December 14, 2006

A bedtime story for your kids tonight… Will Hertzberg

When you tuck your kids in tonight, be sure to read them this bedtime story…

A loan that’ll get ugly fast – Los Angeles Times
HERTZBERG bought his house 11 years ago for $129,995, immediately after his second divorce. (He has no children.) Since then, Corona and the Inland Empire have boomed.

Comparable homes in his neighborhood fetch more than $400,000. With fresh paint and a few repairs, Hertzberg could probably sell his place for $275,000 more than he paid.

He would see little of that, however, because he’s already seen so much. Over the years he has taken out $190,000 in cash through refinancings.

Hertzberg’s home equity paid off his credit cards, financed trips around the world that allowed him to indulge his passion for photography, bought a $32,000 Toyota Avalon and enabled some lousy investments. He bought dot-com stocks and lost money. To recoup those losses, he bought commodities — and lost money faster.

“Free money always has the unfortunate effect of making people go overboard,” said Hertzberg, whose living room is strewn with financial publications including American Cash Flow Journal and Donald Trump’s “How to Get Rich.” “You’d be surprised how fast $190,000 can go.”

The money wasn’t really free, of course. It just seemed that way, the result of a radical shift during the last decade in how people view their homes.

“Homeownership has become like auto leasing, where the price of the car doesn’t matter,” said Rick Soukoulis, chief executive of LoanCity, a San Jose lender that funded $7 billion in mortgages in 2005. “All that matters is the size of your monthly payment.”

Lenders say these new loans are all about payment choice, but Hertzberg is far from the only borrower who invariably chooses the smallest payment option. Washington Mutual Inc., which has one of the nation’s largest portfolios of pay option loans, said 47% of its borrowers in this category last December took the minimum option.

Few people intend to become deeper in debt every month. Hertzberg certainly didn’t.

“I assumed my future and my retirement would be taken care of by the company I worked for,” he said. “I trusted corporate America.”

He used to make a six-figure income selling vacation packages to corporations that would use them as customer incentives and employee bonuses. After the 9/11 terrorist attacks, the business soured.

His current sources of income include selling comic books on EBay and freelance photos to golf and travel publications. “Once you’re over 55, what employer wants to hire you?” he asked. “I’m a dinosaur.”

Moral of the story: when you make over $100,000 – don’t extract equity from your house to buy cars and fancy trips. Use it to buy another house because housing always go up!

Click here to post a comment -- Posted by: burbed @ 5:53 am

Who has option/smart/negative amortization loans?

A loan that’ll get ugly fast – Los Angeles Times
In 2003, only about 8 of every 1,000 people buying a home or refinancing a mortgage in California got a pay option loan, according to San Francisco-based data tracking company First American LoanPerformance.

Last year, 1 in 5 loan applicants got one.

In the first eight months of 2006, even as the real estate market began to weaken amid fears of a downturn, the appeal increased again. Nearly 1 in 3 California loan applicants are now choosing them. The state boasts about 580,000 active pay option mortgages, about half the U.S. total.


We’re NUMBER 1! We’re NUMBER 1! We’re NUMBER 1!

Take that rest of the nation. We’re California – we’re special and you’re not. Hah! Just try to catch up with our option/smart/negam loan numbers!


Click here to post a comment -- Posted by: burbed @ 4:56 am

December 13, 2006

How long has this house been on the market?

MLSlistings Property Detail for MLS number 664162
San Jose, CA 95127


This Single Family Residence has the following features:
MLS#: 664162 Approx Age: 55 Years Approx Sq Ft: 1192
Detached Single Family 1 Story Traditional
3 Bedrooms 1 Bathroom 1 Shower over Tub

I think I’m going to guess that this house has been on the market for almost 2 months. Just guessing. What do you think?

Click here to post a comment -- Posted by: burbed @ 5:26 am

December 12, 2006

What does $450k buy you in San Jose these days?

