In Camden, N.J., perhaps the poorest American city I regularly visit, I photograph what I call paired houses: two dwellings, side by side, one occupied, the other empty. Those living in the occupied home often have their lives made more difficult by what happens on the other side of a shared wall. If I see a neighbor or meet the resident of one of the occupied houses, I ask how they’re coping. They tell me that people throw trash in the front and back yards of the vacant unit, causing foul smells and attracting rats.
I think this is a powerful metaphor for the real estate crisis as a whole. There are a lot of legitimate complaints about bailouts and assistance for people who bought houses that they shouldn’t have, made unwise choices due to ignorance or greed or desperation. Why should we have to pay for these people’s mistakes.
Leaving aside the arguments to compassion, there’s no way we can let half of our house go into disrepair and not have that come back to affect us. No matter how well we take care of “our side”, eventually the smell of the garbage will make it through the wall.
Over at his blog, my real estate guy Tom McGiveron asks and answers this very question in a conversation with a prospective client.
As we talked, I showed her all the information that I normally review. This information contains the latest insights from experts in the real estate industry as well as my expert analysis of the Long Island market.
Halfway through our discussion, she said, “Oh, so prices are dropping?”
This interaction helped me realize that I, and my colleagues in the real estate business, have our work cut out for us. There are a number of homeowners out there that just do not pay any attention to what’s happening. And there are some that do listen and know a little, but still think Spring will bring higher prices.
It’s amazing to me that anyone would even ask this question at this point. I realize that most people haven’t been following this obsessively like I have but…come on! Don’t you read the news? Watch TV? Talk to your friends and neighbors? It’s like Jack and Rose, standing on the deck of the Titanic, the last strains of “Nearer, My God, To Thee” being drowned out by the horrific groans of the cracking hull, and wondering if the ship is really sinking.
A banker explains that the complex securities he designed were “fourth dimensional” and sold to “idiots.” A senior Wall Street ratings agency executive describes being ordered to “guess” the worth of billion dollar securities. A mortgage loan salesman explains how borrowers’ incomes were inflated to justify a loan. A billionaire describes how he made a massive bet that people would lose their homes and has won $500 million, so far.
Finally, as the global financial system crumbles and outraged but impotent lawmakers fume at Wall Street titans, we see the casino’s endgame: Riverside, California a foreclosure wasteland given over to colonies of rats and methamphetamine labs, where disease-bearing mosquitoes breed in their millions on the stagnant swimming pools of yesterday’s dreams.
Filmed over twelve months in 2008, American Casino takes you inside a game that our grandchildren never wanted to play.
A Rocky Point home Gisela Skoglund and her family are trying to sell has been on the market for nearly two years. The property is large enough to build another house on, and the Skoglunds are asking $319,000.
“We’ve had a lot of people looking at it,” Skoglund said. “But I think it’s actually fear” that keeps people from buying. “People are afraid to make a commitment. When you listen to the media, it’s creating fear. Young people are afraid they’ll lose their jobs.”
Lady, if your house has been on the market for two years, it’s not because people are afraid of losing their jobs. It’s because the house isn’t priced right.
It’s amazing to me that even now, with the wind howling and the lightning crashing and poison arrows falling from the sky, people are still sitting on their over-inflated prices because that’s what they think the house is worth or that’s what they think they deserve or that’s what they need to get out of their house to make it work for them.
Case in point, my co-worker is retiring and moving out of state. She’s already bought her retirement home and is counting the days before she can bug out of NY state. All that remains is selling her condo. I advised her that in this market you need to be agressive with your price reductions to move a property quickly. She snipped that she wasn’t going to lower her price. The place was listed just over the number she needed to make the retirement work for her. And, in fact, she turned down an offer that was 15% off her ask.
As a buyer, I don’t really care what the seller “needs” to make the deal work for him or her. I don’t care about the mortgage on the house or the home equity loan you need to pay off or how much money you need to get to settle your divorce. I only care if the price works for me. If it doesn’t, then I walk.
It’s hard to know what to excerpt here. The whole article is so shocking, you should really read the whole thing. However, this part was too good to not quote.
Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.
Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.
Note to my bank: please include the photo to the right in my loan application.
WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.
“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”
I’m a little sad to see Wamu flushed down the tubes like this. I have my business checking acount with them and they’ve always given me good customer service. Yes, their new branches do look more like cell phone stores than banks, but that’s a small price to pay.
Tom McGiveron has a new post up on foreclosure statistics in Nassau and Suffolk from RealtyTrac. RealtyTrac doesn’t have the best reputation for accuracy, but even still there’s bad new all around Suffolk county.
The big shock, 34 homes in foreclosure right here in Babylon. That may not seem like a lot. Looking at the numbers, there are 176 homes in foreclosure in Tom’s backyard of Deer Park.
But Babylon isn’t Deer Park. Not only is it smaller, it’s a much more upscale and exclusive community. There are no real bad or undesirable parts of Babylon. I’d guess that there’s not a lot of sub-prime lending here. The next time a Realtor tells you that Babylon is “holding it’s value”, tell them about the 34 foreclosures.
As for me, I’m waiting for the REOs that should be showing up in the spring. Until then, I’ll be hiding under my desk.
Photo by Flickr user Respres used under a Creative Commons license
Home resales in the U.S. dropped in October and prices fell by the most on record, signaling a deepening housing recession going into 2009.
Purchases of existing homes slid to an annual rate of 4.98 million, lower than forecast, a National Association of Realtors report showed in Washington. The median price fell 11.3 percent from a year earlier, the most since the group began collecting data in 1968.
“The large number of homes already on the market and the number of those that will appear via foreclosure over the next several months only add to the diminished prospects for existing home sales,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said before the report.
Sales of previously owned homes fell 3.1 percent for the month, to an annual rate of 4.98 million, according to the National Association of Realtors, a private trade group. Of the homes that did find buyers in October, nearly half were the result of a sale after a foreclosure.
Read that again. Of all the sales of pre-existing home is October, almost half of them were due to a foreclosure.