Bailout by fire?

[Bugs]

“Trend in prices?”

Based on what we saw after the Cedar fire, I think the answer to this question will be mixed. Last time we were in the midst of a housing boom and taking some of the existing inventory offline spurred additional local demand. Some additional construction jobs came up that wouldn’t have come up. Since there were very few commercial structures there weren’t many jobs lost.

I’ve been chewing on this question for the last couple days and I think this time it will be different. There will be some people who will choose to move into a rental and stay there, those who are underinsured or on edge anyway may move into the rental market for lack of any other options. I think that the rebuild number will be lower this time than last time.

But I still think a lot of people will rebuild and carry on, and a few people might have the means to buy another existing home instead of rebuilding.

The news reports are talking about the loss of some commercial structures, which we didn’t have much of last time. To me, that reads to be the equivalent of saying that several businesses will close down for good and those jobs will be lost. However, the rebuilds will also add some more opportunities for contractors and laborers that they wouldn’t have otherwise had. Retailers will benefit, too, as people replace what they lost.

Will a significant number of people decide that twice is more than enough for them and leave town? I dunno. I do know that this disaster will eventually end up costing us all. If there are losses then somebody is paying, and that somebody will always pass it back to their customers the first opportunity they get.

[Eugene]

Suppose you have a $600k house in RB and it burns down.

* $300k appraised RE value, $300k land.
* To think of it, it costs less than 300k to rebuild (houses like that one go for 150-200k tops in Texas)
* If you owe more than $300k, insurance will pay $300k to your lender. If you owe less than $300k, insurance will pay off your balance and give you whatever’s left.
* You end up with a piece of land in RB with ruins of your old house on it in your possession, and possibly a mortgage on it.
* At first, it seems that equity in your land is equal to equity you had in your house.
* In reality, however, there isn’t much demand for empty lots in RB, 4 out of 5 people would rather buy an existing house than to build a custom house on your land. Furthermore, your land has just lost a lot of value because it is now viewed as risky.
* Your equity suffers a 100-150k hit.
* You have a strong incentive to rebuild. Your land isn’t worth much, you may even have negative equity, but rebuilding will give you a chance to recover and your insurance will even pay your rent while you’re waiting.
* One exception is if you bought your house with zero down in 2004 or later. You had no equity to begin with, and now you’re seriously upside down. The way out is to buy a new house, then foreclose on land. (It may be difficult to get a mortgage for a new house, though.)

[Eugene]

Suppose you have a $600k house in RB and it burns down.

* $300k appraised RE value, $300k land.
* To think of it, it costs less than 300k to rebuild (houses like that one go for 150-200k tops in Texas)
* If you owe more than $300k, insurance will pay $300k to your lender. If you owe less than $300k, insurance will pay off your balance and give you whatever’s left.
* You end up with a piece of land in RB with ruins of your old house on it in your possession, and possibly a mortgage on it.
* At first, it seems that equity in your land is equal to equity you had in your house.
* In reality, however, there isn’t much demand for empty lots in RB, 4 out of 5 people would rather buy an existing house than to build a custom house on your land. Furthermore, your land has just lost a lot of value because it is now viewed as risky.
* Your equity suffers a 100-150k hit.
* You have a strong incentive to rebuild. Your land isn’t worth much, you may even have negative equity, but rebuilding will give you a chance to recover and your insurance will even pay your rent while you’re waiting.
* One exception is if you bought your house with zero down in 2004 or later. You had no equity to begin with, and now you’re seriously upside down. The way out is to buy a new house, then foreclose on land. (It may be difficult to get a mortgage for a new house, though.)

[Eugene]

Suppose you have a $600k house in RB and it burns down.

* $300k appraised RE value, $300k land.
* To think of it, it costs less than 300k to rebuild (houses like that one go for 150-200k tops in Texas)
* If you owe more than $300k, insurance will pay $300k to your lender. If you owe less than $300k, insurance will pay off your balance and give you whatever’s left.
* You end up with a piece of land in RB with ruins of your old house on it in your possession, and possibly a mortgage on it.
* At first, it seems that equity in your land is equal to equity you had in your house.
* In reality, however, there isn’t much demand for empty lots in RB, 4 out of 5 people would rather buy an existing house than to build a custom house on your land. Furthermore, your land has just lost a lot of value because it is now viewed as risky.
* Your equity suffers a 100-150k hit.
* You have a strong incentive to rebuild. Your land isn’t worth much, you may even have negative equity, but rebuilding will give you a chance to recover and your insurance will even pay your rent while you’re waiting.
* One exception is if you bought your house with zero down in 2004 or later. You had no equity to begin with, and now you’re seriously upside down. The way out is to buy a new house, then foreclose on land. (It may be difficult to get a mortgage for a new house, though.)

[sdduuuude]

This will give realtors an explanation of why sales were so poor in October.

[sdduuuude]

This will give realtors an explanation of why sales were so poor in October.

[sdduuuude]

This will give realtors an explanation of why sales were so poor in October.

[Raybyrnes]

esmith,

I am really missing the point that people do not want an empty lot in RB. I think the fact that there are a lot of people buying in del Sur is evidence that people want a new home of their own. The fact is that there were not too many options for good empty lots to build on in RB.

