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**
I had this at the house next door. A flipper bought it, made some improvements and sold it to an older couple at the peak. The older couple then tried to flip the flip. They had it up for sale for 2 years and had 1 offer. The husband died and the wife is renting it out. My guess is she ia barely covering he taxes and other expenses.
You cold, cruel SOB. These poor retirees were just trying to improve their nest egg. Now you want to hold them accountable for their own personal investment decisions? How can you be so heartless? It’s our obligation to pay more taxes to help out these hapless souls. I know I am undertaxed and am only more than happy to fork over more money to prevent more of these sad cases from going to foreclosure. We should all do our patriotic duty and send more money to Washington.
Capitalism implies a profit motive, which is another word for greed. Let them succeed if they can, but if they fail, then that's on them.
The real greed is on Wall Street, where trillions of dollars of securities where sold on the foolish notion that markets will always go up, never down, and risk is spread out so widely as to be inconsiderable. All false, but because they had such powerful allies in Washington then they where bailed out, at our expense.
We all said "let them fail", but that's not what our overlords in Washington wanted.
The government is not supposed to save people from themselves. Who would be so stupid to buy an investment property in an undeveloped area, where there are no jobs?
Still may be a few trillion short!!!
What makes him think he's not speculating that the bottom has been reached. The article says the glut of empty lots and partially built homes there will depress prices for "months if not years". Buying a grossly-overprised home at a 20% discount in a falling market is not, IMHO, a good practice.
Interesting, she tried for a whole year at $749K after starting at $799K.
The year with no sale should have given her an inkling of the conditions... she probably could have easily dumped it for more than the $633K she bought it for in that period...
It seems that a lot of these late term “flippers” were people who had little experience in the commercial world and finally got greedy watching the market.
We have some friends of similiar social service type background who are in deep do do with multiple properties in CA. These people should not be bailed out. When they were getting in..we were getting out. A lot of people in the CA and west thought the bubble would go on forever, but bubbles always burst.
There will be another wave of foreclosurers as more investors walk on property beyond their means..job losses will further fuel the fire.
“Number six is the real kicker, $35,447.00 in wages and some lender made him a loan on a $638,206.00 house. Someone should be in jail!! “
The story doesn’t ID the lender, but I’ll bet you a burger it was WAMU...
Those shows on TV show the flippers actually IMPROVING a rundown house, not just a buy-and-hold strategy waiting for prices to go up. This couple learned the wrong lesson.
” The husband died and the wife is renting it out. My guess is she ia barely covering he taxes and other expenses.”
....I wish you well on this my friend...in our old neighborhood we had several houses that didn’t sell so they bacame rent houses....which meant they became problems...
So far the people are not bad. I will have no tolerance for it. it is weird that sometimes they are not there.
These were speculators. they took risk in order to make a profit. They lost their gamble. There is always risk associated with this sort of transaction. Although Wall Street is working very hard to eliminate risk, it won’t work.
There’s a whole lot of 5000 sq. ft. houses out there. A whole lot more than there are families of ten to live in them.
I’m buying right now. The house is modest and tidy, if a bit large for just myself and the soon-to-be-adopted cat. I put a hard-saved 20% down on it, and the mortgage payments are less than I would pay in rent.
Job number one after settlement will be accumulating a significant cash reserve. I am planning to accumulate a YEAR’S expenses before I branch out at all financially, with the exception of doing a company stock purchase thing.
I went through my flat-broke can’t-afford-a-tank-of-gas phase about two and a half years ago. I ain’t going there again, not if I can help it.
Greedy speculator gets burned.
Solves two problems at one fell swoop! I expect this to be happening in the near future, with government stepping in to give these homes away to socialism's constituents.
they’re just not making those loans anymore. Can’t see stupidity being outlawed however. This is Darwinism in action and regardless of how much money is thrown at the problem it will continue to play its way out.
“We should all do our patriotic duty and send more money to Washington.”
Amen. No one pays enough taxes and no one is regulated too much. /s off.
Who would have thought that the country that Washington, Adams (Both of them), and the others would fall so far so fast.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.