Apr012014
Would permitting in-law units destroy good neighborhoods?
Population pressure and high home prices prompt homeowners to rent rooms and illegally convert garages to rental units, changing neighborhood character.
There goes the neighborhood. What happens when your neighbors start renting out rooms and converting their garages into makeshift apartments? How do these new neighbors behave? Do they park their cars in front of your house? Block your driveway? Do they party at all hours of the night? Do they behave like those degenerates and loser renters you were trying to escape?
If developers were allowed to buy up properties in an existing neighborhood of single-family homes, demolish them, then put up a factory, it would turn the neighborhood into something other than what the remaining homeowners bought into. In short, it would ruin everything. In order to prevent problems like that from occurring, society developed legal mechanisms to control land use. One of the purposes of planning and zoning and neighborhood covenants and restrictions is to preserve the character of the community, and thereby preserve property values.
Allowing additional residents into a neighborhood isn’t as drastic as permitting a factory to start belching smoke, but when more people move into a community, it creates problems with traffic and parking, infrastructure is strained beyond its design capacity, and it lowers the standard of life for existing residents. 
If the existing residents don’t benefit in some way, and renting out rooms or converting garages to rental units only benefits a single homeowner at the expense of his neighbors, then the neighbors who pay the price get rightfully upset.
Pavilion Park in Irvine
The new Pavilion Park development in Irvine has several floor plans with in-law units with separate exterior doors leading to the street. These were ostensibly designed for extended families, but in the real world, homeowners who overextended themselves to buy in Irvine will rent these units to strangers to help pay the bills. These are ideal rental units because unlike renting out a room in the house, these units have independent kitchens and separate entry ways; the homeowners and the renters never need cross paths.
Even though new residents in Pavilion Park know about these units, I doubt most of them thought through the implications of so many potential rental units in their neighborhood. Since these units don’t come with garages, and since most homeowners won’t want the tenants parking in the driveway and blocking their garage access, most of these renters will park their cars on the street. Guest parking will be hard to come by, and the streetscape will not be very attractive will all those cars. Further, as the homeowners teenagers get cars, these will be added to the mix further straining side-street parking capacity.
This issue is not confined to Irvine. The Beach communities have long had serious traffic and parking problems, often because so many accessory units were added over the years. Due to high demand for housing and almost no new supply available to meet this demand, San Francisco residents are increasingly turning to in-law units to rent out to help pay the mortgage, and they are facing the problems these new residents bring with them.
S.F. urged to legalize thousands of in-law units in bid to tackle housing crisis
Mar 10, 2014, 1:36pm PDT Updated: Mar 10, 2014, 2:31pm PDT
San Francisco should establish a process to legalize thousands of illegally-constructed housing units and bring them under rent control laws, according to a staff recommendation ahead of a Planning Commission review this week.
The Commission is set to hear on Thursday the legislation sponsored by Supervisor David Chiu that would apply to the approximately 50,000 illegal units built in garages, attics and attached to the rear of homes all across the city. Many of those units, often called granny flats or in-law units, are occupied by renters.
That’s a lot of illegal units. The problem for officials is that this kind of tenancy is difficult to restrict. If someone is letting their aging parent live with them in a true in-law situation, the municipality has no business telling people who they can and can’t live with. The city can regulate the quality of the living space and enforce building codes, but if the homeowner wants to let a family member live there, the municipality is powerless to stop them — and they shouldn’t want to.
Where it becomes gray is when these units are rented out to strangers. People have the right to rent out rooms in their house to strangers, so renting out a garage or accessory unit is difficult to enforce. Staff from the municipality could start going through Craigslist ads and attempt to curb the behavior, but this isn’t the best use of staff time, and it isn’t popular with the many residents who do rent out these units.
San Francisco has had illegal units for decades. If city inspectors find illegal units, property owners are required to either bring them up to code or ordered to tear them down.
Destruction of illegal units does not happen often. Between 2000 and 2011, about 250 illegal units were demolished.
