The Rage Diaries

I can't see my house from here

The WSJ's cheerily-titled "California's Crashing Market" has a handy interactive graphic where you can see exactly how screwed some of the counties here are screwed ... homes sold at a loss, foreclosure sales, negative equity percentages.

Among the counties not featured: San Luis Obispo, Santa Barbara, Marin, San Francisco, Alameda, Contra Costa, Santa Clara and San Mateo (AKA Silicon Valley) and San Diego. You know, counties with a very high percentage of rich people. Or, at the least, a high percentage of people who can afford to make their mortgage payments. I am sort of relieved that my county's not on the "Hoooo-boy, you are so screwed!" interactive graphic (which accompanies "California Home Sales Revive, But Not Without Intense Pain"). But reading the article makes me twitchy because, seriously? Nobody foresaw the collapse of the exurbs?

Anyway, despite my county not being on the "Hoooo-boy, you are so screwed!" interactive graphic, it's not like it's 2004 all over again here -- per "Bargains Push Bay Home Sales, But Prices Plunge" (SF Chron, Oct 22, 08), median home prices in my county dropped 33% in year-over-year comparisons. So, wait ... maybe we are screwed after all.

Revenge of the tiny houses!

The most recent issue of Money magazine has a feature, "The Incredible Shrinking House," which reports:

Generations X and Y seem more intrigued with life downtown where they can enjoy easy access to restaurants and entertainment, a minimal commute and smaller, easier-to-care-for living spaces.

"Ask anyone how many rooms in their house they don't regularly go into and most will admit that they actually live in a small percentage of their home," says Marianne Cusato, an architect who used to design 3,000-square-foot-plus homes but now specializes in cottages.

And then today in the WSJ, there's "Ceilings Come Down to Earth," which finds:

Major home builders including Pulte Homes, Toll Brothers and K. Hovnanian say more buyers are looking for the maximum number of rooms and square footage for their money, so they're opting to have a loft, bedroom or playroom built in the air space where the plans call for a double-height ceiling. "People don't want it anymore," says Ken Gancarczyk, head of builder services for KB Home. The big Los Angeles-based builder has stopped offering double-height great rooms in response to falling demand.

I know I've talked before about how weirdly unlivable the McMansions felt when I ventured into them. But I do wonder what will happen in these neighborhoods where these monstrous houses are currently packed cheek-by-jowl. Will we see a teardown effect where people will buy the land and build a smaller place on the lot? Will we see battles as people attempt to convert McMansions to multifamily units? Will we see these neighborhoods slide into crime? And how long will this shift away from giant overstuffed houses take?

There are no good neighborhoods, are there?

One of the side effects of joining the mortgaged class is an exquisite awareness of property taxes. I gasped in empathy upon reading that Loudoun County, Virginia will be raising its property taxes in an effort to make up for a drop in property assessments ("Loudoun Approves Jump in Tax Rate," WaPo, Apr 2, 08). The article says the overall tax rate is up 19%. If I'm reading the story correctly, here's how it will affect the landed class:

Get ready for slumurbia

[T]he story of vacant suburban homes and declining suburban neighborhoods did not begin with the crisis, and will not end with it. A structural change is under way in the housing market—a major shift in the way many Americans want to live and work. It has shaped the current downturn, steering some of the worst problems away from the cities and toward the suburban fringes. And its effects will be felt more strongly, and more broadly, as the years pass. Its ultimate impact on the suburbs, and the cities, will be profound.

-- "The Next Slum?" Atlantic Monthly, Mar 08

The article makes the argument that over the next decade or two, the populations that used to pay the kinds of property taxes that made for great schools and safe neighborhoods will continue shifting back to cities -- which means far-flung bedroom communities will see their real estate values flatten or drop, the tax base will dry up, and those little 'burbs will soon breed the kinds of social woes that used to be associated with inner-city living.

Poor people, poor pets

This story makes me very sad:

Across the [Boston] region, dogs and cats are arriving at shelters in growing numbers, as their owners face foreclosures and head to temporary homes, such as rental units or relatives' houses, where pets are not permitted or may not be welcome.

The separations are putting a strain on shelters already strapped for space and are making for teary scenes from Boston to Brockton, from Lowell to Worcester, as owners relinquish their longtime pets to uncertain futures. Some shelters euthanize animals that cannot be adopted.

