By The Tim on August 31, 2009
Here is your open thread for Monday August 31st, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Posted in Open Thread | Tagged open_thread
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
There were over 300 Chapter 7 bankruptcies filed in Seattle the last week of July. That’s huge.
Here come the tax increases:
http://www.latimes.com/classified/realestate/news/la-fi-harney30-2009aug30,0,4745.story
Its the end of the month. What the closed sales numbers and median going to be for August? Warranty Deed filings with King County are about 10% lower than July.
RE: DrShort @ 3 – Hey you’re getting ahead of things here. The stats preview will come tomorrow :^)
RE: Kary L. Krismer @ 1 –
And you no longer practice bankruptcy law, Kary?
You could be making a killing.
@2 Scotsman
Some of these ideas are worth looking at, but as always, they are skewed to favor certain tax brackets so that the masses can stomach it.
I am afraid that they won’t touch the mortgage interest deduction b/c real estate is in such a precarious position, and the banking industry I am sure will let them know what would happen if they caused house values to fall further by removing another ownership incentive.
The only one that has a chance of making it through, and I will be surprised if Obama doesn’t push for it, is raising capital gains taxes. This is the only one that won’t affect the real estate prices. It may affect stock prices though as it becomes more costly to take a profit.
RE: Kary L. Krismer @ 1 –
I don’t understand why that is huge.
i think there will be many more, and many, many more Chapter 13s.
RE: Tyler @ 6 –
It’s hard to say what may make it and what won’t- every tax has it’s related interest group. I think we may see the mortgage deduction reduced to $300-500K. Do $1M+ home buyers really need a deduction? But I have no doubt taxes will be going up- we have to pay that interest on the debt one way or another.
I’m in favor of a flat tax, say 5% of the first $50K and 20% everything over that with no deductions. I think it’s important that everyone pay something, if only to keep them interested in how the money is being spent, and give them some skin in the game. After that, a flat tax with no exclusions/deductions offers the fewest long term distortions for the economy as a whole.
“The Government Can”
http://www.youtube.com/watch?v=LO2eh6f5Go0
Does anyone know what happens to negative home equity situations during divorces in Washington state these days? I keep hearing of how negative equity is complicating divorces, but I don’t really understand the nuts and bolts of it.
Do the divorcing parties have to split the negative equity down the middle? Is it apportioned based on what percentage of ownership each party is considered to have (i.e. who made the down-payment, the percentage of the mortgage payments each party covered)?
What about the case where one party really didn’t make any financial contribution (e.g. a home-maker)? Would that party be saddled with substantial negative equity debts (owed to their ex) if their over-all asset situation was in a significant under-water situation?
For the record, I am renting (as most people on this site already know), so this certainly isn’t something that concerns me directly. It is just something I have been wondering about as I continue to see larger numbers of homes go under-water.
I have some friends that are divorcing, but stuck living together due to a divorce. They bought the house July 2007 and, in my opinion, over paid even at the peak. It sounds completely miserable to me.
Marital debts are community property, so I believe they’re split down the middle along with assets. I suppose one person could forgo other cash (401k for instance) to be free of the negative equity.
But here’s the kicker….
To get someone’s name off the home mortgage, you have to refinance. And with no equity, there’s no refi. So even if one person wants to stay in the house and wait for the market to rebound, they can’t — unless the other party is stupid to keep their name on the mortgage.
I really feel for anyone in that situation.
Oops…
This got me thinking. I know its a few months away, but and predictions about closed sale numbers for December and January once the $8K tax credit is gone? How much future demand is being pulled into pre-November 30th? Is under 500 closed sales possible for Dec or Jan?
If you’re selling a $350K house and it doesn’t sell by this November, you got to be feeling pretty iffy. Even if the credit is renewed, most people are probably rushing to close soon.
RE: DrShort @ 12 – Yeah, I think there’s a pretty good chance that the big lobbying push by the National Ass. of REALTORsOMGWTFBBQ may be successful at extending the misguided tax credit, but since it’s still currently assumed that it will end in just a few months, much of its effect may have already passed by December.
What if the title, and mortgage, are all in the name of one spouse (e.g. they got married after one party had already purchased the home)? Would that then mean that the person who’s name was on the mortgage would be the one saddled with 100% of the negative equity?
Its my understanding that if one person owned the home alone pre-marriage, then it’s “seperate property” and the value and debts aren’t necessarily split upon divorce. But it depends a lot on how long they were married and if both put money in it and so on. So I think “it depends” in this case.
