Here's recent history of the Fed’s policy committee and its Fed Funds rate. Next Fed decision is June 24/25.
Emblem of O.C.’s $600,000 home market, now a short sale
May 5th, 2008, 4:54 pm · 93 Comments · posted by Jeff Collins
The Costa Mesa home of Sergio and Monica Anaya became the poster child for Orange County’s galloping real estate market in June 2005, when they bought it for $600,000. It was the first month that the local median home price, as measured by DataQuick, reached that lofty threshold.
Now, they no longer can afford the home they bought with two loans and no money down. It’s back on the market as what industry insiders call a “short sale.”
The couple is asking between $439,000 to $479,000 for their three-bedroom, two-bathroom house near the 405 and 55 freeways. If the lender approves their short sale — that’s a sale below the total owed for the mortgage — in that pricing range the loss, before expenses, will run between 20% and 27%.
A photo of the just-sold $600,000 house ran on Page 1 of the Register on July 19, 2005 (pictured here) with a story noting a new high in pricing. (An interview with local expert who that same day gave an upbeat — and incorrect — outlook IS HERE!)
But with Sergio’s business drying up because of the sour economy, he said he no longer can afford the $3,300-a-month house payments. He’s fallen five months behind.
“I’m self-employed,” said Anaya, owner of Sunwest Window Tinting. “The work is so low. It’s dead. The economy is so bad. That’s the reason I can’t afford the house.”
The Anayas’ agent, Moe Usman of A1 Realty Inc., said they listed their house for sale a little over a week ago for $559,000, then dropped the price to a range of $439,000 to $479,000.
At the time the Anayas bought, interest rates were below 6% and aggressive lending made mortgages readily available to first-time buyers like them. The median price of an Orange County home had soared from $515,000 to $600,000 in just 14 months, setting a record in June 2005 for a fifth consecutive month.
Home prices continued to rise for at least a year after the Anayas bought their 1,300-square-foot home on Traverse Drive. Orange County’s median home peaked at $645,000 in June 2007 — two years after the Anayas bought. It has fallen 22% since then to $506,000 in March.
“This house was worth almost $700,000. More than that. $750,000,” Anaya said. “Now there’s a house around the corner that’s selling for five-something, but it has more (amenities).”
The Anayas will be out $20,000, which they spent upgrading and repainting the 40-year-old house. Anaya said he installed a new kitchen sink, faucet and granite countertops. He drywalled the garage and installed a new garage door and opener. The house also was repainted inside, and the exterior green covered in a smooth, creamy tan.
Anaya said he spent many sleepless nights worrying about the mortgage, but those days are behind him now. He knows that he either will sell the house or lose it to foreclosure. He and his wife and two children, 5 and 7, will end up renting a two-bedroom apartment somewhere, he said.
His wife works part-time for a local school district. Two boarders pay $550 a month to rent a room in the home. That’s still not enough, Anaya said.
“Too many bills to pay. Oh, you don’t want to know, man,” Anaya said. “I pay so much each month. It’s like crazy. … The economy is one of the main things. It’s really hard for people now. Even the rent is really expensive.”
… and read about a mortgage-payment struggle in Coto de Caza.
May 5th, 2008 at 5:01 pm
Old news. Let us know what it sells for.
May 5th, 2008 at 5:10 pm
look at the yolk run down that page LOL
May 5th, 2008 at 5:15 pm
It’s back on the market as what industry insiders call a “short sale.”
LOL, or the paper boy, LOL
May 5th, 2008 at 5:16 pm
Is it $439,000? $559,000? $479,000? “Five something” Iike the neighbor? Time to have a heart to heart with Moe. And then there’s the bank.
May 5th, 2008 at 5:18 pm
smells like a “pending sale” LOL…… LMAO !!!
May 5th, 2008 at 5:24 pm
I had to laugh when I reread the interview with Walter Hahn. He admitted that he was wrong and then readjusted his prediction of $1.4 Million Median Price from 2014 to 2016. Is he crazy?
Real Estate cheerleaders like Walter have no shame. Even when they were obviously wrong, they still spew out propaganda. No wonder these people have no credibility.
May 5th, 2008 at 5:41 pm
As much as I have sympathy for them, I’m getting the feeling this is a walking away move more than anything. No payments for five months? On another note: I bet National Bubble and his merry band of misfits will be overjoyed hearing about a little guy having tough times. This is invasive, sensationalistic, meaningless garbage.
