The Human Face of Foreclosure

My glee in watching the housing market implode is tempered by stories like this that illustrate the personal costs of subprime lending. Not just investors or even new home buyers are caught in the foreclosure net, but people who have owned their homes for years are also at risk. They have my empathy though I will stop short of advocating government bailout. In the end, responsiblity for debt lies firmly in the person who made the choice to sign their name on the loan forms, regardless of circumstances.

For decades, the 5100 block of West Outer Drive in Detroit has been a model of middle-class home ownership, part of an urban enclave of well-kept Colonial residences and manicured lawns. But on a recent spring day, locals saw something disturbing: dandelions growing wild on several properties.
"When I see dandelions, I worry," says Sylvia Hollifield, an instructor at Michigan State University who has lived on the block for more than 20 years.

Ms. Hollifield's concern is well-founded. Her neighbors are losing interest in their lawns because they're losing their homes -- a result of the recent boom in "subprime" mortgage lending. Over the past several years, seven of the 26 households on the 5100 block have taken out subprime loans, typically aimed at folks with poor or patchy credit.

Buyers a Rare Breed

The Sacramento Bee profiles three buyers who are a rare breed in the softening housing market. Everyday that I see more houses in my price range become available is another day I will wait to buy.

Now that it's done, Joi Bess couldn't be happier about selling her Rancho Cordova house and buying a bigger one in Folsom.She closed escrow in April on the first anniversary of a new marriage and blended family of eight. "It worked, and we're reaping the benefits already in a fantastic house and fantastic area," she says.

In what's proving to be a second straight year of slowed sales and falling prices in many neighborhoods, that closing makes Bess a hero to the Sacramento region's real estate trade. She is a buyer.

All-Time High Prices

Prices are at an all-time high....not for housing, anyway but aluminum cans. Just read this interesting article in the LA Times about the rising value of recycled materials. On Jan. 1, the California redemption value for a 12-ounce bottle or can went up from 4 cents to 5 cents with the average price for a pound for aluminum at $1.55, an all-time high. Whether the amount paid for cans is a pittance or an income stream depends on your perspective.

When I was 10 or 11, it certainly was a great way to get pocket change for snacks. Money was tight and us kids didn’t get allowances. I remember scavenging the flea market garbage cans on the weekends while my parents worked their stall. My dad even made a special pole with the hook at the end so I could really dig in. It’s not exactly a fond memory. The days were really hot, the garbage smelly and the cans sticky and hard to flatten beneath our child sized sneakers. I would have been embarrassed to be seen by any of my classmates or friends. One indelible image that pops up is that of me and my sister, aged ten and five, both with poles and garbage bags in hand standing next to my mother, who had taken a break to find us and was holding my baby sister, a toddler on her hip. A white man with a soda saw us and deliberately made a beeline for us, sidestepping several garbage bins, and placed the can directly in my bag. I wonder if what he saw was a brown family on the edge of poverty. Looking back, I wonder about my parents’ decision to let their ten and five year-old daughters roam around scavenging cans on their own but longer feel shame or embarrassment. It is these long-forgotten memories involving my earliest experiences in how hard it is to earn money that influence how I view money today. My youngest sister who luckily grew up as our family prospered, I feel, has a much more careless attitude toward money. ($100 for a two piece swim suit!!!) She’s has decidedly middle-class tastes while my low-income inner-self consciousness has become more prominent since the home-buying obsession started. I used to roll my eyes when my mother marched into the grocery store to demand a 30 cent price difference after discovering an error on the receipt. Now, I’m right there along with her demanding the same thing.

Bought a New Car

While fighting a very serious bug, I managed to buy a new car--a Honda Fit Sport, one of the new lines of relatively inexpensive subcompact cars with good mileage like the Toyota Yaris. In a word, they are cute. The Honda Fit kind of looks like a little bulldog, short and rounded. Anyway, "raising" a car, as the Chinese idiom goes that likens the cost of a car to the cost of raising a child, will put a kink in my house buying scheme. Car payment, insurance, gas and maintenance will definitely add up as well as the attendant costs in wanting to go out more in my cute new car. Nevertheless, I'm looking forward to when the car arrives in 3 weeks. These cars are in short supply. I vetted 10 dealerships and still had to special order the car at MSRP. One thing I refused to do was to pay the dealership markup.

It may be a combination of being ill (still) and the beginning of summer, but the urgency to buy a home, or at least to track the housing bubble, has faded. What will happen will happen but in the meantime...I got a cool new car!

Not Dead!