What happened to quoting and editing of my own posts? Is it just me? I’ve got some grammar errors in previous posts that are killing me ;)
RE: DrShort @ 16 – A couple weeks ago I updated the plugin that allows post editing within a 5 minute window. Apparently the update introduced a bug. I have downgraded to the previous version, and I think it should work in most cases now.
RE: Sniglet @ 14 –
The way I understand it, assets or debts owned by one party entering a marriage belong to that party in a divorce. But there needs to be good documentation to avoid it becoming community property / debt.
In a marriage without a pre-nup, even if one spouses works gangbusters while the other one refuses to lift a finger, the assets/debts accumulated during the marriage are split down the middle in a divorce.
Alimony can change the picture dramatically. I’m not sure when that kicks in in WA, but in other states it’s after 10 years. After that point the spouse that worked the least can get payments for life from the other one, and will probably be relieved of the chore of paying community debts too.
By DrShort @ 11:
Really? you can’t get off with a quit claim deed?
RE: see it clearly @ 19 –
It’s up to the lender to let someone off the mortgage; they have little incentive to do that. Long ago it took me an extra six months (9 months total) to get divorced because of our lender. They required legal separation (not divorce), and WA law requires an extra six months total if separation intervenes. It would’ve cost a lot at that time to refinance.
RE: Sniglet @ 10 – The problem is more that with the divorce it’s much less likely that either of the spouses will be able to afford to keep making the payments, but one of the spouses might try to continue living there. It’s not like these people are completely rational, or anything close to it. So you can have the court award one spouse the property, have that spouse fall behind, and have the other spouse’s credit affected by the delinquency and eventual foreclosure.
Add in the difficulties doing a short sale if they don’t have the assets to pay off the loan, and you have a real mess even if they are legitimately trying to sell.
By Sniglet @ 14:
A divorce court has wide authority to divide debts and assets, but that’s only as between the spouses. The original creditor can only pursue those on the loan (and that’s still true if the court says only one has to pay–the creditor can pursue either or both).
RE: Markor @ 18 – Alimony is relatively rare in community property states. Child support, not so much.
By see it clearly @ 19:
No, that just gets rid of the ownership.
When you sign a note and deed of trust you are obligating yourself to pay. Do you really think you can after the fact just sign something else saying” “I decided I don’t want to pay back the $350,000 I borrowed!” ;-)
RE: Kary L. Krismer @ 22 – Right. Theoretically, debts incurred prior to marriage stay separate, but a judge has broad discretion to divide assets and liabilities as he/she determines “fair and equitable,” and the judge’s decision is hard to tip over on appeal.
Maybe we should start a spin-off site called marriagebubble.com. When it comes to risk and marriage, it’s always July, 2007. ;-)
Thanks Markor@ 20 and Kary@22. Why I keep reading here, I’m always learning something.
By Kary L. Krismer @ 26:
It’s a great time to marry?
Interesting article in Fortune “Housing Recovery Mirage”:
http://money.cnn.com/2009/09/01/news/economy/homebuilders.fortune/index.htm?postversion=2009090106
Particularly found the the final quote true:
“It took 10 years to create this problem,” said Hanson. “Do people really believe we can correct it all in 36 months?”
By Kary L. Krismer @ 24:
Sure, just put it on the envelope you send the keys to the bank in.
RE: Joel @ 30 – That could work if you only had one loan (e.g. no 80/20) and no other significant assets/income. But you’ll still have the foreclosure on your record as long as the loan is in your name (even if the property no longer is).
RE: The Tim @ 17 –
I would appreciate it if you could make it so that the window is longer IF the edit has begun. I cannot tell you how many times I started an edit only to submit after the time expired. Some time web lag kills me. I just end up posting another post, but then the continuity is lost. I still consider the 5 minute time to be a vast improvement over the 2 minutes, but substandard. Does it get abused? If not, how about a decent amount of time, like 15 or 30 minutes? Of course if the edit is being abused, then I could not support the longer time.
RE: Kary L. Krismer @ 31 – Remember the days when the banks would pay for keys, and avoid the foreclosure on the record? Those days are pretty much over, with some banks refusing to even foreclose.
RE: see it clearly @ 27 –
A divorce court has no authority over the original agreement between a party that is not part of the divorce case. In other words, if I lend a husband and wife some cash with each one individually responsible, then the divorce court cannot change that agreement. What the divorce court can order, however, is who is responsible between the two, former married couple, for the debt. If a party does not hold up to this agreement, then the divorce court is the proper venue, right before the same Judge that signed the order–again the third party is not part of that case.