Additionally I think people are way overestimating the build out costs that insurers are going to pay out for properties. I would venture to say that when they calculate the insurance premium for rebuilding they are using 100$ to 150$ per square foot maximum.

The replace cost provision is really geared towards the contents of the property. For the added premium the Insurer will replace your 40 inch 1980 TV with a 40 inch 2007 TV as opposed to acv that would essentially take the 40 inch TV and dpreciate essentially leaving you wiht nothing.

The 150% vs 100% is a rider to your policy that essentially allows the rebuild to account for added costs such as new building codes for earthquake, electrical etc.

Just because you put new florros in the house or that you added Granite to the kitchen doesn’t mean you are going to be compensated for this. Especially if you had not discussed these renovation with your agent so that he could update the policy and charge a HIGHER premium for this added risk that they take on.

With respect to the empty lot, people are going to have to check their policies, but most of the time it begins with “Debris Removal.” A good insurance agent writing policies for a reputable company would make sure that this is included in your policy. Many of the more reputable compnaies will ahve pre-negotiated rates and direct billing wiht companies that speacialize in this area.

I have spoken to a few home owners effected by the fire and when asked if they would rent for a while the consensus seemed to be that they could never see themselves going abck to being renters. Was funny to hear, but was a reality check that people like to call themselves owners even when it is the bank that owns the home.

That being said I can only see this fire propping up the housing market. Many people who had considered moving up will see this as a reason to buy what they want or redo the house the way they want.

My question for the board is will these people who rebuild get to use their original tax base when their homes are reappraised? If they do, many people with older homes may make out on this. Sort of like getting a brand new car but having to pay the older licensing fee.

[Raybyrnes]

esmith,

I am really missing the point that people do not want an empty lot in RB. I think the fact that there are a lot of people buying in del Sur is evidence that people want a new home of their own. The fact is that there were not too many options for good empty lots to build on in RB.

Additionally I think people are way overestimating the build out costs that insurers are going to pay out for properties. I would venture to say that when they calculate the insurance premium for rebuilding they are using 100$ to 150$ per square foot maximum.

The replace cost provision is really geared towards the contents of the property. For the added premium the Insurer will replace your 40 inch 1980 TV with a 40 inch 2007 TV as opposed to acv that would essentially take the 40 inch TV and dpreciate essentially leaving you wiht nothing.

The 150% vs 100% is a rider to your policy that essentially allows the rebuild to account for added costs such as new building codes for earthquake, electrical etc.

Just because you put new florros in the house or that you added Granite to the kitchen doesn’t mean you are going to be compensated for this. Especially if you had not discussed these renovation with your agent so that he could update the policy and charge a HIGHER premium for this added risk that they take on.

With respect to the empty lot, people are going to have to check their policies, but most of the time it begins with “Debris Removal.” A good insurance agent writing policies for a reputable company would make sure that this is included in your policy. Many of the more reputable compnaies will ahve pre-negotiated rates and direct billing wiht companies that speacialize in this area.

I have spoken to a few home owners effected by the fire and when asked if they would rent for a while the consensus seemed to be that they could never see themselves going abck to being renters. Was funny to hear, but was a reality check that people like to call themselves owners even when it is the bank that owns the home.

That being said I can only see this fire propping up the housing market. Many people who had considered moving up will see this as a reason to buy what they want or redo the house the way they want.

My question for the board is will these people who rebuild get to use their original tax base when their homes are reappraised? If they do, many people with older homes may make out on this. Sort of like getting a brand new car but having to pay the older licensing fee.

[Raybyrnes]

esmith,

I am really missing the point that people do not want an empty lot in RB. I think the fact that there are a lot of people buying in del Sur is evidence that people want a new home of their own. The fact is that there were not too many options for good empty lots to build on in RB.

Additionally I think people are way overestimating the build out costs that insurers are going to pay out for properties. I would venture to say that when they calculate the insurance premium for rebuilding they are using 100$ to 150$ per square foot maximum.

The replace cost provision is really geared towards the contents of the property. For the added premium the Insurer will replace your 40 inch 1980 TV with a 40 inch 2007 TV as opposed to acv that would essentially take the 40 inch TV and dpreciate essentially leaving you wiht nothing.

The 150% vs 100% is a rider to your policy that essentially allows the rebuild to account for added costs such as new building codes for earthquake, electrical etc.

Just because you put new florros in the house or that you added Granite to the kitchen doesn’t mean you are going to be compensated for this. Especially if you had not discussed these renovation with your agent so that he could update the policy and charge a HIGHER premium for this added risk that they take on.

With respect to the empty lot, people are going to have to check their policies, but most of the time it begins with “Debris Removal.” A good insurance agent writing policies for a reputable company would make sure that this is included in your policy. Many of the more reputable compnaies will ahve pre-negotiated rates and direct billing wiht companies that speacialize in this area.

I have spoken to a few home owners effected by the fire and when asked if they would rent for a while the consensus seemed to be that they could never see themselves going abck to being renters. Was funny to hear, but was a reality check that people like to call themselves owners even when it is the bank that owns the home.

That being said I can only see this fire propping up the housing market. Many people who had considered moving up will see this as a reason to buy what they want or redo the house the way they want.

My question for the board is will these people who rebuild get to use their original tax base when their homes are reappraised? If they do, many people with older homes may make out on this. Sort of like getting a brand new car but having to pay the older licensing fee.

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