheme for transferring tax money from the middle class to the property owning class, under the guise of helping the poor.

This is not a "welfare" program, but rather similar to a "corporate welfare" program, except it is more of an REIC (real estate indusrical complex) welfare.

If it was a welfare program, the money would go directly to the poor, and they would use it to BUY property, not necessarily in the same geographic location where they currently are living under the program. Section 8 creates a permanent and immobile underclass that serves the property owning class at the expense of the taxpayers

(Wow, the new site software is fast. I hit the wrong button and it posted my text in a flash, before I could stop it).

In conclusion, section 8 gets a bad rap for being a "welfare" program, whereas in reality it is a subsidy program for slumlords.

justme Says:

> After reading the various posts about the “section 8″
> program, it occurred to me what is going on:
> Section 8 is a scheme for transferring tax money from
> the middle class to the property owning class, under
> the guise of helping the poor.
> This is not a “welfare” program, but rather similar to a
> “corporate welfare” program, except it is more of an
> REIC (real estate indusrical complex) welfare.

This is how EVERY government program works…

An example on the right the politicians decide that we need to protect the US from Soviet and Chinese ICBMs with satellites and get $100 Billion that they give to defense contractors who build a system for $25 Billion take $25 Billion in profit and send the rest back to the politicians and their relatives.

An example on the left is that the politicians decide that we need a government backed student loan program so poor people can learn to be cooks or court reporters and get congress to approve $100 Billion. The poor people get $50K each in loans that they pay to schools who spend $12K per student on the education, take $13K of Profit and send the rest to back to the politicians or business owned by friends and family of the politicians.

FAB, I'm not going to disagree with you. I think a lot of "government programs" are just corporate welfare in disguise.

What I don't understand is how the right-wing spin machine manages to hide this fact from the general public, while simultaneously blaming the supposed poor recipients of the benefits of the program. It is quite feat, really.

And in the case of the ICBMs, blaming the Russians for the expenditure, while getting 25% bang for each buck given to the contractors.

The problem with US government isn't that it is not run enough like a private enterprise, it is that it is run TOO MUCH like a private enterprise.

Looking at it another way: This country seems to be chock full of people that think that the gub'ment is ineffective and wasteful, etc, etc, etc, and should be shut down.

No shit! They are being ineffective and wasteful because some frighteningly large percentage of the tax revenues are being used to line the pockets of private corporations, instead of benefiting the general public. It is all the contracting that causes the waste, not necessarily the programs themselves.

Man, I'm halfway through my BLT and people are putting on the tinfoil hats! :) C'mon. It's not a "conspiracy" by the right or the left. Anytime free money flows, two things happen. First, a lot of people figure out how to get in line for the free money. Many scam the system. Next, a couple of smart people figure out how to transfer the free money from the lazy people to themselves.

I generally think accusations of corruption are vastly overdone, simply because it's a lot easier to separate fools and money than most fools (er, people!) realize.

"C’mon. It’s not a “conspiracy” by the right or the left."

Yes, the Section 8 program was designed to take the poor out of concentrated housing projects and spread them about town. One benefit was the idea that the kids would no longer grow up in a crack/gang infested projects and may pick up other values from working neighbors. Unfortunately, it also provides an opportunity for profiteering (though many landlords, like myself, refuse section 8), encourages sloth, and puts upward pressure on rents for non-section 8 tenants. Section 8 also dumps a little "projects attitude" next door in neighborhoods where people are working hard to pay for their homes. I know about Section 8 houses, but other posters seem to indicate that Section 8 applies to apartments in their areas as well.

Note also the HUD 203(K) rehab program. This program loaned a contractor the money to buy a house plus the cost of rehab. The program was shut down because too many contractors took the loans, put the minimum into the house, walked away with the "profit" and let the loan default. Some contractors did this scam on a whole row of houses.

Bapp33,

Were you at Merced during the early 90s, when Castle AFB was being closed? I knew many people stationed there when it closed and all were able to sell their homes fast. I was there for a couple months at that time, and from your description, Atwater and Merced have certainly changed.

Brand, I think it is a problem that the people who rig/game/exploit the system do not get branded as lazy, but those who get scammed do.

Headset, good explanation of the (official, stated) intent of Section 8. I guess we have seen again how easily the intent of the system can be perverted.

Bap, could not agree more about cracking down on abuses.

It bothers me that it is the "government" that always gets the bad rap, and not the people stealing the money.

