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Gallery of Unlikely Bubble Victims


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2007 Mar 29, 8:28am   16,747 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

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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!

122   OO   2007 Mar 30, 10:27am  

Peter P,

that's precisely the reason immigrants target areas with good school districts. Going to public school saves a LOT. Can you imagine sending two kids through private schools at $30K each after tax? That is a big ouch.

123   OO   2007 Mar 30, 10:47am  

I have a confession to make. I used to line up at Costco for free food samples, with the hope of making it a meal.

The reason why I stopped doing so was because the line got longer and longer and there were far more vultures waiting at the stall before the food even came out. So I figured that I needed to spend 3-5 minutes per morceau which is not really worth my time, and after circling different food stalls for half an hour, I may still be left only a quarter full. If I spend that half hour working on something more productive, I can make more than a free lunch.

And ultimately, I just stop going to Costco because I can't find enough things to buy there to recoup my membership cost. I just tag along with my in-laws when they buy toilet paper and washing powder, which is all I need from Costco. I shop from Trader Joe's for the rest. Trader Joe's is more like a community shop, so I feel obligated to buy when I take a free sample. Therefore, I try not to descend on the food display if I don't intend to buy.

124   OO   2007 Mar 30, 10:48am  

Yep, I am talking about Harker.

125   Allah   2007 Mar 30, 11:08am  

allah,

These days overpriced is hard to define, I’ll give you an example, my in-laws’ house in the same neighborhood was purchased new from the builder for around 450K in 1994 or 1995 (bottom of the real estate cycle), it’s worth around 1.2 million or maybe more at this time. So that million dollar house is maybe 300K tops 10 or 12 years ago.

Who knows, maybe the toilet bowl is made of solid gold!

126   sfbubblebuyer   2007 Mar 30, 11:30am  

Who knows, maybe the toilet bowl is made of solid gold!

Now THAT'S what I call sitting on your equity!

127   Allah   2007 Mar 30, 1:00pm  

Look at these posts, obviously made by the same person in Flushing Queens, namely the realtor "wendy kelly" just to try to drum up business.

128   Allah   2007 Mar 30, 1:29pm  

He just took in $6.00!

Great we can get a list of the people who donate and they can do the bailout!

129   DaBoss   2007 Mar 30, 2:24pm  

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

Well so far old Larry put the employees of Siebel, Peoplesoft, and now Hyperion out of a job. Yes I dare say some that were making 160K are
not going to make that salary anymore. Back to the bottom for those
folks.

Yes, Larry is doing were well indeed.

Ha Ha writes,

"160K/year is a VERY ORDINARY salary in Bay Area ….."

As someone who knows what people make, because I see salary data,
I can put a persons face to their salary very easily. Many in Finance have this kind of access.

First off, Company Officers ( CEO, COO CFO VPS) may make 160K.
But thats limited to 5 or so people per company out of 100-500

Engineers with 15-20 years of exp. may approch that but cap out
and dont go beyond rate of inflation. Its too expensive. Again thats
limited based on budgets/profitability. Very limed again maybe 15-20%.

Sales people will get 100K base and rest commissions another 15-20%
of people. They dont make quotas they dont got a job in 6 months.

That leaves you all the rest which are around med. 85K or so.

When salaries get to this level you can bet your pretty dollar management is looking at cost cutting. This is no secret for many in finance department.

Before we talk about 160K in salary is common. I suggest you look around your company and figure who makes what. Dont throw numbers out like everyone drives BMW in Silicon Valley. We all see many drive Toyotas.

130   DaBoss   2007 Mar 30, 3:32pm  

"I am a manager"

How common that everyone is a manager?

131   Jimbo   2007 Mar 30, 4:48pm  

160k is a very common family salary, but it is an uncommon salary for an individual. At most 10% make that, even in the land of Milk and Honey.

132   cb   2007 Mar 30, 5:08pm  

Fortress Sunnyvale update

This one takes the cake, the house just closed in March. It's got good schools but look at the price.

Type: Detached Single Family
Status: Sold
List Date: 02/21/07
Sale Price: $1,168,000
Sale Date: 03/07/07
Location: 1125 POME AV, Sunnyvale, CA 94087 (map)
Bedrooms: 3
Bathrooms: 2
Approx. Sq. Ft.: 1772
Approx. Lot Size: 7,840sf
Approx age: 44
MLS#: 708446

133   cb   2007 Mar 30, 5:11pm  

For a software engineer, 5 years out of school with a MS from a good school can garner 110K easy, I'm not debating the longevity or quality of such jobs, just what the job market is like these days.

