The people we elect to public office should set a higher standard for conduct than ordinary citizens. If we are to trust them to make laws governing the rest of us, we should be able to rely on them to follow the rules rather than gaming the system to their advantage. Unfortunately, that’s not the world we live in. Many California lawmakers got caught up in the mania of the housing bubble, and when their faith in ever-increasing house prices was shaken, their ethics went on sabbatical.
Real estate bubble bursts for California lawmakers too
In the boom years, several California legislators bought homes but are now having trouble keeping up with mortgages or avoiding big losses.
By Patrick McGreevy, Los Angeles Times — August 6, 2012
SACRAMENTO — State lawmakers typically keep modest quarters near the Capitol to use when they’re in town, with help from their tax-free expense allowance of $28,000 a year.
Since state lawmakers are term limited, and since they are supposed to be residents of their home districts, buying a house is a speculative play on real estate values. They could rent a house with their tax-free expense allowance and be very comfortable. 
Assemblyman Tony Mendoza bought a three-bedroom home instead, paying $463,000 for it after his 2006 election.
“If you bought property, property values would go higher,” said the Democrat, whose main home is in Artesia. “So I figured as soon as I get there [Sacramento], I will buy the house.“
That’s the brilliant logic this guy used when considering a $463,000 investment? And we elected this guy to public office?
But now he is one of at least 10 legislators who didn’t fare well in a real estate climate that once showed no sign of cooling. The housing market tanked, the recession lingered and legislators’ pay was cut.
Unlike some predecessors who made handsome profits on second residences in Sacramento or in their districts before the downturn, these lawmakers have found themselves unable to pay their mortgages or stuck with homes that would sell at a loss, or both.
Being termed-out in 2004 was certainly a blessing to some who cashed out at the top of the bubble.
At least five have endured foreclosures or short sales. The others have hung on; to do so, at least three have depended on people who work for them — and in Mendoza’s case, on a campaign donor as well.
It sounds shady, but I don’t have a problem with politicians going to their campaign donors for help as long as such assistance is within contribution guidelines. 
This is money voluntarily given. I may not think the cause is very worthy, but apparently, those people do. If this is buying favors from the politician, then I have a real problem with it.
What I do think is very wrong is renting a room to an employee who the politician gives a raise. That’s a kickback. Politicians should not be allowed to have financial dealings with anyone in their employ.
As Mendoza nears the end of his final Assembly term, he says he owes $150,000 more on his Sacramento home than it’s worth. A longtime campaign contributor, Cecy Groom, who is also his accountant, rounded up investments of $42,000 to help him keep the home on Soaring Hawk Lane.
In filings required by the state, Mendoza reported receiving $6,000 each from Groom’s daughter and Beatriz Ricartti, a Los Angeles businesswoman who subsequently donated to Mendoza’s political coffers. Covina physician Shura Moreno invested $30,000.
Moreno is under investigation by the Los Angeles County district attorney’s office, and five employees of his East Los Angeles medical clinic await trial on charges of defrauding the state’s Medi-Cal system, prescription fraud and other offenses.
“I was totally shocked by that,” Mendoza said.
That looks really, really bad. Why did Moreno give the $30,000 if not for special favors?
Moreno would say only that he is not interested in taking over ownership of Mendoza’s house.
Sure, he is only interested in getting out of trouble through the lawmaker’s influence.
The lawmaker also rented a room in the house to fellow legislators and to Gabriella Villanueva, whom he hired in November 2010 as a legislative assistant for $60,000 a year. Villanueva paid him $500 a month in rent.
Villanueva said there was no tie between Mendoza’s giving her a job and her decision to rent from him,
LOL! Bullshit!
and she has since moved out, although she would not say when. She was hired just before a legislative pay cut was to take effect.
What a convenient time to hire a new employee and take her on as a boarder.
Mendoza has attributed his financial troubles partly to a salary cut, which cost him about $20,000. “I was paying the mortgage with that,” said Mendoza, whose annual compensation now is $123,000, including the tax-free per diem.
After taxes, that $20,000 a year was about $1,200 per month. He was not paying the mortgage with that. He was probably cut off from the housing ATM machine which stopped any Ponzi borrowing. That really would change his lifestyle.
He said he wants to avoid losing his house and the money he has put into it: “If I break even, I will be happy.”
If I were $150,000 underwater, I would be happy to break even too. Idiot.
