[FormerOwner]

The buyers are mostly Hispanics. The top 5 last names of 2005 CA home buyers were:
1 Garcia
2 Hernandez
3 Rodriguez
4 Lopez
5 Martinez
From what I see, 2006 + 2007 continue the trend. Anecdotal evidence tells me that a LOT of them 100% finance!

Link:
http://www.usatoday.com/news/nation/2006-05-10-hispanic-homeowners_x.htm?POE=NEWISVA

[FormerOwner]

I agree, they must be smoking crack at that bank. This house probably wouldn’t sell for more than 600K even if it was in pristine condition. There are a heck of a lot more than 20K of repairs needed plus there’s the risk of not really knowing what hidden problems (plumbing, etc.) are lurking. Maybe we’ll see this house on “Flip This House” or “Flip That House”.

[FormerOwner]

Aguho, I completely agree that the ethnic market will take the biggest hit. I’ve watched the demographics in Temecula change a lot over the last couple of years. I wouldn’t really have major concerns about that except that a lot of the new home debtors don’t appear to have jobs that pay anywhere near enough to buy houses at the prices they paid unless they’re using extremely risky loans. They probably barely qualify at the initial teaser rate. Downpayments appear to be a thing of the past and debt/income ratios are going to get really ugly once the loans reset to higher rates. On top of that, you’ve got 1.6%-2% tax rates plus HOA’s! I’ve also heard of a number of cases where people of roughly median income own multiple “investment” properties, all bought near the peak of the market. Yikes! I think a lot of these have nothing to do with the Stonewood scam but the owners are still stuck with huge debt on deflating assets.

[FormerOwner]

The scale of this is incredible:
$1.2 billion worth of property / average value of $525K per property = 2,286 houses! The city of Murrieta has a population of 92,000. Assuming an average of 3 people per house, thats around 31,000 houses in the city. If 2,286 of them are owned by this investment group, that’s 7% of the total number of houses in the city! Every one of them will probably foreclose or become a short sale. If half of the houses are in Temecula and half in Murrieta that would still be around 3.5% of the housing stock of both cities – just involved in this scam alone.

Add to that all of the people who got in over their heads with teaser-rate loans and all of the people over their heads with home equity loans and you’ve got a major meltdown underway. My guess is that the % of houses involved in this scam is dwarfed by the number of houses where people just got in over their heads and will not be able to continue making mortgage payments. What would happen to R/E values if 10%-20% of the houses in Temecula/Murrieta goes into foreclosure? Is this going to be another Texas oil-patch situation where there are thousands of empty houses no one wants?

[FormerOwner]

I wouldn’t even consider buying anything in Temecula/Murrieta until prices get into line with market rents. That’s about a 200K-300K price drop for a lot of the tract homes! The property taxes/mello-roos and HOA’s in some tracts are so high that it’s really a liability to own one. The price I’d be willing to pay to commit to those fixed monthly costs is far lower than current prices. I strongly agree with other posters here that rising gas prices will also push down prices in this area.

I’ve lived up here for a number of years. This year, I’ve noticed that a lot of the people who couldn’t sell their homes are now renting them out. I suspect some of them refinanced to some sort of inerest-only or teaser rate loan so that their monthly cash flow is not too negative. They’re hoping the market will “bounce back” and they can sell before anything hits the fan. I think a lot of them are going to end up foreclosing within a couple years. I think situations like this will continue to flood the market with rental houses, keeping rents down. Prices have nowhere to go but down, down, down. Patience is a virtue. If prices don’t go down enough, just keep renting!

A lot of the houses around here are either rentals with negative cash flow, vacant, or are in some stage of foreclosure already. The shortage of housing supply up here was an illusion caused by speculators, flippers, and over-extended home debtors living above their means. We’re just starting to see the fallout now. It will be a long way down in my view.

[FormerOwner]

You’ll get priced out of the market if you keep renting, fool. Ha ha ha ha! Over the years, I’ve bought and sold a few houses and rented as well. I’ve always thought that once people start ranting about being “priced out of the market” it’s best to stay out of the market. There’s nothing wrong with renting, people. And there’s nothing wrong with buying, either, as long as the economics of the buy pencil out (which they probably didn’t for most people that bought in the last few years).

[FormerOwner]

Another negative: a lot of people bought houses out in the boonies and were willing to do the commute because their houses were going up-up-up in value. No one will want these houses in the boonies now. The pool of buyers for these houses (and there have been a lot of them built in the last few years all over the country) will be close to non-existant. The banks will not be able to sell them at any price since the market will be illiquid. Defaults will cascade since no one who needs to sell will be able to. In the better locations, houses will still sell, but at much reduced prices.

[FormerOwner]

Home ownership is the American dream. It’s so engrained in the national psyche (reinforced by the REIC) that saying houses prices could fall is, to most people, like saying the moon could fall. Everyone looks at the last 10 years appreciation and projects that into the future. Last year, I remember having a conversation with someone. I used my own house as an example (which had already more than doubled in value in 5 years) and said, “What, you’re saying it will double again in five years? Who would buy it?” The person said something to the effect that “…of course it will.” The conversation ended there. I subsequenty sold that house. Now I have to resist the temptation to say “I told you so.” It’s also too late to warn anybody to get their house in order. If they’re highly leveraged or need to sell and haven’t already done it, it’s probably too late to avoid any nasty consequences.

