Another Friend Losing Their Home

S

SacRenter_IHB

New member
<p>We moved to Sacramento last spring. My husband is a pastor at a large church in the suburbs and after going through the sticker shock of housing prices here compared to the housing prices of a smallish steel belt city we decided to rent. </p>

<p>This was a more difficult decision than it should have been because everyone assumed we would buy. Our new employer had graciously set aside entire days for realtors and financial wizards to meet with us. Naturally they all told us that last spring was the perfect time to buy because prices were down and they were only going up. </p>

<p>But we knew the realities of our finances and were dead set against spending 50% of our income on a house. We also learned alot about Sacramento housing from reading Casey Sterins blog. The guy is a loser but sure helped us cut through the nonsense that people were trying to sell us regarding west coast real estate.</p>

<p>Just yesterday we found out that yet another co-worker and friend who had bought in the past 5 years is now upside down on their home and in danger of losing it. This is the 3rd co-worker in less than a year. </p>

<p>I'm glad you guys are here speaking out about the truth of the housing market. Not a week goes by when we aren't approached by someone trying to convince us that we need to buy right away. I've never lived in a culture as obsessed with real esate as this area. You are a much needed voice of reason against the insanity. Keep up the good work, Irvinerenter! </p>
 
<p>SAC, </p>

<p> I must say I am proud you did not succumb to the California buy/spend/KeepUpWithTheJoneses pressure. People are STILL laughing at me for renting, but after so many years of saving, my next home purchase will be a home paid for. Keep up the good work and the sanity level.</p>

<p>-bix</p>
 
>We also learned alot about Sacramento housing from reading Casey Sterins blog. The guy is a <strong>loser</strong> but sure helped us cut through the nonsense that people were trying to sell us regarding west coast real estate.





Don't you mean "looser"?
 
The last top was approximately 1990 and the last bottom was approximately 1995 or 1996, for a time span of 5 or 6 years from top to bottom. Why should this cycle be any different?
 
<p>I'm hoping this cycle isn't any different, <strong>awgee</strong>. Five or six years is about the amount of time I'll need to save up enough money for a down payment. </p>

<p><strong>caliguy2699</strong> - a few months with IHB and I'm realizing how "normal" Sacramento is compared to south OC!!!! I can <u>almost </u>understand paying crazy prices to live in an area as beautiful as south Orange County. Middle class homes asking half a million in Sacramento? Pure insanity. The income level can't support it and there isn't any great natural beauty to justify the high prices. But I try to keep that to myself these days. Too many friends and neighbors are losing way too much watching their house depreciate while their mortgage goes up. I stay quiet and then log onto IHB where I'm not an anomoly. </p>
 
I know how you feel.





Its kinda like missing being hit by a fully loaded 80,000lb 18 wheeler doing 90mph downhill.





Thank god I didn't succumb to an interest only or negative amortization loan like my friends in the last few years.





If you don't mind, I'm going to go chase that truck and kick the driver in the arse.
 
Awgee>The last top was approximately 1990 and the last bottom was approximately 1995 or 1996, for a time span of 5 or 6 years from top to bottom. Why should this cycle be any different?





Well, one reason that comes to mind is that the last cycle topped out at much more rational levels than this cycle had. Therefore, either it will take longer to deflate, or the decline is going to be much steeper.
 
WINEX - I have a whole set of reasons why this time will be worse, but I have yet to hear any good reasons why this cycle will be shallower than the last. For awhile it was, "The economy was going sour last time and that drove the real estate market down." Which made me think that if the real estate market was tanking during economically good times, what happens when the economy starts to decline? Anyways, I am still waiting to hear some good reasons why 2008 will be the bottom.
 
<p>awgee - I think it'll be a good long time too, but just for the sake of playing devil's advocate ...</p>

<p>Perhaps since mortgages are now securitzed and more stock like, we could get stock like declines (ie. rapid declines?) as the financing disappears more rapidly?</p>

<p>Or, if worse case scenario htis (ex. Roubini's risk of global financial meltdown thing) and all buyers have to pay 100% cash for a few months? Then what?</p>

<p>Just a thought.</p>
 
I don't think 2008 will be the bottom. I'm just saying that 2012 may not be the bottom either. This could take longer to unwind.
 
<em>Perhaps since mortgages are now securitzed and more stock like, we could get stock like declines (ie. rapid declines?) as the financing disappears more rapidly?





</em>Mortgages were packaged as securities back then, (they have been since the late 80s), and there was an ARM problem as well. The reason why the foreclosure numbers were so awful in 95 and 96, were because of the ARMs taken out in 90-93 period, when the FED dropped rates. 95 and 96 had job growth, so it really isn't different this time, but a different timeline. There are several articles from the OCR, that even had a title "A Call to ARMs", proving this is another wash, rinse, and repeat cycle. Sound familiar? It gets better. There is a great article about a guy, who sold at the peak, and waited, but couldn't get a loan. Yup, lenders tightened the standards then, just as they are now.