At least two other legislators are getting help with personal finances by renting to their aides, their financial disclosures show.
Assemblywoman Mary Hayashi (D-Hayward) and her husband bought a home in Castro Valley, in the Bay Area, for $698,0000 in 2004. When they put it on the market for $499,000 last year, it didn’t sell.
The pair’s residence today is in Hayward, also in the Bay Area. Hayashi legislative aide Christopher Parmon and his husband, Chabot College Chancellor Joel Kinnamon, occupy the Castro Valley house.
Parmon said he asked to live there. The couple began renting in February 2010, less than a month after Hayashi gave Parmon a $7,500 raise, lifting his salary 10% to $82,440.
Parmon said the raise was unrelated to his move to his boss’ property and declined to say how much it costs to live in the home. Hayashi’s financial disclosures show Kinnamon paid her between $10,000 and $100,000 in rent last year.
Does that lie pass the giggle test? Does anyone on the planet believe the raise was not tied directly to bailing the boss out?
Apparently, drowning in debt and corruption is the least of Ms. Hayashi’s problems.
Hayashi, who in January pleaded no contest to shoplifting charges, did not return calls for comment.
Assemblyman Richard Gordon (D-Menlo Park) has an employee renting a San Francisco condo he bought for $680,000 four years ago. The county assessed the home’s value last year at $560,000.
The employee, field representative Joey Vaughn, pays Gordon more than $10,000 a year to live there. The lawmaker said he rents to Vaughn because he is trustworthy.
Yeah, right. He’s $120,000 underwater on a house he should never have purchased. Not his best investment.
Westminster Republican Van Tran chose a different route out of his dilemma. He estimates that he and his wife lost $300,000 on their second home in a short sale when he completed his Assembly term in 2010. His bank also lost money, although Tran said he could not recall how much.
Tran said the $783,000 Sacramento house seemed a safe investment after his election in 2004.
He gambled and lost. I doubt he lost $300,000. The bank probably lost much of that, particularly on a 2004 purchase that might have been 100% financed.
But by the time he moved back to Orange County six years later, he could not sell it for what he owed.
But “geographically, physically and financially,” he said, “it was untenable to hold onto the house.”
It was a dumb investment gone bad. Why would he hold it?
Assemblywoman Alyson Huber lost a million-dollar home to foreclosure in June. She said she could not afford two mortgages — one on that house, which she and her husband built in 2006, and one on another home they bought for $520,000 when they split up.
Congratulations! She lost twice!
The Democrat from El Dorado Hills, in the Sacramento area, said her husband stopped paying on the first home soon after she moved into the second one because it was worth less than they owed.
The x-husband strategically defaulted.
“I was legally obligated to pay,” the lawmaker acknowledged. But “I could not afford to pay his mortgage.”
And she got stuck with the bill.
Tim Huber did not return calls from The Times.
Former Democratic Assemblyman Mervyn Dymally of Compton left office in late 2008 and lost his Sacramento home to foreclosure seven months later, leaving unpaid debt and costs of $177,000, according to county records.
When he left town, he walked away from everything, including the debt on his underwater home.
In August 2009, the records also show, former Democratic Assemblyman Ed Chavez of La Puente had his Sacramento home foreclosed upon. His unpaid debt and costs were $302,000.
$302,000 in unpaid debt may be a record.
Neither official returned calls for comment.
Saving the worst for last…
One former state lawmaker defaulted twice. U.S. Rep. Laura Richardson, a Long Beach Democrat, walked away from her debt on a $535,000 home in Sacramento after she left the Assembly for Congress. The house was sold at auction but was returned to Richardson after she complained to her lender, Washington Mutual.
The congresswoman defaulted again and unloaded the property last year in a short sale for $320,000.
She walked away from a bad investment, used her influence as a Congresswoman to get special treatment from her lender, then she defaulted again and left the FDIC holding the bag. I imagine she voted for the tax forgiveness bill when it went through Congress.
All these politicians succumb to their own greed. They bought houses when they knew their time in Sacramento was limited for the sole purpose of making a profit on the sale. Their bad behavior in the aftermath is a microcosm of what everyone else is doing to game the system for whatever they can get.
Despite their believes to the contrary, they are not savvy real estate investors.
If you count the HELOC money, it was a good investment.