These units were not habitable. The City will crack down on slumlords.
Finding a way to permit illegal units, and not punish property owners in the process, has come into vogue as a way to maintain a significant portion of the city’s rental stock amid surging demand for housing, supporters of the ordinance said.
“Creating a path to legalize the unauthorized dwelling units would allow the city to maintain a large source of affordable rental housing, while ensuring such units are habitable and meet the minimum life and safety standards,” reads a portion of the proposed ordinance.
Legalizing these units would have that effect, but as I pointed out above, that may not be desirable to other residents in the neighborhood.
Extending rent control to those illegal units, however, is a controversial element of the proposal because it could serve as a disincentive for property owners to seek legal status.
Yes, extending rent control to these units will stop anyone from seeking legal status. How would you put rent control on someone renting out a room in their house?
Under Chiu’s plan, the city’s Department of Building Inspection would approve an illegal unit if it complies with city ordinances for health, fire and building codes.
Property owners would have to bear the cost of bringing a unit up to code if it falls short. The cost to do so can easily reach tens of thousands of dollars. None of the cost can be passed on to tenants, if the illegal unit is being rented.
If a significant number of these units don’t meet code, then this should be passed to make these units safe and habitable. Proponents should drop the provision about rent control to get it passed because they can always go back and try to get rent control added later.
DBI officials said they suspect three likely, and costly, code violations will be found in many illegal units: not providing minimum floor-to-ceiling height of seven feet, six inches; only one way in or out of a unit and nonexistent or subpar sprinkler installations for buildings with three or more units.
Why not pass an exemption to grandfather in these units for the existing owner. It becomes a problem for the new owner at time of future sale, but the existing owner can avoid the cost of renovation.
Granting legal status to illegal units not only would maintain a critical swath of the city’s housing stock, it would allow the city to start applying property tax on those units, city officials said.
The proposed ordinance would not allow property owners to seek legal status for their illegal units if they had evicted a tenant from one through the Ellis Act within the last 10 years.
An association for the city’s small property owners has a number of concerns with the Chiu proposal. Among them:
- Homeowners should be able to apply rent increases to amortize the costs of capital improvements related to legalizing an in-law unit, said the Small Property Owners of San Francisco Institute.
- The proposed ordinance does not provide amnesty from lawsuits from previous or current tenants. Without such protections, the group said, “homeowners will refuse to apply for the program, afraid of reprisals from previous tenants.”
- The ordinance does not allow property owners to merge in-law units to an original home. Such flexibility encourages homeowners to open up their homes as in-law dwelling. Preventing units from being re-merged will affect the affordability of the in-law unit and remove the financial incentive of legalization, SPOSFI said.
- Homeowners should be exempted from providing relocation costs to renters if the owner needs to upgrade an in-law unit.
The proposed Chiu ordinance will go before the city’s Planning Commission on Thursday. The commission may recommend adoption, rejection or propose changes before sending it to the Board of Supervisors for consideration.
I am biased on this issue
[dfads params=’groups=4&limit=1&orderby=random’]I openly admit I am biased on this issue. I am in favor of allowing in-law suites and other rental units in most circumstances, mostly for family reasons. As many of you know, I have a special needs child, and he will likely never live independently. Like any parent, I would like to see him develop the greatest degree of independence he can, but I also recognize he will always need some help. My son will likely live with us for the rest of his life, which I consider a blessing because he is a good friend and playmate. As my son gets older, my family will probably seek out a house with an in-law suite to provide my son as much independence as he can handle. Since I want the freedom to live where I chose, I would like to see these in-law suites permitted in more locations.
[dfads params=’groups=3&limit=1&orderby=random’]
[listing mls=”OC14061180″]
More evidence that despite extraordinary, unprecedented stimulus from Central Banks around the world, they cannot defeat this secular deflationary cycle.
http://www.zerohedge.com/news/2014-04-01/worst-recovery-ever-japan-regular-wages-decline-21-consecutive-months
BTW, Orange County house prices are going to get crushed. The demographics are bad and getting worse, and we’re vastly over leveraged.