May 5th, 2008 at 5:47 pm
come on thoughtful this is great for you…………. this is probably worth a solid 3 months as a “pending sale” in steve thomas’ data….. who knows maybe more…. good for you………
May 5th, 2008 at 5:53 pm
mav, you are evil at times…anyone losing their home does zero good for the community.
May 5th, 2008 at 5:55 pm
evil are the people who got someone making their income in a $600K home with a 100% financed loan………. that helps no one……. the home will now go to the person who deserved it in the first place….. karma is funny like that
May 5th, 2008 at 6:00 pm
no…taking joy…aka (lmao or lol@ribsplitter) at a short sale, taking joy at someone else’s misfortune makes you evil. If you can happen to take advantage of an opportunity without gloating at the dire impact it could have on that family, their children, etc. that would be one thing. But over and over here, you and others shallow bears have proven yourselves to be inhumane with your comments and treading slightly above the amoeba in the compassion scale.
Do not take joy in the financial misfortune of others…you are correct…karma is funny like that.
May 5th, 2008 at 6:02 pm
“the home will now go the person WHO DESERVED it in the first place.” Classic bear line…entitlement 101. You guys are sick.
May 5th, 2008 at 6:05 pm
That anyone in their right mind could ever think that POS was ever worth $600K is truely frightening and a good illustration of the madness of the housing bubble over the last 4 years.
May 5th, 2008 at 6:10 pm
no, if i said i hoped the people who deserved the home used redfin that would be sick, hopefully they use you mulli
getting homes back to affordability levels is good for everyone…… do you have kids mulli?……… don’t you want normal affordability for them?
the misfortune occurred on day 1 when some realtor and mortgage lender convinced them that this would work out…….
these people will be fine, this is not the end of the world…….. life goes on
May 5th, 2008 at 6:17 pm
While it sucks that somebody’s losing their home, it wasn’t really there’s to begin with. If they lose a $600K rope around their neck that they can’t afford, that’s a good thing. They can start from square one. It’s not like they’re now living out on the streets. They can rent just like of a lot of people.
May 5th, 2008 at 6:21 pm
Sorry mav…but you and rants have taken joy one too many times at these misfortunes. I do wish I could believe you. But your actions of the past indicate otherwise. You all seem to be thrilled at these stories. But, let’s go back to three years ago.
This family contacts their agent expressing interest to buy. Just what is their agent supposed to do? Tell them not to buy? Suggest they rent for a while longer? The family is making this decision, not the RE agent. Better yet, how do any of us know what price ranges they explored before they made an offer on this home? And if you were the seller of the home, your agent has a fiduciary responsibility to you to get you top $$$. I am guessing if you were the seller, you would not care how it impacted this family, as at the time, it was market value…like CSCO in 1999. Value can only be determined at the current market rate.
May 5th, 2008 at 6:27 pm
sorry mulli……… the realtor has a responsibility to their client….. they serve as the expert in the transaction……. they have a moral responsibility to make sure their clients are not biting off more than they can chew……. if you disagree then i think you are the one with the moral issue……. i believe this issue is debatable (if you have no morals)….. but form a moral standpoint it’s not debatable
similarly the mortgage lender has a responsibility to the investors to make sure the loan has a high probability of being paid off…….. this is not really a moral issue and it’s not really debatable either
shift the blame to me if you want……. i don’t care……… similarly i don’t care if you hate the fact that the OC housing market is going back to fundamental affordability levels…… that’s your own moral and financial issue to deal with
May 5th, 2008 at 6:38 pm
What cracks me up the most is homes listed in Santa Ana… I mean, er… “South Coast Metro” (what a joke) are listing at $800,000 — You gotta be kidding!!!!
May 5th, 2008 at 6:39 pm
mav, you didn’t pay attention. Thomas specifically states that this type of property typically shows as “active” (sometimes for months) until the deal is approved by the bank. Nice try though….not. I don’t believe this is about affordability at all. They could afford it at $600,000, they could afford it at $700,000 then, presto changeo, 5 months ago (when values really started dropping) they can’t afford it. Hmmm. Did they not see the affordability problem coming before then? Why wasn’t it ever listed? It sounds very shady.
May 5th, 2008 at 6:39 pm
Um, mav, most realtors do not get into how much their client makes, etc. The lender learns of the financials and SHOULD NOT share it with anyone. The RE agent has the moral obligation to explain the transaction and all deadlines associated with it. But rarely does the agent understand how much their client makes. They might have an idea based on the parameters of the offer, but that is it.
