0
0

Gallery of Unlikely Bubble Victims


 invite response                
2007 Mar 29, 8:28am   16,453 views  220 comments

by HARM   ➕follow (0)   💰tip   ignore  

typical media bubble 'victim'

One of the more interesting side-effects of the housing bubble's collapse is its ability to produce victims from some rather unexpected places. For example: Lennar Corporation, one of the nation's largest home builders which profited handsomely during the run-up (and has been accused by some of substandard workmanship), has just officially been granted victim status from the media:

One by one, some of the nation's largest home-builders have seen quarterly earnings get crushed by the slump in the housing market. Lennar Corp. became the latest victim Tuesday, with a 73 percent plunge in first-quarter earnings and predictions that it is going to fall short of 2007 earnings goals. Since the start of February, home-builders KB Homes, Hovanian Enterprises Inc. and Toll Brothers Inc. all reported falling profits. Stuart Miller, Lennar's president and chief executive, said a lack of demand for the winter-spring buying season, new problems with subprime lenders and higher-than-desired land costs hurt profits.

Apparently, the recent sub-prime credit crunch has also produced quite a few human victims among those who can no longer borrow beyond their means indefinitely and add to their already crushing debt loads:

“A first-time home buyer with an annual income of about $36,000 and almost no savings, Mr. Fields did not qualify for a prime loan for the $315,000 house. So his half brother arranged a 15-year mortgage from WMC Mortgage Company, a subprime division of General Electric, and another from the Option One Mortgage Company, the subprime group of H & R Block.”

“The $2,312 monthly payments were much more than he could afford, but Mr. Fields said his brother assured him that they could find tenants. They did, but then lost them. Last July, without the rental income, his brother, who was managing the property, stopped paying the lenders. Mr. Fields now owes almost $30,000 in delinquent payments and has fallen out with his half brother.”

“‘It’s just sad,’ said Mr. Fields. ‘I can’t even borrow money.’”

And the damage is not just limited to uneducated, Joe 6-pack types with limited means and bad credit. Look what just happened to a PhD with a good job:

“Unlike many borrowers who took out subprime loans, Andy Sobel had good credit, a decent job and modest savings, but he needed to stretch to buy a home in the white-hot San Diego housing market in 2004.”

“Three years later, Sobel has lost his home and his savings, and he faces a big tax bill as a consequence of a failed subprime mortgage held by Countrywide Financial Corp. he says he should never have been written.”

...“‘You never think that this could happen to you. You feel like an idiot,’ said Sobel, who has a doctorate in education. ‘You fall down and they stab you.’”

If these people can become media "victims" of the housing bubble, who's next? Some possibilities:

Alan Greenspan:
"I was forced to lower rates to 1% to moderate the tech bubble recession, and to make the economy look good, so incumbents could get reelected. Those big, mean politicians were really pressuring me! How was I supposed to know it would spawn an even bigger bubble in real estate?? I'm just a powerless (former) central bankster!"

David Lereah:
"I didn't want to keep fanning the flames with outrageous lies and baseless industry propaganda, but I had to feed my family. The NAR kept on blackmailing me with my enormous salary and benefits. What was I supposed to do --quit and become a regular working-stiff like all you low-rent schmucks out there?"

Gary Watts:
"If I didn't come right out and say '15% was in the bag' for 2006, they would have hurt my family. I practically choked on those words, but it was either say it or 'lights out' for little Billy and Janie. I had to choose between my family or my integrity --what would anyone have done in my situation?"

Casey Serin:
"How could I say 'no' to such sweet deals, when everything I learned from those R.K./Robert G. Allen books and seminars was screaming 'Yes, yes, yes!' Besides, Galina was really pressuring me to 'get a house'. How was I suppoosed to know she meant only one? Besides, all those sellers really tricked me --they used my Macaroni Grill & Jamba Juice addiction to talk me into those illegal cash-back deals. They preyed on my fears of being a Looser and took full advantage of me. I feel so... violated."

Discuss, enjoy...
HARM

#housing

« First        Comments 82 - 121 of 220       Last »     Search these comments

82   DinOR   2007 Mar 30, 7:57am  

"Bay Area has a lot of self-proclaimed smart (though salaried) people"

Yeah, uh I've never been able to reconcile the two either? :(

EQ?

