Periodically, I look at homes in the area that have been on the market for an extended period of time in my Happy Birthday Socal posts. This one is similar in that it hearkens back almost 2 years from its original listing date, and exactly shows the greed, stupidity, and laziness of the last 5 years on Socal.
Many of you remember the Mel Brooks’ production of “History of the World Part II” that dissects several historical well-known stories and presents them in a humorous fashion. One of the best known sections is from France’s pre-revolutionary period where the king takes what he wants when he wants it while his ruling elite rape the country. One of the funnier characters is a count (Count De Monet) whose name is routinely mispronounced to sound something like “Count The Money”. To which he repeats the proper pronunciation, “Day Monay, Day Monay!”
The history of the bubble in SoCal can be summed up by several trends indicated by this home.
1. The Oh Shit! I phase. This is when people realize their house is going up in value fast enough to make them feel good.
2. The Oh Shit! II phase. This is when people realize they can actually take free money out of their house and pay for shit.
3. The Oh Shit! III phase. This is when people realize they can barely afford all of the free money they just got.
4. The Oh Shit! IV phase. This is when people realize all they have to do is just sell it, pay off debts and they make more.
5. The Oh Shit! V phase. This is when people realize that while selling and making money is all and good, they need to actually get it moved, so they lower the price to the point they break even.
6. The OH Shit! VI phase. This is when people realize that they can’t even break even after taking money out, so they might as well offload it at a ridiculous price just to be rid of the albatross.
7. The Oh Shit! VII phase. This is when people realize that even that ridiculous price is not low enough to get attention.
It seems we are precisely at this point with a house in Laguna Niguel on Rue De Monet, or perhaps could be renamed Rue the Money. Of course, Rue is french for avenue, so it can mean several things, but I doubt this “owner” has ever hated the money he got out of his home.
This money has come via a cash-out refi, which is why the house is listed as a “short sale” more than $200K above the owner’s purchase price some 6 years earlier.
What has infuriated most of the mainstream media and bloggers alike is the lack of outrage on this kind of blatant manipulation. During 2008, these kinds of gains were deemed nontaxable when you walk away from your property; by foreclosure or short sale. So, the owner walks away with $200K of free cash money. Meanwhile, normal people who work for a living would need to make nearly $350K before taxes to equal the amount of money siphoned off of this house. If I weren’t so outraged, I’d find that funny.
But, this isn’t cherry picking; if you can show me a short sale listed, I can show you greed and stupidity. The surprise is how stupid our lawmakers are that they think that somehow “saving” this kind of homeowner is worthwhile. The only thing that it does is encourage the next person to do the same. And, by penalizing the bank by allowing the homeowner to walk away unscathed, they’re making it more difficult for credit to be had by those who are more deserving. Indeed, the only thing current legislation does is to make it more difficult for everyone except for the financially irresponsible.
The only thing left for lawmakers to stupidly do is to write down mortgages and have taxpayers foot the bill, or is that already happening? I lose track with the level of stupidity. Once it goes beyond “moronic” I lose track.
Meanwhile, homeowners who bought before 2003 in Orange County are able to “count de money” at prudent taxpayer’s expense.
Until homeowners can afford the homes they buy, prices will be falling; and by current measures, we’re still nowhere near the bottom in most areas.
Great post. Funny movie. Unfortunately, the only funny thing is the movie.
Absolutely. Banks were nuts to give away the money to people who had no real means to pay it back.
I wish there was more transparency in the proposed bailout. Who wrote which sections, so responsibility for dumb ideas can be noted.
Don’t worry the senators don’t really care they aren’t in any hurry to help, they have the best health care and are well payed, “Let them eat cake”
More and more it just seems that the whole point of the “stimulus” package is discouragement of the people who work hard in the faith that their efforts will be rewarded. Pure discouragement.