I'm not dead, just really sick. =(

Affordable Sac of Tomatoes

According to the California Association of Realtors, Sacramento is the 2nd most afforable area in the state for first time homebuyers. Excuse me if I don't Yippee kai-yay because realtor associations lack credibility (witness the repeated predictions of a bottom/rebound of the real estate market and the $60 million they will spend to convince buyers that now is a good time to hire them) and the minimum qualifying household income for a medianly priced home is still $62,640. The U.S. Census pegs the medium household income of Sacramentans at only $49,894!

The Sacramento region is the second most affordable area in the state for first-time homebuyers, according to a report released Thursday by the California Association of Realtors. In Greater Sacramento, 43 percent of households could afford to buy an entry level home, up from 40 percent last year. The first-time buyer median price was $310,670, with a minimum qualifying income of $62,640. The percentage of households who could afford to buy an entry-level home in California stood at 25 percent in the first quarter, down slightly from 26 percent for the same period a year ago.

Harbinger of Doom

Forbes reports that the Commerce Department reported today that building permits fell 8.9% in April— the worst decline in almost two decades—and is an indication that the real estate market has yet to hit bottom. After reading the interesting posts over at the Dr. Housing Bubble blog, I’m not sure whether I should feel vindicated or depressed. Depressed is more the mood for the day because even though it’s good that home sales prices have slipped in recent months, rather than being isolated, the housing sector meltdown is only a harbinger of impending economic doom. According to various media reports, the housing fiasco is bleeding into other sectors, fewer cars sold, more expensive groceries etc, causing a ripple effect in our economy. Witness the weakened dollar. Ultimately, according to Dr. Housing Bubble, the economy will get worse, possible leading to inflation which means that the money I’m saving for a home purchase may not be able to buy as much even if sales prices drop. It’s not exactly a rosy picture painted.

The drop caught economists by surprise. Many had expected a more modest 3.1% decline. In March, building permits actually increased 1.8% after a large fall in February. The dismal figure underscores the massive correction currently taking place in the housing market, which has been plagued by suprime fallout and inventory gluts this year. Homebuilders, eager to burn through their oversized inventories, are now holding back on new building permits for future construction.

Advice on "Black Mole"

I love reading advice columns, thinking that the more I shore up information, the less intimidating the homebuying process will be. Here's a nice question from Inman Real Estate news about "black moles" that keep coming back. It brings up creepy images like a Stephen King novel or an Asian horror flick and also brings up the point that you should know what is included (or not included) in an home inspection. Assuming anything when buying a house could have serious consequences.

Dear Barry,
We bought our home about one year ago. At the time, our home inspector found some minor defects, but nothing was mentioned about black mole. After moving in, we noticed some black stains in the closets. But then the rainy season came, and we found black mole on most of the upstairs walls, especially in the corners. What upsets us most is that the former owners never mentioned a word about black mole. In fact, their disclosure statement said everything was OK. We've tried washing the mole off, but it just returns. What can we do legally, and how do we get rid of the mole? --Renee

Dear Renee,
Mold (not "mole") has been widely publicized as a significant health hazard and should have been disclosed by the sellers, assuming that they were aware of it. Your discovery immediately after closing escrow indicates that they should have known. If they deny knowledge of any mold infection, you would have to prove that they knew about it, and that could be very difficult. Mold disclosure is generally regarded as outside the scope of a professional home inspection and is routinely disclaimed in most home-inspection contracts. However, when evidence of mold is unavoidably visible on exposed surfaces, failure to make some manner of disclosure is hardly justifiable for a competent home inspector. The least an inspector could say would be, "Black stains noted on upstairs walls. A professional mold survey is recommended." The growth of mold is caused by excessive moisture conditions, often accompanied by a lack of adequate ventilation. What you presently see on wall surfaces may be an indication of additional mold within the wall and ceiling cavities. Therefore, mere cleaning is not the way to resolve the problem. To determine the extent of the mold
infection in your home, have a mold survey performed by a qualified professional.

Realtor's Six Percent

Well, the wireless connection didn't last but I still have access to the Internet via the family computer. 60 Minutes did a segment questioning whether the six percent commission for Realtors is still needed. Hey, I'm all for paying Realtors if they put an equal amount of time and effort to earn their thousands of dollars worth of commission.

For realtors, the six percent commission is sacrosanct. It's remained in place, even as the price of homes has quadrupled over the past 25 years.

But as correspondent Lesley Stahl reports, things are beginning to change. What happened to travel agents, stock brokers and book sellers – the encroachment of the Internet – is beginning to affect real estate agents. And the sacred six percent is under assault from online discounters.

Dream House Sold?

