Owners of McMansions Defaulting effects of housing bust are beginning to ripple

[EV_Ares]

through the economy.

Sept. 10, 2007 issue - Walking through the gated community of Black Mountain Vista on a hill in Henderson, Nev., Thomas Blanchard offers a guided tour of real-estate woe. A row of stucco duplexes that recently sold for as much as $500,000 sit empty. "That's a repo," the real-estate agent says as he stands in front of 678 Solitude Point Avenue. Then he points to the adjacent houses, where yellow patches blot the spartan lawns and phone books lie on front porches, their covers bleached from weeks under the desert sun. "No. 680, repo; 684, repo. Those two at the end, repo."

Three years ago, this Las Vegas suburb was teeming with modern-day prospectors armed with low-interest mortgages, all hoping to strike it rich in real estate. Now, what started with the subprime-mortgage mess and subsequent credit crunch are turning communities like Black Mountain Vista into luxury ghost towns. Buyers who got in over their heads are being forced to abandon their homes, leaving behind empty McMansions on the California coast and see-through condominium towers on Miami Beach. Real estate is turning into a money pit, sapping the fortunes of home buyers, hedge-fund managers and house painters alike. The really bad news? This is only the beginning.

No sooner did the housing market peak last summer than pundits and home builders assured the public the bottom had been reached. But with each passing month, the shoes continue to drop. First, dozens of subprime lenders were forced to close their doors. Then in July the nation's largest mortgage lender, Countrywide Financial, reported that mortgages held by borrowers with better credit were starting to curdle. Nearly 180,000 homes fell into foreclosure in July, up 93 percent from a year ago. Last week President George W. Bush offered a series of proposals designed to ward off a flood of foreclosures. Sales of new single-family homes were off 22.3 percent in June from a year earlier, and sales of existing homes—a much bigger market—were off 9 percent in July. The National Association of Realtors reports there's enough housing inventory for sale to last 9.6 months, more than double the 2005 level. The Case-Shiller index, which tracks national housing prices, fell 3.2 percent between June 2006 and June 2007. While that's a relatively small drop, "this is the largest sustained decline in year-over-year prices since 1991," says Yale economist Robert Shiller.

The decline in housing construction and sales has had an immediate economic impact. From the perspective of job creation, real estate was the best sector in which to have a boom, providing jobs at every rung of the ladder: real-estate agents and mortgage brokers, architects and lawyers, investment bankers and decorators, movers and painters, contractors and landscapers. Between November 2001 and April 2005, housing and housing-related industries created 788,300 jobs, or 40 percent of the total created in the United States, according to Asha Bangalore, an economist at Northern Trust in Chicago. The demand for mortgage brokers in Las Vegas was so strong that "every stripper, waiter and bartender on the Strip had a broker's license," says Boyd Nyborg, a former mortgage broker who now tends bar at the Tao Las Vegas.

Story continues below ↓

http://www.msnbc.msn.com/id/20546324/site/newsweek/

[Tansy_Gold]

1. I'm shocked, shocked I tell you, shocked

not.

[livvy]

2. Check out this site.

You can see what homes are being auctioned, in forclosure, for sale, etc. Looking at a fairly affluent area near where I live, it's really amazing, and alarming.

Homes for sale: 161 with an average price of $319,000
Forclosures: 172 with an average price of $166,000
Nothing is selling. My sister has had her home up for sale for close to a year. It's a really nice home, 3 bedrooms, family room, well maintained, and empty. They have not had a single offer. They are really struggling to pay the taxes on the property along with the mortgage on the condo they moved to.

There is a home in forclosure on my street, and these are homes that, in the past, sold by word of mouth. You would never see a for sale sign. One day you'd see a moving truck, the next day another, and you'd have a new neighbor down the street.

Seems the bubble has done burst.

http://www.realtytrac.com/

[EV_Ares]

4. Dam, you know as they say "It ain't over until its over" which certainly

applies to this crisis. Have you noticed when this first began, Wall Street one week was worried, the next week not worried and so on and so on. It appears now there have not been any "not worried" weeks for a while so the covering up and saying this is not going to have any influence on the economy is over.

It really is sort of scary since this entire sub-prime thing reaches into the banks in Europe and elsewhere. The global economy is great, huh.

Also, the lenders are unable to do any negotiating with the buyer to prevent them from being kicked out because almost before the ink is dry, the loan is sold off which is where Wall Street comes in and bundled up with bunches of other mortgage loans so there is not any way to work things out like they used to be able to. Then these bundled up loans become paper of the Wall Street brokers where they are bought as stocks or bonds or something which gets them into other countries.

What a freaking mess!

[tanyev]

12. Yeah, and our Glorious Leader's concern didn't start until Wall Street finally got real worried.

[Viva_La_Revolution]

9. wow

Washington County Foreclosure Search Results
Location: Home > OR > Washington County
Search Results: Foreclosures in 97223
1069 listings match your search criteria.


