patrick.net

I don't know if hose people are "rich". Many middle class people bought homes that were a million with neg am loans and predatory lending. You can't blame the people as much as you should blame the government for letting all regulation go on lending practices. Many people didn' t even understand the loans they got into.

Bullcrap!

People (EVERYONE that bought at insane prices) wanted a house, they would have signed a firstborn clause, to get the loan.

So I read the title before I read the article :). After reading it I still agree with my original post, however many "rich" or "upper middle class" are walking away just becuase they have a "bad investment" on their hands that is a fact! However, the public shouldn't make blanket statements that everyone is just walking away because of a bad investment. We don't know everyones situation, maybe they lost their jobs, in this economy many of the "rich" lost their jobs. I also think many people even those in the upper middle class are posers and still bought more than they could afford. I think many people did regardless of econimic class.

Condohelp says

We don’t know everyones situation, maybe they lost their jobs, in this economy many of the “rich” lost their jobs. I also think many people even those in the upper middle class are posers and still bought more than they could afford. I think many people did regardless of econimic class.

True dat.

However, many people with higher incomes from the professions due to the bubble - loan officers, realwhores, investors, etc - didn't plan for a rainy day. They were raking in the bucks. That goes for construction workers too... I know many who bought every toy known to man and spent $20,000 (not a typo) on horses for their little kids to use for 4-H... and have lost it all. If only they had saved a bit and bought something they could afford - they could have paid it off and had sufficient funds left over.

I'd like to see one single person that bought in 05-07 that didn't buy with the intention of flipping the house with in 3 to 5 years, and had no intention of entertaining the worse case scenario where they actually were forced into taking those loans to term.

It has been for me distinguish who was using who, and frankly have been both appalled and disappointed that the banks were the villain in this by the "Predatory Loan" perspective.
That really helps them dodge a big bullet, from a fraud wrap to letting them off with a slap on the wrist trumped up unfair business practice accusation. "Oh they were stupid and you took advantage of them."

When the real crime was the money trail that lead to the County Appraisers door.
These appraisers and inspectors are Contractors, and have a better grasp on Real Estate value than speculation and say so. These guys were enticed to make those numbers higher, by someone, they weren't intrinsic nice guys here. They are City and County workers.

The banks should have never loaned 300K-400k on 99k-120k ranch shacks in historically ran down RE distressed communities. Houses that were bought for 90K then flipped two times in a year to end up at 225K with in 3 years. It all ballooned and scaled up from there.

Now forget that Horhey and Luicia Menedez only makes 29K between them and got loans for that amount. That's wrong too, but the bank should have never loaned that kind of money on every shack standing. They should cap out at country records and if speculators want to run the market up from there. The bank loans based on fair tax value, and if want to pay more, it comes out of the buyers pocket.

Where was the guys at Washington in charge of the Real Estate division of Homeland Security?

OH? It's not that kind of "HOME" land.

Tenouncetrout says

I’d like to see one single person that bought in 05-07 that didn’t buy with the intention of flipping the house with in 3 to 5 years, and had no intention of entertaining the worse case scenario where they actually were forced into taking those loans to term.

I know many who bought and actually believed they'd be able to afford long term. Not everyone was a flipper. They were naive, stupd, and otherwise lacked pragmatism...

Tenouncetrout says

Where was the guys at Washington in charge of the Real Estate division of Homeland Security

Some people, including my husband bought with the intention of this is the way it is. You have to buy a small house first, make a little bit of money off of it to buy a big house. We have other friends who saved for years put over $200k of savings down just to buy a 2,000 sq ft home in the middle of the ghetto, all so they could have a nice house.

I'm sorry that we bought a place. We did not expect to make millions, but we did expect to make $15k to help with more of a downpayment. But most people in this country have the notion that part of the American dream is to own your own home. After reading Patrick's blog, I don't think it should be part of the American dream until home prices deflate.

I think that everyone played their role in this mess, but unfortunately it is the middle class that will have to make up for it. The big guys on wall street are still living it up, and so is the x ceo of countrywide.

Condohelp says

ncluding my husband bought with the intention of this is the way it is

I was VERY well-read about the situation 2005-2006 and I did not expect $300,000 condos to decline to $200,000.

I thought prices had peaked and there would be a $30,000 or so drift down as incomes inflated and buying power returned.

It wasn't until the Casey Serin story broke in late 2006 that I realized that prices (and loans!) were totally divorced from buyer ability to pay, and that the low-end was heading DOWN in a big way once the fraud element was exposed.

