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The Galindo Mystery


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2007 Mar 8, 9:14am   22,026 views  221 comments

by HARM   ➕follow (0)   💰tip   ignore  

Most of the posts here tend to pretty much revolve around posting housing/economic news stats, debunking REIC propaganda, ranting about the NAR/Fed, sharing stories, parodying ignorant FBs, etc. This time, I have a genuine mystery for you to help solve.

A recent San Francisco Chronicle article, "ECONOMIC DEEP FREEZE
January cold spell inflicts hardship on the state's citrus workers"
contained the following excerpt:

Ruben Galindo, 44, Castanon's neighbor and a LoBue worker for 15 years, said, "Whatever little savings that we have, we are just not spending any. We are saving our pennies and nickels just to get us through the year.''

Galindo, with a wife and three kids, also has a mortgage and thinks he can handle two months of unemployment, but no more than that. He bought his house in Lindsay in 1995 and has thought about moving to El Paso, Texas, where housing costs are lower.

"But when prices of homes here go down, I won't be able to sell,'' Galindo said. "And they're already starting to come down.''

Ok, now here are the facts:

  • Galindo bought his house in 1995, so that's 12 years of (presumably continuous) mortgage payments, at a much, much lower cost-basis than today
  • Galindo was a LoBue worker for (again, presumably continuous) 15 years
  • Yet...

  • Galindo has very little savings, in fact no more than two month's worth
  • Galindo cannot afford to sell if/when house prices here come down
  • I really need your help here, because I just can't seem to reconcile the first two statements with the last two. From 1995 to 2007, house prices throughout virtually every part of California have at least tripled. So, even assuming Mr. Galindo took out an interest-only loan back in 1995 (not likely, as they were very rare back then), he must have at least 66.67% equity in his home by now, right? And if he has been more-or-less continuously employed since 1992 (with a very, very low housing cost basis), then how could he have almost zero savings? Even with the wife + 3 kids and assuming his job is of the low-skill/low-pay fruit-picking variety, and that his wife never works, this all seems somewhat hard to understand.

    Has Mr. Galindo cash-out refinanced his house each year since 1995 and used the money to take his family on annual round-the-world luxury cruises? Has his family dined exclusively on Chateaubriand, Maine lobster, pâté de foie gras, Italian black truffles, Kobe beef and Dom Perignon for the last 12 years? Is he single-handedly putting "Kitty", "Amber" and "Bambi" at the local gentleman's club through college?

    Unfortunately, this mystery is beyond my limited amateur-sleuth abilities to solve. Please help me out here.
    Thanks,
    HARM

    #housing

    « First        Comments 211 - 221 of 221        Search these comments

    211   astrid   2007 Mar 11, 9:43am  

    I assume true Buddhists walk everywhere...mindfully...

    Tantric Buddhists can fly...

    212   astrid   2007 Mar 11, 9:56am  

    New thread: Ask a JBR.

    213   skibum   2007 Mar 11, 9:59am  

    This piece is on the front page of the Sunday New York Times today:

    http://www.nytimes.com/2007/03/11/business/11mortgage.html?_r=1&hp&oref=slogin

    A login password is needed. An excerpt is below. As usual, the NYT is a day late and a dollar short, but it is on the front page...

    "Crisis Looms in Market for Mortgages "

    By GRETCHEN MORGENSON
    Published: March 11, 2007

    On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.

    A Booming Market What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.

    The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.

    Now, as then, Wall Street firms and entrepreneurs made fortunes issuing questionable securities, in this case pools of home loans taken out by risky borrowers. Now, as then, bullish stock and credit analysts for some of those same Wall Street firms, which profited in the underwriting and rating of those investments, lulled investors with upbeat pronouncements even as loan defaults ballooned. Now, as then, regulators stood by as the mania churned, fed by lax standards and anything-goes lending.

    Investment manias are nothing new, of course. But the demise of this one has been broadly viewed as troubling, as it involves the nation’s $6.5 trillion mortgage securities market, which is larger even than the United States treasury market.

    Hanging in the balance is the nation’s housing market, which has been a big driver of the economy. Fewer lenders means many potential homebuyers will find it more difficult to get credit, while hundreds of thousands of homes will go up for sale as borrowers default, further swamping a stalled market.

    (continues)

    Of course,

    214   Boston Transplant   2007 Mar 11, 10:27am  

    Brand,

    The Yahoo article is written by fools, as you say. For Boston they mention Dorchester as an up and coming neighborhood. One of my friends rented an apartment in Dorchester for a while. He works for a federal agency that involves him carrying a gun, so let's just say he's not the type to shy away from a bad area. Well, after a year there he moved because it was too dangerous. When he would go for a jog (in plainclothes), the locals would tell him to "keep running, boy". And not in a friendly way either.

    215   Brand165   2007 Mar 11, 11:55am  

    Bap33: Maybe BostonTransplant's friend is black.

    216   Peter P   2007 Mar 11, 4:07pm  

    Driving a premium car CAN be a fashion statement.

    I think being driven in a true luxury car (e.g. RR, Bentley) can be a fashion statement.

    Too many people are driving Lexus for it to be a "statement". :)

    217   Jimbo   2007 Mar 11, 4:31pm  

    Unless the statement is "I am part of an original crowd."

    218   astrid   2007 Mar 11, 8:47pm  

    Peter P,

    Numbers never stopped the SUV drivers or the BMW 3 series crowd (though some of them might have bought them just for the car).

    219   Allah   2007 Mar 12, 1:27am  

    Nothing seems to disrupt the flow of lemmings.

    220   Peter P   2007 Mar 12, 2:33am  

    Unless the statement is “I am part of an original crowd.”

    That is an such a non-statement. :)

    221   Malcolm   2007 Mar 12, 11:54pm  

    'Too many people are driving Lexus for it to be a “statement”. '

    A Prius makes a more noticeable statement than a Lexus.
    People driving around in overpriced American luxury SUVs like Hummers, and Yukons now look like utter morons. Especially when you know that they used a HELOC to buy it. Ha ha ha ha ha.

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