Many Bay Areans like to describe CA areas outside of the Bay Area as "arm pits" and so very beneath us that they serve as "obvious" justification for our lofty prices and ingrained snobbery. (That and other such derogatory terms can be found in the comment sections of earlier posts to this blog when the housing bubble was still hotly disputed by local housing bulls.)It is rather odd, then, that so many Bay Area RE "geniuses" saw fit to buy investment properties in "arm pit central", aka Sacramento, and contrary to our claimed opposition to the loss of prime agricultural land to development:
Many real estate agents estimate that about 40 percent of the 10,000 single-family houses for sale in Sacramento County are empty...So these investments aren't selling. They sit vacant and their lawns are brown and choked with weeds, the pools clogged with algae and breeding pits for West Nile virus. Because no one lives there, when and if the investment sells, there is no move-up buyer, so that move-up chain breaks. If it doesn't sell but the Bay Area "genius" has to sell it, they walk away (since it was probably a no-money-down sort of thing anyway). Their credit is now crap and they might have to sell their primary residence as that investment loan might be a non-owner occupied recourse loan.
"There are so many new homes here and so many investors from the Bay Area," McDonald says. "When we pull up the owner's names, nine times out of 10 they live in the Bay Area."
Speaking of which, remember this post and this article?
But in California, refinanced loans, second trust deeds and home equity lines of credit are generally considered recourse loans. In these cases, a lender can file suit and go after almost any of the borrower's assets once they obtain a court judgment.Too bad it is so much harder now to get bankruptcy protection.
"They can literally go after everything you have," Hall says.
There are a few limited exceptions. Retirement accounts are excluded, and declaring bankruptcy could protect some homeowners.
In the past, lenders have been reluctant to go after borrowers personally because it takes time and can involve costly litigation, but Hall says things might be different this time, especially if a borrower has substantial assets.
5 comments:
I have a new hero, Mr. Rick Santelli of CNBC. He's always been a straight shooting reporter in my opinion (and smart and on the button), but now he's my hero.. he's one of the last reporters to chime in, and it's worth the wait.. I'll post this again to another thread because it's that good in my opinion..
Matt
http://www.cnbc.com/id/15840232?video=500002151
Great video. And did you hear the uncomfortable laughs from the other speakers which then turned to comments that were generally supportive of Santelli's rant?
Yeah, the Fed has to decide whether or not it is in the home ownership business.
Sept. 18 will be interesting.
RE: the bankruptcy laws being tougher...hmmm...think that was any accident when the laws were changed, what was it, 2 years ago? I think the banks knew full well "something wicked this way comes"...and lobbied to have it that much tougher for debt zombies to walk.
I agree w/you Lisa in that our bankruptcy laws changed just in "the nick of time" for the bankers.. hmmm.. Yes, it's all part of the wealth transfer & serfdom plan that has played out over the past 6 or so years in this country.
Someone will need to explain to me why we won't see home prices in these "arm pit" locations like Stocton and Sac Valley return to normal / historic pricing standards. What that means in most cases is 60+% price declines from the fall 2005 peaks.
Unfortunately, Lisa, the "perfect timing" notion falls apart once you realize that banks have been angling for those changes in the bankruptcy laws for bettern than a decade, and possibly two.
But it is an interesting idea... :)
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