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A Metro NYC Real Estate Horror Story
In 2006 a house not too far from mine came on the market at a very rich
price. $2.7mm for a five bedroom home on four acres. It was a nice
place. At the time I thought it was way over priced, but I was praying
it would sell. That comp would have put money in the pockets of all the
neighbors.
It didn’t sell, and then 2007 happened. There was not
much price erosion that year. But there were no sales either. So that
house sat on the market. The price was lowered several times through 07
and 08. The RE agents let it be know that the seller was “negotiable”
at every new sales price. Nothing sold in 2008.
The house was
sold this week. It was a short sale. The sale price was $600,000. Less
than 25% of its asking price three years ago.
The owners had a
total of $1.8mm on the house. A $1.2mm 1st lien and a $600,000 second.
I don’t know how the sale proceeds were divided up. The 1st got less
than 50% of principal. The 2nd probably got pennies. The loans had been
in default for more than a year, so the $90k in arrears were wiped out.
An absolute disaster for the lenders.
The new buyer is solid. He
shopped for a mortgage on the property for three months. They finally
got a mortgage with an advance rate of only $417,000. This number is
the Agency limit; therefore the only lender out there was Fannie Mae.
This comes to an advance rate of 70%. The buyer had the $183k required
down payment so the deal got done.
There are hundreds of $1 million homes within a few miles of this property. This morning they are all worth 40% less.
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i believe bruce's blog gives the city wherein he resides....in NY. he may be in geithner's area, but i'm not sure without checking again and i am too lazy/busy right now.
Westchester county, don't know what town.
Westchester County taxes will destroy the RE market. Just look at some of the listings and check out the taxes...crazy $25,000 to $45,000 for what? So your kids can go to a school with country folks..
Yeah, all the IBM PhDs that used to infest Yorktown Heights are all going bye-bye. IBM basic research is being turned into marketing research.
That and the collapse of FIRE will keep Westchester modest.
Jon Stewert had a bit on that. It's unsold at 1.6M and his real estate agent basicly called him a moron.
Wow. As a potential buyer a couple of years from now, that is awesome. Thanks.
too bad the USD will be destroyed by then
Meh, if he borrows in dollars, at least he won't end up like the icelanders... well, not in the same way at least.
Hahahahaha! Destroyed? Try DXY 100.
Mark-to-market, eh? In a real economy, things are worth exactly what you can sell them for. Thanks for sharing this.
Holy Shit! That is a sad, sad story...especially for you and your neighbors. I know it is not any comfort to you, but I know for a fact that you are certainly not alone....here in Cali....do I really need to continue?
Sad? I played by the rules out here in costal CA and rented through all these phoney loans because I knew 500k 2br-2b was horeshit. Those people borrowed to the max and I hope they got their clock cleaned for it. THEY are the problem.
Who is "THEY"? Are you trying to tell us the suckers who bought these homes are the ones to blame? Are you saying that collectively they developed and marketed all this synthetic financing? You're a bozo.
David Brooks had an interesting take on this. His point was that in each neighborhood, we were all suckered by the housing bubble and then each time we bought/sold, we were all a part of the problem. Because as the values were rising, our judgment was influenced by those rising values (even though many of us kinda sort knew better), but then if we took advantage and sold or bought, then we were driving up the prices more. It's an interesting mass phychological phenomenon.
If you rented throughout, bully for you. You're getting subtly screwed by the government, but you're still coming out ahead.
That's right, nobody twisted your arm to buy a home you can't afford during an obvious housing bubble. Nobody forced shit on anyone. Problem is 90% of this country can't even balance a checkbook, so when it comes to making the biggest investment of their life, do you think they will do a good job? I rest my case.
Yeah they are partly to blame. You must be one of those ARM Interest only monthly payment morons. Let the idiot buyer be screwed. Caveat emptor. Learn it. Dumbass.