The Bankruptcy court has authority, however, to terminate the legal responsibility to pay back debt, within the bounds of the bankruptcy code. (I am no attorney, but it is my basic understanding that debt secured by primary residential real estate is, generally speaking, not subject to much discretion. See the whole “cram down” issue regarding mortgage debt and bankruptcy.)
RE: Sniglet @ 10 –
Hi Sniglet:
I can give you the story of two moderate incomes that got a divorce about 4 years ago and neither qualified to buy the other out on a $300K Tacoma home….I’d add, whoever gets stuck with the house [even if its not sold and still owned by both] after the divorce gets stuck with the mortgage/tax payments too…LOL
If the loan is upside down, it just totally complicates things….I imagine the divorce court can’t force the payments on a loss either….what a friggin’ mess [the best alternative, don't get married until you can avoid this trap]….
I hope no one is planning to buy or sell in Auburn, Kent or Tukwila in the next 5 years:
A mini Katrina? King County prepares for flooding
Yay, they ruined it!
http://www.redfin.com/WA/Seatac/2652-S-148th-St-98168/home/193448
I saw this come on Redfin in May for 142k. It was gone within the day. Someone paid cash for it, put on a new roof, carpet, paint and beat it hard with the ugly stainless steel stick.
What a shame. Now it’s out of my price range, and completely ruined to boot. WHY ARE PEOPLE STILL DOING THIS? I want to slam their heads in the doors of their side by side Sub-Zeros (and I know, those aren’t top dollar appliances – they didn’t even spend the money to put in double glazing… if you’re going to remuddle at least go all the way).
Cosmetic ‘upgrades’ only, and awful ones at that.
RE: Lake Hills Renter @ 36 – Not to mention a Mt. Rainier eruption that would dump catastrophic mudflows over that same area. There are some things you just can’t “engineer” around.
That kitchen is hideous.
By laterite @ 38:
Something that happens approximately every 5000 years can be forgiven I suppose, but we’re getting 100 year floods every 3 years at this point, and living below a dam is just asking for trouble.
RE: Lake Hills Renter @ 36 – Yeah, ok, that’s one thing – but why don’t we talk about the possibility of a lahar from Rainier?
USGS has most recently given us a 1 in 7 chance of a ’substantial’ event like the one that send sand flowing all the way up to the Port of Seattle only 1200 years ago happening in the average person’s lifetime. An event such as the Osceola mudflow (6000 years ago) would obliterate Tacoma, Puyallup, and most of Renton, and probably even damage downtown Seattle.
Those are terrible odds if everything you own is at stake, and your lives as well. I won’t even consider property built on the Osceola mudflow. I mean… do you really want to die in your bed as a wall of mud rushes towards you at 60 km/h? I know I don’t.
Rainier doesn’t even have to erupt for this to happen. It just has to shrug it’s shoulders…
Ah, someone beat me to it.
I’m new to the area, and naturally very inquisitive about geological formations. Hiked up to Blanca Lake on Sunday. Stunning, and well worth the (substantial) effort – but the mountains are not a forgiving place.
I ask locals about lahar all the time, and only one or two have had the slightest idea of what I’m talking about.
I guess it’ll have to happen for people to realize the power of that mountain.
Ok, I read the article – the flood-prone area is lahar terrain anyway. That dam will give way like it’s made of cardboard when Rainier decides it’s time.
Grout, or no grout.
At least they are thinking about the possibility of flooding – IMO there are worse things to fear. Apparently California is having some fun and games with some other elemental forces. As usual.
Do the pink ponies protect us from volcanic eruption, too?
By Ira Sacharoff @ 28:
I saw a sign along the road in Everett today.
Happy Wife!
Happy Life!
Avoid Foreclosure.
By Lake Hills Renter @ 39:
Beyond hideous. It was such a cool house before the remuddlers got to it. I wish I’d have saved the pictures. Now it’s just sad.
Oh well. I think there’s a special section of hell set aside for these kind of ‘investors’. Each of them gets their own huge house filled with nothing but granite, ‘modern, open kitchen spaces with great flow’ and stainless steel… but no exit.
Then eternity to ponder their ‘tasteful upgrades’ they have forced upon so many once unique houses.
RE: AMS @ 34 – In Chapter 7 the personal liability disappears, but the lien remains (subject to any claim the spouse might have that the debt to them is non-dischargeable).
