May 10, 2007

Desperate would-be homedebtors doing anything they can to get out of it

You just know this is happening all over America today - would-be homedebtors (and "investors") who signed up to buy that can't-lose condo in Phoenix or new home in Florida who now realize that values have plummeted, and if they close they'll lose everything.


So they go to their developer, politely ask to cancel their contract and for their money back, and their going-bankrupt developer says "no way Jose, you're buying this debt-trap from us no matter what!".

Oh, this is ending ugly.

As Market Cools, Home Buyers Seek a Way Out

In the latest fallout from the housing market's decline, disputes are breaking out between builders and buyers who signed contracts for new homes and condos when the market was hot -- and now want to get out of them.

Even as many of the new buildings are completed, buyers are filing lawsuits claiming they were duped into purchases they couldn't afford, or victimized through fraudulent investment schemes. Some are scrutinizing their contracts looking for loopholes, or searching out tiny flaws in finished homes that might allow them to back out without losing their deposits.

For some builders, the disputes are contributing to cancellation rates as high as 30% and writedowns in some markets. "People will go to great lengths to get out of a legally binding transaction," said Larry Sorsby, chief financial officer of Hovnanian Enterprises Inc. "They were willing to ride the real-estate boom on the way up, but some are not willing to ride it on the way down."

Florida, a magnet for housing speculators in the boom, is ground zero for such disputes. The state long has been a boon to housing attorneys, some of whom are now filing lawsuits against developers.

24 comments:

Anonymous said...

Did they not think about that prices could go down before they signed? Doubling of home prices in a short 5 years didn't raise eyebrows?

Mark back in said...

Today is the red letter day - May 10, 2007 - the day retail sales tanked the worst since records were started in 1970. . . the consumer has hit the wall - China's market will collapse tomorrow on Chinjunk(tm) sales collapse. . .oil is still up, but even gold is down $15 as of this writing. . .the end if FINALLY here!!!!!

Anonymous said...

I thought real estate in Florida would never go down. What happened to all the millions of baby boomers flocking to "lovely" Floriduh? What about all the Eurpeans and Latins who were lining up with suitcases full of money to "invest" in Miami--that shithole that the REIC calls a sophisticaed center of culture and business---ha, ha, ha. Back to dealing Cocaine and Spic Whores........

Mort said...

Godzilla, my favorite!

Anonymous said...

Why don't you racist Americans stop buying "junks" from China then ? The American corporations exploit cheap Chinese labor AND they help suppress the wages there because Americans want everything cheap (consume consume consume!!!).. The factories that produced the cheap goods Americans consume have helped polluted the Chinese environment so bad that force the already poor Chinese farmers out into the city to get jobs with cheap wages. So stop your racist indignation about "Chinjunk".

Anonymous said...

get this, dated May 5, where have they been?

(on the ground reporting) MY ASS!!

But FORTUNE's on-the-ground reporting - in what up to now have been some of the nation's hottest areas - paints a very different picture: Contracts are being canceled, deals are drying up, prices are starting to drop. The psychology is shifting even as thousands of new homes and condos join the for-sale listings each day - so the downward pressure will only get worse.

http://tinyurl.com/mahbe

Ben Franklin said...

get this, dated May 5, where have they been?

(on the ground reporting) MY ASS!!


You owe Money magazine an apology, as that was dated May 5th, 2006: it's over a year old!

FWIW, it's a good article, and in my area it's already happened. Prices are down 20% from peak prices, and there's PLENTY of room for a further drop.... We still haven't even seen the effects of credit restriction in March 2007, as well sub-prime resets with defaults to follow. Bottom line is this party is just getting started.

Ben Franklin said...

OH, and FWIW, that Money magazine series features a great article (printed in 5/06) of how we got into this mess. It's called "unmasking the myths of real estate", and explains how and why this RE bubble got on a roll:

http://tinyurl.com/rgtxz

Guy Daley said...

Oh no, GOD HELP ME! The racist epithet was casually and thoughtlessly thrown once again. I think I've blown a gasket.

Why don't you racist Americans stop buying "junks" from China then ? The American corporations exploit cheap Chinese labor AND they help suppress the wages there because Americans want everything cheap (consume consume consume!!!)..

Well MISTER, have you ever picked a booger? Huh, well have you? YOUR A RACIST. What did that booger ever do to you? It just wanted a better life!

You ever mowed the grass? LIAR!! You have too and WHAT did the grass ever do to you?!!! RACIST!!!