We’ve heard all of those doom and gloom stories about real estate elsewhere. But let’s face it – Silicon Valley is special. Here’s proof:

MLSlistings Property Detail for MLS number 648574
San Jose, CA 95126


This Single Family Residence has the following features:
MLS#: 648574 Approx Age: 91 Years Approx Sq Ft: 439
Detached Single Family 1 Story Cabin
2 Bedrooms 1 Bathroom 1 Tub
Eat in Kitchen Utility Room Laundry Area – Inside

So while $450k might buy you a house elsewhere – it buys you a 439sqft junk yard here.
Buy now before this becomes $1 million!!!

Click here to post a comment -- Posted by: burbed @ 5:17 am

California economy is safe! Buy and/or sell houses!

California economy seen overcoming housing slump – Yahoo! News
The worst part of the housing market downturn may be over in California and how long it will weigh on the state’s economy may be shorter than expected, according to a report released on Monday.

Because of the drag from a slowdown in home building, the most populous U.S. state’s economy will grow by 3.2 percent next year, compared with 4.3 percent in 2006, according to the report by Union Bank of California economist Keitaro Matsuda.


Meanwhile, California’s “service-sector growth engine remains well oiled and strong. That’s why overall employment growth is projected to continue in 2007, although at a somewhat slower rate than this year,” according to Matsuda’s report.

“Unless the health of the housing market takes a sudden turn for the worse, the service sector engine alone should be able to carry the California economy nicely through 2007,” his report added.

That was a close call. Thankfully, everything is back to being good. But let’s be extra sure – do you part and help out! Remember what the Realtor says: “It’s a great time to buy or sell a home.”

Click here to post a comment -- Posted by: burbed @ 4:43 am

December 11, 2006

Why transfer from Los Altos High to Mountain View High?

This caught my attention:

Mountain View Voice: School district deals with flood of transfer requests (December 1, 2006)
Local high school officials are scratching their heads over a growing flood of student requests to transfer from Los Altos to Mountain View high schools.

This year, there were 391 requests to switch to Mountain View High, a trend that cannot be sustained according to Mountain View-Los Altos School District officials. During the same period, only 180 students requested a move to Los Altos High.

The number of transfer requests to Mountain View has risen steadily over the past several years, a cause of concern because both schools are nearing maximum capacity. In addition, district officials say, very few students will be granted transfers in the years to come due to both schools reaching that maximum. The transfers are granted on a first-come, first-served basis.

So why all these transfer requests?

Part of the larger perception about the two high schools may be that Mountain View High is considered safer than Los Altos. While this reason has never been officially listed in a transfer request, Sarraf said that an informal survey she conducted resulted in several people telling her they believed the perception to be true.But both Sarraf and Superintendent Barry Groves said that it isn’t.

“It’s not accurate in terms of our statistics. The schools are almost identical” in terms of safety, Groves explained.

Ah, safety. But that’s interesting that parents think one is better when they’re both the same. Let’s just take a look at the median home prices:

Los Altos      94022      $1,588,000
Los Altos     94024     $1,520,000
Mountain View      94040      $815,000
Mountain View     94041     $825,000
Mountain View     94043     $660,000

Only in the Bay Area would getting a 40 year mortgage to pay off your $1 million dollar house mean that you have to be concerned about your child’s safety.

See? It really is special here.

Click here to post a comment -- Posted by: burbed @ 10:10 am

2164 Poplar Ave (480 sqft) has a guest house!

It’s time to revisit one of Burbed’s favorite properties on the market:

Popular Ave in East Palo Alto – houses for sale galore! 2164 poplar ave price reductions! — Your Silicon Valley Home and Mortgage Insanity Blog
2164 Poplar Ave, East Palo Alto Property Details – East Palo Alto Real Estate – East Palo Alto Homes for Sale – Movoto

That was back in August. So what’s new?

Here’s what Burbed Reader Squisita wrote in:

This place is being advertised on Craigslist as a 2 bedroom rental. Interesting that the for-sale description was “one legal bedroom, plus three bonus rooms.” I don’t even know what that means. I’m intrigued that they can squeeze all that (legal or not) into 480 square feet.

