Monday, January 21, 2008

"I thought a Realtor would work hard".

The Orange County Register picks up an excellent story today "Humbled Homesellers" of two very frustrated homesellers in Tustin and Laguna Hills.
Months and months of open houses, advertising, changes in realtors and even changes in sales tactics.

Nothing. Not a bite. Not even a serious nibble. Just frustration and more waiting.

One cannot help but wonder at this stage of the collossal housing market meltdown in southern California, how many more families are out there in Orange County who find themselves in similar dire straits like Ms. Freeman or Mr. Beyer?

A combination of "bad luck" and "bad timing".


Could it also be an example of everyday Americans - knowingly or unknowingly -caught up in the hype of the Orange County housing market? Only now, in the end, do people begin to understand. The OC housing market, pumped up by the N.A.R., local Realtors and carefree lending practices was but a massive "house of cards".

It's foundation?

A stack of thin paper. Easy-access, high-risk, undocumented mortgage financing, appraisers colluding with savings and loan institutions, realtors refraining "it's a great time to buy" and "real estate prices are not going down", "Get in now-they're not making real estate anymore", "Monthly payments will adjust on this house, but you can always refinance" - that sent the values of homes in Orange County to all-time highs at a scorching rate of incline that few had ever seen before.

It all seemed perfectly normal for a time. Surely, it must be all be based on sound economic principles and conditions. You buy a home for $500,000. You sell it later for $750,000. Easy as pie! I mean, that's what the realtor said all along. No problem. That's what the Jones' across the street did too. And they have an SUV, a boat in Newport Beach harbour, and damn it if they didn't just put in a new granite countertop kitchen in their new home with a HELOC.

No. Peel the onion. It was all a huge lie.

These homes aren't worth $750,000. Hell, they weren't even worth $500,000. It's not a mutual fund or a stock or a company or a business that produces shit, sells it to the market, and has a balance sheet. It's a freaking house. It's a place to live. Somehow people have forgotten that. But more importantly, we seem to have forgotten what makes common sense in terms of home financing and home prices. Millions of Americans are in denial as to what they can really afford. If they had that common sense in the first place, then the number of Americans carrying a credit card balance of $5000.00 or more would be the exception. It is not.

The average resident of Orange County, given his/her median income of around $68,000, can only afford at maximum a $350,000 using financially sound mortgages without a serious risk to his/her personal budget. How does this jive with a single family home, 3 bed, and 2.5 bath market that is asking for $500,000 in Tustin, Lake Forest, Irvine or Laguna Niguel?

It's all well and good to be in debt for that house and to listen to Realtors who say "we'll put it out there at $750K".

That's irrelevant. It doesn't matter what home you have or what you paid for it. All that matters now is that it can be sold and whether there is a bigger fool out there to buy it.

Most of those "fools", or financial inepts, as I like to call them, are still out there. Yes, they CAN BE FOUND! Because if subprime loans where still available, these fools would make use of as many of them as possible. They don't bother to read any fine print or judiciously review their personal budget. They want a house. But like scared sheep, now these fools know something is happening, and that for some reasoning still incomprehensible to them, it just isn't a good time to buy a home. All the same, this pause is action to buy is devastating for desperate homesellers and probably the Hobby Realtors out there as well.

There are people like me, who are renting right now in Orange County, who would love to buy a home. It does makes sense long-term to buy a home. But the price has to be right. The house has to fit. The financing instrument has to make sense. I want to make my mortgage payments ever month forever. I don't want to foreclose or pass the obligation or declare bankruptcy. If I have a family, I want to watch my monthly budget and try to have money left over that I can save or use to finance other things like education, vacations, etc.

It is of no consolation to Ms. Freeman or Mr. Beyer that they are not alone in Orange County in trying to offload their American nightmare.
The comment by Mr. Beyer of Laguna Hills was particularly noteworthy. Mr. Beyer, who after months of frustration, is now left with no option but to try to auction off his beautiful million dollar Orange Couty home: "I thought a Realtor would work hard".
At this stage of the market, there isn't much a Realtor can do.

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