Farfetched you think? No more than calling IMMIGRANTS A RACE!!!!

You halfwit, we can call stuff made in China junk if we want to. Because stuff made at Ford and GM IS junk, DOES THAT MAKE ANYBODY A RACIST!!!

It wouldn't matter if we poured our entire GDP into education. You can lead a horse to water but you CANNNOT make him drink.

westwest888 said...

"Why don't you racist Americans stop buying "junks" from China then ? The American corporations exploit cheap Chinese labor AND they help suppress the wages there because Americans want everything cheap (consume consume consume!!!).. The factories that produced the cheap goods Americans consume have helped polluted the Chinese environment so bad that force the already poor Chinese farmers out into the city to get jobs with cheap wages. So stop your racist indignation about "Chinjunk"."

Shouldn't the Chinese ISP you connect to have censored that?

turdly said...

Easiest way to tell what your neighborhood will drop to; 3 times yearly income of average person in your neighborhood. It historically always drops down to 2.5%, but I'm adding a bit for easy math. Really Really simple. If you live in a neighborhood in Santa Ana where average income is $45,000, it's 45x3=135k. If you want more house and a better neighborhood, you'll put more down to get into it. You can add whatever the REQUIRED down payment is to the formula. we're headed back to 20% as a rule, so you can add 20% to the equation for a value of 162k. HEY! that's what I paid for my house in Anaheim back in 1989.

That's exactly where we're headed. It's easy it's fun, and the rate starts at 11.5% for a libor with a 18% cap. Yeah!

Anonymous said...

Now , the real reason why builders did not want to lower their prices and gave incentives and cash backs instead for new buyers . If the homes went down in price all the pre-construction contracts would have a point about not being able to obtain financing or be able to get the appraisal on those pre-construction contract .


Just drop the price to current market conditions you greedy builders and stop trying to have your cake and eat it to on these contracts you wrote 2 years ago . You already committed fraud with your incentive and cash-back deals trying to keep the market inflated .

I don't blame you builders who want to charge the speculator a penalty for trying to get out of the deal , but what in the hell are you selling you whole tracts out to speculators for when the loan applications say they were going to occupy ? You marketed to speculators and now they want out so shame on you for telling the planning commissions you were building for the needs of the people .

Anonymous said...

"You halfwit, we can call stuff made in China junk if we want to. Because stuff made at Ford and GM IS junk, DOES THAT MAKE ANYBODY A RACIST!!!"

RACIST is the new term used by those that intend on raping you continually.

I'm tired of graffiti and taco music at 2am in my neighborhood. I'm tired of crime and having to push 1 for English. I'm tired of schools that speak only Spanish and have no intention of assimilating.

I'm tired of "made in China" and I'm tired of "made in Bangladesh". I'm tired of the white man becoming a third class citizen, and I'm tired of the white man not having the same voice as the La Raza cult.

Does this all make me a racist? Then I'm a racist.

Anonymous said...

Anyone try the favorite excuse, "my dog ate the loan paperwork"? :)

JAFO said...

Godzilla ? I don't get it. What does a fictional japanese monster have to do with anything?

JAFO

Anonymous said...

For some bizarre reason, I make Godzilla roars for every one of those frame shots. Am I going insane? I'm kind of old to be doing that stuff. Whatever! Must be the booze.

Anonymous said...

Talking about racism and Made in China, I'll tell a story to show you how this damn Keith blog goes far.

The first time I visited the US was in 1975, as a 10 year old tourist. That's right, the Disco era was booming and the most played song I heard EVERYWHERE was "Love Will Keep Us Together" from Capitain & Tennille. I loved that song, especially when I played pinball (remember those?) at American hotels.

I was a Brazilian kid who booked his own Disney trip after seeing a poster in a travel agency, on the way back from school. I've always been adventurous like that. America was a very different place those days, much nicer, and Disneyworld was just a few years old. Imagine that for a kid who came from a Latin country under siege by a military dictatorship, totally closed to imports. Nevertheless, most Brazilian families were doing pretty well those days, and I got to vacation in America for 15 days, during summer break. Brazil was freezing while Florida was hot like hell.