The underwriter of the loan has the obligation to approve or disapprove the loan. The officer just compiles all of the information for the underwriter. THE PURCHASER has the responsibility to UNDERSTAND the terms of LEGAL DOCUMENTS they are signing. The realtor and the lender have the LEGAL obligation to explain the documents, but they do not take the role of legal adviser to their clients. Every buyer signs off on this.
I have no problem with the market fluctuating…it will always trend north over time. I do take issue with high school attitudes with real life situations which impact people rather harshly. Watch out for that karma you spoke of.
May 5th, 2008 at 6:40 pm
“Mulliganville Says:
May 5th, 2008 at 6:02 pm
‘the home will now go the person WHO DESERVED it in the first place.’ Classic bear line…entitlement 101. You guys are sick.”
Oh please. The pot calling the kettle black. Sense of entitlement is reinforced by 1) government/Fed intervention and 2) resisting market forces.
May 5th, 2008 at 6:40 pm
For those of you that actually feel sorry for this couple, you have major, and I mean major issues.
First, I am willing to bet that the loan application shows an incredible income on a montly that never existed.
Second, did probably felt that they could always sell at a higher price if they ever got in trouble (Gary Watts and company said so.)
Third, they were able to basically rent their house and use the interest, property taxes, and isurance as a write off.
Forth, the stupid government will punish me by wasting my tax dollars to help people like them for votes.
I wonder, would anyone on this board feel sorry if these people sold at a profit?
Show me a person who got into a house that they could afford, became truely sick and no longer able to work, and I will show you a person that should be helped.
Get a life.
May 5th, 2008 at 6:45 pm
mav said it price…it does stink to high heaven.
May 5th, 2008 at 6:47 pm
Im not selling in today’s market…and I really do not care what the gov’t does as the market will do what it will do NO MATTER how often any of us chime in on news here. That is a fact.
May 5th, 2008 at 6:53 pm
Mulliganville Says:
May 5th, 2008 at 6:47 pm
“Im not selling in today’s market…and I really do not care what the gov’t does as the market will do what it will do NO MATTER how often any of us chime in on news here. That is a fact.”
Oh, in other words, your sympathy for troubled homeowners is insincere? And you accuse bears of insensitivity. Pot calling kettle black indeed.
May 5th, 2008 at 6:57 pm
Nice try at twisting there price…what I mean by that is the gov’t will be ineffective in affecting market forces. The market will do what it will do no matter what any of us do. I have never taken joy in anyone losing their home…matter of fact, not one bull here I know of has done so. Can you say the same about “your side?”
May 5th, 2008 at 7:09 pm
The crickets speak volumes…yep…you know the answer to that question dont you price.
May 5th, 2008 at 7:20 pm
Thoughtful: “Did they not see the affordability problem coming before then? Why wasn’t it ever listed? It sounds very shady.”
They put as much thought into buying it as they did in paying for it and selling it.
Buying a $600K home with little to nothing down means you (1) cannot save money (2) accept increased exposure to risks without considering the contingencies (3) probably have no idea what your actual monthly budget is (4) will have problems paying it off at some point in the first 5 years of ownership - most, much sooner.
May 5th, 2008 at 7:21 pm
It is funny to see Thoughtless calling this old news.
Thoughtless, actually you are old…… and a moron.
May 5th, 2008 at 7:26 pm
How come earlier bears seem to disappear and new bears crop up with new proxy? And they all claim they started posting only few weeks ago.
Let me make one sure prediction: A year from now, we will not see Thoughtless, Sighburrmoron and Mulli on this site….just as Ken, EZMoney, ROC, Truthi (she does post only when there is a slightest whiff of favorable RE news) have disappeared, they will be back with new proxies.
May 5th, 2008 at 7:28 pm
Hiflyer…been here for nearly two years…get your facts straight…and dont assume…you know what it does.
May 5th, 2008 at 7:39 pm
Mulli,
I don’t want to assume anything.
Please show few of your posts from two years ago.
May 5th, 2008 at 7:42 pm
Hiflyer,
his tone does sound familiar….
i’m just not sure if his handle 2 years ago was:
homerun
or
touchdown
May 5th, 2008 at 7:47 pm
Funny how the Bulls berate the Bears for schadenfreude when they should be congratulating us. I didn’t fall into the same trap as these people..I’m not going to cost any tax payer a dime to bailout. I’m going to buy my home with money I saved, pay my taxes, pay my mortgage, keep up my house and watchout for my neighbors. I was smart not to buy and still am by waiting until the house I would like to live in is in my affordability range. If that never happens then too bad for me. I’ll be the first to admit, it may not happen but fundamentals are fundamentals and alll the signs point toward their return. While it is unfortunate for these people I didn’t see any of the Bulls crying their eyes out for Canseco.