If we are following the path of Japan, wage growth will be weak despite all the stimulus. If that is the case, house prices will get whacked as interest rates go up because wages will not rise to compensate.
If you ever read Martin Armstrong. He stated that hyperinflation only happens to currencies that no one cares about like the Bolivar or the Argentine Peso. Core currencies like the dollar or the yen have so much global demand that despite all the printing still hold much of its value. The more you print the more you paid out in interest (on existing + future debt) so the less money you have in the future to spend actually. That is the flaw with debt based economy currencies. Now I’m a little more convinced that stagnation is the only path forward until the all debt collapses which destroy demand and the consumer economies to reset the cycle.It’s already starting to happen in Europe and been happening in Japan.
The FED should have allowed it reset back in 08 but the political arms know that it is political suicide so they will play this game until it cannot be played anymore. We will have many years of reduced standards of living first before we see the light of day. The bible was correct in stating that 7 years of feasting will be followed by 7 years of famine.
The modern currency regime of central bankers is founded on the premise that the 7 years of famine need not follow the feast. I think reality says otherwise. Printing money does not produce goods and services, and people can only consume what is produced. A society’s standard of living can ultimately only be sustained by its production.
I might add, where’re at our near maximum resource capacity that this planet has to offer. The bankers can only create paper but it doesn’t do one iota to address the resource capacity issue. Same resource and more population means less for everyone on the planet but technology can be the equalizer (i.e. recycling). However, we’re at the tail end of the current innovative wave so we will suffer if we don’t have another breakthrough.
>>>Same resource and more population means less for everyone on the planet but technology can be the equalizer (i.e. recycling).
This will be one of the benefits of the economic reset:
New Technology will become a forceful driver, shoved straight down like a bottleneck. People are most willing to accept & change course, during a crisis.
After the 7 years of feasting and 7 years of famine, the Israelites were enslaved by their government.
+1
History repeats itself.
Although, I agree with most of the new financial regulations. After the housing bubble, I think it obvious that a little enslavement of the financial sector was in order.
in fantasy land, the banks are “enslaved” by a benevolent gov and benign regulations.
I wonder how long 7 biblical years is in literal years 😉
Noting that we commonly cite the lack of *wage* growth when we really mean income (or even “wealth”), I’m reminded that if one were to look at the top 5% of zip codes by median net worth, I suspect we would find that the vast majority of households moving into these zip codes from elsewhere are not reliant on traditional “wages”, but are busines owners, “talent” of some description, or are living off of accumulated/ing wealth.
I recall a few years back that in London, the worse things got in Greece and Portugal, the more wealthy Greeks and Portuguese there were buying up flats. Given this tenancy to self – segregate based on wealth, the mobility of capital, and nasty future economic /political circumstances throughout the world which the wealthy have both a desire and the means to escape , isn’t it possible that the wealthiest zip codes will at minimum tread water even as the rest go to the dogs?
As long as there is concentration of wealth among the top percentiles, anywhere they want to live should do well. If they have assets, real estate becomes another place to store money, and if they live in the house here in the US, they can even claim a huge capital gains tax exemption if the later sell for a profit. Other than the drain for property taxes, it’s probably a good investment for the very rich.
Speaking of vastly over leveraged… a settlement of accounts is nearing…
http://advisorperspectives.com/dshort/charts/markets/nyse-margin-debt.html?NYSE-investor-credit-SPX-since-1980.gif
tic tock
I love these charts you find. That one should scare anyone invested in the stock market. With all that debt fueling buying, it looks like another Ponzi scheme. It also looks to me that the best way to reduce volatility in the stock market would be to eliminate margin debt.
That chart sums it up. Is Las Vegas really the gambling capital anymore? I think not! The banks have ruined our markets.
It is becoming more and more clear that we’re going to have a debt crisis in the near future.
