I don’t know about Queen Anne, but I humbly suggest he take a drive up to Cap Hill, say Federal Avenue E for example. On Federal, just south of Republican, there’s a condo that was built just over a year and a half ago, moved into last year, and is now on the market for $619,000. It’s been on the market for at least a month.

Around the corner, on Republican is a dump, I mean a house that is listed for $6-something, and has been on the market for at least 3 weeks.

This kind of thing has been going on for at least 9 months if not longer. Some houses have taken 6 months or longer to sell. The guy must be a closested real estate broker…

Kelly

The credit card bubble maxed out in the early ’00’s, but was quickly replaced by the mortgage credit bubble. It’s really the same thing, packaged differently.

Here’s a great article about the American economy’s historical dependence on bubbles, in Harper’s:

http://www.harpers.org/archive/2008/02/0081908

The rehab loan that Angie got and the and the scheme Ardell talks about are pretty different. The rehab loan exposes what you are doing to the lender and I am sure forces you to carefully document you plan and progress the other way you are totally unsupervised and can buy a land rover if you want.

Even if the appraisal is just rosy financing the entire value of a property leaves you with little cushion if there are bumps in the road. Ardell’s story is clearly those whose houses would be sold first if they were affected by the changes in available financing starting in July / August. The “straw buyer” is letting the investment gone bad go into foreclosure to avoid foreclosure on their primary residence.

In a forclosure it basically goes:

*First Mortgage on primary residence – don’t pay and they can take your house and sell it, pay it and nothing else and they can’t take your house.
*Home equity loan / 2nd Mortgage – they can take the proceeds of your house when you sell
*Investment properties, other property – they can take the property but not your primary residence.

So the first houses to come up as foreclosures or shorts sales are going to be houses that are not primary residences as the time frame is much shorter.

I do think that some less nefarious derivative of what Ardell talks about was very prevalent in Seattle and probably elsewhere. With most medianish houses here being older and needing some work to be exactly what many buyers want, It seems like a perfect close for a broker / realtor team. Buy it and take the 20-50 grand extra the house is worth and make the house perfect.

The sales message is pretty powerful, you got a great deal, and here is the proof in cash. Closing costs come out of the difference as well, so everybody gets paid and the buyer has zero costs and actually comes out of the transaction with tens of thousands of dollars in cash.

“Some local realtors say it’s just not credible”

Sure, It’s a great time to buy, it’s always is. They are nuts. They have no idea. Idiots.
Great work Tim.

Median house price=Family income *3-4, depends on the location.

Median family income in Lynnwood not higher then $70000 (Sorry, I’m too optimistic). The median house should be $210000-280000 but not $400000-450000. Nuts!
I’m telling you, I’ll buy it for 100 Oz of gold when it is $2000 for 1Oz.

No.

That was my point. I chose not to go into details.

To be fair, this isn’t necessarily a sign of financial distress. Maybe wife writes check not knowing hubby just moved a large am’t of cash into their brokerage acct or into a CD or savings or whatever. He didn’t know the painter was getting paid that day and knew their paychecks would be direct deposited into their checking acct in a couple of days so didn’t think twice about moving out the cash,. Then the check happens to go through the day after said transfer takes place but the day before their paychecks gets direct-deposited to fill the hole.
Did your friend the painter get paid immediately after letting Dr. Bounce know the check was bad or did he see them rush to the basement to look for things to sell on Ebay?

Angie, re your MD friend, there must be a happy medium between living in an overpriced rat-trap in one of the country’s most overpriced cities and buying a castle in the middle of nowhere ruralia. I guess some people are simply committed to making life as hard as possible.

Ardell, you’re kidding right? Did you really say that or is someone masquerading as you?

Because, you see “never was worth ..in the first place” is kinda what it’s all about, isn’t it.

Seriously, Isn’t it?

I would be more interested in seeing foreclosure stats for primary residences, as it is often advantageous financially for distressed real estate investors to move into their most expensive property and let the source of their problems go back to the bank.

Sometimes you do have to remember that real estate is not the stock market, there is no SEC and no rules to ensure prices are comparable and based on prescribed data. Real estate data exists to record the purchase and sale of properties and allow municipalities to collect property taxes. It has always been and always will be tainted for analysis by taxes, inheritances, real estate sales people, business transactions, charitable giving etc.

and

When you are pricing a house based on comps, how do you distinguish between comp prices based on this sort of remodelling scam and house prices from legitimate purchases? Don’t these scams artifcially inflate prices?

We bought our first house with a rehab loan (borrowed for home purchase plus improvements). The appraisal was based on what the place would be worth after the work was completed, which is was.

We needed to get three bids for each job and sent documentation to have the repair money released…good times, good times.

Of course if someone takes the money and runs, it’s a scam–but not all arrangements like this are dishonest.