May 5th, 2008 at 7:53 pm
Its kind of sad when the same house makes the front page….then two years later makes the front page again. Too bad this time its not so positive.
May 5th, 2008 at 8:05 pm
Mulliganville Says:
May 5th, 2008 at 6:57 pm
“Nice try at twisting there price…what I mean by that is the gov’t will be ineffective in affecting market forces. The market will do what it will do no matter what any of us do. I have never taken joy in anyone losing their home…matter of fact, not one bull here I know of has done so. Can you say the same about ‘your side’?”
Then why are you and Thoughtful always in favor of RE bailouts while accusing bears, who are following market forces, of having a sense of “entitlement”? Therein lies the constant contradiction.
Personally, I don’t believe for a second that you or any bull give a crap about others’ misfortune unless it directly affected your bottom line.
“Mulliganville Says:
May 5th, 2008 at 7:09 pm
The crickets speak volumes…yep…you know the answer to that question dont you price.”
Oh I’m sorry. There was this thing called dinner I had to attend to. Were you eagerly waiting for me?
May 5th, 2008 at 8:36 pm
we’re #1….. we’re #1
check it out…. we’re #1 in many things
http://calculatedrisk.blogspot.com/2008/05/bernanke-on-mortgage-delinquencies-and.html
like foreclosures, price drops, and home loans that have piggy backs…..
you can’t make this stuff up………. the fed did, LOL
May 5th, 2008 at 8:42 pm
I have voiced repeatedly that I am not in favor of an overall bailout. The only aspect of “bailout” I would remotely support is one for those who have a stake in the home, did not buy as an investment property, and purchased in the last 3 years.
Since you think I dont give a crap about others misfortunes, it seems you are assuming again, and wrongly so. But, think what you will.
The entitlement came from this statement:
mav Says:
May 5th, 2008 at 5:55 pm
–evil are the people who got someone making their income in a $600K home with a 100% financed loan………. that helps no one……. the home will now go to the person who deserved it in the first place….. karma is funny like that–
As if this couple DID NOT DESERVE THE HOME. It is that precise disposition from you all that makes thoughtful or myself or sigh equate your compassion for others to that of Saddam Hussein…it does seem you all are enjoying the financial misfortune of others. But hey, that is your gain, right?
May 5th, 2008 at 8:51 pm
What upsets me the most is that they put no money down and now have not paid their payment in 5 months at $3300 a month which is $16,500 so far that the bank is out. They mention that they wasted $20,000 on upgrades to the home but by the time that they finally sell or the bank takes the home back that will probably be a wash when you consider the payments they haven’t made. This story is repeating itself all over CA with all different types of people from various walks of life who shouldn’t have bought more than they could afford in most cases.
May 5th, 2008 at 8:52 pm
your damn straight mulli, they did not deserve it…….
not only did they likely fake the papers for income…. but they did not make a mortgage payment for 5 months……
well mulli…. i would never live in this house…. but someone who can afford will buy it…. i’m glad…. the banks will now make sure they can afford it……
and mulli……when i do buy a house….. i have more than 30% cash down…. i will make my payments…….. and pay my taxes……. in addition i have cash reserves of more than 2 years income….. so if the crap hit the fan….. i still would not foreclose………….. you talk about entitlement like it’s a bad thing…..
May 5th, 2008 at 8:52 pm
Hilflyer two points for you.
1. your confusing the bulls and the bears.
2. truthi is still here, her name is thoughtful.
May 5th, 2008 at 9:14 pm
Even more frustrating is that my wife and I are trying to buy a short sale or foreclosure and the hoops you have to jump through are ridiculous.
We have two properties now, running our rental at cash-positive (well over) for four years and we both have solid, high paying jobs. We are preapproved for a $550,000 loan and $100,000 line of credit for our down and it’s ridiculous dealing with banks or the agents to make a deal.
We’re trying to put money back into the economy and the delays and run-arounds are about ready to make us give up.
May 5th, 2008 at 9:24 pm
Mulli:
U finally got mav riled up………
Good one……………………………………………………………………!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
May 5th, 2008 at 9:25 pm
Mav;
You smell like a rat….= rants…??