Before the thread of this question is lost…..one of the current “trends” in homebuilding is “multi-generational housing”. Homes designed specifically to accommodate families with aging parents, extended family, etc. Exactly HOW will these units be regulated? Do they need to be regulated? Lennar is building them, as are other builders in Irvine.
I don’t know if they can or should be regulated, but someone at the planning department needs to carefully think about the parking requirements in these neighborhoods. Two in the garage, two in the driveway and two on the street may not be enough to cover the parking demand, particularly since many residents fill their garages full of junk and can’t park there.
You must be fun at parties!
(Not that I’d quarrel with your prediction…)
Plan to seize mortgages with eminent domain fizzles out
Eminent domain at its core is used to seize land to build public necessities like highways, electrical lines and public schools.
But when the very company pushing for the product is dropping the ball, it is hard to jump on board with the idea that eminent domain is a good idea.
In the most recent “necessary” attempt of eminent domain, Richmond, Calif. proposed to allow city officials to seize mortgages using the power of eminent domain. In turn, officials would adjust the existing loan terms for troubled borrowers.
And one of the main faces behind the resurgence: Mortgage Resolutions Partners.
Eminent domain first gained public attention when the firm Mortgage Resolutions Partners tried to get San Bernardino County officials to adopt a similar plan in the California county.
However, so far, the company has failed at marketing the product or itself.
Back in September, a scheduled eminent domain debate between Realtor Jeff Wright and Stephen Gluckstern, chairman of Mortgage Resolution Partners, never happened since Gluckstern bailed on the discussion.
And now, the CEO of Mortgage Resolution Graham Williams has officially left the company.
While the company has not commented, interestingly enough, Steven Gluckstern is now reported as the chairman and acting CEO.
This doesn’t exactly give you a vote of confidence.
Another prime example of how ineffective eminent domain can be is Kelo v. City of New London, which after nine years is barren with no trance of urban revival despite the use of eminent domain.
While this may not be the fate of Richmond, in September, the city council officially approved the decision in a 4-to-3 vote to move forward with the initiative.
As an article in the Washington Exmainer put it:
Here’s what investor trends mean for the housing market
Purchase activity by investors – particularly institutional investors – has slowed down in the housing market, but hasn’t stopped.
The slowdown is partly due to the fact that there are fewer distressed assets available for purchase as foreclosure rates slow down. But it’s also partly due to the fact that there’s just not much inventory of any kind on the market. Most parts of the country still have less than 6 months’ supply, and many of the markets where investors were initially buying (California, for example) have even less.
Other reasons for the slowdown are that some of the investors have already spent the capital they’ve raised for their single family rental initiatives and, in some cases, they’re trying to get the properties they’ve already purchased repaired and rented out.
Investors are still buying, though – they’ve simply shifted where and what they buy.
We see a lot of investor purchase activity at foreclosure auctions, for example. This is one of the reasons that there are fewer bank-owned homes on the market: investors are buying them before the banks repossess them. We’re also seeing investors move into different geographic markets – especially in the Southeast and Midwest – where their dollars will go farther, and where they can generate healthier returns on rental income.
Some of the larger investors, such as Blackstone and Cerberus, are also moving from asset purchasing to asset financing – offering loans to smaller investors who are interested in buying and renting out single family homes. So some of the inventory that institutional investors would have purchased is now being purchased by individual investors instead.
There is still a big market for rental units, though. Occupancy rates are still north of 95%, and rent prices are still rising in many markets, albeit a bit more slowly. Household formation has slowed down, and a higher than normal percentage of the households that are being formed are renters rather than home buyers.
While all of this could mean less competition for first time homebuyers, don’t expect to see a huge wave of buying activity from owner/occupants as investors scale back.
What’s keeping first time buyers on the sideline isn’t competition from investors, it’s other factors: lack of jobs for the 25-35 year old cohort that typically makes up most of the buyers; a mountain of student loan debt that makes it difficult for these folks to afford a loan – or qualify for a QM/ATR loan; tight credit overall, which makes it hard to get loans in general; and the lack of inventory.