Perhaps the California legislators weren’t such bad investors. If they HELOCed the money like a Ponzi, they gained all the profit, and the bank ate all the losses. I don’t have access to their mortgage information to find out. However, I do have access to the records of thousands of Ponzis here in Orange County. Today’s featured property was owned by a guy who more than doubled his mortgage and sold the house to the bank at the peak. Other than losing the house, it worked out well for him.
- On 5/1/2002 this property was purchased for $299,000. The owner used a $239,200 first mortgage and a $59,800 down payment.
- On 3/18/2005 he refinanced with a $499,999 first mortgage.
- On 7/20/200, right at the peak, he obtained a $88,250 stand-alone second.
- Total property debt was $588,249. Total mortgage equity withdrawal was $349,049.
Perhaps it was a good investment after all.
We're sorry, but we couldn't find MLS # S708086 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
Proprietary OC Housing News home purchase analysis
5342 EDINGER Ave Huntington Beach, CA 92649
$449,900 …….. Asking Price
$299,000 ………. Purchase Price
5/1/2002 ………. Purchase Date
$150,900 ………. Gross Gain (Loss)
($23,920) ………… Commissions and Costs at 8%
============================================
$126,980 ………. Net Gain (Loss)
============================================
50.5% ………. Gross Percent Change
42.5% ………. Net Percent Change
3.9% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$449,900 …….. Asking Price
$15,747 ………… 3.5% Down FHA Financing
3.64% …………. Mortgage Interest Rate
30 ……………… Number of Years
$434,154 …….. Mortgage
$113,739 ………. Income Requirement
$1,984 ………… Monthly Mortgage Payment
$390 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$112 ………… Homeowners Insurance at 0.3%
$452 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$2,938 ………. Monthly Cash Outlays
($299) ………. Tax Savings
($667) ………. Equity Hidden in Payment
$19 ………….. Lost Income to Down Payment
$132 ………….. Maintenance and Replacement Reserves
============================================
$2,124 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$5,999 ………… Furnishing and Move In at 1% + $1,500
$5,999 ………… Closing Costs at 1% + $1,500
$4,342 ………… Interest Points
$15,747 ………… Down Payment
============================================
$32,086 ………. Total Cash Costs
$32,500 ………. Emergency Cash Reserves
============================================
$64,586 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
OC Housing News FREE Guides!
Click on the book cover for more information.
Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."  |
$480,000 15882 HUMMINGBIRD Ln |
0.17 miles 3 bd / 1.75 ba 1,626 Sq. Ft. |
|
 |
$525,000 6291 CITADEL |
1.14 miles 3 bd / 1.75 ba 2,000 Sq. Ft. |
|
 |
$549,000 4197 ANDROS Cir |
1.17 miles 3 bd / 2.25 ba 1,913 Sq. Ft. |
|
 |
$825,000 17221 BERLIN Ln |
1.22 miles 5 bd / 3 ba 1,860 Sq. Ft. |
|
 |
$670,000 6432 GLORIA Dr |
1.23 miles 4 bd / 2.25 ba 1,800 Sq. Ft. |
|
 |
$619,000 6571 WOODSIDE Cir |
1.29 miles 3 bd / 2 ba 1,550 Sq. Ft. |
|
 |
$799,900 5502 WENDY Cir |
1.38 miles 4 bd / 2.5 ba 1,920 Sq. Ft. |
|
 |
$960,000 17272 WAREHAM Ln |
1.39 miles 4 bd / 2.5 ba 1,927 Sq. Ft. |
|
 |
$619,000 6721 LAURELHURST Dr |
1.39 miles 4 bd / 2 ba 1,800 Sq. Ft. |
|
 |
$889,000 4641 WINTHROP Dr |
1.43 miles 3 bd / 2.5 ba 1,755 Sq. Ft. |
32 Responses to “California legislators are terrible real estate investors”
Sorry, the comment form is closed at this time.
‘Investing in a home’ ??? Total rubbish!
If you buy a home because you think the price is going to go up, that’s not investing in a home, it’s speculating.
‘Investing in a home’ ??? Total rubbish!!
If you buy a home because you think the price is going to go up, that’s not investing in a home, it’s speculating.
I believe we will see a revival of the real estate religion in California. As soon as people believe house prices have bottomed, kool aid will flow again, and all the fallacies which were thoroughly disproven during the house price collapse will return with a renewed faith. People’s desire to believe the fantasy is stronger than reality.