[FormerOwner]

I would LOVE to ride my bike, walk, or use mass transit if it were possible and get rid of at least one of our cars. I walk places as much as I can but the other two options really don’t exist in my area. Most of this country (especially post WWII) was built for automobiles as the sole mode of transportation. Everyone wanted the house with the yard and didn’t want to get on a bus or train or sidewalk with any inner-city folk. Now we’re left with urban sprawl, gridlocked roads, and the looming threat of Peak Oil.

My sense is the the suburbs will have to be re-engineered in some way otherwise not many people will be able to live in them when oil gets to $100/bbl and traffic gridlock becomes paralyzing. Even if we all drive Priuses, the roads would still be gridlocked. I don’t have the answer to this, but some type of mass transit system for the suburbs seems inevitable. A lot of the problem with doing this is that, not only are houses spread out but so are jobs. Maybe some of the far flung office buildings will become vacant. I don’t know. I just feel strongly that we can’t go much farther with the post WWII mentality. Whatever the solutions are for this country’s energy and transit problems will form the basis for the next boom in the economy. It’s about the only thing that can.

By the way, if oil prices get high enough, big-box retailers like Wal-Mart, etc. will cease to exist due to the high transportation costs on both the stores’ and buyers’ ends. We would go back to more localized production and distribution. Things would cost more and we’d buy less junk we don’t need. I’m all for it. I’m hoping oil shoots up to $100-$200/bbl so that we can get rid of some of the excesses and distractions in our culture. It would reduce the trade deficit as well.

Wal-Mart doesn’t seem to care what happens to the buildings they occupy anyway:
Vacant Wal-Marts Litter America

[FormerOwner]

I wouldn’t be at all surprised if some of those cars belong to realtors. I know two realtors that went from making it big to hitting the skids. The ones that bought those cars can sell them and take the depreciation hit – it will probably be a tax write-off anyway. As for the ones leasing those fancy cars, they’re stuck with making the payments until the lease expires. What good is a tax write-off when you don’t have any business income to deduct it from?

[FormerOwner]

“The Creature from Jekyll Island: A Second Look at the Federal Reserve” is a great book that I’m almost done reading. The book retraces the history of money in western civilization and focuses on the role of the Federal Reserve.

The central point is that the US Dollar, as managed by the Federal Reserve, is destined to collapse and that the powers that be already have a world currency in mind to replace it. Perhaps the Amero would fill this role as a “regional” currency like the Euro, instead of a world currency as the book predicts.

Furthermore, and this is where it really gets interesting, there has to be a common enemy for the US citizens to fight against in order to be able to accept a lower standard of living, as a result of the currency collapse and economic upheaval. The best candidates are war and environmental destruction. We now have both. It’s not hard to see how the dots can be connected. I will post a synopsis of the book once I’m all done with it.

[FormerOwner]

Along these lines, I’ve come across a few studies that show that happiness has more to do with DOING things than with owning things. A lot of the things that we do that are enjoyable don’t cost any money, by the way.

Another thing I read somewhere that I think is very pertinent is that the cost of anything is the amount of TIME you give up in exchange for it. If more people thought about that, I don’t think they’d be blowing so much money on frivolous “luxuries” when they could work less and have TIME instead.

[FormerOwner]

Solar, wind, and nuclear power seem like the only viable options to reduce our oil consumption. I guess coal is another one, if someone could find a way to burn coal cleanly; of course, we’d eventually run into something like “Peak Coal”. There have GOT to be some smart people with $ who are investing in these areas already.

It seems to me that reconstructing the energy and transportation infrastruture of the United States may be the only possible underpinning for the next “boom” in the economy. I’m not quite sure how it would work economically or technologically but I’m going to be thinking about it.

[FormerOwner]

Here’s a link relating to oil wars that I think is very thought provking (Iran hasn’t yet started trading oil in Euros to my knowledge but they are still planning to do so):
Petrodollar Warfare

Here’s one that gives some reaons why petrodollar recycling is important to keeping the US economy alive, with a good example:
“Japan needs to import oil for domestic use. To do so it must first acquire dollars, as the dollar is the only currency in which oil can be traded. To acquire these dollars, Japan must sell goods and services to the U.S. economy. The Japanese build a Honda to sell to the U.S. The U.S. federal reserve prints a certain amount of dollars and gives these to the Japanese in exchange for the Honda. The Japanese buy oil from Saudi Arabia using these dollars. The Saudis take the dollars and reinvest them in the Federal Reserve Bank of the U.S., and from then on they will only be used as a reserve currency. Therefore, all the U.S. had to do to acquire a Honda, was to print dollars. In essence, it has its very own money tree. The result of this is that the total debt of the United States is somewhere in the region of $8.4 trillion and increasing by $80 million per hour.”
Petrodollar Recycling

[FormerOwner]

I saw this movie about a year ago. I’m a firm believer in Peak Oil and this movie makes some scary but not unreasonable projections about what will happen within the next few decades. I think a lot of the people on this blog would really enjoy this movie.

One thing the movie doesn’t touch on, as I remember, is “petrodollar recycling”. I think this is really the #1 reason why the US invaded Iraq and may end up doing the same with Iran. Both have threatened to start trading oil in Euros instead of Dollars. We need the rest of the world to pay for oil with Dollars so that we can keep printing more Dollars without causing domestic inflation. Do a google search on “petrodollar recycling”.

I think anyone who cares about the future of our civilization would find “The End of Suburbia”, “An Inconvenient Truth”, and “Soylent Green” very thought provoking. “The Corporation” and “Manufacturing Consent” are two other movies I highly recommendend; they touch on the reasons why the general public is so blissfully unaware of how bad things really are economically and environmentally.

[Author]

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