On that last note, new home inventory is near a 40-year low (and much of the available inventory is made up of larger, more expensive “move-up” homes); distressed inventory is lower than expected; and a high percentage of existing home owners are either underwater or don’t have enough equity to sell their current homes.
This all adds up to weak demand – especially weak demand at the lower end of the market – and could lead to home prices weakening in some of the markets where price growth was accelerated by investor activity last year.
Consumers are addicted to low interest rates
Despite improvements in their own financial situations, consumers’ optimism for the economy fell back slightly in March, with trends suggesting subdued interest in major purchases such as homes.
According to a report released by Thomson Reuters and the University of Michigan’s Survey Research Center, consumer sentiment retreated last month to an index reading of 80.0, down 2 percent from February’s 81.6 but an improvement on last year’s 78.6.
The headline index was negatively impacted by 3.7 percent decline in the Index of Consumer Expectations to a value of 70.0. The decline more than offset a slight 0.3 percent nudge in the Current Conditions Index to a reading of 95.7.
“While consumers anticipate that the national economy will continue to grow during the year ahead, they have become increasingly concerned about the ability of the economy to avoid a downturn sometime in the next five years,” the joint report read.
The most immediate concern, according to the survey, is the ongoing slowdown in home value gains—one that is expected to continue in the year ahead. Given the stall in price improvements and the increase in interest rates over the last year, plans to purchase homes are reportedly on the decline.
“Since consumers have become accustomed to very low interest rates on loans, even small increases, which simply tempered demand in the past, could now have a much more pronounced impact on sales of homes and vehicles,” said Richard Curtin, chief economist for the survey.
Curtin added that with consumers now reacting to even small rate hikes, “[t]he Fed now has a more powerful policy tool as well as a less forgiving tool to a policy misstep.”
In my townhome complex I see people convert their garages to bedrooms, but only after they had moved out. They also kept the garage door shut.
In El Monte where I grew up it’s a HUGE problem. The house across the street from my parent was one whole dorm. They residents had to eat dinner in the garage since there was no where to eat inside the house.
In HOA communities, I doubt this will happen.
It depends a lot on the HOA enforcement. If the HOAs consistently enforce their restrictions, they can curb the practice, but once they allow it for a couple of years, it sets a precedence that is hard to change. I see this in Irvine with restrictions against parking RVs and classic cars under cover on the streets. Some neighborhoods allow it and some neighborhoods don’t even though all of them have written restrictions against it.
Sober-living homes find few welcome mats
With proximity to beaches, nightlife and world-class shopping, sober living homes are sprouting up so quickly in Orange County that one city is battling back while its neighboring city can’t keep up.
In recent years, Newport Beach has passed local laws and plunged into costly court fights to cut 73 sober living homes by one-third.
At the same time, the number of sober living homes in Costa Mesa has shot up to 76 – and city officials say the number likely is much higher with many homes operating under the radar.
“We weren’t really paying attention to these things for so long that now we’ve got a proliferation,” said Rick Francis, Costa Mesa’s assistant CEO. “Once you got a groundswell, it’s hard to stop the influx. ”
Costa Mesa officials estimated one in four of Orange County’s sober-living homes operates in in their city.
“It’s a magnet effect,” Francis said.
Compounding the effect, sober-living homes with no more than six adults don’t need a state license. California health laws only kick in if treatment is offered on-site.
In 2008, Newport Beach passed a law to severely curtail group homes. The law bars the homes from single-family neighborhoods and requires a city permit, a complex, time-consuming process.
Within a year, about 25 homes were gone, court records show.
“Unfriendly, unaccommodating – pick your word. Unwelcome,” said Joel Edwards, who works for Morningside Recovery, which ran several sober-living homes in Newport, tucked in upscale neighborhoods.
But as Morningside and other operators opened more and more homes, neighbors grew outraged, complaining about litter, noise, outdoor smoking, excessive traffic and how the character of their neighborhoods was altered by a transient population.
