patrick.net

MA,

You're doing harm by NOT making a 50% offer!

I didn't necessarily mean to take things to that extreme it's just frustrating that b/c of our reverence for RE we treat FB's that should be dumped out on their ear with the dignity of a deposed prince. It's over already! Especially where flippers are concerned. You somehow got a loan claiming this was your primary res. so that makes what, FOUR "primary" residences for you? We need to figure out a way to get these clowns blown out so we can all move forward!

Like a margin call? I DO understand people go through difficulties in life and if this were truly their primary res. they should be given the FULL benefit of the law! But flippers? Aw c'mon, let's get this over with! The longer we treat specuvestor properties like a "homestead" the more unhealthy the situation is for everyone. Isn't there some kind of "acceleration clause" the lenders can exercise to get this thing on a more sane path?

SQT,

It's a whole new breed of desperation. In the past ARM's were intended for newlyweds etc. Now it seems as if they're being marketed to anyone and everyone. Not cool.

SQT,

For some FB's serial re-financing may put off the inevitable on a personal level but I really don't believe that it will in any way help support prices. Most won't have any wiggle room with low or no equity and we'll likely begin to see this type of activity reflected by the credit reporting agencies as "risky/shaky finances" (as it should be). Unlike some folks here I really do not believe this will be strictly a middle/lower middle class impact. Since they've been so widely used across all income levels the pain will be more evenly spread than most of us would like to think.

SFWoman,

Well, my feeling is that if the government offers a free lunch, a lot of people will take advantage of the offer. However, if they deplete their retirement savings to pursue their life, they can't expect me to be sympathetic when they run out of money and are forced to work as Walmart greeters.

This is OT, but just when I thought I understood most of the loopholes and market-distoring effects of Prop. 13, I realize there's another angle being exploited that I hadn't even considered. I can now add the term "Santa Monica teardown" to my CA bubble lexicon.

From 'Tipping Point' thread on Ben's blog:

------------------------------
Comment by Robert Cote

Indeed. They are even called “Santa Monica teardowns.” The general rule is to leave a washbasin and tub on one timber frame wall to “qualify.” The usual event is to build around the two and then rip them out after the inspection. The house immediately next door is one such. About 1200 sf that was recorded as like 1800 sf bumped up to 2600 sf per permits but really comes out to about 3200 sf. A “patio” turned into a two story high family room and a cement work pad turned into an attached office. House is sitting empty as some “anonymous” source tipped off the county who won’t issue occupancy. Geeeee. Sniffff.
------------------------------

A couple years ago I saw them tear down and rebuild an old supermarket in my neighborhood –everything except the rear wall, which they took great care to preserve (used lateral bracing to hold it up). I couldn’t comprehend why they would rip out everything else but go to such trouble to preserve one bare wall. Now it all makes sense.

Yeat another example of how Prop. 13 distorts incentives and should be abolished.

SP,

To me, a buyer's market is when my PITI is lower than rent. Until that happens, greedy sellers can blame themselves for the slow moving RE market.

To me, a buyer’s market is when my PITI is lower than rent.

I don't know if this will ever be the case in CA --even at the bottom of the market-- but PITI should at least be close to equalling rent. Perhaps a more precise benchmark would be PITI + HOA + est. monthly maintenance - est. monthly tax deduction.

I'm worth with George on this one;

If the seller ain't cryin' I ain't buyin'!

HARM,

Coincidentally, I also came to know about the tear-down rule. Someone I know in BA reconstructed his house, and kept just the one wall. He casually mentioned it, as if it is a safe and sound legal practice - which it very well may be.

July 31, 2006

Men Not Working, and Not Wanting Just Any Job
By LOUIS UCHITELLE and DAVID LEONHARDT

ROCK FALLS, Ill. — Alan Beggerow has stopped looking for work. Laid off as a steelworker at 48, he taught math for a while at a community college. But when that ended, he could not find a job that, in his view, was neither demeaning nor underpaid.

Millions of men like Mr. Beggerow — men in the prime of their lives, between 30 and 55 — have dropped out of regular work. They are turning down jobs they think beneath them or are unable to find work for which they are qualified, even as an expanding economy offers opportunities to work.

About 13 percent of American men in this age group are not working, up from 5 percent in the late 1960’s. The difference represents 4 million men who would be working today if the employment rate had remained where it was in the 1950’s and 60’s.

“These are men forced to compete to get back into the work force, and even then they cannot easily reconstruct what many lost in a former job,” said Thomas A. Kochan, a labor and management expert at the Sloan School of Management at Massachusetts Institute of Technology. “So they stop trying.”

