The boy began to sigh, looked up in the sky, And told the moon his little tale of woe.
People have harvested all the money they are going to get out of their houses for quite some time. From 2001-2006, the median home price in Irvine rose each year by an amount equal to the median income. Every homeowner had another breadwinner in the family: the house itself. People proceeded to harvest this free money. A few resisted the temptation. Some took it out slowly, and some took it out as fast as it accumulated. From what I am seeing in my daily searches through the property records, the majority took out something, many took out a great deal, and some took out all of it.
There are those readers who believe I make too much of this issue; it can't really be that bad. Well, when I start running out of new properties where the sellers took out all their equity, I will start to believe those that did this are already purged from the system. As it stands today, I have a steady stream of new properties with HELOC abuse, and there are many more that I don't write about. I am able to be choosy. I can pick the most egregious cases or the ones with the most interesting storylines. There is no shortage of these borrowers out there.
Today's featured property is an interesting case study in how owner's managed their debts, and how lenders enabled this insanity. The lenders are now reaping the harvest they were sowing during the bubble years. The toxic loans they planted have grown to poison our entire financial system.
You can see the mornin', but I can see the light Try, Try, Try, to let it ride
Speculating in an inflated market is much like shooting craps. In the game of craps, if your number comes up, you can choose to let your winnings ride in the hopes that your number will come up again. At some point, you need to take your chips off the table because if you don't, you will lose it all when a 7 is rolled. Many people during the bubble took the equity from one property and bought more. Many would-be Donald Trumps built substantial financial empires. They were playing monopoly with real properties and funny money being given out by the banks as if the borrowers were passing "go". With money that was easy to come by and properties appreciating at double-digit rates, it is obvious why so many people played this little game. Unfortunately, not many of them took their chips off the table in time.
Today's featured property is a typical 100% financing walkaway, but the real story is with the previous owners. They were HELOCing themselves into a great lifestyle and multiple properties right at the peak of the bubble. I imagine they are somewhere between fear and denial as their empire falls apart.
No-one you see, is smarter than he, And we know Flipper, lives in a world full of wonder,
Do you remember the extreme arrogance and smugness of flippers and other kool-aid intoxicated people during the bubble? Isn't everyone who buys in a bull market a genius? They were all so sure the market could only go up, and every property was a gold mine. They were all living in their private wonderland.
And we know Flipper, lives in a world full of wonder, Flying there-under, under the sea!
And of course, now they are under water, drowning in debt and sinking to the bottom. When it comes to flippers, my schadenfreude overfloweth...
Today's featured property has been profiled before. It has been on and off the market for about a year and a half. This is the third listing we have documented here. It takes a great deal of courage to flip a $2,000,000 property. Either that or a great deal of ignorance and kool aid.
Isn't that the reason everyone panders to their sense of entitlement and buys too much home? We all know that emotional longing to live well and have the very best. I am certainly not immune. Like many in my industry, I have had to live with a reduction in my income during the housing crash (I am lucky to have a job at all). The place I rent now used to be easily affordable, but now I am stretched to maintain my standard of living. Am I entitled to the life I had during the bubble? I certainly do not want to downsize and lower the quality of the place I live because I enjoy it. I am over my head, but it sure feels nice.
Everyone feels these desires to have more. Some people have less discipline than others when it comes to resisting these urges. During the bubble, lenders removed all external resistance, and the most irresponsible among us were given access to as much money as they wanted to buy a home. It shouldn't be terribly surprising that we are having a lot of foreclosures now.
Of course, the assurances of realtors like Suzanne convince people they deserve it and they can do it. Well, sometimes they don't deserve it, and they can't do it. If you don't fully understand what "pandering to a sense of entitlement" means, watch the Suzanne Researched This video above. It demonstrates the concept better than I could explain it.
Today's featured property was owned by someone who overbought and simply could not afford the place they had. The property was purchased in 2004 with an Option ARM and a significant downpayment. The Option ARM consumed much of their equity, and the market took the rest. Now the bank owns it, and they are asking 15% off the 2004 purchase price.
It has been a year-and-a-half of foreplay here on the Irvine Housing Blog. It has been a long time coming, but the book, The Great Housing Bubble, is finally here.
I am pleased to announce we will be having an Irvine Housing Blog party and book signing at 6:30 on Wednesday, November 12, 2008, at JT Schmids at the District. This is your chance to meet the people behind the screen names.
You have plenty of time to order and receive a copy of the book from Amazon. I will also have a large but limited number of books available at the signing. These will be available for a $15 "donation" to the IHB. You are under no pressure or obligation to buy a book or have it signed. All who wish to be a part of the IHB community and meet others in the community are encouraged to attend.
I hope to see you all there.
Its been such a long time I think I should be goin, yeah And time doesnt wait for me, it keeps on rollin Sail on, on a distant highway Ive got to keep on chasin a dream Ive gotta be on my way Wish there was something I could say.
Well Im takin my time, Im just movin on Youll forget about me after Ive been gone And I take what I find, I dont want no more Its just outside of your front door.
Its been such a long time. its been such a long time. Foreplay/Long Time -- Boston
BTW, We have a private room, and although this is publically announced, it is a private party. Agitators will be asked to leave.
You can see the mornin', but I can see the light
