I was watching the daily show the other night where Jon Stewart lambasted the “expert advice” of  CNBC and Rick Santelli specifically on his “Fu&c the homeowners” rant on Wall Street. Pretty funny. Don’t need to watch the whole thing. A few minutes should give you the gist.

And I agree with Stewart for the most part, but having been a real estate broker myself at the height of the flip ‘n greed phase, I’m also a bit in the “fu*k the homeowner” camp too. 

 

Watch this video below, and we will talk about it some more.

  

Now we see from the video that we have a School bus driver that is in danger of losing her $800,000 house to foreclosure. Yes EIGHT HUNDRED FRIGGIN THOUSAND DOLLARS. Was it an inheritance gift, nope. Is she like the CEO of Bus Drivers America? Nope. She is just an ordinary run of the mill bus driver. 

I don’t believe there is any shame in being a bus driver. BUT, I would have to guess that an $800k house is stretching the pocketbook for the majority of even well-to-do Americans.  At the height of my fancy pants days, I lived in a house that was $500k. I was making about $150k a year base and about $100k more in stock, bonuses and options.  And I really thought that was a stretch.  When I moved to Florida, I seriously downsized. Yes, I miss the marble floors and everything, but not enough to carry more than twice the mortgage I have now.

These days, I live in an average $250k home that I bought at the time for about $150k and pimped. It’s in an average neighborhood; with an average mortgage of about $1300 a month included all taxes and all the crap.  The point though, is that when I moved down to Florida, I COULD have bought a $700k house in cash! 

I didn’t because:

  1. I have a brain.
  2. That brain told me that buying something that expensive was just retarded, and unnecessary
  3. That brain also told me that there might be a rainy day sometime in the future (and there has been).  That I might be better off squirreling some of that cash away in case I ever need it, and it might as well be making me money at the same time. 

 

So did I buy that $700k house? No.  Because that would be just stupid. I put some in savings, some in retirement, some in the stock market, some in rental properties, and some in my business.   But yet you have this woman, who I am guessing maybe makes $30-60k a year with a mortgage of $4796 a month not including things like taxes, insurance, PMI, utilities, and maintenance on that behemoth.

 

What is does she have to say about it? 

Bus driver Minta Garcia admits that she and her husband bought more house than they could afford, but she said “the lender made the purchase all too easy.”  Now the home that she purchased for $800K is worth $675K and she wants Obama to “Stop the foreclosures”. 

Seriously? Just FUCK YOU!

At some point you have to take responsibility for your stupidity.  I hope you lose the house, kill your future credit, be forced to wear a sign highlighting your stupidity, and have to ask your local church for cheese.  Vanity and/or laziness made you buy that house and you deserve to be at the reverse end of the spectrum for a while. 

Please understand that I am FAR FROM SAYING that the banks didn’t do anything wrong.  Back then, banks were lending 95%+ on primary mortgages, and there was a booming business for “hard money” loans to cover the difference.  They should definitely have known better.  I believe that them going out of business is just Karma. I think what they did was criminal in some cases, but at the very minimum it was just plain ‘ole greed and most of them will get what is coming to them. 

 

So now we have 2 camps of people screwed in the housing mess. 

Camp 1: The people who bit off more they can chew AND investors who were looking for a quick flip and easy money.  Those are my Fu*k you camp. 

Camp 2:Then you have people who either bought within their means, or invested for the right reasons, but are now screwed because the property is not worth what they paid for it because of assholes in Camp 1. 

I am personally in the second camp. I own my home in Florida, but I also own 2 rental properties near the university.  I bought my rental properties for the right reason (not to flip but because they had a decent CAP rate, I got them WELL below market value, and they were stand-alone money makers) 

Because I bought my rental properties correctly, they are still doing fairly well.  As long as I keep renting them out, even at a discounted rate, I’m just fine.  However, there is a good chance that I am going to be moving far away in a few months.  That leaves me in a conundrum.  The market value on my house is about 70% of what it really should be, and my investment properties are probably between 50 and 60% of what they should be. 

I now have to decide between selling them at breakeven (and in one case taking a loss of about $20-30k) or holding on to them and worrying about finding a property manager I can trust (harder than you think) with the possibility carrying about $2500 a month in debt if I can’t get them rented out.  Yes, I planned ahead and build into my investment model 10% as a vacancy allowance, but that will only carry me so far.  There is also the real possibility that they will take a year or more to sell even at a discounted price.  

That’s a real concern. 

I’m guessing that is not so different from the scenario for a lot of Americans.  For whatever reasons, they need to move away (lost job, new job, etc) and they have a house that is now worth less than they paid for it.  Since their old house ain’t moving anytime soon, they probably will not be able to get a loan for the new house at their new location.

If they sell their current house, they lose money. If they keep their current house, they will either not be able to get a loan for a new house, or if they do, have to deal with the headache and possible financial crutch of having to pay the mortgage on TWO houses if they can’t rent the other. 

Tough call.

 

Will a housing bailout help? 

I really don’t think so.  Any experienced realtor or broker will tell you that the housing market is cyclical, typically on 5 year swings.  Sometimes they coincide with a stock market downturn, sometimes they don’t. 

I do believe that this is going to be a longer than 5 year swing, and much deeper than others.  This is because the level of greed and stupidity far surpassed anything we have seen before. 

But, given how slow the housing market usually responds to anything, I can’t imagine ANY difference happening from a housing bailout.  

If the government decides on a foreclosure bailout, then maybe some more people will stay in their homes.  That means a few less houses on the market.  The problem is, that there are still SO MANY properties on the market now (not even talking about foreclosure properties), that all those will still need to be absorbed before we see any change in property values.   And that takes a long time in the best of scenarios.  Like multiple years long.  Until demand again exceeds supply, property values won’t get better.  No housing stimulus is going to make that happen. 

And until the economic situation improves, consumer confidence rebounds, and we get a little glimmer of greed and vanity back again (a little is a good thing), I just don’t see a whole lot of people going out and buying stuff. 

Well that’s just my take. Would love to hear what you guys have to say about it. 

JJ
 

Stay cool… and if you in the mood for something lighter, and are not easily offended, check out the new site.  www.shortbushumor.com