May 5th, 2008 at 9:28 pm
No one has pointed out that $3,300 does not service debt on a $600,000 mortgage. Total PITI on a 30 year fixed is over $4,000 even at an unattainably low interest rate of 5.75%.
May 5th, 2008 at 9:30 pm
Caloshua:
You are right.
I meant bulls.
Mulli:
I am still waiting for proof of your posts from 2 years ago.
May 5th, 2008 at 9:32 pm
Mulliganville Says:
May 5th, 2008 at 8:42 pm
“I have voiced repeatedly that I am not in favor of an overall bailout. The only aspect of ‘bailout’ I would remotely support is one for those who have a stake in the home, did not buy as an investment property, and purchased in the last 3 years.”
First of all, any type of bailout will not help the owner, just the corporations. Second, how are you going to determine who qualifies for your criteria? Third, how far will this bailout go — why just people who got in trouble during the bubble years?
“The entitlement came from this statement:
As if this couple DID NOT DESERVE THE HOME. It is that precise disposition from you all that makes thoughtful or myself or sigh equate your compassion for others to that of Saddam Hussein…it does seem you all are enjoying the financial misfortune of others. But hey, that is your gain, right?’
First of all, don’t lecture me about Hussein. Or need we remind you of the incompetence and list of failures by your idol, Bush? Second, it might be harsh but true. They did not “deserve” the house if they had to use an exotic loan for no other reason that they couldn’t afford it otherwise.
you and Thoughtful throw “entitlement” around as if you knew its true meaning.
If you are going to lump bears together, then turnaround is fair play:
Bulls continue to defend these ridiculous prices as if the OC was an gentrified country club. They denigrate places like Garden Grove, Santa Ana, and any other cheaper cities for “pulling the median down”. They want to keep prices artificially high for the current generation of owners and foresake the backbone of RE, first time buyers.
May 5th, 2008 at 10:03 pm
How are they “losing a home”? They took out TWO loans and no money down. The home was ALWAYS that bank’s and not theirs. They are just going to go back to where they started. If anything, they are SCREWING the bank by walking away from it. They aren’t losing any money here, the bank that lent them the money in good faith is losing all the money.
May 5th, 2008 at 10:15 pm
Let’s cast a different light on this.
They bought what they knew they couldn’t afford — or they wouldn’t have started off with “two boarders” paying $550 month (each).
Just some rough numbers;
Bought June 8, 2005
Assume 30 day escrow — first payment due August 2005. (at the earliest)
Paid for 17 months - 17×3300 = $56,100
Lived there 22 Months and counting - 56,100/22 = 2550/mo.
Never raised the boarder’s rent- $1100/mo - Net of $1450/mo.
Tax write offs — Any wagers on if they claimed the $1100 as income?
Bet they are still collecting the rents as we speak.
Yep. They did it the great American way.
Screwed the bank, the taxpayers and the neighbors (check out the vehicles in the pictures - two in the driveway, 3 in the street.
We all should have bought one of those overpriced s-boxes. No down. No deposit. Tax savings. Low payment. No three day notice to quit — hell, no 5 month notice….. and the rental income continues.
May 5th, 2008 at 10:22 pm
The title of that old article should have read: “These suckers just paid $603,000!” I mean c’mon, they paid over 400 bucks per square foot. Is anyone surprised this market tanked???
May 5th, 2008 at 10:47 pm
I’ll say it.
It makes me happy every time one of these hapless homedebtor saps goes busto. When I say happy I mean 6-year-old-on-Christmas-with-a-new-bike happy.
How the hell did these scrubs get away without paying for 5 months before they got foreclosed on? Oh right, it’s that phantom inventory thing again, coupled with the fact the bank DOESN’T want to foreclose because they really don’t want to add another foreclosure to thier books……one they can’t sell.
May 5th, 2008 at 11:57 pm
439k..hahahaha. That is hilarious, really, how much will this place go for, let me think 2500\mo x 150 = 375k..final offer.
May 6th, 2008 at 12:25 am
Add me to the group who is fascinated that the Anaya family didn’t pay their mortgage for five months (!?!) and they are just now going for a “short sale”.
They got into that 40 year old tract home on shady financials, and they appear to be getting out of the place just as shady. But then that was fairly average for most OC buyers during 2002-07.