Yeap. People will blame the drop in housing prices on “evil Wall Street” or “broke families that should never have bought”; but they’ll never consider what houses should really “cost.”
Indeed, the kool-aid will flow again.
But, what good are prices that rise to a previous level where the debt-load could not be serviced and collapse ensued?
According to their customer, most realtors suck.
Customer Satisfaction with Real Estate Companies Falls to New Low
There are some things we tend to take as fundamental truths.
Just a few examples might include the law of gravity or how Treasury debt – even in the face of credit downgrades – remains beyond reproach for investors. Or how, given the choice between making safely innocuous remarks and off-the-cuff zingers that land him (and his boss) in hot water, Vice President Joseph Biden will probably choose the latter, if we take one recent gaffe as proof positive of the trend.
Nowadays, people may add to their roster the idea that home buyers and sellers seem to downright dislike their real estate companies.
According to a recent report by J.D. Power and Associates, home buyer satisfaction with national real estate companies fell to its lowest level in the history of the five-year-old survey, a record low on par with mortgage rates.
The firm said that overall satisfaction slipped to 789 on a 1,000-point scale, down from 797 in 2011. Seller satisfaction followed the trend by averaging 768, down from 779 from the same time frame.
“Although home buyers and sellers are aware of continuing challenges in the real estate market, a key reason satisfaction is down is that customer expectations are not being met, either in terms of sellers having to compromise on their listing price, or for buyers who are compromising on the home’s condition and size,” Christina Cooley, senior manager of the real estate practice at J.D. Power and Associates, offered in a statement.
“This is understandably frustrating all around,” she added.
The study tied real estate companies viewed more favorably by buyers and sellers to the frequency with which these companies capture a sizeable proportion of the listing price. The firm said that sellers report obtaining 89 percent of their listing prices from their real estate companies.
Several companies withstood the test of customer satisfaction – at least by the standards of 2,990 evaluations and more than 2,790 respondents. These included Keller Williams, which J.D. Power found ranking highest in both buyer and seller categories, with lofty scores among agents and salespeople to boot.
Buyers ranked Prudential Mortgage second after Keller Williams and sellers second-placed Coldwell Banker.
According to Cooley, companies like these “set themselves apart in terms of working closely with their customers and meeting their needs,” a courtesy that she says “may play an important role in both managing expectations, but more importantly, exceeding them.”
This isn’t the first time real estate companies wallowed near the bottom of customer satisfaction surveys. A Leads360 white paper from August last year found that only 21 percent of mortgage lenders made an effort to follow up with borrowers.
Then again – revealing just how wishy-washy these surveys sometimes are – the same report by J.D. Powers from July tracked a jump in customer satisfaction among servicers. Which maybe means that you should get the facts and find your own truth.
Hmm… so using the logic of the satisfaction surveys referenced in this article, in an analogy, the only way for both the Buyer and Seller teams in the 1-0 baseball game to be happy is to fire the umpires that call outs too often, and change the rules mid-game so it is required that each team gets at least 10 runs, and the final score must be at least 11-10. Doesn’t change the reality of the situation, but only what makes everyone feel good. So fickle…
The jump in satisfaction with servicers isn’t surprising. Most have improved drastically from a few years ago. The requirement that a single point of contact be assigned to a customer has made people less frustrated with mod documents getting lost, delayed approvals on short sales, etc.
Freddie-Fannie Push Bank Bad Debt Cost to $84 Billion: Mortgages
Fannie Mae and Freddie Mac have expanded efforts to get refunds on soured mortgages, boosting the cost of faulty home loans and foreclosures at the biggest U.S. banks since 2007 to at least $84 billion.
Bank of America Corp. (BAC), Wells Fargo & Co. (WFC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Ally Financial Inc. (ALLY), set aside almost $3 billion to buy back bad home loans in the first half of 2012, according to data compiled by Bloomberg. Regional lenders including SunTrust Banks Inc. (STI) disclosed at least $1.3 billion of added costs, exceeding their total for all of 2011.
“More and more financial institutions are reporting this and some of those that behaved themselves pretty well during the mortgage cycle are starting to see this happen,” said Blake Howells, an analyst with Becker Capital Management Inc., which oversees about $2.3 billion, including shares in JPMorgan and PNC Financial Services Group Inc. (PNC) “It certainly impairs earnings power.”
