Comments on: The Irresolution Lack of Trust Corpse

By: Bryan

Bryan — Sun, 21 Sep 2008 01:08:13 +0000

I’m glad to hear that sanity has come to your section of Northern California, but it will be a long time before anything like that happens in SoCal. The “dream” lives on, and reality rarely shows up down there. Of course, it’s not like they have the water to support the population they already have down there.

Oh, you can forget about this plan doing anything about the foreclosure problem on any large basis, it is apparently limited to helping Wall Street, not “the little people”.

By: Badtux

Badtux — Sat, 20 Sep 2008 06:46:19 +0000

Actually, if the “toxic mortgages” and all the REO go to a “Resolution Trust”, those houses will go on the market and get sold for market price (much lower than current price) and won’t be empty anymore. So yes, this will help, by depressing the price of homes back into the realm where ordinary people can afford them. Right now the banks are foreclosing on the houses and just letting them sit. As long as the house is sitting there, it can be kept on the books for its “book” price. The moment they sell the house for what it’s worth, they have to take that loss on their books. The banks have been refusing to sell the houses for what they’re worth because they don’t want to show that loss on their books because if they showed the loss on the books, it would show that they’re completely and utterly bankrupt. At least the Irresolution Trust will get those houses off the bank books and back on the market for the real market price rather than the inflated price that the banks want for them. Which will definitely help people like me who avoided that whole bad scene over the past six years — when I moved to California renting was cheaper than buying, and right now renting is *still* cheaper than buying, but at some point the housing prices are going to come back to earth.

As for the nature of the local housing market, note that there is a *lot* of inbuilding of high-density housing near transit going on here now. They’re building condo towers all over the place, and tearing down old dumpy commercial buildings that have been sitting empty for ten years because cities overbuilt in commercial (because that gets them more tax money since commercial doesn’t use as many services as residential) and putting up townhouse complexes in their place. Your statement about the local housing market here in Northern California being low-density would have been true twenty years ago. Now… not so much. Building out the light rail system and getting Caltrain back on track have made a *huge* difference in mentalities here about what kind of residential to permit…

By: Bryan

Bryan — Sat, 20 Sep 2008 03:45:26 +0000

Housing in California has always been different than the rest of the country because everyone wants to live in a limited number of places, but don’t want the high density housing and public transportation that would make it possible.

Builders don’t want to build affordable housing, because the profits are so much higher in the McMansion market.

There are too many houses over all, but they aren’t where the people who want houses are located and even if they were, they are too expensive for the people who want a house to buy.

If you can’t afford a conventional mortgage, you can’t afford a house. It’s a scam to tell people that with a “new, special” mortgage that they can buy a house.

In any case, there is absolutely nothing in what these people are talking about that is going to help a home buyer. Until the pricing drops to reality, houses are going to sit empty. It’s part of the market system.

By: Badtux

Badtux — Sat, 20 Sep 2008 02:50:42 +0000

No, the problem in most of the places that are being hardest hit is that the price of housing appreciated at far higher than the cost of inflation, until you could not buy a home unless you went into one of these “exotic” mortgages. Part of that was investors buying because they didn’t trust the stock market (smart people, sort of), here in California 40% (FORTY PERCENT) of homes were being bought by investors, and they account for 70% of current foreclosures here. But the problem with that, is that this took homes off the for-sale market and onto the rental market and rents for homes took a nosedive until they were less than 1/4th of what the mortgage payment was on these homes, so they basically created a situation (by flooding the market with rental homes) where they could no longer meet their nut and had to let it go into foreclosure. But the other part was simply that if you had a wife, two kids, and an average California income, it would take saving for 30 years to afford a 20% down payment on a home. By that time you wouldn’t need one! So they took out these “exotic” loans, and made a bet — in three years, either houses would go up in price (at which point you could re-finance with a better loan or sell), or they’d go down in price (at which point your house would get foreclosed upon). Here in California deficiency judgments are not allowed, so if houses went down in price, well, at least you had a home for three years, whereas before, you didn’t have a home at all. So from the perspective of someone who needed a house, it made sense. He was renting before, he’s renting now, the only difference is that he had a house for three years before it was foreclosed on.

There is no surplus of housing here in California. I mean, c’mon. We have tens of thousands of homeless families living out of their cars, we have families jammed ten to the one-bedroom apartment (there are FIVE PEOPLE living in the one-bedroom apartment underneath me!), we have plenty of people here in California to fill every home that has ever been built here. Maybe it’s true there in Florida that you have a surplus of housing, but it’s not true here. What there’s a shortage of, here, is not people to put into houses. It’s a shortage of houses that people can afford to buy. Here in California, the situation is like in 1930, when the food riots started. The stores in 1930 were full of food, but nobody had money to buy the food. We have 20% of the homes vacant in some of our neighborhoods, while three or four families apiece live in the other homes in those neighborhoods. At some point, something’s going to start breaking. Because that situation simply cannot stand forever until people are going to say, “f*** this **** of living five to a bedroom, we’re going to go break into that house next door that’s had the for sale sign in front of it for a year now”, a house that’s had that for sale sign in front of it for a year now because the bank is reluctant to cut the price and sell it for what it’s really worth (because, see, if the bank does that, then they have to write down the house to its real value rather than the inflated value on their books and therefore has to declare the loss) and …

— Badtux the California Penguin