Other friends have two quite handsomely paid corporate jobs in the family right now, but after two job-related cross-country moves and occasional spells where one is unemployed, they’re backed up against their credit limit and sweating about what happens next. They are paying through the nose for childcare.

A third friend has been surfing through the corporate world as a well-paid consultant for the last decade. She’s pushing 50 but couldn’t scrape together cash for a meaningful down payment on the Eastside condo she bought last year. You should see her spectacular wardrobe, though–she needs every last inch of that closet space.

As well as the dozens, if not hundreds of other houses that were valued based on this and other inflated appraisals over the past several years.

It isn’t just a handful of recent failed flips that were overvalued.

This mystifies me too (thought we’re nowhere near being one of those 3 million.) But I know an awful lot of households that have much higher incomes than ours, who also have a difficult time making ends meet and staying out of consumer debt. I think there’s a mindset of, “If I make (large number of dollars), I should be able to afford….” Do that too often and $100k, $150k, $200k a year can blow right through your hands, it seems. Having kids seems to exaggerate that inclination, too.

When you are pricing a house based on comps, how do you distinguish between comp prices based on this sort of remodelling scam and house prices from legitimate purchases? Don’t these scams artifcially inflate prices?

Also major remodel and new construction projects by small operations that were able to get money hand over fist to start the project, Money dried up halfway through and the shortsale or foreclosure is for a 3/4s finished house.

All that adds up quick.

With compound interest! When I was a homedebtor I was well aware that I paid a 4.8% premium on every cappuccino, in the form of mortgage interest after the mortgage interest tax deduction. That gave me the incentive to be frugal.

Well, as it happens, that’s not a particularly safe strategy either. Check out this story that ran on NPR yesterday.

Yeah, being foreclosed upon as a renter is a risk. It can be mitigated by renting in an apartment complex. I think the main risk now of selling everything and holding cash is bank failures.

It’s a great read. Check it out. Definitely puts our current situation in perspective.

Yeah I’ve read Grapes of Wrath, so I’m familiar with how bad it can get. Half of people today don’t realize how important it is to vote for the little guy. They think voting for the ultra rich will benefit them somehow, or is otherwise better, despite all the evidence to the contrary. They should learn about the Dust Bowl days to see the extent to which the little guy can be exploited. A lot of our laws and services that protect and benefit workers came from that era. Laws & services that have been eroded and circumvented; e.g. gov’t spends Social Security funds on war, leaving IOUs that will likely never be repaid.

One of the great all-time non-sequitors.

First, what happens has nothing to do with what people wish for. So people don’t have to be careful about what they wish for. People have to be careful about what they do. Like, you know, buying a ridiculously overpriced house.

Second, the bubble burst is not a bad thing. It’s a good thing. It’s the bubble that was a bad thing. It caused an enormous waste of resources and got people into situations that will ruin them financially. If the bubble had persisted for longer the ill effects would be even worse.

Third, it was inevitable that the bubble would burst, so that to pretend that the perpetuation of the bubble was a plausible outcome is pure BS.

- granite countertops
- flashy cars
- Nordstroms shopping trips
- extravagant vacations
- mochas (designer coffee)
- landscaping for their McMansion
- plasma tvs
- ipods
- powerful desktop or laptop computers for checking email and getting on the internet
- bling
- plastic surgery
- whatever britney, paris, or lindsay is buying

All that adds up quick.

I find this astounding. I am one of those 3 million housholds, and I didn’t do anything special to get there. Maybe I’ve just spent less than the average American. What on earth are people spending their money on?

Well, as it happens, that’s not a particularly safe strategy either. Check out this story that ran on NPR yesterday.

Six months ago I was telling all the folks who were cheering for the bubble to burst that they should be careful what they wish for, ’cause they just might get it. Well, here we are, and yes, it’s ugly. Probably going to get uglier.

On the other hand, I’ve recently read The Worst Hard Time, about the people who stayed and lived in the Plains during the Dust Bowl. It was sobering and heartbreaking and provided a new baseline for comparison for contemporary housing woes. As in, if you’re not living with your 5 children in a 300 square foot hole dug out of the ground, listening to the centipedes chewing behind your wallpaper, and using dried cattle poop as a fuel for heating and cooking: quit your "female dogging".

It’s a great read. Check it out. Definitely puts our current situation in perspective.

Tim, you’ve been doing a great job with the numbers/data analysis lately. Thanks.

Yep, and they’ve been working on those suckers (starting at 500K!) for over a year now. They don’t seem to be in any hurry to get them finished.

It may take a while. In DC metro, some areas are holding up very well, while anything outlying has cratered, and pockets of close in homes/condos have cratered. This is nearly 2 years after the local market peak.</blockquote)

Unfortunately, I think that the economy is coming off the rails faster and faster, and will wind up bringing the lagard part of the country into the vortex of deflation in short order.