83   DinOR   2007 Mar 30, 8:00am  

Ghost,

I keep hoping against hope that once we've had a reasonable level of price correction new entrants won't be so buried in their payments that they'll actually have a smidgen of their paycheck left with which to buy goods or services *without the aid of a HELOC.

It has worked before you know! :)

84   dp337   2007 Mar 30, 8:11am  

I know quite a few friends that bought in the BA that I know they make less than I do. House maybe 10-12X their income. Reset may not have kicked in yet but they are already drowning. I'm probably at 4.5X but I'm renting, saving, and waiting.

Lots of money flowing around BA but I figure a small percent of the people hold a large chunk of that cash.

85   Allah   2007 Mar 30, 8:16am  

It's truely amazing that at this point in time there are actually still some sheeple who are buying and apparently think that it's a good time to buy :roll:. In my area (Long Island) an article was recently released stating that 19,000 families stand a chance of losing their house in the next two years when their loans reset, yet there are still some sheep out there buying; amazing!

Schumer said an analysis by his office found that an estimated 1.8 million American families -- including 23,000 in New York City and 19,000 in Nassau and Suffolk counties -- could face foreclosure within the next two years when their subprime loan rates spike.

86   DaBoss   2007 Mar 30, 8:16am  

"Lots of money flowing around BA but I figure a small percent of the people hold a large chunk of that cash."

Oh we all this before in early 90's.. then puff!
Their money is gone and so are they!

Its not the next earthquake ( THE BIG ONE THAT WILL HIT)
which will shake these people... Just watch for the next tech recession!
You know Q1 Revenue at local companies is rather shaky!
Keep a keen eye on earnings announcement in the next 2-3 weeks.

87   DaBoss   2007 Mar 30, 8:18am  

"But SF/SM/SC/Alameda/CC counties will still get hammered."

Getting hammered already! Several companies already having layoffs.

88   DaBoss   2007 Mar 30, 8:22am  

"I don’t think we’ll see that kind of doomsday in the Bay Area proper. Places like SF, Cupertino, Palo Alto… "

I guess you didnt see the recession of tech recessions of mid80s' and 90-91. You already saw the 2001.

There was plenty of hurting! Looking back it was just cycles playing
through.

89   dp337   2007 Mar 30, 8:27am  

"There was plenty of hurting! Looking back it was just cycles playing
through. "

I agree. There is so much paper wealth right now, it's crazy! Tighter lending standards definitely will affect the BA.

90   DaBoss   2007 Mar 30, 8:31am  

"MSNBC is soliciting sob stories (I assume) at the above URL. "

I got one !!! LOL!!!

(1) My realtor told me there were multiple bids so I upped the offer by 10%. I didnt know if there were really "other offers"...My realtors couldnt disclose these 'phantom bid amounts to me' ... But I had to trust my realtors.

(2) My Appraisor came 10% below comps so he fudged the apprasials by 15%.

(3) My Lendor fudged my income because of (1) and (2) above to qualify for a exotic loan.

I got fudged three ways by the realtor,appraisor and Lender!
Can you help me! I am really sore!

91   sfbubblebuyer   2007 Mar 30, 8:46am  

I sent MSNBC a link to Casey Serin's website.

92   Paul189   2007 Mar 30, 8:49am  

@ FormerAptBroker,

She has other assets and I'm not saying anyone should cry for her because she is fine. My point is that the asset was built up over time through hard work and the crooks that ended up with the company destroyed it. You could also make the point that at least half of that value never really should have existed since its like the bubble where someone was lying to inflate the price.

93   Paul189   2007 Mar 30, 9:18am  

"Lower margins for stocks resulted in Black Tuesday. "

I'm not a fan of the coming reduced margining. People blow themselves up just fine as things are now.

94   OO   2007 Mar 30, 9:24am  

Palo Alto, Cupertino and Sunnyvale are HOT while the rest being sluggish
http://www.mercurynews.com/breakingnews/ci_5558959?nclick_check=1

I can understand the school-addict parents targeting Los Altos, Palo Alto and Cupertino, and the location of Mountain View, what's the story with Sunnyvale?

95   Peter P   2007 Mar 30, 9:28am  

what’s the story with Sunnyvale?

It is one of the safest ghetto in America.

96   OO   2007 Mar 30, 9:29am  

Here is the related story partially explaining the strong property market in the prime areas and the sluggish market outside these enclaves:
http://www.mercurynews.com/business/ci_5555055

# of households making more than $200K grew a lot, # of households making less than $50K grew even faster, # of households making between $50-200K shrunk.