Those days, Brazilians valued that little American flag and the famous "Made in USA" on all the products we brought home. It meant quality, innovation, pride. Some of the American made products I brought home: banana skateboard (made of fiberglass and poli yellow wheels, wow!), Head tennis rackets, tennis gear (Lacoste made in the USA!), a bunch of "Hang Ten" shirts (remember those?), Converse tennis shoes, lots and lots of toys, horror masks from Disney, you guys had the best sweatshirts, etc. Man, that NASA giftshop was a dream for a kid, and I bought a cool astronaut jacket that cost a bundle. During 15 days, I blew US$500 bucks in 1975! Everything sold in America those days had the American flag and "Made in USA", and the quality was superb. Being a Brazilian from European heritage, we always admired the pride of American craftsmanshift. What happened to you guys? You totally sold out to the Chinese! Those days we could see that Americans had pride on their American made products. Now we don't even know where things come from. Sure, they are still well made because all the manufacturing techniques were transferred to Asia, but it feels different. I guess you had to experience America during the 70s, like I did, to know what I'm talking about.

During the trip, I went across street from the hotel to eat something at the convenience store (even that store concept was amazing to me!). So I made a hot dog, wrapped in foil, and put in a strange machine to heat it up. Man, that cashier came flying over the counter, screaming: "Noooooooo...!!!" (just like in the movies, in slow motion). I freaked out. He told me that the world could come to an end if I put foil inside a microwave. I thought that machine called "microwave", made in America, was one of the coolest things ever.

It was a great trip, full of American innovation. And your Coca-Cola, made of sugar cane and crushed ice (novelty), was the best. Even that sucks now, since it's made of corn syrup.

Now this is my favorite experience. I didn't noticed but I lost an American Express traveler's check of US$50 (yes, my family was loaded those days) inside Disney, and guess what? After I had arrived home, some honest American found and sent it back to me in Brazil. I thought: "what an amazing country!" What happened to you guys?

Brazilians are still the biggest tourist group in Disneyworld, as well as in Florida as a whole, including expenditures. Unfortunately, all the money is going to China. Well, it happened to Romans, Spain, England...history really repeats itself.

Sorry, you know Brazilians, we talk a lot while drinking "caipirinhas". Hey, c'mon over here to visit us sometime, you'll have a great time. Do you know that we can fill our cars with gas or ethanol at the same time? It all goes into the same tank, no need to empty the tank. If half tank is filled with gasoline, we can fill the other half with ethanol. Do you know how much more does it cost to add the technology? Only US$70...it's just a little plastic hose. The boys in Detroit and Exxon have been lying to you for a long time. Good luck!

Anonymous said...

God - Zirrrrrrrr - aaaaaaahhhhh!

Smug Bastard

Anonymous said...

"Sorry, you know Brazilians, we talk a lot while drinking "caipirinhas". "

Everyone I've met from Brazil seems pretty cool (including a gal I used to date who knows how to make those drinks - no wonder the Stones love playing in Brazil). I remember a lot of what you posted (banana board - what a trip!) and miss it too. I wish our country would focus more on relations within our own hemisphere and leave the Asians to do what will. Personally, I'd rather we had good relations with a country capable of producing a Santos-Dumont and killer coffee anyday over the Chinese.

Smug Bastard

Bitter Renter said...

Yeah, Brazilians are cool. I dated one for a summer who was working in the US. Hottest gay men in the world, those Brazilians.

But your country is a mess. 5 families have all the wealth and everyone else eats dirt. I imagine from your post yours was one of those families. The poverty rate is what, like 60%?

I read last week that major Brazilian cities are fifedoms of crime where the authorities have lost all control.

And thanks to the republicans in this country whose sole mission in life is to cater to counerpart American families like yours, we're on the path to looking more like Brazil. A few with wealth beyond the imagination and a majority that struggles just to live.

Anonymous said...

"And thanks to the republicans in this country whose sole mission in life is to cater to counerpart American families like yours, we're on the path to looking more like Brazil. A few with wealth beyond the imagination and a majority that struggles just to live."

And this doesn't apply to China or India?

The southern portion of Brazil had a lot of people from Italy and Germany immigrate there to escape the poverty that existed in their own countries. Very industrious, very grounded, very workmanlike people trying to better themselves but also humble -"as an Italian, it is o.k. to die poor but you may not die hungry" and very independent (Gauchos ROCK!) - sound familiar? They tried to secede from the remainder of Brazil at one time because some folks in the northeast (flatheads) wouldn't carry their own water. Mandatory voting is not a good idea when you are talking about huge uneducated populations that can be bought off with a meal. Brazil has its problems including a shrinking middle class - again, sound familiar?

Anonymous said...

throw these debt zombies out of the streets where they belong. Liiving in paradise for months years while sending home prices into the stratosphere.

welcome to the local homeless shelter dopes..

Anonymous said...