This whole house of cards is collapsing around us. It may have started in Santa Ana in ‘07, but by 2009 there won’t be a zip code in OC untouched by this mess.
May 6th, 2008 at 3:07 am
How Do You Report Suspected Tax Fraud Activity?
If you suspect or know of an individual or company that is not complying with the tax laws, you may report this activity by completing Form 3949-A. You may fill out Form 3949-A online, print it and mail it to:
Internal Revenue Service
Fresno, CA 93888
If you do not wish to use Form 3949-A, you may send a letter to the address above. Please include the following information, if available:
Name and address of the person you are reporting
The taxpayer identification number (social security number for an individual or employer identification number for a business)
A brief description of the alleged violation, including how you became aware of or obtained the information
The years involved
The estimated dollar amount of any unreported income
Your name, address and daytime telephone number
Although you are not required to identify yourself, it is helpful to do so. Your identity can be kept confidential.
http://www.irs.gov/individuals/article/0,,id=106778,00.html
May 6th, 2008 at 5:44 am
What loser’s. Maybe if they reduce the price to 200K I’ll make an offer of 120K.
May 6th, 2008 at 5:46 am
Let’s go have a pity party for these low lifes
May 6th, 2008 at 5:50 am
The term for the seeming pleasure some take in watching the misfortune of people like these is schadenfreude.
The prices were not supported by the fundamentals, it was unsustainable. This had to happen, it was unavoidable.
May 6th, 2008 at 6:08 am
Amazing how people that make responsible choices are called greedy for critizing our government and individuals like Anaya that make bad choices. Also interesting how the OCR’s bias toward the underdog makes people that make bad choices saints.
The Anaya’s should not have purchased a home with no money down or one that they could not afford. They were speculating that prices would continue to rise and took the risk.
Rather than add Granite to their kitchen, they could have saved. I suspect they had other income that could have been saved if they honestly qualified for their loan. Then they could continue to pay.
They are 5 months behind in rent, but they are collecting $550 per month from boarders. Do they feel they are entitled to that money instead of the taxpayers that are going to bail them out?
It’s sad, but there should be no government (aka Taxpayer) bail out for businesses or individuals that make bad choices.
May 6th, 2008 at 6:28 am
Distortion. Distortion. Distortion. This home is a stone throw from the freeway. This story forget to mention that point. This house is anything but typical of the OC market. I would suggest someone overpaid for a freeway location. “Housing Crash Hysteria” is in full swing.
May 6th, 2008 at 7:04 am
rick4us,
Trust me, there’s no way somebody in the window tint business clears $15K a month (which, if you used today’s critera for getting a loan done is about what you need to make).
Plus, check the timing. These guys teaser rate is just about to reset.
What’s really sad is these folks would of been ahead about $2K a month plus the $20K they stuck in this pile they never could of afforded in the first place and now they are going to be foreclosed to a lender that shouldn’t of ever wrote the loan in the first place.
I guess the real question is - what is the first place?
May 6th, 2008 at 7:04 am
This is common. 2005 prices were insane. People were insane. This is the fallout from the overhyped market. It was artifically inflated and now all the layers of excess are being shed away. 450k is still too much for this house.
May 6th, 2008 at 7:24 am
I don’t blame people for being sucked into buying homes late in the boom - there was so much frenzy people start to think “if I don’t buy now I’ll never own a home.” I remember telling people that the market is cyclical and prices will come down, but honestly I had a had time believing my own words at the time. It was a mix of ignorance of how markets work, acting on emotions rather than facts and common sense, and unscrupulous real estate agents and mortgage companies convincing people like the Anayas that they could afford that house and weather any financial storm. It’s a hard lesson for them to learn, but if it sounds too good to be true, it generally is. The rule of thumb to never spend more than 28% of your income on housing was a rule of thumb for a very good reason. Too many people are figuring that out now. While I feel bad that people like these folks allowed themselves to be lured into such a risky gamble, I no more believe the government should bail them out than I believe they should bail out the poor saps leaving Las Vegas with empty pockets or those who lose their shirts in the latest stock market “sure thing”.
May 6th, 2008 at 7:30 am
This is what happens when you gamble with houses.
May 6th, 2008 at 7:31 am
My husband and I had just made a six-figure income when we went househunting in 2004. Just a bit of looking around told us we could NOT afford a new home, even with 70K we’d saved for a down payment. The prices were already starting to get high (and we were looking at 3x and less our annual income). The choices were few. Within a year, the prices were up 50K plus on the same homes. We decided to just forget about buying.