Multiple lawsuits ensued, costing the city $3.6 million and there’s more fighting ahead. Last week, Newport Beach lawmakers decided to try to defend its law before the highest court in the land.
HAVEN FOR SOBER-LIVING HOMES
Edwards acknowledges he moved clients from Newport Beach to neighboring Costa Mesa.
“It was just easier to move out,” he said of leaving Newport Beach.
Costa Mesa officials admit they only learned about the homes because police or city code enforcement officers stumbled across them while responding to service calls and complaints.
Still, Costa Mesa has been active in curtailing the homes. The council last year passed nuisance laws that target loud noise, smoking in larger groups and parking multiple vehicles along residential streets. The fines range from $250 to $1,000.
Costa Mesa says it also tries to work with property owners to bring them into compliance, especially first-time offenders.
Francis said operators typically charge each resident anywhere from $800 a month to $1,600 a month, making it a financially lucrative investment. Some operators say there’s another side to it.
“Many people get into the business just to have a place to live,” said Grant McNiff, president of Orange County Sober Living Coalition. “They think if I can fill six beds at $800 a month, I’ll be able to live rent free.”
But McNiff also pointed to another side of sober-living homes, saying collective living helps with sobriety. Recovering addicts flourish with the structure of daily chores, common meals, and curfews.
McNiff said the coalition works closely with operators, training them on best practices. It also inspects and certifies homes. The group counts 55 sober-living homes as members – a fraction of those operating in the county.
Of non-member homes, McNiff said, “We kind of refer to them as rogue houses.” He added some operators lack training on health and safety standards and business basics, like insurance coverage.
“It’s too bad because they’re giving the rest of us a black eye.”
LEGAL BATTLES
While it’s rare for the U.S. Supreme Court to select a case, Newport Beach hopes to take its fight all the way to the Supreme Court.
Newport officials point out that while a panel on the 9th U.S. Circuit Court of Appeals called the city ordinance discriminatory, some judges agreed with Newport.
“The five judges said why this is an important case, not just for Newport Beach or for other California cities, but for the entire nation,” city attorney Aaron Harp said.
For neighbors who end up with sober-living homes on their block, the odds of getting them out are slim. Cities understand that their hands are tied by federal laws that protect recovering addicts from housing discrimination, officials say.
Shelly Lummus, who sits on an Orange County substance-abuse advisory board, said the best approach for sober-living operators and neighbors is to work collaboratively, rather than seeking city intervention.
Sober-living homes aren’t going away, and society cannot afford to have them go away, Lummus said. “If these people don’t have places to live, how are they supposed to stay clean and sober? We don’t want more people on the streets who might be breaking into your home and stealing from you.”
The CC&Rs in the community at the townhouse we sold recently include strict rules on how the garage is to be used – everything is prohibited basically, except for storage on the sides and two parked cars.
We, and our neighbors, were involved in a months long battle against a family who’s 18-22 year old sons and their friends used the garage as a lounge, smoking, and Harley repair area. The fines escalated sufficiently, and the family finally moved.
Bless CC&Rs!!!
Yep.
The challenge is in consistent enforcement.
When I used to live in Woodbury, when I drove or walked through the condo neighborhoods at night, there was no available side-street parking. The only reason for this was because people were parking junk in their garages instead of cars, the HOA was not enforcing the parking regulations.
Here we go boys and girls … the table is being set for SoCal. The only question is, who’s going to pick up the pieces when the shit hits the fan?
Buy-To-Rent Is Officially Dead In California
http://www.zerohedge.com/news/2014-04-01/buy-rent-officially-dead-california
This is why sales volumes are going to be so low this year. We simply don’t have the buyer replacement pool willing to step into this void at higher prices.
The only thing that could bring sales volumes up this year is if prices fell and the hedge funds got interested again.
More warm weather couldn’t hurt either. 🙂
LOL! See below….