Pre-Foreclosure 169 Properties
Auction 84 Properties
Bank Owned 168 Properties
Govt-Owned 1 Properties
For Sale By Owner 21 Properties
Resale Homes 594 Properties
New Homes 32 Properties

[3waygeek]

3. And yet, they still keep building them...

in the next town over from me, there's a short street (less than 2 miles long) on which are being built 4-5 new McMansion subdivisons, with houses ranging from $500K to $900K. The street already has about 10 such subdivisions which have been built up over the last 20 years -- too much is not enough for the developers.

[salin]

you could be describing my home town

college town gone nuts. Houses are still being built and sold at the top end (500-900k) - tiny cottages go for 100k - but everything in-between (esp not newly built homes) are falling, falling, falling.

[Warpy]

5. McMansion developments attracted real estate speculators

both in Las Vegas and here in central New Mexico. The paper was full of tales of chartered flights met by chartered buses taking Californians (mostly) around to all the big builders in town. One whole cul de sac here was bought by a single speculator, four gigantic houses dumped on the market the same day.

Most of those people expected to sit on the properties for a maximum of two years to turn a profit on a nothing down, interest only balloon mortgage.

Woops.

Now we have a town where housing was ridiculously overbuilt, especially the wrong type of housing: overlarge, hard to heat and cool, lots of party rooms and few bedrooms, far from jobs.

Give a few years of all those places sitting empty, and I imagine everything in the immediate vicinity will start to decline in value just from being associated with properties that attract squatters and weeds.

[sandnsea]

6. No, it's poor people with bad credit

DUers have repeatedly told me so. Newsweek is all mixed up, it's not wealthy people buying out of their means, or house flippers, or lenders keeping the best rates from buyers because they made more with the ARMs. No, it's just poor people with bad credit who lied and cheated and should never own a home in the first place.

[salin]

7. heh... so people really are that tied to "personal responsibility" but

no corporate (or investor) responsibility (per responsible lending) nor greed explanations.

Old reaganitis dies hard.

[1932]

11. And what about the government? How about government responsibility to play an honest referee

between individuals and corporations whose mutual stupidity and greed are going to drive a lot of people to ruin who acted sensibly (because half the homes in their neighobrhood are vacant) and aren't CEOs and didn't get stock options at the corporations that made all the money off these ridiculously-priced transactions.

Clearly the behaviour over the last couple years is going to do a lot of damage to a lot of people who never did anything wrong. Didn't FDR teach us that, in situations with those kinds of risks, a good government steps in and protects society?

[salin]

13. Didn't you hear... regulation is so pre-Reagan...

look at how much better off we are with the corporations unfettered from govt regulation! :sarcasm:

[1932]

14. You can make a lot of money off wild swings from boom to bust to boom to bust

especially if you own the politicians who can push the pendulum (or who can refuse to control it) so that you know the timing...

[salin]

15. you can bet a whole lot of $ has been earned on insider trading

just before the beginning of the collapse.

[1932]

17. You can also bet that a lot of people who knew the Bush government was going to turn real estate

into a the boom-then-bust driving force of the economy for eight years to hide the fact that trickle down economics doesn't work knew to invest a lot more in on the ground floor made a ton of money (compared to all those middle class people the MSM only convinced to become real estate speculators last year so that there was someone to whom the insiders could unload all their real estate before the bust).

[kestrel91316]

8. Can somebody PLEASE explain to me why, with the handwriting on

the wall for Las Vegas, those freaks STILL feel they have to steal the water out from under White Pine County and Great Basin National Park. WHY?????

Las Vegas is a frickin' uninhabitable desert. The city has ZERO long-term sustainability. The Colorado River is going dry so, instead of limiting growth, they decide to steal from the poor. And Harry Reid supports this death blow to rural Nevada.

http://www.nevadaappeal.com/article/20050126/OPINION/101260016
http://www.lvrj.com/news/7060302.html

[sandnsea]

10. Looks like an environmental disaster

I can't believe they'd risk the ancient habitat of the GBNP this way. Between the water and the electricity used, Las Vegas is the giant symbol of everything that is wrong with this country. I don't think they even try to move toward a sustainable model.

[kestrel91316]

18. If there's anyplace that screams for mandatory solar PV on all

new construction, it's Vegas. They are DISGUSTING wastrels. Part of why rural NV HATES Vegas with a purple passion.

[livvy]

16. I've only been to Vegas once.

I don't think I'd ever go back. The lights and hotels and the people watching were great, but it was the environmental aspect I just couldn't get over.

We drove in from the surrounding area, so I knew how dry it was. We had driven through a part of a reservation on our trip where there was barely enough green to keep a single goat alive. Yet, walking down the streets of Vegas we found all these wide open doorways, with air-conditioned air blasting out into the heat. Then all the misters found everywhere. I couldn't get over the waste of resources that the city didn't even have. Green lawns, trees, flowers. I was really taken aback.

I'm not a gambler, but don't have any problem with people who enjoy it. One thought kept nagging at me though. How many of these people really couldn't afford to lose, but just couldn't help themselves?

Both days I was there, I was really bothered by both issues, but the environmental thing really got to me the most.