Making the most of my iffy wireless connection, I offer one more post for the day to make up for recent inactivity. (If it keeps up, I'll be much more active blogging from the comfort of my humble abode)

A house that I've been monitoring on MLS went into a pending sale recently. I'm sad because this well could have been my dream house! It was the right price, was in a good location, had 2 bed, 2bath, big yard, 1,300 sq feet and looked very well-kept. Now I'm lamenting that I wasn't ready to buy yet. Sometimes I think lurking on MLS is bad because it feeds my house lust. My motto in my head of "Wait, waaaiittt" is drowned out by the impulse to buy now. Good thing that a financial barrier of actually having very little money keeps my big eyes in check.

My NetWorth IQ

I stumbled upon this site for tracking one's net worth at My Networth IQ.

The idea behind it is that its a personal finance social network hybrid. People can not only track their net worth but also share the information with their friends/strangers on the Internet. I'm not sure how prudent that is (again, the paranoia) but it's an interesting idea. I've signed up for an account but am keeping the information from the public for now.

You can peek at my net worth . According to CNN Money, there is a disparity between what my net worth should be according to my age and income bracket. Average adults under 30 have a net worth under $5,000. I'm way ahead there. However, for my income bracket, I should have much more net worth in the 100K range. Looks like I have a lot to go.

Bailout for Borrowers

New York Senator Chuck Schumer is urging Congress to spend $300 million of taxpayer money on counseling and outreach for homeowners facing foreclosure. That doesn't sit right with me as this action circumvents the notion of personal responsibility. Nobody forced these borrowers or lenders to engage in activities leading to this market crash. New Century just announced the termination of 2,000 employees. There has to be consequences in order to exact change. Carol Lloyd of the San Francisco chronicle sums it up succinctly in a recent column on the notion of a short sale where debt forgiveness is a "win-win" situation.

It's a weird facet of American society, which better rewards those who try to live the American dream and fail miserably than those who live within their means. In the end, those left carrying a fat debt, bad credit scores and lingering regrets are as much a mirror of our system as all the happy homeowners who make their mortgage payments month after month.

Monkey Reaching for Branches

A free Wall Street Journal column called "Why What You Have is Never Enough" examines the transient nature of happiness and why Americans are complelled to get a bigger house, a better job and still are unsatisfied. It reminds me of an ex who disapproved of me applying for a better paying job within 6 months of landing a new job. He described me as a monkey constantly reaching for another branch even before settling the one I just landed in. True, some of the insights in the article resonates but that is not going to stop me from realizing my ambition of home ownership. I'm not there yet so I HAVE to be the monkey continuing to swing from branch to branch.

We may have life and liberty. But the pursuit of happiness isn't going so well. As a country, we are richer than ever. Yet surveys show that Americans are no happier than they were 30 years ago. The key problem: We aren't very good at figuring out what will make us happy. We constantly hanker after fancier cars and fatter paychecks -- and, initially, such things boost our happiness. But the glow of satisfaction quickly fades and soon we're yearning for something else.

This Interactive House Value map shows whether house values are overvalued based on historical data. Statistically normal house values are determined with consideration to house prices, interest rates, household incomes, population densities, and historical premiums or discounts paid to live in certain areas over time.

In Debt We Trust

Last night I watched most of a documentary newly released on DVD called "In Debt We Trust" which examines the credit card industry and the consumerist culture it encourages, leading to crushing debt for millions of Americans. While interesting, I found the documentary heavy-handed and a bit overbearing. Felt more like a 20/20 episode rather than a documentary. It places the blame of consumer debt squarely on the shoulders of the credit card industry but rarely mentions consumer responsiblity to stop spending. Also, the film draws a comparison between buying a house/real estate and modern day serfdom because the mortgage turns us into slaves to credit for 30 years. Ouch!

With things not going so well for them lately on other fronts, Republican politicos have taken to emphasizing a hale U.S. economy -- though that is something few Americans feel in their own pocketbooks. Some reasons for those clashing perceptions are explored in vet documentarian Danny Schechter's "In Debt We Trust," which portrays a nation hobbled and preyed upon by credit card companies and other lenders. When this borrowed-money bubble bursts, he suggests, another Great Depression could arrive.

I'm a Plankton!

I love this LA Land blog post that likens first time homebuyers to plankton--seemingly small and insignificant but essential to the health of the whole real estate ecoystem. Price the plankton out of the market and everyone suffers.

Plankton, of course, are almost microscopic organisms that serve as food for higher life forms. Without plankton almost every fish and mammal in the sea could not survive, since most species depend upon other fish for their existence and plankton are the initial building blocks of the entire process. In the case of real estate, the plankton would be the first-time buyer (perhaps a young married couple) with a desire to own their own home but with very little capital to carry it off. When the time comes that they can’t pull it off – either through an inability to come up with a down payment, or to service the monthly mortgage – then the ‘plankton’ would disappear and the rapid escalation in housing prices would ease as well.