Fannie Mae and Freddie Mac (FMCC) are stepping up attempts to hunt down and sell back faulty mortgages bought from lenders during the U.S. housing bubble, according to bankers, investors and analysts. The goal is to whittle down the $190 billion cost of bailouts for the two taxpayer-backed firms. Investors’ concern about the potential damage helped push Bank of America’s stock down 40 percent since the end of 2010 and discouraged some banks from writing new mortgages, regulators have said.
“It sounds shady, but I don’t have a problem with politicians going to their campaign donors for help as long as such assistance is within contribution guidelines. This is money voluntarily given. I may not think the cause is very worthy, but apparently, those people do. If this is buying favors from the politician, then I have a real problem with it.”
Are you joking? It seems like you are being serious. The logic above is so tortured logic that I read it several times to ensure I had understood it correctly.
I’m going to analyze your assertions point by point.
“It sounds shady”
That’s far too tepid. I believe it is shady because giving money to an elected official for his own personal use inevitably leads to favoritism thereby undermining our government. It may or may not actually be bribery, but it certainly flirts with bribery.
“but I don’t have a problem with politicians going to their campaign donors for help as long as such assistance is within contribution guidelines.”
Our “contribution guidelines”, like many of our laws, are corrupt. Merely because something is legal does not make it just. To quote Oliver Wendell Holmes, Jr., “This is a court of law, young man, not a court of justice.” Or to quote Murphy, “He who has the gold makes the rules.”
“This is money voluntarily given.”
This statement is inane and foolish. Bribes to politicians are normally given voluntarily.
“I may not think the cause is very worthy, but apparently, those people do.”
What cause are you referring to? This isn’t the March of Dimes or United Way. I don’t think there’s a cause here at all. Instead of a cause, it seems there is an individual or perhaps a family.
“If this is buying favors from the politician, then I have a real problem with it.”
As for me, I was a real estate novice before I began reading this an your former blog a few years ago. I’ve learned a great deal from many of your postings on this blog and many of the readers’ comments as well.
I now have a very good theoretical understanding of the mechanics of cash flow investing in real estate. Over the next couple of years I intend to use that knowledge to invest in cash flow real estate. I am truly grateful to you and many of those who commented on this blog.
However, this blog has steadily decreased in quality over the last couple of years. Today’s post was particularly egregious. Giving or loaning money to politicians for their own personal (or family) use obviously buys favors from politicians.
Frankly, the subject matter you have chosen to write about is far too limited and changes far too slowly to justify daily updates. I think your readers would be better served with one substantial, well-considered posting as needed (say once every week or two) instead of daily posts in which you try to find stories that are newsworthy.
I subscribe to Doctor Housing Bubble and this blog via Google Reader. That way I don’t need to check to see when a new story is posted. Generally, I find the postings on this blog are better written and more insightful than those on Doctor Housing Bubble, but I appreciate that the posts on Doctor Housing Bubble are only occasional and meaty whereas those on this blog are increasingly becoming more obtuse and less valuable to me because too little significant content exists in this sphere to make for interesting daily posts.
As real estate agents quickly become anachronistic, much like stockbrokers and telephone operators, this blog itself isn’t likely to actually provide you with much in the way of monetary renumeration in the form clients for your real estate brokerage business. Apparently your attempt to persuade folks to invest in Sodom and Gomorrah, er, uh, I mean Las Vegas hasn’t worked out well because you seem to have essentially stopped promoting it.
Instead, this blog appears to have gradually transformed from a way to drum up new business to a hobby written by a man who is rapidly becoming a former real estate agent and who therefore needs to figure out another way to make a living for his family. Therefore, I’d encourage you focus more of your efforts on figuring out “what’s next for you” (how to make money for your family) instead of combing through the daily dross of real estate press releases and propaganda trying to scrape together daily meaningful blog posts.
Why are you so interested in my business, particularly when it’s none of yours?
It is difficult to find good subject matter for daily posts, but I enjoy writing, so I write. If people like it, then they read it. If they don’t, they don’t. I don’t see why that is a concern of yours. If you don’t find a daily post interesting, then don’t read it.
I stopped soliciting investment in Las Vegas is because the auction inventory dried up, and I am no longer able to deliver reasonably priced rental units and produce a profit for my fund investors. They now profit from rental income and appreciation on the properties the fund owns. It doesn’t make much sense to solicit business when I can’t perform. I have many people interested in such properties, and no properties to deliver. But again, this is none of your business as is how I provide for my family.