Many of these men could find work if they had to, but with lower pay and fewer benefits than they once earned, and they have decided they prefer the alternative. It is a significant cultural shift from three decades ago, when men almost invariably went back into the work force after losing a job and were more often able to find a new one that met their needs.

“To be honest, I’m kind of looking for the home run,” said Christopher Priga, who is 54 and has not had steady work since he lost a job with a six-figure income as an electrical engineer at Xerox in 2002. “There’s no point in hitting for base hits,” he explained. “I’ve been down the road where I did all the things I was supposed to do, and the end result of that is nil.”

Instead, Mr. Priga supports himself by borrowing against the rising value of his Los Angeles home. Other men fall back on wives or family members...
_____

We are royally screwed!

See, we should demolish the welfare system before it is too late!

Astrid,

That PITI is rarely less than rent. In fact, since WWII PITI always exceeds rent except for very short periods of sharp adjustments/recessions or for longer periods in severely depressed labor market areas.

In case #1 ownership is not facilitated by the reversal of PITI and Rent because such periods are also accompanied by credit-crunches. The primary reason that homes become cheaper than equivalent rents is because the cost of credit goes so high that it forces home prices down. And, prices only stay below rent during the brief period of "overshooting", then they go back up to equilibrium, which is above rent equivalent. (Of course there are a few micro-markets with true supply constraints on rental stock--though not many, and in these cases rent may exceed ownership longer, but still usually not for very long, mainly because these places are usually urban and people just move to the 'burbs to buy a home or rent given such economic pressures).

In case #2 you don't want to live there anyway; nor does anyone else, thus the reason homes are cheaper than rent.

Michael Holliday,

I'd prefer to think that "they" are royally screwed!

What happens to Mr. Priga when his home no longer appreciates? And what kind of sleaze bag mortgage broker and his scumbag underwriter are extending credit to this prima donna? Life sucks, now get back to work.

MH,

There is always another side to articles like that.

Firstly, there is a big difference between a male steelworker who drops out, an engineer, and a VP-level director. I contend that the telling correlations are to be found in the socio-economic strata, not in some broad-brush "men between 30-55".

Secondly, there is a very real age-"discrimination" (I use that word in quotes to signal my uneasiness with victim-izaiton) issue. Many studies have show that along with rising turnover rates in corporate America, there has been a strong downward movement in replacement age averages. What you are seeing is middle management or supervisors turned out only to find increasingly fewer jobs for professionals over 40.

Lastly, there is a very real fine line between "dropping out" and "holding out". Anyone over 35 who's lost a professional job knows the routine. You have to be very careful about marking yourself down too early. Often, you can find equivalent work if you are patient and determined. This is the "competition" part. You have to fight for those jobs. However, if you take that McJob McManagement position you may find that you have effectively downgraded yourself from that point forward. Of course, for some folks holding out 3 months is too long; for others 3 years isn't.

Anyways, most people like this aren't sitting at home or on welfare. They're doing "independent consulting" or something else "self employed". Sometimes they might find they actually like that better and make just as much money, only with a lot more freedom and a lot less BS.

Oh, did we forget to mention that Mr. Priga no longer has a job or any investments to speak of with which to re-pay the loan?

People, that's the whole misconception of "home equity loans". They really are "job loans". First, true it helps to have a home to pull off this little scherade but another pivotal factor is having a freaking job with which to make the payments.

Or is it just assumed that when his little juggling act runs out of juice that it will have appreciated enough to play the whole shell game over again?

Good responses to my post.

DinOR Says:

"...Life sucks, now get back to work."

Ha, haa! I love that line. I'm goint to steal it.

Randy H,

In ways I hear what you're saying. In fact I pretty much counted on it! Let's face facts here, if you're in your late 30's early 40's and you haven't been invited into the "inner circle" it's probably not going to happen. No matter where you work. Randy, you and I have discussed before just how important it is to develop a "moonlight" activity. As far as I can see these guys made absolutely no provision whatsoever.

Overpaid, arrogant demanding Boomer a$$hat thinks accepting a job offered at market wages is "demeaning" or "underpaying".

Oh, Boo-hoo! Time to throw a tantrum, I guess (that always worked on mom & dad, didn't it?). This a perfectly predictable reaction to be expected of anyone from the Entitlement Generation, whenever anyone tells them they can't have absolutely everything they want.

Want to try "demeaning" and "underpaying"? Try busting your ass supporting yourself through college, while trying to maintain a high GPA to qualify for student loans, only to graduate into high unemployment and recession. Then working a succession of crappy $5.75/hr jobs because that's all that's being offered at the time. Gee, that sounds familiar... oh, that's right --it happened to me.