By Kary L. Krismer @ 44:
I was inspecting a house in Fed Way, and as I jumped down from poking my head in the attic space the trapdoor fell shut on my hand just before I let go. My titanium wedding band was forcibly removed along with some skin and flesh.
I was lucky not to lose the finger. As it was I merely sprained the joint. I think there’s a message here somewhere. For one thing – definitely use a ladder to inspect attic spaces. Another might be more subtle and more sinister… I’m not a superstitious person, but this wasn’t exactly a little thing like seeing a black cat or walking under a ladder.
As for the house? Some other idiot paid 2007 prices for it. I can’t compete with that kind of stupid – although clearly I need to be more careful looking at houses. It hadn’t had any updates, either. I was left scratching my head… and nursing a torn knuckle.
I’m actually very glad we didn’t buy that house, in retrospect. It wasn’t worth half of what they ended up selling it for. No character whatsoever. Instant negative equity, at the price the final buyer paid.
“I can’t compete with that kind of stupid”
That one sentence is why I haven’t bought a house in the 3+ years I’ve been watching the market. Although technically I guess won’t is more accurate than can’t.
By deprogram @ 37:
Why don’t you wait for the bottom for another year or two, maybe then you’ll find what you can afford!!!
LOL
By deprogram @ 47:
This is amazing – can afford 1000s of dollars worth of titanium ring but cannot afford a 200K house!
consumerism at its best
By Rojo @ 50:
Titanium rings are dirt cheap. $100 or so.
http://www.zales.com/product/index.jsp?productId=3379586&camp=CSE_GoogleBase&ci_src=14110944&ci_sku=3379586
From what I remember from my geology classes, Mt. Rainier is one of the most unstable mountains around. The type of rock and direction that it lays makes it very fragile. Plus, as an added bonus, it has more glacial ice than all of the other Cascade volcanoes – combined. A volcano does not need to erupt to have a lahar/mudslide/rockslide event. http://en.wikipedia.org/wiki/Lahar
RE: deprogram @ 41 –
” An event such as the Osceola mudflow (6000 years ago) would obliterate Tacoma, Puyallup, and most of Renton”
Whoa- green jobs, rising home values, and a tourist attraction to boot! I think we have a winner. And really, who is going to miss Tacoma, Puyallup, or Renton? Win, Win, Win!
My apologies to those who are going to be buried under tons of mud, but hey, in the new Amerika we all need to do our part…
By Rojo @ 50:
RE: Rojo @ 50 –
I bought titanium because it is relatively inexpensive, light, and indestructible.
But you wouldn’t know that. You just think all metals with names towards the bottom of the periodic table are equally valuable. It doesn’t quite work that way.
These were handmade in British Columbia out of aircraft grade Ti, inscribed, covered with a black industrial diamond coating and annealed. $275 each. They are stunning. They look like they were carved out of obsidian.
Perhaps you were thinking of platinum. Due to it’s scarcity it commands a decent price per ounce. Hey, give your honey the same metal that’s in her car’s catalytic converter! Classy.
Idiot.
By Rojo @ 49:
I plan on doing just that.
In the meantime, I plan on buying a house for a lot less than what I can supposedly ‘afford’. I said ‘price range’. My price range is very low as I’m not interested in taking a massive depreciation hit – only a small one.
Do you have any comments as to the actual content of my post?
By Lake Hills Renter @ 48:
Either way – right now there’s plenty of stupid out there, and either way I can’t afford to pay to play. Nor do I wish to.
I have no desire to spend the next 30 years of my life paying a crushing mortgage for the house of my dreams. I just want a livable dwelling in which I can wait out the next few years and entertain myself by working on a house that doesn’t belong to someone else. Hey, if it appreciates, great. If it doesn’t, I’m still paying less than renting this (or another) bubble house.
I wish I could afford to wait a few years. No, that sentence is not contradictory.
By Scotsman @ 53:
I have to admit I won’t feel too bad to see Puyallup go. Although they’ll probably just divvy the mudslide it up into lots and throw it back on the market.
I know I’ve seen actual lahar footage from Pinatubo on youtube, but I couldn’t find any right away… did find this though:
http://www.youtube.com/watch?v=N_cyG2dJPpc
Heh. But hey, this has only a one in seven chance of happening in my lifetime. So, no big deal. And, what, we’d get like 45-60 minutes of warning? Yeah, plenty of time to get out of there.
Ira,
You have to be one of the funniest Realtors I’ve never worked with. Thanks for making my day with your ad.