As my friend put it,
What does “one bonus bath not warranted by seller nor agent” mean?

If neither the seller nor the agent call it a bath, then who wrote that?

Why don’t they just advertise it like: 4BR, 3BA luxury home with heated pool.*

* (3 of the BR, 2 of the BA, and pool not warranted by seller or agent)

Seriously? Well, it looks like the ad has changed a little recently – still absurd though. Here’s the Craigslist post:

Very Clean – Beautifluly Remodled Home ++Pics++
2164 Poplar Ave, East Palo Alto

Virtual Tour Link

This Bungalow style home is located in East Palo Alto. This cozy home is conveniently located near shopping and transportation and the trendy University Avenue area.

The home has 2 bedroom and 1 Bathroom plus a bonus cottage. The House also has been fully remodeled with new paint, granite counter tops, and a large front yard patio.
• Pets are negotiable. • Lease negotiable • AVAILIBLE NOW • Security Deposit $1300.00 Please Drive by unit and take a look. If you have any questions please feel free to call 650 814 9666 or reply to this add.

There’s a guest house? For a house that has 480 sqft?? Is the guest house for a car perhaps?
But even more interesting is the rent: $1300 a month. Yet the sales price is $499,000 a month.

Let’s say you put down 20% (OH NOES! TRAPPED EQUITY!)… according to Dinkytown, your mortgage would be:

  • $2,457.94 for a traditional 30% loan (boring!)
  • $2,142.99 for a ARM loan
  • $1,663.33 for an Interest Only ARM loan

Let’s ignore property tax, maintenance and insurance – just like everyone else. Just think of the big fat juicy tax break you’ll get on this. And when you sell in 5 years, this will be a million dollar house – so you’ll definitely make back the $62k that you’ve lost by buying.

Remember, now’s a great time to buy or sell a house!

(Thanks Squisita!)

Click here to post a comment -- Posted by: burbed @ 5:30 am

December 10, 2006

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Click here to post a comment -- Posted by: burbed @ 5:22 am

December 9, 2006

"MUCH of the growth of the United States in recent years has been financed by homeowners’ rising wealth."

Signs of Lean Times for Home Equity, the American Piggy Bank – New York Times
MUCH of the growth of the United States in recent years has been financed by homeowners’ rising wealth. But now the growth in that wealth has almost vanished.
The government reported this month that it estimated the equity of Americans in their homes — what the homes are worth less the money owed on mortgages — rose a scant 0.1 percent in the third quarter. At an annual rate, that was just 0.5 percent, the smallest gain in more than a decade.

From late 2003 through the first quarter of this year, the gain in home equity was running at more than 10 percent a year, more than enough to keep Americans feeling richer and to provide cash — through refinancings or home equity loans — for other uses.


Some of that borrowing came from home buyers who needed to borrow to pay the high prices, and some from homeowners refinancing their homes. But a lot also came from an increased willingness of Americans to use home equity lines of credit — and from the expansion of the asset-backed securities market that funds many such loans. The amount outstanding under them rose at a compounded annual rate of 22.9 percent over that period.

In my opinion this is a good thing – the best way to earn money is always to borrow it. And if you need more money, get a second job by returning things that you buy. You can’t lose!

Click here to post a comment -- Posted by: burbed @ 2:26 pm

December 8, 2006

Interest only and Payment Options Mortgages take hold in Bay Area | 12/07/2006 | Brokers help borrowers untangle their mortgage options
“These exotic mortgages have kind of taken over,” said Mike Tacconi, president of the East Bay chapter of the brokers’ association.

Indeed, they have. In the Bay Area, 43 percent of loans taken out in 2005 were interest-only loans, according to San Francisco based LoanPerformance. Another 28.3 percent were payment-option, which can lead to a growing loan balance known as negative amortization.

Well, we love exotic foods. Why not exotic mortgages?

Click here to post a comment -- Posted by: burbed @ 11:57 am