"Everyone I've met from Brazil seems pretty cool"

I'm glad that you had a good experience with us. Thanks for the kind words and for the interest in our culture. Come to visit Brazil someday, you will fall in love with the place, guaranteed. Our music is great, too. There are many Americans and Europeans moving to Brazil, seeking quality of life. But be careful in Rio or Sao Paulo.


"Yeah, Brazilians are cool. I dated one for a summer who was working in the US. Hottest gay men in the world, those Brazilians."

Thanks, Bitter Renter. The Brazilian girls are hot, too. For instance, most of the models on the Victoria's Secret catalog are Brazilian: Gisele, Adriana Lima, Alessandra Ambrosio, Isabeli Fontana, Izabel Goulart, Michelle Alves, Ana Beatriz Barros, etc) My friends, brother and I, have also dated many American girls.

"But your country is a mess."

We have problems but the ENTIRE country is not a mess. I live here and travel abroad often, so I can give you an honest opinion.

"5 families have all the wealth and everyone else eats dirt."

Not really, we have the same top 5% who control most of the wealth, exactly like any other country in the world, including the USA, England, Canada, France. Brazil is too big to have only 5 families controlling everything. You can read more about Brazil on wikipedia.

"I imagine from your post yours was one of those families."

No, my family is not within the top 5% of the wealthier class. I wish! Are you saying that just because I did a trip to Disney or play tennis I'm wealthy? You know, Brazil has dentists, doctors, lawyers, architects, entrepreneurs, accountants, small business owners, middle-class, like everywhere else. We also do travel to other countries during vacation like everybody else. Let's not try to generalize about countries and cultures, without having the facts straight. To give you an idea, the GDP of the state of Sao Paulo is bigger than the GDP of entire Argentina. And Brazil has the ninth biggest economy in the world. I think that our middle-class can afford a few trips during vacation and play sports. Again, please read more about the Brazilian economy on wikipedia.

"The poverty rate is what, like 60%?"

I'm not sure where you got that figure but it's off mark.

"I read last week that major Brazilian cities are fifedoms of crime where the authorities have lost all control."

Mainly Rio and Sao Paulo, but nobody lost control. As a matter of fact, Al Gore is in Rio right now for some major environmental event that will include free concerts from major international bands on Copacabana beach. You must have the wrong idea that Brazil is like Somalia or any other poor African nation. But we understand, lots of foreigners influenced by MSM think like that. We have our Comptons, South Central LAs, Bronxs, St Louis, like any gigantic country (i.e., many European countries fit inside our smaller states).

"And thanks to the republicans in this country whose sole mission in life is to cater to counerpart American families like yours, we're on the path to looking more like Brazil."

Again, my family is middle-class and the simple fact that we take vacations to visit other countries, and get to know other cultures better (including speaking other languages), doesn't make us elite by any means. In fact, Brazilians are traveling much more now that the dollar has sunken 60% in our country. Do you know that all Brazilian workers receive paid 30 days vacation / year and an extra salary on December? For example, if you make $3k per month (12 months x $3k = $36k), you would receive an extra $3k on December, making your annual total salary = $39k. It's not bonus or benefit; it's work legislation. Nice, huh?

Bitter Renter, you need to visit Brazil to change those erroneous views.

PS: I'm happy that Brazilian race car driver for the Ferrari team, Felipe Massa, won the second Gran Prix of Formula 1 on Sunday, this time in Barcelona. The next race is in Monaco, then in Indianapolis. The Brazilian race car drivers also win most Formula Indy races in the US.

Anonymous said...

"We have our Comptons, South Central LAs, Bronxs, St Louis, like any gigantic country (i.e., many European countries fit inside our smaller states)."

You are guilty of the same prejudices. I’m the one who wrote about Santos-Dumont (there’s a nice book called Wings of Madness about his story) killer coffee, industrious immigrants, etc. I’m writing from St. Louis. We have areas where crime is highly concentrated. Crime is highest in the north end of the city and parts of north St. Louis County. To the east, we have E. St. Louis, IL which is an old rust belt city with high poverty rates, illiteracy, crime, etc. Funny thing is, for a time in the 1980’s I worked door to door collections in that town for two years and I never had much of a problem – lucky I guess. Anyway, to generalize and lump the entire city into a “Watts, MO” bin is similar to what some did to Brazil – just on a different scale. I’ve never been there, but I suspect that Detroit has several livable areas if you know where to look. I would never agree with anyone who would maintain that Brazil is one giant favela. You might want to think about that.