The conclusion is: if your household makes less than $200K but more than $50K, perhaps moving out of the Bay Area is your best strategy.

97   Peter P   2007 Mar 30, 9:44am  

CB, my friend looked into that house. It was pretty nice. I heard there were a lot of offers.

I prefer bad school districts.

98   Peter P   2007 Mar 30, 9:50am  

$200K is definitely middle class pretty much anywhere in the first world.

99   skibum   2007 Mar 30, 9:52am  

Palo Alto, Cupertino and Sunnyvale are HOT while the rest being slugish

OO,

I think there are two things at play here.

First, this observation jibes with the theory I've proposed here before. During a RE downturn (which we are in the early stages of), the "prime" areas (by whatever metric locals have) stay up for a while. There has been price stabilization even in these prime areas, and potential buyers are likely saying, now that prices have come down a bit, we can look in Cupertino instead of having to look in East San Jose. This in fact props up demand in these areas, even as the less prime areas continue to fall. As the flood waters rise, people run for higher ground. However, if the waters rise high enough, everyone still drowns (or at least has to tread water for a while)...

Second, take a look at the photo gallery accompaning the article. I hate to stereotype, but every single human in the photos is of the South Bay immigrant demographic. These folks (a) still have the means to buy (I'd venture there's a lower rate of subprime lending in this demographic) and (b) I'd venture have no clue about any bubble.

I'd say, let them buy - who cares. Continued demand at this stage in the cycle only leads to a more rapid fall once the inflection point has turned.

100   OO   2007 Mar 30, 9:54am  

CB

That house is deep into Sunnyvale, not even at the border with Cupertino that can go to Cupertino schools. The lot is below 8000 sqft. The bidders lost their mind.

The interior is just IKEA, you can fit out such a kitchen for less than $20K, the bathroom costs even less. Even if you want to pay the market price, you can easily find a home below $800s with comparable location and lot, and spend less than $100K to bring to the same look.

101   HARM   2007 Mar 30, 9:56am  

Dear MSNBC,

I too was a victim of those nasty mortgage lenders.

One day, I was walking home to my pathetic rental, when I was approached by a man who only identified himself as Mr. Subprime, who I later found out was a dodgy mortgage broker. Though he was dressed a little strangely (black overcoat, stovepipe hat and handle-bar mustache he was constantly twisting), he seemed harmless enough at the time.

He said, "Psst... hey, kid, wanna buy a house?". The next thing I knew, I was in his office he was showing me all kinds of glossy picture of granite countertops, faux-French turrets and happy looking people holding rakes. He explained how all this could be mine, with the help of something called “leverage”. Being unemployed and broke and all, I was a little skeptical, but he assured me “it’s a no brainer” and there was nothing to worry about, ‘cause “it only goes up”.

Before I knew what happened, he had his hand in my pants (grabbing my wallet) and was drawing up a bunch of confusing looking documents. I didn't understand any of it, but he assured me he'd fit me into a monthly payment I could handle, and even promised me lots of cash back at closing! Of course, I didn't want to offend the nice man by asking lots of silly questions –and what he was telling me sounded like a really sweet deal, so I went ahead and signed!

Well, everything started out great, just like Mr. Subprime said it would. I took lots of cruises and vacations and bought matching Lexus’s for me & the Mrs. It was great not "throwing away money on rent" anymore! I felt really smart and superior around my pathetic friends who still rented. When the Mrs. wanted a boob job, Mr. Subprime even helped us liberate more of our equity with something called a "HELOC". It was awesome! Later on, Mr. Subprime even hooked us up with several “investment” properties in Las Vegas and Miami. I was well on my way to becoming the next Donald Trump –and my wife and I didn’t even have a job or penny of savings between us!

Then about a year later, something strange happened: the monthly payments on my twelve mortgages suddenly jumped from $300 to $65,000! So I called Mr. Subprime, demanding some answers. Apparently, hadn’t been up front with me about a few things, like this stuff called “negative amortization”, “adjustable rate-reset” and a bunch of other financial gobbledygook. He had also inflated my income on the loan docs, from zero to $3 million a year.

Well, naturally, I was more than a little miffed about that, and I told him so. He just laughed at me and hung up –can you believe that?! I don’t understand how someone like this can even be allowed to run a business! Well, I went ahead and reported him to the state attorney general, but later found out his company had gone out of business and Mr. Subprime was nowhere to be found. Evidently, “Mr. Subprime” wasn’t even his real name, and he had skipped town to some place called the “Cayman Islands”.