Six figure income. 70K down. We said, “No, not prudent.”
At that time, I kept asking folks, “Who the hell is buying these 400 and 500K dwellings?” I mean, most of the population here is NOT making above 50K a year, much less 100K.
Apparently, we now know. The Anayas and their sort were buying houses without deposits with mortgage payments way beyond their means to pay rationally (ie, payments of (ideally) 25 and no more than 33% of monthly income) .
Excuse me if sympathy is low. Yes, banks and real estate agents just wanted to rake in bucks. But buyers were greedy, too. What was at stake for the Anayas? No loss of down payment. So, they essentially paid really high “rent” for a while, then they move on with some blot on their credit that will clear up in time. They’ll rent for far less than their home payments (mortgage, insurance, taxes, upkeep), and save for a reasonable home in the future (where prices may actually be normal).
No. I save my sympathy for prudent folks who suffer catastrophes not of their own greedy or covetous or irrational making. There are lots of Americans who NEED help. Foolish buyers of overpriced homes who took no financial real risk (by saving their own moeny for D.P.) should just move on and stop asking others to pay for their own covetousness, greed, and lack of commons sense.
I will add that taking rent from boarders while not paying mortgage themselves is rather rank and says something about character. I hope the boarders decide to stiff them and live there rent-free, too.
M.
May 6th, 2008 at 7:31 am
BEFORE THIS MESS IS ALL OVER, THE OC WILL HAVE BECOME THE POSTER COUNTY OF THE HOUSING BUST.
RIght now there are worst places I agree, but it’s not over. It’s very early in the OC. Homeowners in the OC have more resources to fall back on in hopes of riding out the downside, and waiting for the next boom. Well, it’s going to take much longer for this baby to bottom and start heading up again. So when the dam breaks in the exclusive communities, this is going to get ugly. Thus: before it is all over, the OC will have become the poster county of the greatest housing implosion ever!
May 6th, 2008 at 7:45 am
I don’t take any glee in someone’s misfortune. This family was reaching for the American Dream, the get-rich-quick, like so many dot.com millionaires we’ve read about.
Unfortunately, they failed to take advantage of the situation.
I learned the hard way in the stock market, not only do I need to be a good buyer, I need to be a good seller.
If you are going to treat your home as an investment, you can’t become emotionally attached to it. If they bought it at $600K, knowing they couldn’t afford it, they should’ve sold it at $725K, taken the $50K out of the deal, went to rent, and then waited for the collapse like the rest of us rationale folks.
Otherwise, they never should’ve bought the place.
Come on…zero down…no payments for 5 months…huge write-offs for taxes…they are so much better off than if they had rented.
Now they can actually go get a nice rental, farther from the freeway in a decent neighborhood, for 2/3rds their payments.
How is that so bad?
May 6th, 2008 at 8:38 am
I call BS on Mulligan. In a post he stated, “most realtors do not get into how much their client makes.” The first thing agents want to know is their client’s Cash Credit and Income. As an attorney who goes after real estate professional who commit mortgage fraud, my experience tells me the biggest cuilprits in this whole mess are the real estate agents and loan officers who knowingly put their clients in bad positions. Sure, borrowers and lenders share in the blame. But, when it came time to submit that stated income loan to the lender, who was in the best position to know what income to state on the loan application? The loan officer. Why did real estate agents use specific loan officers? They knew that the one they were using would have know problem fudging the numbers.
I have been reading this blog for awhile, but I have not posted. I find the extreme views on both ends quite amusing, specifically Thoughtless. No credibility there. The truth is there are deals out there to be had, but this problem is going to last a lot longer than most bulls would like.
May 6th, 2008 at 9:06 am
Its too bad “the market” has no sympathy like many of the posters here.
asking 439k - 479k ?? I think “the market” still disagrees.
Unfortunately, the market will continue to crush those who took on way too much risk.
May 6th, 2008 at 9:16 am
It’s gonna be a BLOODBATH. Judgment Day is coming in 2010. In the aftermath I’ll be there to buy at rock bottom prices.
Kids, its best just to WALK OUT on your mortgage.
OC pricing is coming down 50%.
TIMBERRRRRR!!!!
-sharky
May 6th, 2008 at 9:52 am
sharky,
Keep dreaming. 50% drop–the deep pockets would buy up the market before you could even get a realtor to talk to you…LOL
May 6th, 2008 at 9:56 am
The reality is most of you will never feel the market price falls within your “fundamentals.” So the outcome is obvious.