If you don’t like what this blog is transforming into, then don’t read it.
I’d just like to reiterate my thanks for your efforts on this blog. In my opinion, it’s probably the best source for “out of the box” thinking on real estate. There are many places to get RE numbers, but this is probably the best place to debate ideas, especially pertaining to OC.
Lansner had a great venue at one time but he lost his passion for RE sometime in 2010, letting things slide into a cesspool that eventually had to be shut down via required FB commenting. He seems to run his blog on cruise control now.
Calculated Risk has good content, but the comments section is unreadable.
This place is still fun and a good source of information. I wouldn’t have read today’s article had you not featured it and I think it’s important to know why our elected officials are motivated, in part, to make it a felony to foreclose on people.
I’m betting those that criticize you have no idea what it takes to run a blog or an investment fund. People like that have never taken a risk in their life. It’s easy to sit behind a keyboard and criticize others. They should try writing an article sometime and see how critical they would be after 3-4 hours of struggling to write something that somebody would want to read. It’s not easy and yet this is what you do every day. I’m actually amazed at how interesting you keep the content given that there’s not always a lot of RE news to report on.
Anyway, ignore the jackass that brought your family into it and keep up the good work
How about this? How about you add a new RSS feed in which you include your “Top Posts of the Week?” That way I, and others like me, could subscribe to that RSS feed. Some weeks you might choose three posts, other weeks one post, and perhaps other weeks no posts. That might help you broaden your appeal to folks who don’t want to become overwhelmed with too much information.
“Why are you so interested in my business, particularly when it’s none of yours?”
Of course I am interested in your business.
Like many bloggers, you are advertising your services and the services and products of others on this blog. As a reader (consumer) of this blog it is certainly my business to understand what motivates you because that will help me to understand your biases as well as your strengths and your weaknesses.
To some extent you are (or were) trying to make money as a celebrity. Like all celebrities, you were saying something like, “Come buy from me!” or “Come buy what I buy!” But now you are essentially claiming you want your privacy. You can’t have it both ways. If you want to put yourself out in the public eye to profit that your customers will naturally want to know what motivates you.
Let me give you just one example of how understanding your business helps me to understand your biases. You seem to be an itinerant real estate agent/developer/investor/writer who left his hometown in the upper MidWest (Wisconsin, if I recall correctly) and has regrettably yet to find a home.
Therefore, understandably to you the difference between owning and renting seems like, at least in large part, a business decision. However, to many folks around the world, throughout history, owning land in a community is part of their identity.
I suppose you have occupied many houses for a few years in various neighborhoods across the USA only to leave when a better opportunity arose. Therefore, you seem perplexed that more Americans who are deeply underwater don’t make the obviously good business choice of strategically defaulting.
I suspect they aren’t defaulting because they don’t see it as a business decision. Sure, most of them are probably deluding themselves into thinking that the house they bought in the nice neighborhood is essentially a home in an actual community.
Furthermore, you seem to be working hard to overcome the harsh reality that most of the jobs you’ve previously worked in as an adult are either gradually becoming obsolete or the demand for them is dramatically decreasing as large corporations swallow up small ones (thereby allowing one or two people working in one large corporation to do the job that say, ten other people used to do in ten smaller corporations).
The notion of buying properties at auction initially struck me as a very good one. I researched it very thoroughly. I ultimately realized it was utterly inane for me to even consider. I realized auctions would quickly dry up, if for no other reason, that that the big guys would move in and buy properties at lower prices because not only would their costs be lower for buying, fixing, and flipping (or holding), but the returns they would require would be lower than mine.
It’s akin to the Walmart or Home Depot strategy: lower your costs, lower your margins, increase your volume, and then dominate a market. I clearly saw your bias. As a real estate broker you were trying to figure out a way to make a living. Therefore, persuading folks to invest in your Las Vegas real estate investing fund made sense, to you. However, I resisted following your advice about buying at auctions because I realized I’d quickly be shut out of that game.
“It is difficult to find good subject matter for daily posts, but I enjoy writing, so I write.”
That, of course, is another bias. Much like many intelligent and thoughtful folks employed at daily newspapers, you are faced with a serious problem: you like teaching but there’s just not much new news (redundancy intentional) worth discussing each day.
That’s precisely why I suggested posting less often. I prefer quality over quantity.
