Saturday, October 06, 2007

Home Owner Temper Tantrum

I first saw this Inside Bay Area article over at Ben's blog and was aghast at how spoiled and entitled some home owners are; it reminds me so much of the motivations behind much of Marin's NIMBYist ways -- to protect property values at any and all costs.

Apparently, some Greater Fools who bought houses in a prestigious housing complex are staging protests against the developer and demanding that the developer pay each of the current owners a $20,000 rebate. Why? Because the developer is unable to sell any more of the houses for bubblicious prices and so are auctioning them off for whatever price they can get. As a result of the auction, the current owners expect the values of their houses to drop by "hundreds of thousands of dollars."

So in other words, the people who already bought these overpriced luxury homes expect, no, demand that prices can only go up and if they don't go up, then they were "obviously" misled and so are victims and thus entitled to compensation. Give me a break!

For perhaps the first time ever, I am in agreement with a developer who in this case refuses to pay the rebates and reasons that if the houses had spiked in value before the current owners had finished escrow on their houses, would they be willing to pay the developer an additional fee to compensate the developer for the increase in values? No, of course not.

Look, if you leverage yourself to "buy" a house with any expectations at all on the future price movement of the property, if you even so much as care or make plans based on what the future price movements of the house will be, then you are an investor and/or a speculator. Investments are not guaranteed to appreciate; by investing you are taking on the responsibility of the inherent risk and implicitly acknowledge that risk the instant you sign the contract. Buyers are not obligated to bail you out of your expensive lifestyle choices, your debts, or your poor financial decisions.

Here are some choice quotes from the article:
Despite an initial setback, outraged homeowners in the upscale Paseo West subdivision plan to continue their informal protest against a developer planning to auction off 34 brand-new homes.

Upon learning of the auction, the subdivision's 26 owners became infuriated — upset that the auction would lower property values and turn the neighborhood into a rental community... The consensus from homeowners is that the auction will undercut property values by hundreds of thousands of dollars and that the current tight credit situation will mean only investors will participate in the auction, and would rent out the homes.

Following a meeting last Friday with Barton, homeowners crafted a letter asking Anderson Homes for a $20,000 per owner rebate for their property.

On Wednesday, homeowner Dave Cantrell — the de facto leader of the protest — received a response. In a letter via e-mail, Anderson Homes president andowner Larry W. Anderson said he was "perplexed" by the rebate request.

"In nearly 25 years of building homes, I have not asked a homeowner to pay more for a house when the value increased," he wrote. "Housing is cyclical and values will fluctuate as history tells us. Housing has been hit especially hard this cycle due to the financial market crisis and large number of foreclosures."


Blogger Rob Dawg said...

Easy, bid on them and not only preserve values but double down on all that appreciation they think is there.

Oct 7, 2007, 8:00:00 AM  
Blogger Lisa said...

In the Business section of today's Chronicle (Sunday), there were two great letters to the about rent money is NOT "going down the drain"....laid out the huge savings afforded by renting, even after all the tax breaks. The letter ends with "Who is throwing money down the drain? Do the math." Brilliant.

Another letter titled "No Sympathy for Housing Speculators".....some choice quotes...."The families profiled in the article are not suffering a financial loss. With no money down, no evidence of income or the credit worthiness to purchase a pack of gum, they gambled that the would make $100,000...When people start writing checks at closing to sell their home, that will be news. So far, this is a crisis of expectations, not reality."

Wow. Our very own Chronicle decided to print these letters.

As for the posted article on Homeowner's Temper Tantrum, it's a prime example of gains are private but losses should be socialized.

Oct 7, 2007, 9:41:00 AM  
Blogger Marinite said...

When people start writing checks at closing to sell their home, that will be news.

So far, this is a crisis of expectations, not reality."


Oct 7, 2007, 10:52:00 AM  
Blogger Matthew said...

I'm simply amazed at all the stories I've read over the past year about ordinary low and middle income Americans throwing all caution in the wind to jump aboard the RE train with the purchse of 4-5-6 or more homes... most with none of their own money. Stories like these people wanting to be compensated for making a terrible purchasing decision are not at all suprising to me.. there are stories like this all over the country by now I'm sure..

Despite the overwhelming evidence and news about the now downward direction of the market, I remain somewhat frustrated that the pace of decline is not faster.. However, I am reminded that I too am an American and that I too "want my cake now".. Well, I've read enough to know that I'll get my cake and will be able to eat it too in a few years.. I'll wait and continue to enjoy reading these stories of get rich quick schemes blowing up.. good parental fodder for my kids..

Oct 12, 2007, 1:23:00 PM  

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