Seattle won’t have the luxury of a lengthy, protracted, slow-down like San Diego or DC. Both of those regions began their downturns when the financial system was still pushing streams of debt at anything that moved. Now, the headwinds keep getting stronger, and will suck in every city and neighbourhood. Sure, some areas might still decline at slower rates than others, but the over-all time between boom and bust will be far shorter than those regions that began their decline years ago.

It may take a while. In DC metro, some areas are holding up very well, while anything outlying has cratered, and pockets of close in homes/condos have cratered. This is nearly 2 years after the local market peak.

I’m depressed. This whole country is about to get slammed into a brick wall at 60 mph. When the citizens come to, half will want to know what’s going on with Britney Spears, and the other half will feel wronged and start looking for someone to fix their problems.

Yet the half who stays focused on Spears will still vote the same way. They still will not fathom that voting wrong can actually hurt them.

so, what is left? if you’re approaching retirement and your nest egg is going rotten, what do you do?

Sell the house at a discount now (whatever it takes, but not less), move everything else to cash, and rent.

There’s been a stock market bubble since 1980. It’s now popping along with the housing bubble. The country has been ruined by hundreds and thousands of bad decisions by the current administration. Bad for the common people that is, but great for the wealthy. How many $millions has Cheney added to his own pension through no-bid contracts for Haliburton? Oh it’s all a blind trust of course.

I’m depressed. This whole country is about to get slammed into a brick wall at 60 mph. When the citizens come to, half will want to know what’s going on with Britney Spears, and the other half will feel wronged and start looking for someone to fix their problems.

Get the popcorn started and pull up a chair.

Cal Poly Pomona real estate finance professor Michael T. Carney had predicted last year that home prices in Southern California would fall at least 15%. Now, “it’s going to be more than 20%,” he said. “We don’t appear to be leveling out.”

I would be interesting to see where our Senators and Congressmen are moving money. You know the old saying, “it’s not what they say, watch what they do.”

Not that they are starving, but the majority of congress are not all that much better off than most citizens with good jobs.

http://www.presstv.ir/detail.aspx?id=47492&sectionid=3510203

According to that article, Senators have a median net worth of $1.7 million, and members of the house have a median net worth of $675,000.

By contrast, an estimated 3 million households in America have a net worth in excess of $1 million.

http://en.wikipedia.org/wiki/Millionaire#United_States

I’m not arguing that some congress members are ridiculously wealthy and that some are no doubt participating in insider trading. But considering their salaries, the median congressman/woman is not shockingly wealthy.

My own strategy is now to wait until a comparable area to Seattle which I think San Diego is experiences a sustained Case-Shiller index stability or growth for at least six months in a row. I will then calculate the total price fall from the top in percentage and not buy in Seattle until we seen the same fall +10%. I.e if San Diego stabilizes at -40% I will not think of buying in Seattle until we have had a 30% C/S drop.

I sure do. In my pro bono work I’ve represented people facing eviction and it showed me the extent of denial some people are willing to live with. Many people simply ignore the collection letters, foreclosure notices, etc., until they’ve finally got a sheriff at their door telling them it’s time to go. I just met with a new client on the other side of that problem. He simply can’t fathom the lifestyle they’ve been leading, e.g., the woman’s hoarding habit filled a 2,00 square foot home floor to ceiling in every room. Yikes!

Nothing to bring more humility to a market than what is unfolding. The Bear Stearns & Carlyle problem is truly epic. If only in future textbooks could we read excerpts of the back channel meetings/dialogue between central banks across the globe and Wall Street financial houses with our own Fed, it would probably blow our minds.

I would be interesting to see where our Senators and Congressmen are moving money. You know the old saying, “it’s not what they say, watch what they do.”

Now, should we get actual price declines, look out. Even Bernanke admits that there is a strong correlation between house depreciation and foreclosure rates.

http://calculatedrisk.blogspot.com/2008/03/bernanke-on-fostering-sustainable-home.html

our baby boomers are watching their largest retirement investments (houses, stocks, and treasuries) disappear or devalue themselves through inflation. gov’t supports (social security, medicare, medicaid) are bankrupt.

so, what is left? if you’re approaching retirement and your nest egg is going rotten, what do you do?

my parents are approaching retirement age and i plan to support them. they have a fair bit of GE stock and have chosen a frugal lifestyle, but i doubt that they will be able to cover expenses for the next 20+ (hopefully 30+) years.

honestly, these are things that people need to consider at some point. there is a lot of retirement money in the stock market and houses and a lot of it is disappearing just as a large number of people are planning to retire.

I suppose the term “good times” should be defined. “Good Times” are when two incomes in Seattle mostly keep their jobs and one of them doesn’t get sick or laid off. This rule’s been around since 1978, it hasn’t changed.

The problem is we do eventually all get sick and in housing, all it takes is like one cancer victim sucking the family’s income dry. Its sad, buts its a fact of life.