RE: deprogram @ 55 –
Yes, I read platinum instead. my bad.
The point I was trying to make was people spend so much money buying stuff and then complaining they don’t have money left for basics of life like home, food and child support.
I have seen medical assistant in my wife’s office with expensive designer bags, iPhones, and other overpriced stuff and yet they continue complaining that they can’t afford a house. Given houses were expensive in the past few years but with this kind of consumerism they will never be able to afford a house of their own. Here comes the point of forced savings plan by buying the right house for the right money and keeping it for a long time.
So, why would you buy a house now knowing that it will go down in value even if you buy a small house. With rents coming down the way they are, won’t you be able to find a better rental for what you want to buy now?
I am confused by this though.
RE: Ira Sacharoff @ 28 –
Hey Ira, I love the ad! Very creative & it really caught my eye.
Rents aren’t necessarily coming down. A lot of people are being forced into the rental market, for one reason or another. Maybe they lost their house. Maybe their job. Maybe their job and then their house. Sure, the apartment market is flooded with condo conversions and over capacity. But have you looked for a dog-friendly rental house recently?
I’m not keeping my dogs in an apartment. That’s simply impractical – and good luck finding an apartment that will allow two large breed animals.
So, I’m looking for a rental house, 2 baths, fully fenced yard, with no dog restrictions, within 20 miles of Auburn, outside of lahar/flood paths, for less than $1500/mo. Can’t actually BE in Auburn as they have municipal BSL. Besides, Auburn is a dump. Sorry, Auburn.
Go find one for me. And then find me first and last month’s rent, with a security deposit that I’m certain to be nickled and dimed out of, in the end. Oh, wait, that’s half of a down payment on a FHA loan for the same exact house. Oh, and I’ll need a washer and dryer.
I don’t have an iClone. I hate them. I bought my current cellphone on eBay for $40, and since it’s out of production, I bought two. Now I have three, so plenty of spares. I don’t plan on buying a cellphone for a long, long, time. They are quad-band GSM Motorola L2s. I have free world-wide roaming with my plan. Of course, out of country minutes cost a little extra… but I think they are the perfect phone. Simple, durable, and very hackable. I’ll be using this same phone for a long, long time.
My ‘new’ car that I just bought before being informed that I was being kicked out of my rental so it could go on the newly bubblicious market is a 1992 Mazda Miata with over 100 thousand miles on the clock. I paid 3 grand for it. I like cars out of warranty because I like to work on them.
You have a valid point. It just doesn’t apply to me. I completely understand, and agree with you – just read a little more carefully next time.
I am done with renting because I am done with landlords. The last three have been ridiculous. After I dropped close to 25 grand on this last place for a little more than a year, and was given the exact minimum notice to vacate after going month to month, I had had enough.
I’m not buying a house as an investment. I think that’s a fallacy – a house is a box that sits in the ground and rots. Land may be a good investment, but I need somewhere to live in the meantime.
I’m buying a house because I want a place to live, to work out of, in which I can feel secure. Now do you understand? It’s not always about the money – in fact, it’s never about the money, for me.
Maybe that’s hard to grasp.
By DrShort @ 51:
“Crafted of the finest pure-grade titanium for durability, value and beauty, Edward Mirell’s contemporary jewelry collection exudes elegant workmanship through every facet.”
Well. That’s kind of funny, in a way. Titanium really needs to be alloyed with something to make it super strong. And my guess is these aren’t made in the western hemisphere. But neither are naturally occurring diamonds… ‘Pure’ Ti is used in cheaper applications, where ease of working the metal is of primary importance.
Ours are simple bands of Ti 6-4 aerospace grade alloy. They’re only special because they were made just for us, by hand.
Again. Money is not always the primary consideration.
RE: deprogram @ 61 – Lighten up, Francis.
RE: deprogram @ 61 –
Hey I absolutely get it. I was 26 when I bought my first house. Even thought I won’t make a killing when I sell mine, it was the right thing for me to do in my situation. I don’t want to deal with landlords either.
RE: Rojo @ 64 – See?
There are many kinds of buyers in many different situations. I am less interested in building equity, in this case, than getting out from under the heel of the landed gentry.
I fully expect my future house (if I can ever get an offer accepted, that is) to depreciate. I plan on fighting some of that depreciation by doing massive amounts of work to the property. It doesn’t really matter, though – I’m not buying a house as an investment.
Nice to know that we are actually in agreement :)