May 6th, 2008 at 10:11 am
Scott you think the deep pockets want to own a capital trap? Don’t think so. Just so one or two can have “elite” ownership in the OC? I see “fundamentals” coming to bite people who think like you in the azz pretty soon, sonny boy.
May 6th, 2008 at 10:20 am
t-less and mully are slime: how disgusting that you would hope for a 600K “value” for this sitting-on-the-highway bluecollar home. It is greedy dreams like this that have devastated our economy. Allah willing, you both will be foreclosed and bankrupted as this bubble continues to implode. And may your daughters marry camel molesters and sodomizers.
May 6th, 2008 at 10:24 am
50% …………do the math $600,000 house………..on market for $450,000……….still sitting on the market.
The “market price” is the price which a house SELLS at!
So you figure, what……..someone would buy this POS for $300,000 TODAY!!!
I repeat what it would SELL at TODAY…….TO-DAY.
NOT what YOU think it’s worth, or what is WAS worth or what it’s GOING TO BE WORTH in 20 years. TOOOO DAY it’s worth 50% of it’s peak.
Children listen carefully………….YOU DON”T OWN THE FREAKIN” HOUSE……..the BANK OWNS IT……..till you PAY IT OFF STUPID!!
May 6th, 2008 at 10:33 am
sharky,
The price it sells for will be determined by the bank. You should inquire on the short sale process.
At 450K it could spark interest (not mine), but the bank makes the ultimate decision.
May 6th, 2008 at 10:34 am
I remember all You mortgage and real estate guys HOO HAAin at the local pub about how much money you’re making.
You guys talking smack in the GYM locker room, like you were Trump himself.
Flashing your funny money, O-Down equity withdrawal BMW driving Fools.
Sucker Play gets SUCKER PAY!!!
FOOLS!
May 6th, 2008 at 10:47 am
Friends,
The bank does not determine “market” price, The bank has an “offer” price, the buyer has a “bid” price, when both parties agree on a price and an EXCHANGE is made, this is the “market” price.
The “market price” is the price which a “sale” is made.
Mind you $450,000 is a very nice price for this home. VERY VERY nice.
But hey, I now need %20 down ……No CAN DO.
This crash is worsening because the GOVERNMENT is getting involved. There in DEMAND!!! Problem is they can’t get a fricken loan approved.
The only buyers are cash wealthy people………..most people in OC are credit card wealthy.
lol……
-sharky
May 6th, 2008 at 4:02 pm
No government bailout! Sign the petition!
http://www.angryrenter.com/
May 6th, 2008 at 5:30 pm
” Problem is they can’t get a fricken loan approved. ”
Ever stop to wonder why that is? This isn’t magical.
The median price of houses in an area must be no more than three times the median household income in the area. This is the metric that has held true for over 120 years. Right now, you’re way above that mark.. and no loan will get approved until the ratio has blown past on the downside.
Loans are acquired based on down payment and long-term ability to repay - nothing more, nothing less. The reason loans aren’t getting approved is because nobody can AFFORD to live here. Housing prices must be based on affordability - and nothing else. Historically a 20% down payment is the average, not a phantom number.. this is so families have enough money already invested in the property to stay with the house.
The bank will find out what this house is worth - only when someone is willing to buy it. The bank can’t set their value and hold it because they will “get” to pay taxes and insurance on that self-appraised value.. unless they want to become a landlord, which none of them are interested in doing.
It may feel good to declare the house “worth” 450k.. but it’s only actually worth what someone else agrees to spend for it. I don’t think the bank will get north of 350k for it.
Ultimately investors need to know the fundamental underlying value of the paper they hold.. so it’s in everyone’s best interest to promote the fall of house prices to 3x median income as quick as possible. Government intervention can only make it worse. There isn’t anything to be done about house prices falling. Bailouts simply exacerbate the problem of bad loans rather than “solve” any piece of the puzzle.. and actually draw out the period of house price decline, increasing the time until the economy recovers.
May 6th, 2008 at 6:52 pm
Link to the entire article
http://www.newsweek.com/id/135724
May 7th, 2008 at 8:00 am
I saw this coming at least 15 years ago and kept wondering what the banks were thinking. I’m sorry I don’t feel that bad for those that got in with no money down or proof of income. They shouldn’t have been homeowners. Why did the couple upgrade their home if they could barely afford the payment and needed to rent out rooms? It seems obvious it wa