FAB, you gave a more accurate and more succinct definition of the difference between the Republican and Democratic Parties than I have ever seen.

slightly-less-poor people who do not qualify for Section 8 end up paying big taxes in order to subsidize the program that is keeping market rents painfully unaffordable for them

Nah, slightly-less-poor people don't pay much tax. other than Social Security. Most working poor actually get more back in EIC than they pay in taxes. It is the middle class that pays the bulk of the overall tax burden.

Would Paris Hilton become Section 8 if she was cut off from her family fortune?

"Would Paris Hilton become Section 8 if she was cut off from her family fortune?"

You may have to father a kid with her first. I'm not a authority, but all the Section 8 I know of invoved a single mother with kids(s).

Bapp33,

Sad to hear that. The talk in '92 was that the Merced part of California could absorb a base cosing because the land was so highly valued and desired by folks who worked in SF but could not afford to live there. I know three officers who sold to such commuters, and since they sold quickly I thought others would also. I felt bad for those who had to make the Highway 99 commute every day. Even then it was bumper to bumber.

Now I go to "open houses" on the week-end to have a laugh.There is a comedy show in this... Here, in the Palm Springs area, if it does not sale in 90 days they put the sign "sale pending" and relist it with a different agent name one month later, faulting the ghost buyer. The entire town belongs to the NAR,every home is owned by a broker. We have straw buyers, lots of 1031, real estate agents phishing in high end supermarkets, car wash, restaurants... Everyone here is a real estate agent. You have heard of the movie "body snatchers". Here it is the "home snatchers".The worst kind of slime....they are everywhere....Thank god for the internet and you bloggers! The Desert Sun insists there is nothing wrong with real estate and now is the time to buy before the interest rate gets higher....Keep talking!!!!!!Pass the popcorn...

Cuorips,

I think I've seen a few of those fake "sale pending signs", then "sold" , up for 2-3 months
total.

And then the same car shows up in the driveway again. Nice.

@Bap33:

Speaking of FDIC, I asked a knowledgeable reader whether my CD was really safe, and he said 5 things that sum it up:

Capital is protected but not interest or time.
It's the government. You have to file a claim and prove you are you.
They are still working at FEMA on Katrina claims.
You'll get your money but not soon
Get in line, fill out many forms.

Treasuries are sounding better all the time. Avoiding CA income tax is almost reason enough. But you have to have a brokerage account to buy a US Treasury, I think.

Patrick

I felt bad for those who had to make the Highway 99 commute every day. Even then it was bumper to bumber.

There are actually people who make the 131 mile commute from Merced to SF every day?

Brrrr.

Since our genuine, part-time East Bay buyer/looker Jimbo is throwing in the towel (for now) I will try to chime in with:

Anecdotes from the East Bay
Ran into some folks this weekend who moved from a tony area in the East Bay to the City (SF) and then, for personal reasons, decided to come back. They were in the process of selling their EB home when they made this decision, and tried to take it off the market so they could move back in. Tried, as in, they had a buyer who took this as an invitation to up their offer. They couldn't resist the increased counteroffer (how that for a negotiating tactic -- you want my home, you can't have it ... uhhhh... more cash... okay). At the same time, through other fortuitous circumstances, they got a lead on a rental, in a better part of town that was nicer than the home they just sold. So, of course, I had to ask (but really, did I need to) which was less expensive: the payments on their recently sold house or the new rental. He was sure to qualify his answer saying that even after considering the tax breaks of home ownership, their rental was the cheaper option (even though it was the better of the two homes).

On the other hand, the one open house I went to this weekend (across the street from an elementary school --ahh, the sweet sound of screaming children) was mobbed. We are prime I tell ya, prime!

"But you have to have a brokerage account to buy a US Treasury, I think."

I buy 90 day Treasuries through a bank. Rates are not that great right now, less than 5%. Bank charges $30 to do the transaction.

Paulson: Housing 'at or near bottom'
But Treasury secretary gives no timetable for recovery; says financial markets remain healthy despite subprime mortgage mess.
July 2 2007: 4:40 PM EDT

WASHINGTON (Reuters) -- Treasury Secretary Henry Paulson said Monday the U.S. housing market correction was "at or near the bottom," although it could be some time before an upturn.

"In terms of looking at housing, most of us believe that it's at or near the bottom," he told Reuters. "It's had a significant impact on the economy. No one is forecasting when, with any degree of clarity, that the upturn is going to come other than it's at or near the bottom."

My goodness, that's a relief! What with all the data posted here and elsewhere, I was starting to get the distinct impression we could be entering a housing secular bear market that could last years, if not decades. Thank God Hank Paulson's at the helm.