Two years after the infamous goo-goo-for-housing cover, and two years of absolutely no reporting on the mortgage meltdown, the housing crash or what's really happening in America, TIME Magazine FINALLY wakes up, does their job, and runs a story on the crash.
FINALLY
It was also nice to see recurrent HP themes of kudzu in the South and "Ponzi Scheme" show up in the article. Glad we could help.
Hey TIME - What took so long? Next time put it on the cover where it belongs. Here's a few article highlights. Maybe Newsweek will follow with a story (since that's what these two lazy lemmings do)
If Wall Street wants to get even more worried about the real estate market, it need look no further than southern California. There, the culprits aren't just the bad-credit borrowers whom banks and lenders loaded up with ballooning debt to purchase their dream homes. The well-to-do have partaken of those treacherous loans as well. And now everyone is hard pressed to pay as interest rates rise.
The spectacularly bad trend was coupled with news from mega-mortgage lender Countrywide Financial that homeowners with good credit are starting to fall behind on mortgage payments. It has all contributed to a contagiously pessimistic mood. "We thought the upper end of the market was immune," says Steve Johnson, of real estate consulting firm Metrostudy. "But this is now like Kudzu in the South, spreading into all product types in the southern California housing market."
With home values increasing by double digits annually, "people began buying houses they couldn't afford under the theory that the more house you buy, the more wealth you have once it appreciates," he says. "It's kind of a Ponzi scheme on a mass scale. But there has to be an end at some point."
If Wall Street wants to get even more worried about the real estate market, it need look no further than southern California. There, the culprits aren't just the bad-credit borrowers whom banks and lenders loaded up with ballooning debt to purchase their dream homes. The well-to-do have partaken of those treacherous loans as well. And now everyone is hard pressed to pay as interest rates rise.
The spectacularly bad trend was coupled with news from mega-mortgage lender Countrywide Financial that homeowners with good credit are starting to fall behind on mortgage payments. It has all contributed to a contagiously pessimistic mood. "We thought the upper end of the market was immune," says Steve Johnson, of real estate consulting firm Metrostudy. "But this is now like Kudzu in the South, spreading into all product types in the southern California housing market."
With home values increasing by double digits annually, "people began buying houses they couldn't afford under the theory that the more house you buy, the more wealth you have once it appreciates," he says. "It's kind of a Ponzi scheme on a mass scale. But there has to be an end at some point."
38 comments:
The odd thing about it all is that they are partnered w/ CNN which has been pretty fair in regard to housing news.
Nice; TIME came through. I still think a cover story for them is years off. Something with the image portraying record homeless numbers juxtaposed to record vacant REOs (scary). To have a major story, many events have to already be historical. MSM is not forward looking.
The time article is highlighting the same thing that is happening all around the big bubble metro areas.
1-Many buyers are priced out of the close in areas.
2-The go to the exburbs, purchase w/ exotic loans and think they've achieved the American dream.
3-Faux wealthy flippers from the inner metro areas HELOC their homes and buy spec houses to flip in the exburbs.
4-2 & 3 artificially inflate housing prices in the exburbs.
5-High oil, coupled with exotic loan resets push the new american dream wannabes to the wall & forclosures start wiping out housing values in the exburbs.
6-Flippers get sucked up in the under tow of foreclosures as the drop in housing values ripples.
7-The result is the mess we see unfolding before our eyes.
Good luck!!
Time hit the top of the market... that was the signal to sell... now, this must mean we've hit the bottom... this is the signal to buy...
Celebrity socialite Paris Hilton has put her Los Angeles house on the market. Ms. Hilton paid about $2.9 million for the four-bedroom residence in 2004.
Ms. Hilton's home measures about 3,000 square-feet and sits on a 7,000 square-foot lot. Her uncle, Mauricio Umansky, of Hilton & Hyland, Beverly Hills, has the listing.
Price run-ups were outragous here
in Southern Ca., especially alone the coast and beach-cities (Belmont Shore, Seal Beach, Huntington Beach, Aliso Viejo, etc..)
If you drive through these areas and really take a good look at the residential living areas, street access and surrounding conjestion, you'll realize it's been over speculated *big time*.
Now, that the *true worth* of these properties are coming to light, concerns about selling are hitting these residents as well.
