Somewhere A Crocodile Sheds a Tear

From today's SF Chronicle:

Israel Medina admits he got too gung ho about the idea of getting rich by flipping Bay Area real estate. Medina...has seen not one, but 11, of his Northern California properties move into foreclosure in the past year. "I was a real estate tycoon; I had everything," said Medina. "Now I have nothing."

These real estate gamblers are hardly the struggling home buyers often portrayed as victims of the Bay Area's and nation's foreclosure crisis. Some bought houses as often as other people buy shoes, rarely putting down any money. More than one-fifth of 6,557 Bay Area properties that fell into foreclosure from January through September this year were owned by investors, according to a Chronicle analysis of public records compiled by DataQuick Information Systems. Of properties repossessed by lenders, 1 in 6 had been owned by people who had two or more foreclosures in their names. Eighteen Bay Area investors had five or more foreclosures.

Easy money through no-questions-asked subprime mortgages allowed almost anyone to become a real estate speculator. The flood of investors and first-time home buyers into the market helped to fuel the Bay Area's double-digit price appreciation in recent years.

A Marin resident [Rose Hodges] invested $1 million in four properties that a construction company owner told her he would fix up and flip; she lost all the money, her good credit and her own home. [Hodges] said she attended Marin investment clubs and met many people like herself who wanted to learn how to invest in real estate. "All these Baby Boomers started inheriting money from their parents and looking for ways to invest it. And the real estate market was booming," said Hodges, who learned the hard way that such investments can have a big downside. "It's crazy out there and people ought to know."

It's widely known that get-rich-quick real estate speculators flooded markets such as Las Vegas or Miami over the past few years. The Bay Area was presumed to have been relatively free of speculation because real estate here is so expensive... Why would investors buy multiple properties in a pricey market where their carrying costs - mortgage payments, taxes, insurance - would certainly eclipse the potential rents? Flipping and fraud appear to be the primary motives.

"It was a really, really bad investment," said Medina, who said he lost hundreds of thousands of dollars of his own money that he had invested in the homes. "I should have bought fewer homes. I never should have gone so crazy."

Too bad these speculators didn't lose more of their own money. Too bad the rest of us have to also pay the price of their greed. Too bad Hodges didn't read (or didn't outright dismiss) this and other such blogs. Too bad the real estate industry is a propagandist cartel. Too bad the Bay Area really isn't "special" vis-à-vis real estate; too bad it isn't "different here". Too bad so many people believed the commission-based lies, manipulations, and fear-mongering of local realtors/agents.