Or how about reliving what my old man went through: cutting lumber with hand axes and saws with the CCC in upstate Maine during the Great Depression. At least the CCC was nice enough to provide tents and food. Then his "payoff" was getting sent to Burma to fight off the Japs in WWII.

This fuck doesn't know a thing about "demeaning", but I suspect the market will be stepping in to give him an education real soon. I'll be looking forward to it.

It is the specialization conundrum.

In order to rise in most professions one is forced into increasing specialization. The classic example is the defense industry engineer. Then, when things change these workers find themselves competing at a disadvantage.

Nothing new about this; been going on for decades. What is different today is that previously generalist manger type roles have become ultra-specialized and tracked. Basically, if you didn't follow a certain exact path in career development you find yourself unable to compete with usually younger workers who did follow the cookie-cutter track. This is true even after people return to school, earn advanced degrees, or have far superior total experience.

It is an effect of the increasing fungibilization of all workers at all levels except for the 1-3 layers at the very top...the "club". Everyone else is just meat. It's no longer about increasing the value of these workers' contributions, but instead about reducing the variability of their performance.

"I don't care that you have 15 years of great experience in otherindustry, nor that you went back to school to earn anothergreatdegree. I want someone with 8 years of experience who went to oneofthese schools, worked for oneofthese6companies afterwards and achieved thistitle. We'd love to talk about hiring you as a contractor to help fill the gaps though".

By the way, I know men who took 2 or more years off after losing a job, usually around 2000/2001. Some went back to school, some became stay-at-home dads, some did odds&ends consulting. In most cases they ended up eventually finding something equal or better than they lost. In all cases they considered the time they got to spend with their kids beyond value. This is something our fathers never had the chance to do. The added benefit is their wives got a chance to reengage their careers if they so wished also; something their mothers never got the chance to do without turning their kids into latchkey kids.

It is the specialization conundrum.

In order to rise in most professions one is forced into increasing specialization. The classic example is the defense industry engineer. Then, when things change these workers find themselves competing at a disadvantage.

Again, it is about being in the right place at the right time, always.

newsfreak Says:
Oh, and thanks for sending that heatwave East–the dogs and cats are melting.

Yeah, sorry 'bout that.
My cats spent most of last week scrapping with each other to lie in the PRIME spot under the AC vent. Well, scrapping may be a too strenuous term for it....the odd wave of a paw in the other's general direction before falling asleep on their backs.
Poor old furries.

Appropos of nothing....does anyone know if there's a way to use the Tax Assessed Value to figure out a 'fair' price for a house? If you don't know the year bought - as Zillow only goes back about 10 years - can you use it to extrapolate a price?
Also - what's the skinny on 'non/un-permitted' square footage? Is that legal? I've seen lots of properties here in LA where they say something along the lines of 'square footage does not tally with floorplans', or something like that.
If I was to buy one of these places, wouldn't umpermitted square footage be a problem?

LoL!

My friend was telling me about one of his cats today, who got so hot sleeping near a heater, in the sunlight, that he needed to use oven gloves to pick her up because she was so hot.
Maybe its due to the incredible insulating properties of long-haired cats....

Speaking of a shell of a house, this shell wants $2.5M and has been on the market for over a year.

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=1&mls_number=524099&type=property&name=

Also, the realtor writeup says that this property is red-tagged by the city, what does it mean? Red-tagging to me means the city doesn't allow you to build due to some topography challenges or constraints, and still they want $2.5M for a shell?

My new favourite phrase...."emotional charmer".....WTF?

The place in question:
http://tinyurl.com/m5yuj

Although Ill let you know if I feel emotional about it....once they've posted a photo....

Michael Anderson Says:

What do you make of these houses that sit on the MLS for years with the same price? Is the owner just playing, “I’m holding this until inflation catches up with my price”?

I'm looking at some verrryy expensive houses in Topanga (90290) and have noticed that they have the highest DOMs of any other area I'm looking at.

My take is that they're so filthy rich that they haven't actually noticed that thier houses haven't sold yet.

There are a couple of places that have been on the market 200+ days, and no reduction, no nothing...

RP,

the lot in that part of Saratoga sells for around 1.5M per acre, he is asking for 2.5M.

Obviously the seller wants you to pay an extra Mil for that SHELL. Anybody who thinks that shell that has been sitting in the rain and sun for the last 365 days is worth a Mil??? Anyone?

Oh, I forgot to mention that the 2.5M shell does sit on a relatively steep slope (which also means that it has a good view) at the border of Saratoga and Monte Sereno. I drove by the place about one and half year ago, it looked the same as shown in the photo. I suspect that the builder/owner runs out of money.