For the media, or anyone, to believe that this problem is only contained to a particular group of borrowers is pure fantasy.
Southern California! Schadenfreude!
Talk about ostentatious! The number of people you see here driving Hummers, BMW's, Escalades, its unbelievable! And to think that a large number of these people got their fancy cars, boats and big vacations- this all came from funny money- cash out refi or HELOC.
How could it be otherwise? I know of one person whose husband quit his job because, all of a sudden, just because they own a f@#*ing house in Orange County (The big OC)all of sudden they think they're wealthy! So they buy all these toys and go on expensive vacations and, worst of all, look down on other people who drive second hand cars but LIVE WITHIN THEIR MEANS.
But they're not the only ones who think this way. Its a social, cultural pathology that's unique to Southern California.
But Now the chickens are coming home to roost, foreclosures are up 800% year over year, and just about everyone I know has this impending sense of anxiety.
I for one am ecstatic! I guess there's a better word for it: Schadenfreude! or F U !
Sincerely
Guy Laughing at the Flippers
We'll see how much those homes are worth when they're surrounded by 20 million illiterate illegal immigrants and their streetgang offspring. When the brownies become the majority, they will take their vengeance out on those who "stole" the land that they "stole" from the Native Americans.
Considering Time is always "a day late and a dollar short," maybe it is time to buy??? They usually run a story after the peak of whatever. . . "everyone is buying Beannie Babbies" "Hula Hoop Craze Sweeps the Country" . . .on the other hand - now I can quote Time magazine to my friends about the PONZI scheme!!
"Time hit the top of the market... that was the signal to sell... now, this must mean we've hit the bottom... this is the signal to buy..."
What are you smoking?
"Time hit the top of the market... that was the signal to sell... now, this must mean we've hit the bottom... this is the signal to buy..."
The former was a cover story and the latter is not. Big difference.
We're not even close to "hitting bottom".
Sellers who want to sell, can't.
Most buyers are still out-priced
from getting into a start house,
not to mention the every tightening credit standards.
Prices have a long way to fall still.
Anonymous said...
Time hit the top of the market... that was the signal to sell... now, this must mean we've hit the bottom... this is the signal to buy...
Just wait until lots of Californicators don't pay their taxes. The governator will administer shakedown beatings 24/7. Dyah!!!!!!!!!!!!!!!!
Houses unable to be sold will hit the rental market, driving down rents, until China buys CA out of debtors prison. Then 50 million chinese relocate to "New China".
The real fun begins when the repo men come for the boobjobs.
ANON : "unsold houses now hitting rental market will drive down rents." This is already happening here in SD - if you go on Craigslist (try also for Phoenix, LA, etc.) under apartments/rent - search on "reduced". . .I got 34 hits today - two months ago I would average about 5 to 10. . .there are for-rent signs on almost every building downtown. . .
http://abcnews.go.com/Business/IndustryInfo/comments?type=story&id=3412789
Having a discussion on the ABC site about the housing market. Everybody going 'should I buy, should I buy??'..was going to tell them about this site, but had to leave too much personal info. If anybody has the guts, just get in there and tell them about this place. Would surely save some lives. This is not only informative, but very entertaining..my favorite site.
this focus on owning and getting more shows me a craving that will never be filled
Anonymous said...
http://abcnews.go.com/Business/IndustryInfo/comments?type=story&id=3412789
Having a discussion on the ABC site about the housing market. Everybody going 'should I buy, should I buy??'..was going to tell them about this site, but had to leave too much personal info. If anybody has the guts, just get in there and tell them about this place. Would surely save some lives. This is not only informative, but very entertaining..my favorite site.
July 28, 2007 9:39 PM
What kind of personal information?
I think we should sell California to the Chinese for $10 trillion. That would wipe out our national debt in one fell swoop and give us an extra trillion. After that, pass a Balanced-Budget Amendment so that we never get in this mess again. We put the extra trillion in the Social Security fund and raise the minimum age to 70 and increase it on a 1:5 ratio going forward since people live longer.
California land will only lose value in the coming years. The Chinese need more land for their 1.3 billion people. They already own all the ports on the West Coast. Besides, if we don't sell now, the Mexicans will own it in a decade or two anyways. We might as well let the Chinese and Mexicans fight over the land.