Imagine the shock and sadness I felt when I found out I’d been had! Now I was facing 12 foreclosures and was completely out of money. Plus, my wife’s boob job was botched (we asked for Ds, but they gave her GGGs!), and she was badly in need of some corrective surgery, as well as some back surgery (thanks to the strain those implants were causing on her spine). To make matters worse, we couldn’t afford gas for our Lexus’s and were forced to start eating at home!

Anyway, Mr. Subprime turned my American Dream into a total nightmare! I hope by sharing my story, I can help other people avoid creeps like him and not end up in my situation. I think the government definitely needs to get involved and prevent the banks from stealing other people’s houses (they pretend it’s not stealing by calling it “foreclosure”)! They’re mine, dammit --I signed for them! I dunno, maybe the government could take some money away from people who have too much –like all my renter friends-- and use it to pay off my 12 mortgages. Anything, as long as I don’t have to go back to renting again (*shudder*).

Anyway, thanks for providing me some space to vent, MSNBC –and keep up the good work!

Sincerely,
Ben Dover

102   Peter P   2007 Mar 30, 9:56am  

# of households making between $50-200K shrunk.

The strategy: so homes up to 800K (4x income) may not do so well?

103   Peter P   2007 Mar 30, 9:59am  

the bathroom costs even less

But it can also cost a lot. ;)

104   OO   2007 Mar 30, 10:01am  

skibum,

I think these immigrants are aware of the bubble, just that they have no intuition of how bad things can go. I heard repetitively from FOBs or friends outside the US saying, things cannot be possibly worse than 911, the stock market, housing market cannot possibly crash harder than 911.

They use 911 as the yardstick. They thought that was the CRASH, and we are past the bottom. They don't know that we have never crashed, the crash was delayed by a few more rounds of liquidity injection, and when we do crash, we need to look at 1929 as the yardstick.

Well, let them buy, once they exhaust their savings, there will be even fewer competitors for us when this time bomb really goes off. I know there won't be enough of us to go around to stir up a bidding war by then.

105   skibum   2007 Mar 30, 10:04am  

Even if you want to pay the market price, you can easily find a home below $800s with comparable location and lot, and spend less than $100K to bring to the same look.

The vast, vast majority of people want homes in move-in condition. It is more unusual in my observation to find a buyer who wants a place to fix up (I'm in that category). I think that's part of the reason why (a) new homes are as popular as they are - despite their often shoddier construction, and (b) pergraniteel-coated, staged homes are so pervasive. Don't underestimate people's laziness - both in wanting to undertake renovations and in lack of imagination in taking a raw space and personalizing it.

106   skibum   2007 Mar 30, 10:06am  

Well, let them buy, once they exhaust their savings, there will be even fewer competitors for us when this time bomb really goes off. I know there won’t be enough of us to go around to stir up a bidding war by then.

Absolutely!

107   e   2007 Mar 30, 10:06am  

Well, let them buy, once they exhaust their savings, there will be even fewer competitors for us when this time bomb really goes off. I know there won’t be enough of us to go around to stir up a bidding war by then.

The problem with the FOB crowd is that they're really industrious and that they have lower standards of living than us Real Americans.

I for one would never think of going to Costco on Sunday to get a lunch of free samples.

Maybe I'm the one with a problem I guess. :(

108   Peter P   2007 Mar 30, 10:06am  

we need to look at 1929 as the yardstick.

1929 was not too bad. The tulipomania was probably worse. Some tulip bulbs were selling for more than entire estates. The rest was history.

Did the market crash after 9/11?

109   e   2007 Mar 30, 10:08am  

Don’t underestimate people’s laziness - both in wanting to undertake renovations and in lack of imagination in taking a raw space and personalizing it.

I'm unbelievably unhandy. The extent of my home repair skill is using Drano.

Is it cheaper to buy a cruddier home and pay to remodel it up? I've heard that remodels/contractors are uber expensive.

110   Peter P   2007 Mar 30, 10:08am  

I for one would never think of going to Costco on Sunday to get a lunch of free samples.

I never think of going to Costco on weekends. A weekday noon is much better.