I can’t believe someone spent brainpower analyzing this absurdity. The cold weather meme was a bullshit excuse offered by economists and NAr market cheerleaders. It never had any basis in reality as bullshit never does.
Analysis Indicates Colder-Than-Average Temperatures Don’t Fully Explain Declining Housing Starts
Single-family housing starts, a closely watched indicator of housing market health, fell by 13 percent month over month in January 2014 on a seasonally adjusted basis, and held steady in February. The decline has been been blamed in part on the severe weather conditions that have faced much of the U.S. as opposed to weakness in the housing sector, but if severe weather did influence the drop in starts, can all of the reduced building activity be blamed on the weather? …
Past severe winters that have negatively affected housing starts were followed by a rebound after temperatures began to rise again. This analysis indicates there should be a rebound again this spring, but it will not be sufficient enough to counteract the current weakness in the market that can’t be blamed on the weather.
Christopher Whalen: A rebuttal to consumer advocates generally
Over the past week, I have been subject to personal attacks by consumer advocates such as Tom Cox and Adam Levitin, both in HousingWire and elsewhere.
These supposed consumer advocates don’t want to discuss the facts, but they love to call people names.
Consumer advocates assume that mortgage servicers are not agents to administer legal contracts, but fiduciaries bound to protect some implied non-payment entitlement of delinquent borrowers. They seem to assume that lenders are credit-providing principals in these loan contracts, when in fact most banks and non-banks are almost always acting as agents for an investor.
In fact, loan servicers are agents that are almost always acting on behalf of a third party. In the majority of these cases, the note holder is the US taxpayer. Consumer advocates conveniently forget that in the vast majority of cases, the “victims” of foreclosure abuses, real or imagine, have defaulted on their promise to repay the mortgage.They borrowed money to buy a home and now they are reneging on that solemn promise to repay the debt. Indeed, not content with their clients defaulting on the mortgage, consumer advocates want to further injure the note holder by allowing their clients to live in the house for free, sometimes for years.
And again, nine times out of ten, the note holder is an agency of the US government. That is, the US taxpayer.
Now consumer advocates like Cox and Levitin are correct when they note that the “too big to fail” commercial banks as well as some of the pre-crisis non-banks are irrational when it comes to foreclosure. The pre-2007 mortgage market was designed to move money around, not to care properly for consumers or service distressed mortgages. The big bank servicing operations were built on the assumption of zero defaults.
As a result, the big banks are losing billions of dollars per year on mortgage servicing, one reason they are so desperate to sell these loans. But the systems and loan documentation defects at the big banks are so serious and insoluble, that in many cases the legacy loans on the books of the TBTF banks will never be sold.
Not really housing related, but sort of like the Country-wide of crooked banking.
Turkey Bank Hazards Revealed in CEO’s Shoe Boxes of Cash
Turkey Bank Hazards Revealed in CEO Shoe Boxes With $4.5 Million
When Turkish police raided the Istanbul home of Suleyman Aslan in December, they found $4.5 million stashed in three shoe boxes and hidden in bookshelves.
Aslan, then chief executive officer of the country’s second-largest state-owned bank, said in court that the money was donations collected for his alma mater in central Turkey and to help build a university in Macedonia. When asked why the funds weren’t deposited at the bank he ran, he said that would mean declaring their origin and registering them officially, according to accounts of his testimony in local newspapers.
Dozens of phone conversations purported to be police wiretaps and leaked over the Internet in recent weeks instead paint a portrait of a banker helping a businessman smuggle gold and transfer hundreds of millions of dollars to Iran, evading U.S. sanctions. Surveillance photos said to be taken by police show similar boxes being delivered to Aslan’s home. The money was intended as bribes to ensure his cooperation, police allege.
In a separate investigation, Huseyin Aydin, CEO of Turkey’s largest government-owned bank, was overheard by police approving loans to businessmen who said they were under orders from Prime Minister Recep Tayyip Erdogan to buy a media company. Aydin hasn’t been charged with wrongdoing.