"It's kind of a Ponzi scheme on a mass scale. But there has to be an end at some point."
LauraVella said: Everyone...I mean everyone who bought home in the last 7 years, be it- good credit, bad credit, or no credit, all of them will be in some sort of trouble.
An end will not occur until homes prices come back down to earth. How ever long that is.
While it has occurred to me that while it might be a good time to sell the house before it it really gets bad, it's also apparent nobody is buying.
A twenty-y-o 2/2 townhouse, with three others up for sale within stone-throwing distance, is not a exactly going to attract them like horse-flies to shite.
But I might just have stumbled on to the right solution.
Being in a positive equity position, perhaps doing what nobody else is willing to do- sell at a drastic reduction, below current market, and undercut our competition (3/2 with tiny garages)- mebbe we could still (if not too drastic) walk away with some cash.
It's the only play I see-- if only the wife were on board.
But what am I, a psychic? Maybe it won't get too bad, and we'll hold our value.
Maybe the people in Washington an Brussels and Beijing and Moscow know what they're doing, and are looking out for the interest us wee wage slaves.
I don't agree that everyone will be in trouble. There are many homes across the non-bubble areas with good employment taht were bought for less than $150K the past few years. I passed up on a Fannie REO back in 2002 for $149K. It was built in a very good golf-course community. Having just graduated from college and being single, I didn't feel like buying a house yet. It was a 2500sf 4/2.5 with the backyard facing a golf course.
People who bought in Florida, California, Mass, Jersey, Virginia etc after 2002 and didn't sell are the ones who will be under water. People who HELOC'ed and cash-out refied for vacations, cars and boob jobs will be in trouble.
Unfortunately it will affect the entire economy due to the credit backlash. Neocons and liberals ruined the country.
LauraVella said: Check out your local neighborhoods- if homes were once taken care of, with nice landscaping & flowers to brown grass and lack of attention, and it appears no one is ever home - they are probably in some sort of trouble.
Report from Birminghan.. tucked in amongst all the 'for sale' signs were some 'Ron Paul Revolution' signs.
I swear, this whole thing depress's me almost as much as 911, even tho I don't own, just feel sorry for all the people who got screwed by such a ruthless 'ponzi scheme' as you call it. Bet Kieth won't post this as he doesn't most of my dweeb comments.
I don't know how many of you have experience with financial/credit/asset bubbles. I have some from Asia. So allow me one comment:
Bubbles can go on for YEARS and YEARS at a seeming peak before they pop. Any rational person would have expected our obscene real estate bubble in the US to have popped two years ago.
It may very well drag on for two more years. Or five. Yes, I know that seems unlikely, but it is possible.
Anonymous said...
"Neocons and liberals ruined the country."
No ... greed in all it's forms, across all race and class lines is what has led to this problem.
"I don't agree that everyone will be in trouble."
38% of the economy is in housing; so a slowdown in housing impacts a lot more than you think.
I have a realtor friend who is shitting bricks. Good thing his wife is beautiful and has a good job making six figures. He told me he might become Mr Mom if things don't get better. He's wasting gas money driving around and paying for daycare while not bringing home any bacon.
It's about Time! Lol, but I agree with the idea a cover story from them is more likely to signal the real bottom.
But the guy on "Flip this house" just made 120K in 6 weeks...?
Neocons and liberals ruined the country.
Neocons started the endless war with the full support of the Republican party, so I got you there. How exactly are the liberals responsible?
The country was ruined well before the Iraq War.
Republican and Democratic activists are all loonies.
The liberals went along willingly with the Neocons, so they are just as culpable in this mess. They have shown no leadership now that they have a slim majority.
Ron Paul is the ONLY person in the presidential race that is untainted by this war. If he doesn't win, this nation may be f^@%ed forever.
but remmber falling values should equal falling property taxes, which will neve be as the local vulture leeches have tax and spent more than then received and have plans to tax and spend more and more and more
and try to put an end to the job position itself. imposible...........
20 pErcent less bacon in the mass mess of expensive packaging that tripled in price in the last 4 years...but??inflation is well contained...perhaps like the packaging...but no price increase this time
I resemble this thread!
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