“If people like it, then they read it. If they don’t, they don’t.”
I suspect that is generally correct but as for me, I don’t like much of what I read. I generally read to learn, not necessarily for pleasure. I find reading folks whose work I don’t like, and often disagree with, helps to give me insights I otherwise wouldn’t have.
“I don’t see why that is a concern of yours.”
I addressed this above.
“If you don’t find a daily post interesting, then don’t read it.”
I addressed this above too.
Over the years I have found much of your writing very valuable, although in the last year or so much less so than before. I have found your writing to be insightful, clear-headed, and very easy for me to follow.
Most of the other folks who write about real estate merely prattle on in a muddled manner that requires me to dissect their writing to understand what they actually mean. Furthermore, I agree with the vast majority of what you write. Whereas most of the of the other stuff I labor to read, seems like poorly disguised press releases and utterly nonsensical propaganda which I dismiss.
Therefore, I hope you will post better articles less frequently so that I don’t need to fish through what is increasingly becoming thin gruel in the hopes of finding some meaty bits.
Also, frankly I’m concerned you will burn out within another couple of years. Then I won’t benefit from reading what you write. Most of the blogs I’ve read over the years have been abandoned by the bloggers whose work I enjoyed reading.
Furthermore, I honestly do hope you are able to find a way to make a good living for your family. I don’t want you or them to suffer because you became too wrapped up in blogging to focus on making a living.
“I stopped soliciting investment in Las Vegas is because the auction inventory dried up, and I am no longer able to deliver reasonably priced rental units and produce a profit for my fund investors. They now profit from rental income and appreciation on the properties the fund owns. It doesn’t make much sense to solicit business when I can’t perform. I have many people interested in such properties, and no properties to deliver.”
Like I indicated above, a couple of years ago I assumed this would come to pass. Also, I eventually realized that Las Vegas is similar to Sodom and Gomorrah. Therefore, I expect people will tend to leave Las Vegas over the next couple of decades as they see the brutal toll living in “Sin City” takes on them and their families.
“But again, this is none of your business as is how I provide for my family.”
As I’ve explained above, I disagree with your contention. It’s a bit like a head of a Big Bank saying it’s none of our business how he provides for his family. I wonder how you would react if he commented to you, “Mind your own business and go bank somewhere else if you don’t like the way I choose to make a living for my family!”
“If you don’t like what this blog is transforming into, then don’t read it.”
Like most people, you enjoy preaching to the choir and discourage carefully considered criticism. Most of your critics stopped posting comments on this and your previous blog long ago because you pushed them away. I encourage you to go back and read some of your blog postings from, say, 4 years ago. There used to be far more interesting discussions on them.
You are headed down a dark and lonely road that always ends in precisely the same place: self righteous despotism. Julius Caesar and Napoleon Bonaparte are a couple of well-known figugures who have traveled down that path. They enjoyed fabulous power, glory, and wealth but their behavior was abhorrent and savage. Please don’t descend to those depths which Dante plumbs in “The Inferno.”
Instead, plese open your heart and your mind to carefully considered criticisms so that you may help to bring earth up to heaven and heaven down to earth. It’s a lofty goal. But why not “take the high road?” Why don’t you stop pandering to your loyal readers with increasingly sensationalist articles, and instead post more of the solid, well-considered articles like you did a couple/few years ago on your previous blog. It’s sad watching this blog, much like CalculatedRisk, gradually become fluffier and fluffier. You used to write some really great stuff. I miss those articles.
Whoa dude, I think it’s actually quite appropriate to have a story pointed out in how our CA legislators participated full-blast in the housing bubble mania, and the ramifications it has/had for our state. The same state drowning itself in debt and fiscal calamity right now in 2012.
I happen to enjoy most if not all IR’s daily posts, especially since I don’t have time to troll the entire internet to find relevant real-estate stories. Keep it up, Larry!
Man, it’s like coming over to someone’s house and leaving muddy shoeprints all over the carpet. Plain rude and petty.
Not Given sounds like the guy who shows up at your party, gets rip roaring drunk and ends up puking all over your bathroom and then denies it the next day. I know the type!
I think this is a great post. Showing how our elected “leaders” in CA are no different than the average Joe caught up in the housing bubble. Walking away or short selling is just a business decision. I would much rather their campaign contributors help them out instead of forcing me to pay for their mistakes.