-- "Owners Lose Homes, and Pets Suffer, Too," Boston Globe, Jan 26, 08

Nine years ago, when my sublease in San Francisco ran out, I left my beloved Inner Sunset neighborhood rather than rent an affordable place that wouldn't take Isabel. I figured it was the cost of having a pet. I may not agree with some of the choices people have made with regard to financing their houses, but my heart goes out to them for losing their pet on top of their home. And I hope anyone who's reading this remembers later on that all their financial choices will have repercussions down the line.

Everything is the housing bubble's fault

Only a year ago, money taken out of houses was still more than 9 percent of the nation’s disposable income, Mr. Zandi calculated, using a sampling of Equifax credit reports to supplement Fed data. By this fall, it had dropped to about 5 percent, a difference of about $350 billion a year.

Much of the attention in the recent collapse of the housing boom has focused on those in danger of losing their home or facing higher monthly payments in their adjustable mortgages. But the broader effect on the economy is likely to come from the much larger group of homeowners who can no longer count on rising home values to bolster their wealth.

-- "Homeowners Feel the Pinch of Lost Equity," NYT, Nov 8, 07

Some of that $350 billion is going to be missed around the holidays. In today's "Holiday Job Outlook Iffy," the Chicago Sun-Times reports that holiday sales are expected to rise a mere 4% over last year; this is below the 10-year average of 4.8% and a short drop from last year's 4.4% rise. It's still sales growth, but it's slowing growth, and it could represent more money being spent compared to more goods being purchased overall.

As for me ... expanding your consumer credit powers with your home's equity seems D-U-M, but what do I know? I am not imaginative enough to look around my house and say, "You ... yes, you will help me pay for Christmas presents."

Indeed, every penny does count

Seen when going through my bookmarks folder, appended to "Every Penny Counts" (NYT, Jul 29, 07):

An article on July 29 about people who demonstrated exceptional discipline in saving to buy homes included incorrect financial data from a buyer about his purchase of an apartment. Obi Onyejekwe paid $400,000 for his co-op in Gramercy Park, not $420,000. The down payment amount was $100,000, not $84,000. His assets reported to the board were roughly $100,000, not $84,000.

For those doing the math at home: what it means is that Mr. Onyejekwe put down a 25% down payment on his apartment, not a 20% down payment. Another 5% in home equity? Those pennies do add up!

Shrinky-size it?

Two recent articles cast a little doubt on the future of the McMansion.

There's "Size of New Homes Starts Shrinking" (Marketwatch, Sep 12, 07)

The gist of the story is this: as the lending market tightens up, prospective buyers' abilities to get the loans that go toward the big houses is shrinking. Since nobody can afford the big houses, builders have to produce smaller houses that people can actually afford.

The one that really got my attention: "McMansions Turn 'McApartments,' Stirring Ire" (WaPo, Sep 4, 07), which covers the conflation of two issues: knocking down old houses that fit into a neighborhood's overall architectural feel to build big new places, and then using those places as boardinghouses for several people.

House of cards

[T]he lower payments afforded by an interest-only loan helped us buy a house in an expensive county -- Montgomery -- where we wanted to live and eventually send our children to school. Our payments were significantly lower than what they would have been with a 30-year fixed-rate mortgage, meaning we could buy a nicer, larger home. Also, with the real estate market then booming, we planned to sell the house within five years anyway -- for a big profit, just like the previous owners got from us -- so why pay principal on what was essentially a starter home?

Could we have lived farther from the District for less money, perhaps allowing us to get a less risky mortgage? Yes. Could we have continued to rent, waiting, perhaps, for the market to even out and our salaries to increase? Yes. But we already make nice livings. We pay taxes in the highest bracket. Our parents bought homes at our age. It may sound crass, but we deserved a nice home. We did what we had to do to get one.

-- "Was the Mortgage a Mistake?" WaPo, Aug 19, 07

On the one hand, kudos to the author for his honesty. On the other hand ... we closed on our house at around the same time (give or take a week), and it is like we moved in Bizarroworld compared to this guy. Surely we are not the only people left in America who figured out what we could afford, then went house-hunting based on that, instead of finding the house and worrying about financing later?

Knowing when to say no

Twice during our house-buying process, I hung up on the people who were ostensibly "helping" us out. This was because hanging up was more polite than what I would have said had I stayed on the line.