111   DaBoss   2007 Mar 30, 10:11am  

""What we're seeing now is that the problems with the Silicon Valley model are not just cyclical and short-term - there are some fundamental flaws," said Bob Brownstein, policy and research director for Working Partnerships. "More and more, the regional economy is simply producing too few quality jobs for the middle class to be able to survive and prosper in Silicon Valley"

Nothing new for us old timers! It cracks me up when people ask these questions or or Reports print these comments. Had you simple asked a group of CEOs, they will gladly tell you... Its too expensive and alternatives are cheaper... But the newspapers dont want to publish anything like that.

So Mr Larry Ellison (CEO of Oracle) what will Silicon Valley Look Like ?

"More like Detroit!" was his answer! Live and learn if your crazy enough to buy into this hyped market. If prices go down I will buy! But they have to come down really far.

112   Peter P   2007 Mar 30, 10:12am  

eburbed, many immigrants still want kids, which are very expensive to maintain. The NPV of a kid starts in low 300's. Get two and get no discount.

113   Allah   2007 Mar 30, 10:12am  

Great story HARM,

They did find Mr.Subprime and this is what he had to say.

114   skibum   2007 Mar 30, 10:12am  

I for one would never think of going to Costco on Sunday to get a lunch of free samples.

LOL! You are so right on that one. I split between the RWC and MV Costcos and the difference is stark. In RWC, the sample ladies are pushing, and few are biting. In MV, there's a crowd of FOBs surrounding each sample lady heating their morsels of partially hydrogenated goodness and handing them out in those little white paper cup/bowl things or whatever they are.

115   Peter P   2007 Mar 30, 10:13am  

So Mr Larry Ellison (CEO of Oracle) what will Silicon Valley Look Like ?

If he is so smart why is he poorer than Bill Gates? ;)

116   skibum   2007 Mar 30, 10:15am  

If he is so smart why is he poorer than Bill Gates?

But Ellison is the perfect embodiment of a Zen rage-a-holic a$$hole! He is the poster child for the Silly Valley CEO.

117   Peter P   2007 Mar 30, 10:16am  

He is the poster child for the Silly Valley CEO.

Then I must leave.

118   Allah   2007 Mar 30, 10:18am  

CB,

Unless that house was overpriced when it was purchased in 2000, the price isn't out of wack given the 3 - 5% rule.

119   skibum   2007 Mar 30, 10:18am  

I must contest the idea that only FOBs going to Costco getting free lunch since I’m a FOB who never gets sample from Costco.

Sorry to nitpick, but that's a logical fallacy. Only FOBs getting free samples does not = ALL FOBs get free samples. You are outside the Venn diagram circle of intersection between FOBs and free-sample-getters.

My theory is that when things are free, it usually attracts a locusts of people fear of missing out. I go to Tahoe a lot and on a few occasions stay at the Embassy Suites right on Hwy 50, you should see the breakfast line (it’s “free” with the room), they often have to shut it down early because people think they were getting free breakfast, lots of real Americans there trying to stuff their face with water down scrambled eggs and sausages

LOL. I say let 'em wait in line all they want. Meanwhile, I'll be on the first chair up on a powder day! Yeah!

120   OO   2007 Mar 30, 10:19am  

I am on the same page with skibum , I want to build my next home from ground up, and if I cannot find the right piece of land, I would rather buy a very very run-down home on a prime spot so that I get to see the house "as is".

Having seen the Property Ladder shows and real-life examples of irresponsible owners who hastily putlipstick on their rotten home for sale, I don't want any of those stupid graniteel, Better-Home look for my personal space. Why should I cope with someone else' taste for the most expensive consumption item in my life?

121   skibum   2007 Mar 30, 10:23am  

OO,

Definitely. It's scary watching shows like "Flip This House" where you hear the "flipper" saying things like - "let's just slap on the paint coat to cover that spot of black mold," or granite TILES are way cheaper than cut granite countertops, so let's go with the tiles," or anything along the lines of, "I'm hoping to stay under a budget of $XXX, so forget the this-or-that needed repair.

The funniest one of these I saw was a newbie flipper in SoCal who adamantly wanted to make a "Green" flip and had all these grand plans for bamboo floors, solar panels, recycled tiles, etc. Once she started doing the flip and she found out how much each of these things cost above standard stuff, she nixed everything one by one! She even had the gall at the end to say she stayed "Green" by not wasting too much crap!

« First        Comments 82 - 121 of 220       Last »     Search these comments

Please register to comment:

api   best comments   contact   latest images   memes   one year ago   random   suggestions   gaiste