Brown, white, yellow, black, purble and the rest who werewearing that Realtor Gold Jacket were the ones getting rich hustling homes. Wall Street/Banks made penny while REA were carving up 6% off the top. Have their power and influence stopped ? Nope! They are still partying it up...

Loans go bad, they get hit against earnings and so goes the loses back to the bank. I havent seen anyone "clawback" Realtor commission on the busted sales, have you?

Troy says

I was VERY well-read about the situation 2005-2006 and I did not expect $300,000 condos to decline to $200,000.

How did you feel when that same $100K condo went to $200K in the first place from 1998 to 2000? Writing on the wall was much earlier than 2005. Even the Wall Street Journal started to ask if there was a housing bubble back in 2002.

Troy says
I was VERY well-read about the situation 2005-2006 and I did not expect $300,000 condos to decline to $200,000.

I WAS prepared for a 30% "worst case scenario" drop from the 2006 peaks. The problem is where I'm at values have dropped 60%. I bought in 2001 for $230k, 10% down, never pulled out any equity, now owe $195k and I'm still $50k under water.

thomas.wong1986 says

Troy says

I was VERY well-read about the situation 2005-2006 and I did not expect $300,000 condos to decline to $200,000.

How did you feel when that same $100K condo went to $200K in the first place from 1998 to 2000? Writing on the wall was much earlier than 2005.

That was the dotcom lottery money flowing into the market 1998-2000. Plus apartment occupancy was 100% in mid-2000 when I was FOB and rents were ridiculous. I went to the City Center apts in Cupertino in May 2000 and they told me their actual rents were $200 higher than the website!

I was lucky to have a friend in Santa Cruz with some space in his house so I just moved there to wait on the fallout, which came as expected 2001-2003.

Even the Wall Street Journal started to ask if there was a housing bubble back in 2002.

There was, but hinky lending by Countrywide and the other criminals, the Bush tax cuts & child credit, and falling interest rates increased "affordability" and gave us the mother of all bubbles.

Because Americans are so get used to spending on someone else's money, ie, loans. We just can't do a shit without it. Buying everything because we can do it with loan. Paying my employees by getting a loan out of bank, not out of my pocket. Getting 52 inch state of art TV with credit card. Yeah, I will pay them back some day, I promise... if possible, I hope. That's the way we live in US.

Richs tend to play with leverage more effectively than ordinary Joe. That's great financial advantage though, that means they got more debt than you do. So why not default on someone else's money if that become a burden? It never was my own money from the first place, anyway. Hey, bank. Take this crap back, and do whatever you do.

It was not that hard to understand.

The advantage is that rich folks do not rely so much on credit. They can default on their McMansion and the next day walk down the street and pay cash for a different house.

Troy said.

I was lucky to have a friend in Santa Cruz with some space in his house so I just moved there to wait on the fallout, which came as expected 2001-2003.

Yes, but we havent corrected fully for 1998-2002 period yet. 15% down after the 100% increase is still in process of being undone.

Many things are being undone..

Dwindling public companies means big changes in the valley

http://www.mercurynews.com/sv150/ci_12110548

toothfairy says

The advantage is that rich folks do not rely so much on credit. They can default on their McMansion and the next day walk down the street and pay cash for a different house.

Oh? Havent we read how many times how the super rich ... movie stars, sports figures, dot-com millionaires etc etc are dead broke going into bankruptcy with no money to go out and buy another home. Many of these people do not know how to handle or save money. They did a great job pissing money away on multiple homes all falling in value.

Condohelp says

I don’t know if hose people are “rich”. Many middle class people bought homes that were a million with neg am loans and predatory lending. You can’t blame the people as much as you should blame the government for letting all regulation go on lending practices. Many people didn’ t even understand the loans they got into.

Not around Santa Clara County. Many used neg-arm because (1) couldnt pay using fixed 30year loans (2) gambled on a tech boom repeating with IPO stock boom. (3) the idea prices were always expensive and never go down in the Bay Area. Many couldnt even understand that even the "best" cities do drop in price as they did back in 1989-1991. Many people around SCC are new to the region and their thinking has been skewed based on a few short years during 'boom years' and lots of hype.

http://www.paloaltoonline.com/news_features/real_estate/fall2000/2000_09_22.trends.php

"No one wants to recognize it, but between 1989 and 1992, prices dropped 30 to 40 percent. There's no question that could happen again. Everything has a cycle and real estate is no exception. It's foolish to think prices will go up forever. In the longer term they will, if you can weather the downturns in between. There's no way to know," Dancer said