134   e   2007 Mar 30, 6:12pm  

For a software engineer, 5 years out of school with a MS from a good school can garner 110K easy, I’m not debating the longevity or quality of such jobs, just what the job market is like these days.

And, if that person joined Apple, he'd have options at a great price. I know someone who just retired after 12 years there.

:(

135   cb   2007 Mar 30, 6:28pm  

I know someone who just retired after 12 years there.
So what, someone in my undergrad class is on the Forbes billionaire list (I think his Stanford MBA had a little to do with his success), who's to say you won't retire comfortably in 10 years?

136   DaBoss   2007 Mar 30, 6:59pm  

"And, if that person joined Apple, he’d have options at a great price. I know someone who just retired after 12 years there."

Oh yea... so now the additional expense to earnings "cheap stock expense" by apple from strike price to market price is considered compensation by the Apple and hits their earnings. If your a shareholder you would not be to happy.

If say Google was offered shares a 100 and employee excercises at 500
the difference of is additional expense to Google and will reduce net income.
Are you as a shareholder happier?

Not good news if your a start up trying to make a profit.

137   DaBoss   2007 Mar 30, 7:02pm  

LOL lets face it typical employee lasts 2-3 years at one place. Are we forgetting the politics and cut throat carp that goes on. Thank god I dont have to brown nose some idiot boss.

138   OO   2007 Mar 30, 7:18pm  

Well, salary is salary. If one needs to rely on a wage (especially those who need to rely on 2 wages to buy a million-dollar-shack) to pay the mortgage, feed the kids, he is after all a working class, regardless of how much he makes. That is my interpretation.

One doesn't graduate from the working class and become financially independent until he
1) has a fully-paid off house
2) has an account that can generate a guaranteed annual return that can cover his property tax for 50 years
3) has another account that even when invested very conservatively can generate enough after-tax living cost at whatever lifestyle he chooses for another 50 years

Expenses for 2) and 3) cannot eat into the principal, because once you dip into the principal, then it becomes a very slippery slope.

Before we reach such a stage, the extra $50K or $70K before-tax pay makes little difference. We are all, as the Japanese call it, SALARYMAN.

139   Allah   2007 Mar 30, 11:33pm  

The Casey bailout is in full swing, he’s up over a $1000. Wild.

I don't know who is dumber, Casey or the people who are giving him money!

140   astrid   2007 Mar 31, 12:08am  

Peter P,

There's all kinds of discounts associated with the second kid if you time it (yes, I know what I said) close to the first kid. Clothes, nanny, pre-school, bulk diapers, room sharing after the kids are able to sleep through the nights.

141   astrid   2007 Mar 31, 12:14am  

I'm single and I love Costco. I can go shop there once a month and stock up on all the canned good, frozen goods and items of the moment (all returnable within 6 months). I even love their sample tables, not for myself but for parking boyfriend or parental unit.

I find Costco usually has better QC, especially on frozen and canned food, compared to Trader Joe's. They may sell more generic stuff, but I've almost never had a nasty surprise with a purchase.

142   astrid   2007 Mar 31, 12:17am  

Also, Costco on weekday noon only works if you're in a largely working town. In the Pleasanton Costco, we find about the same amount of traffic on weekdays and weekends. The weekdays bring out all the bored stay at home moms with three kids in tow. The best time is probably early morning or right before closing.

143   Michael Holliday   2007 Mar 31, 1:05am  

Glen Says:

"...I remember the early ’90s: Japan-bashing, Pete Wilson, Pat Buchanan, Gulf war I, prop 187, three strikes law, etc.. Ugly times call for ugly politics."
_____

In terms of the proposed conservative solutions (whose response was only proportionate to the severity of the problems at hand), to the madness of the ineffectual and deleterious liberal policies of the day, I thought those were beautiful times.

But I guess beauty, truly, is in the eye of the beholder.

I question your political aesthetic, my friend. I question it with a curious
eye (and one hand on a chocolate chip cookie and the other grasping a cold glass of Hi-C fruit punch).

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