Your statement about political contributors getting favors in return is laughable. This has been going on since the beginning of time, you act like this is something new and groundbreaking. If you don’t like it, start a movement to change the laws…good luck with that one!
I hope your “very good theoretical understanding of the mechanics of cash flow investing in real estate” works out because i’d hate for any of my tax dollars to be spent on bailing you out when it all goes pear shaped..
Not Given,
IR didn’t write for you, for me or for anyone else. He writes for himself (like a dialogue to me) so stop “encourage” him doing things you want him to do to benefit you the way you think it “ought” to be.
Good luck with your “theoretical understanding of…” because with a mindset like that, you probably will need a lot of luck more to compensate the theory with the practice because in theory, everything works but in practice, hahahaha ….
None Given –
If you’d like to improve the content, here why not submit an interesting post? Share your real estate insights with us. Give it a whirl.
My .02c
As someone who had a blog for a awhile, I found those who thought they knew something about me or my motivations hilarious. The truly quixotic were those who told me how and what I should write on my blog. Huh? And the advice was usually given by those whom I explicitly told I cared not one whit for their opinion of me. And when I would ignore them, they would become particularly vociferous, strident, and angry.
Carry on the good fight IR. Even if you are wrong about the revival of the real estate religion.
Some of them appear to just have bad timing. They made a legit purchase (no kick back money), the value when down, they’re underwater and strategically default. There are plenty of Sac. law make who raided the housing piggy bank, extracted $$$ from the equality by refinancing, then strategically defaulted.
Sac was hit hard with the “right pricing” of houses. The prices returned where they should have been. Stockton is another example of right pricing. Who wants to commute 1.5 to 2 hours every day to San Francisco? If they lost their job in San Francisco and had to get a job that needed a rapid transit transfer from the train, that added another 15 to 40 minutes. The lure of a large house is no substitute for real family time for those commuter, especially if they have a job from Hell. The so-called “buying a home” was really buying a house that cause so much pressure that it wrecked the home. Some rented an apartment and just “when home on weekends”.
Transferring money to politicians are bribes when the politicians get caught. “I was honest until I was tempered by the bribe for xxxx.” In my experience, the “bribe” is explicated or is suggested or else will happen. The money payment really isn’t a bribe, but extortion. In the US, the “bribes” are usually for something on is not legally entitled to get or to avoid, while the bribes in Asia are to get what on is legally entitled to get.
This is terrible! Politicians must be taking lessons in ethics from bankers!
Time for an MBS-land sell-off carnage update……….
via MND-MBS live commentary: 8/16:
Convexity Snowball Is Rolling! Reprices A Near Certainty.
For you NOT to see a reprice for the worse today, MBS would have to stop on a dime, turn 180 degrees and rally like there’s no tomorrow.
As it stands, the selling is now getting into territory that’s causing convexity selling in lower coupon MBS, further perpetuating the overall snowball.
Fannie 3.0′s are down to 101-28, lowest since May. 102-00 was a major pivot point. 10yr yields up to 1.85. Maybe support at 1.857 overnight high? If not, then all bets are off as to where the knife drops.
This is not a drill. It’s getting ugly.
————————————————————————-
Have a nice day.
I am guessing I should be happy I have no idea what el O is saying.
Lo siento amigo.
In other words, mort rates are headed up
It’s disturbing how happy this makes you.
Well, bought some TBT last Tues but just closed-out on the 17th, my short BBY position opened back in early April. Hardly disturbing
Speaking of Cali….
Retail sales rising? Not in California, Where Sales Tax Collections Plunge Amazing 40% YoY
http://globaleconomicanalysis.blogspot.com/2012/08/retail-sales-rise-not-in-california.html
California is done for. It will probably limp along for a few more years, but the day of reckoning is approaching fast. Many things will be FORCED to change…
That’s why politicians are so desperate to get the HELOC money flowing again. It’s the only way to get back to previous spending levels.
Meanwhile in NV our unemployment rate is back up to 12%.
With all the talk of lower unemployment and improved economy, one would expect better increasing not decreasing sale tax revenues for CA. Possible stocking up in other states or Mexico are causing the declining CA sales tax revenues. With the tax at 7-8% in most area, people state to find ways to avoid them – bartering, buying out of state, and merchants not forwarding the tax to the state. However, I don’t see increasing sales – traffic volume at the store, only increasing prices.
Real estate may be over but the nature is and will be our faithful friend.