Even after Erdogan’s party maintained control in local elections over the weekend, state-owned banks face the prospect of a weakening economy, surging bad debt and a repeat of the 2001 financial crisis when they lost $28 billion and were bailed out by the government.
Maybe it’s a car bubble not a housing bubble.
Car makers see stronger-than-expected March sales
Auto makers reported better-than-expected U.S. new-vehicle sales for March, a sign the industry may have benefited from pent up demand after winter storms during the first two months of 2014 kept some consumers away from showrooms.
Sales gains were broad for March, as Fiat Chrysler Automobiles, Ford Motor Co., Toyota Motor Corp. and Nissan Motor Co. reported growth from a year ago. Fiat Chrysler led among those manufacturers, posting a 13% jump.
“March sales turned noticeably higher mid-month and finished strong, said John Felice, a marketing and sales executive at Ford.
Ford’s light-vehicle sales, which exclude heavy trucks, increased 3.3% on broad growth across both the namesake and luxury Lincoln divisions as well as all vehicle categories.
Toyota’s sales grew 4.9%. The Japanese auto maker last week indicated that traffic at dealerships picked up nationwide in March, citing strong demand for pickups and sport-utility vehicles, as well as for the Camry.
“Solid March sales pushed first-quarter industry results ahead of last year’s pace despite one of the harshest winters on record,” said Bill Fay, Toyota division group vice president.
“Toyota dealers had their two best sales weekends of the year late in the month, and we’re optimistic that momentum will spring us in into April,” Mr. Fay said.
Meanwhile, General Motors Co., which has been in the spotlight in recent weeks as the auto maker unveiled several safety recalls, said it would delay its monthly sales data by “several hours” due to a computer systems issue that affected dealer sales reporting.
GM, which typically reports monthly sales around the time the broader market opens at 9:30 a.m. Eastern Time, said it now expects to report its March sales “this afternoon before the close of business.” Observers expect GM to report a sales increase of less than 1%.
More evidence that the United States is actually experiencing an economic depression?
Reminds me of the boarding houses of the 1920s and 30s.
This also aligns with the new trends about “micro-apartments”.
There’s a huge market for this, mainly because so many people have shitty credit, no money, no job, no savings or are living off some live-remote stipend from “mom and dad”.
This has to be an neat and interesting idea for empty nesters out there with an extra room or so.
CC&Rs meet mushroom cloud.
Boarding houses, 1920s:
http://www.simonpure.com/images/wolfs_house%201920s.jpg
Today families are smaller. Fewer men getting married. More women college grads and working full time. High divorce rates, massive alimony and child support pmts. Shitty credit.
Check. Check. Check. Check. Check……
And those 6 veee-hicles parked right on the front lawn? Check.
We’re are in a depression folk.
I think divorce rates have come down sustantially over the past few decades, but the flipside of that is fewer people are getting married to begin with, and those that do are waiting longer.
If you go into a neighborhood in the evening and it is nothing but wall to wall cars on the street it’s pretty much guaranteed to be a horrible neighborhood and gang infested.
Santa Barbara has always had this issue, thanks to the deep, narrow lots of the few square miles around State St.
Basically, there are 3 Santa Barbaras: the first is the house you can see from the street; the second is the cottage apartment behind the house, and the third is the apartment above or in the garage in back.
I can’t say about other places, which lack the ability to delude the buyer which Santa Barbara seems to possess, but Santa Barbara’s real property values have hardly suffered.
Thanks for the interesting post, including the personal angle.
When the economic motivations are so strong that there are literally thousands of illegal in-law units, talking about what the local government should permit gets a little absurd. People are building these things, and other people are living in them, regardless of the rules. The city inspectors may come out and shut down a few, but the in-law units are there regardless.
I heartily agree, it would be better to have them permitted, purely from a public safety point of view. But it’s hard to imagine how changing the permitting rules would affect neighborhood conditions when in fact the in-law units are already there. 🙂