A bit small, but this just leaves me shaking my head...
Posted on 12/07/2008 9:17:55 AM PST by Bean Counter
Southeast Francesca Lane cuts up and around a hillside to reveal the boom-time promise of Happy Valley circa 2006.
Young families rolled in to snap up $600,000, stone-fronted homes with Mount Hood views. They came for the country meets cul-de-sac life, solid schools and a 4,000-square-foot edition of the American dream. Speculators trailed on their heels for the next get-rich-quick venture.
Francesca Lane circa 2008 isn't dreamy any longer.
One of every five homes or lots on the street has fallen into foreclosure since the neighborhood sprang up three years ago. The street offers a grim picture of how greed dragged Happy Valley, Oregon and even the world into financial turmoil.
*SNIP*
House flips retirees
The Andersons arrived after reading news stories about Happy Valley's charm.
The couple lived a comfortable retirement in Clark County's Hazel Dell neighborhood afforded by Social Security and their public employee pensions. Dick, 70, retired after a career teaching at the Washington State School for the Blind. Aloma, 66, stayed home to raise the couple's three children and worked for a while at Clark College in Vancouver.
Both came from Minnesota and clung to Midwestern values. "We've never had a negative thing on our credit. We were one of those people with a 770 credit score," Aloma says while rocking in a chair in her living room in Hazel Dell, the clothes dryer humming in the other room.
Still, Aloma saw opportunity in Happy Valley's hills.
The couple had never bought an investment property. But by 2006, flipping houses had become so common nationwide that TV networks celebrated it with reality shows. Aloma was certain they could buy a home, resell it for a hefty profit and pad their retirement.
That's how they ended up on Francesca Lane in winter 2006. The Andersons saw a fleet of construction vans and heard nail guns popping. After talking to a salesman representing Buena Vista, they picked a lot with a yard a family could ramble around.
Aloma says the salesman told them the home would be worth as much as $1 million by the time it was finished in the summer. They never hired their own real estate broker.
They closed the deal in August 2006 on the four-bedroom, 5,000-square-foot home for $633,865. It was a steal, they figured, at $125 a square foot. "We thought it was a very simple situation. Good value, good ambience," Aloma says.
The Andersons bought the home with a no-money-down loan and an 8.5 percent adjustable interest rate from Hyperion Capital Group of Lake Oswego. That added a $5,000 monthly payment on top of the $1,500 for their Hazel Dell home.
Within weeks, Aloma put the house on Craigslist for $799,000. She planned to sell it herself and made the 35-minute drive most Saturdays to host open houses. She'd stay for seven hours and usually saw no one, a signal the market boom had wilted.
She lowered the price to $749,000. Even after a year, she still had no offer. The Andersons refinanced their Hazel Dell home twice to raise cash for the Happy Valley mortgage. In late 2007, they raided their IRA.
Still no offers.
By then, the nation's housing market had tumbled as subprime mortgage lenders went belly up. Pollock expected things would get much worse, and he cut his losses. He announced an auction in December 2007 to sell 230 homes, including some on Francesca Lane, at bargain prices. His move drove down home values across the city.
"When he did that to us, it killed us," Aloma says.
She mailed her last payment in January, and the lender declared the mortgage in default three months later. Staring at a loan far higher than the home's value, the Andersons faced losing the home to the bank.
A real estate broker found the Andersons a bargain hunter. The lender approved the sale for $515,000. That's $123,000 less than it had loaned the Andersons 20 months earlier.
The Andersons never spent a night in the Happy Valley money pit. But the mortgage, fees and taxes cost them close to $100,000.
"We did everything we thought we could," Aloma says.
**SCHNIPP**
How is it Constitutional for the Federal Government to "bail out" one set of homeowners like are described in this story at the expense of we people who are responsible homeowners??
I have a very difficult time feeling sorry for people like the Andersons, or anyone else who agreed to a mortgage on these terms, and is now simply walking away.
God save us from greedy people like the Andersons, as well as a Democratic Congress who wants to help prop them up....
They made what turned out to be a bad investment and lost money. Sucks to be them, but why do I as a taxpayer have to bail them out?
These people were fools....there is an old saw about fools and their money.
What made them think they could buy a home and then simply flip it for a neat 25% profit (~150K) just weeks later?
Did they think everyone else was just dumb?
Am I understanding this correctly, they bought a NEW house at the height of the housing boom expecting to sell it at a handsome profit? That just doesn’t make sense.
I bought a piece of property in the Northwest in 2002 and built a house on it in 2005. A vacation/retirement house.
I got a 4.75% fixed loan for the property and paid for the construction mostly with savings and out-of-pocket. It’s small, but nice. Not extravagant and sprawling. It was something I could AFFORD.
I’m not patting myself on the back, here, for being smarter than the average bear. Honestly I made plenty of stupid mistakes, but speculating and gambling that I’d be able to make a killing in the housing market was not one of them.
This is EXACTLY why I plan to be really, really active during the next set of primaries. I am going to work as hard as I can to throw every SOB who voted for any of these bailouts, including every RINO I can find. The GOP better start paying attention because, from what I hear from people I know, all of us are really pissed off.
This is a small parable to explain why this country will fall. Not because of muslim terrorists, or other external threats, but because we read this article and feel sorry for these people.
Not just any new home. A 5000 sf home. That’s cheeky.
BTW, has congress passed any new laws making these 0% down, interest only mortgages at the borrowers sole risk? Didn’t hear about it if they did.
Must have missed the memo announcing the height of the housing market was upon us. [/s]
There will ALWAYS be people buying at the peak...as well as people selling at the bottom of the market. Stuff happens.
Yup. People have pure greed and they ALWAYS fail to recall two simple concepts.
1. Supply & Demand - Increase supply and prices fall unless demand can keep growing as fast or faster than the supply(”ain’t gonna happen”).
2, Reversion to the Mean - When prices of a stock or home gets too high and out of wack with historical growth rates the price will revert to a historical average or growth rate. You can usually draw a growth line or average. the price spikes above that average - it will eventually revert to that avg.
You can probably add a third concept and that is the madness of crowds. Like the Dutch tulip bulb craze in the 1600s or tech stocks in 1998-1999 - when a crowd is doing something enmasse - you better do the opposite.
Another concept is fibonacci retracement which is like reversion to the mean.
there is one home tagged 'make me move' for $600k
article promoting doom & gloom where there is none?
It's plain old insane that Americans are subject to prices created by speculation for the basics of life such as a home and gasoline.
Of course, the type of house they were dealing in was hardily a typical home. But, still the concept has a trickle down impact that affected everyone. I can't say I have sympathy for folks like this. I'll save that for the folks pushed into higher mortgages for a basic home because of this speculative insanity.
Let's hope no one corners the market on water.
I bought some stock when it was high...hoping it would go higher but it went lower and I lost money. Can somebody bail me out? It’s really not fair !
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