Anyhow, I think that is probably the most expensive shell I've seen so far.

OO Says:

"...Anybody who thinks that shell that has been sitting in the rain and sun for the last 365 days is worth a Mil??? Anyone?"
___

Hell yeah! I think it's worth a cool Mil.

ANYTHING in Cali is worth a cool Mil. Are you kidding?

Next year it'll be worth a cool 2 Mil. And after than, 4 Mil, etc.

I will be laughing all the way to the bank and surfing all day while everyone
else is renting.

I will be declared a financial genius and shall wear the title like a chip on my shoulder.

God bless the "Golden Age" of California real estate!

And God bless Tiny Tim!

Zillow is way off in its estimate.

I can give you some concrete examples.

258 Belvue Dr, Los Gatos, CA 95032, sold on 5/24/06 for 1,1M. Zillow estimates it to be worth 1.4M. Excuse me, this was just sold 2 months ago for 300K less, how can it jump 300K in 2 months in a down market? The buyer just uncovered a pot of gold buried in the backyard??

105 Maria Teresa Ct, Los Gatos, CA sold on 6/28/06 for 1.0M, Zillow estimates it to be worth 1.25M now. What happened in the last 30 days to make this property worth 25% more???

Zillow is sooo ridiculous in its zestimate. Just check its comp transaction data and ignore the zestimate.

MA,

You can look for transaction record on ditech - but it may not have record for your town either.

OO Says:

"...Zillow is sooo ridiculous in its zestimate. Just check its comp transaction data and ignore the zestimate."

___

Shzit, yzeah. Zillow's zestimate iz fzucking sztupid asz.

About a year ago, a story called "Countdown to Meltdown" was printed in the Atlantic Monthly.

It is supposed to take place in the future, in 2016, after a collapse in the US economy that included millions of foreclosures.

The foreclosures occur because of the adjustable rate mortgages and the fed response to a collapse of the dollar. Something like this happened during the Volcker years of the early 1980's, but at that time the effect was smaller because there weren't so many ARM's and HELOC's.

In this fantasy story, the collapse of the dollar is triggered by events that occur in the wake of the death of Fidel Castro.

I just heard on NPR tonight that Castro is ailing.

Here is a link to the story in last year's Atlantic Monthly:

http://www.theatlantic.com/doc/200507/fallows

Michael Anderson said: I don’t think that a buyer’s market is a meaningful term to me. After all, it is the seller’s property. It’s up to them whether they are willing to sell at a given price.

SP said: Exactly - that is why it is NOT a buyer’s market unless the buyer has pricing power, no matter what the realtwhore says.

Sellers refusing to sell at a price does not necessarily mean it is not a "Buyer's Market". Buyers can still have pricing power even if there is a seller's boycott. This holds true unless any seller's boycott is effective enough at constricting supply to give sellers pricing power.

Interject game theory and basic human behavior here. Potential sellers with a need, want or desire to sell will not enjoin a "boycott" for solidarity's sake. They will act in their own best interest by attempting to get the best price possible. In a sinking market this means doing so by undercutting competitive sellers as early as possible.

Sellers who don't sell aren't sellers and do not represent potential supply. It is much harder to exert pricing power from the supply side in a competitive market with many suppliers and many purchasers.

Is there anything else that has price history for houses? The lack of an answer makes me think I’m out of luck.

Aside from Ditech, you may want to check out the local tax assessor's website (assuming they have one). The county tax assessor should have the complete sale history for all homes.

ajh,

isn't Costello also a member of the Liberal party? Liberal Party has been the incumbent party for 10+ years, so asking Liberal party to win again in the next election is in fact asking for quite a bit.

Does that mean the Costello is unlikely to raise rates again after this one to make sure no homeowners are hurt? Thanks

ajh,

In fairness to the "persuassion guy" they did run a full time "persuassion academy" and toured the U.S and Europe along with interactive on-line training so they were already spread thin. Oh, btw I loved "The Dark Tower of Financial Doom" you described over on Ben's! I'm "getting in" before it's too late!

Randy and SP,

Okay, maybe the PITI measurement isn't the best description, though that's was the case in Norman, OK and Rockville, MD during the durable of my stay there.

In CA, Prop 13 and a history of high housing price inflation may provide extra incentive to go above PITI, since people assume rent will eventually inflate up and quickly make up for the initial higher cost.

HARM,

You're right, of course! PITI to rent is not exactly apple to apple. I should include the opportunity costs and maintenance cost and such...I guess my main point is that I don't want to pay an outrageous premium just to live in a house in my name. Since the current market still reflects a reality where owning is much more expensive than renting, I cannot call such a market a "buyer's market."