<em>I am still waiting to hear some good reasons why 2008 will be the bottom.





</em>Okay, here is what you do. You go to the grocery store, buy all the Kool-Aid powder packages you can, dump it all in a pot with water, and cook it down. You can cut it with whatever you want, but I hear Crystal-Light is a hit with the RE crowd, especially the ones who debate <a href="http://www.europac.net/Schiff-FBN-1-15-08_lg.asp">Peter Schiff on Faux news</a>. Don't worry, I got this all from Gary Watts, so you know it is "in the bag". Once you cook it down, it will become rock-like, and you put it in a glass pipe and smoke it. This is called freebasing, and it is the only way to get high enough, to think 2008 will be the bottom. It also helps if you have long hair, and your econ teachers want to fail you again, just like they did the first time, to prove you have no clue.
 
here's my take on the where the bottom will be:





the common school of thought is that the economy and RE markets move in cycles. what people never mention is why that occurs. instead they just assume that what goes up must come down and vice versa, i.e. that business cycles are simply a function of time. that might be what's been observed but its not the causal effect. excess supply and falling prices alone isn't going to be the reason demand increases because all other variables won't be static -- job growth and incomes, or lack thereof, being the elephant in the room.





there's one economic school of thought which argues that economic trends are completely random walks. a recession, for example, represents a permanent change and what actually causes what we commonly interpret as "cycles" are actually technology shocks. by technology, i mean any sort of innovation, not just hi-tech. junk bonds, derivatives, and the collateralization are prime examples.





so take the decline of the manufacturing industry in america. today we can look back and say, "hey no problem. we simply moved to a service-based economy." for every job that GM and mcdonnell douglas cut in the early 90s, new jobs sprouted at UPS and google. of course, that's because al gore came along and invented the internet, but if he hadn't, it's possible the effects of that recession would have been permanent. in countries like japan and taiwan, the loss of manufacturing to china and others has not been so easy to recover from. from their standpt, there was no business cycle. what went down, never came back up.





when applied to the local RE market, the question is what replaces the loss of the RE job market? not everyone can go back to their jobs since we all know that even in a stable RE market, there's simply no need for 50 different realtors and mortgage brokers in every neighborhood strip center. quite frankly, i don't see what the future is going to bring (but i wish i did!). it might be the next revolution in transportation? maybe the shift to the green economy? personally, i don't see anything that innovative these days. the big revelation from steve jobs yesterday was a thinner laptop. until we start to see <em>it</em> arrive and contributing to the economy, there's no way to say the bottom is anywhere in sight -- not a yr from now, 5 yrs from now, or even 10. so i guess thats my long-winded way of saying,<em> i have no clue but my guess is longer than expected!





</em>
 
<p>I think that now is when we're going to *really* pay the dot com crash and 9/11 because if housing rescued the US economy from that hole, now that the housing bubble and the housing ATM machine are gone, who's going to rescue the US economy?





I was expecting the stock market to go up (the gains from the housing boom will be invested somewhere) but is falling like a dead fly.





The other day somebody posted a comment saying that they financed a $40K fertility treatment from a HELOC, I read in LA Times about disabled people that bought a full equiped Van or had expensive surgeries finaced with HELOCs, all those are noble causes for spending money, but now that the housing ATM is gone, here comes a broad impact to the economy, that also includes hospitals, doctors, etc.





The only thing that can somewhat help or cushion the loud thump of the US economy is the weak dollar and foreign trade, also I'm sure that some investors are currently hibernating and waiting to see blood in the streets to start buying distressed properties left and right. </p>
 
<p>acpme--really liked your post. I had a prof in law school from the U of Chicago, who said that without inside info, it was a random walk. </p>

<p>Empires fall. Once the Roman Empire fell, it didn't dust itself off, say ok, the down cycle is over, and resuscitate itself. It was over and the population fell over the centuries to something like half. Maybe less. No civil control. No money spent to maintain acqueducts, so clean water failing and disease up etc, etc.</p>

<p>Even ours could.</p>

<p>People just lost all discipline. As to spending and lying on apps and everything. Lots of people. People we would normally see as ordinary. </p>

<p>The lady who supervises my ofc building said that things were pretty ok for rent collections up until Dec, but now she was really have to bug people to do her collections. A lot of the smaller ofces are empty.</p>
 
I read an account of the business cycle where it was theorized that as an expansion goes on, Ponzi financing becomes more common, cap rates drop, and everyone underestimates the risk of speculative investment. This influx of capital causes an over-expansion of business and the creation of excess capacity. This in turn causes a buildup of inventories and a narrowing of profit margins. Once profit growth drops off, the whole system unravels.
 
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