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CR y Tanta congrats! Econoblogosphere - Interactive Features - Portfolio.com (Nichebloggers)
"These people put more than $444,000 in luxury "improvements" into the home over five years? That's some serious granite."
They were simply "freeing" the equity. It was trapped in the basement, whining like an injured puppy.
So, according to the stock market, everything that we talk about on this site is moot? Apparently, we are the only ones with unfounded worries. The sun is shining and everything is great with the economy...
It's raining here in California this morning. Go figure.
"
They were simply "freeing" the equity. It was trapped in the basement, whining like an injured puppy"
They can free all the equity they want, it's still American f'ing Canyon, "Gateway to Napa County" the way Barstow in the "Gateway to Las Vegas." A colorless series of tract homes and chain stores on the edge of a -- let's be real -- swamp. A brutal commute to the Bay Area.
The kind of upgrades they put in would have little appeal in kid-worshipping American Canyon even if the boom were still on. They built their retirement home before they were ready to retire. Bad mistake. And yes, these days people pay for their mistakes in the real estate market.
Sal,
You have to accept the fact that the stock market has temporarily disconnected from the economy.
More than any other industry, the stock market has legions of PR people touting it. Stock market flackery has become one of the biggest U.S. industries. Of course, the biggest flacks of all appear on CNBC and masquerade as journalists.
The purpose of this PR industry is to keep the doors open and keep the trades flowing another day.
Ask yourself this question: Assuming you knew that six months from now, the S&P 500 will be 20% below its level today. Would it be better to drop to that point gradually, or all at once?
Sane people would say "gradually" because the shock would be less. But the stock market PR machine would say "all at once." Because that way, they get to do business for another six months.
That's why the PR machine doesn't try to align economic events with stock market values any more. It's too negative.
If they marblized all 4.5 bathrooms, I guess it could cost some serious scratch; though I doubt that it's equal to 105% of the purchase price.
I still can't imagine how bad a cook someone would have to be in order to need so many bathrooms.
This story is almost unbelievable.
no really, I mean I'm not sure I believe it.
Sure, they may take a "loss" when all is said and done, but I'd be interested in seeing EVERYTHING that was done with their home "equity".
Too many times we see stories of people who renovated and took a "loss" only to later find out that the "loss" includes a HELOC that paid for a car or big vacation.
Maybe they did actually throw near 1/2 Million into renovations on a NEW cookie cutter house... but it seems highly suspect.
Especially in that part of the Bay Area... it's all tract homes out there.
"Instead, they were following Saverio Bellomo's old-world ethic of buying a house and living in it forever."
Is blowing almost a half million on countertops an ethic?
We'll see how zen they are in another year, when prices have dropped another 20-30%.
You couldn't paint a less sympathetic protagonist for me: childless peninsular dwellers who take a home in a good school district as "an investment"? And who, like many Bay Areans, think that spending a lot of money on an interior makes up for the fact that your house is a stucco box.
Public architecture? What's that? A BMW out front?
Cheers,
prat
I have a tale from a friend while at a shooting match:
A friend of his bought a run-down house on the far outskirts of the metropolitan area in 1995 for a 40k mortgage.
This guy is about to lose his house because it now has a 400k mortgage and he can't afford the payments.
The house in nicer now and he has lots of toys like snowmobiles, boat, etc. But he still will end up without a house.
Yearning, I see this as just another example of people who are confused about the difference between consumption and "capital improvements." For years, CR would do some post on MEW, and a bunch of folks would pipe up that anything spent on "home improvement" was an investment, you see.
We in the mortgage industry have been dealing for decades with people who expect to get a dollar-for-dollar (or more) increase in value of a property for these "improvements" they make. It is never easy to convince them that they spent a lot of money on enjoying their House Beautiful kitchen, which is consumption (the conspicuous sort), not "investment."
But the bubble market masked that reality. Now we're back to the reality of the economics of overimprovement.
I thought we'd take a moment for philosophical reflection on this bright sunny Monday morning.
excuse me, but the sun isn't even up yet. you crazy DC-areans or whatever you're called.
The stock market, as a "headline" barometer of the economy, will continue to be rescued as long as possible.
Look at the rate cut. What sector of the economy did it help? What problem did it solve?
The same sort of rescue will continue to be made with "jobs created" and "unemployment rate".
Very few people look at or care beyond the "headline" numbers.
The sun is shining and everything is great with the economy...
Sal | 10.01.07 - 10:13 am |
500 trillion in notional derivatives
15 trillion equity marktet
no contest....
Don't forget Citi says buy homebuilder stocks. The bottom is in. How come the people on this site don't believe that?
Maybe we are just naysayers and you really can liberate the equity in your home.
And for some crazy reason, I understood that the liberated equity was really a loan that had to be paid back along with a little interest.What am I missing?
I guess the government is going to make whole all those people who thought they really could liberate equity.
Maybe they do have the big picture, there really is a free lunch.
Any article so beautifully written, so full of nuance, would only be marred by any comments I could make. I absolutely love that type of irony, I adore satire done with such skill!
According to an article in the Napa Valley Register last week there is a "silver lining" in the local real estate market--investors from out of the area are calling wanting to invest now that prices are reasonable! Now that's in American Canyon, where, they calculate by the tried-and-true inventory-divided-by-monthly-sales method, there is a 41 month supply of listings.
Now Mr. Dobbs refers to brutal commutes--the weaker-still markets are in the even further reaches of the metro area. And lemme stick up for the wetlands--they are part of the largest estuary on the west coast.They are prime real estate for lots of critters--just not home buyers.
You know when they put granite countertops in the laundry room of a tract house that the market has jumped the shark.
The article does hint that there are some remodelling contractors with new trucks and pools at their homes paid for by these people.
This is quoted from the comments section of the online article in question:
therealscoop wrote:
I know that house. The real truth is the Bellomos moved out of that home and had the developer greatly improve the home at no cost to them. It was done because of construction defects found in the original construction. The developer spend hundreds of thousands in reconstruction and a number of free upgrades (granite, stone wall, etc.) were given to the Bellomos in an effort to prevent litigation. Also during all this renovation the family was put up first class at Silverado country club for months with maid service. I can not believe that they claim to have spent over 400K in upgrades and are now losing money. The truth is they never even paid for many of the upgrades they are now claiming they spend thousands of dollars on. They may have paid for some extras but to say they selling at a loss is a joke. PS. If you dont like my comments you should not go public with a story full of half truths just to get publicity for you home sale.
Posted 9/30/2007 7:42:36 PM
If that's true, it puts a different perspective on that story, eh?
400,000 in 2002
800,000 in 2007
very Ze
And lemme stick up for the wetlands--they are part of the largest estuary on the west coast.They are prime real estate for lots of critters--just not home buyers.
You got that right. I live on the edge of "wetlands" too. Snakes, mice, and other wonders of nature abound.
I love it tho.
--
BTW, this is a very good example of why OFHEO's HPI (housing price index) is heavily distorted with bias towards higher index price than the real appreciation in the prices of the same homes.
HPI is based on the prices of the homes that were resold. It does not take into account if the home was significantly improved, or "modernized," since the previous sale.
OFHEOs House Price Index is published on a quarterly basis and tracks average house price changes in repeat sales or refinancings of the same single-family properties. OFHEOs index is based on analysis of data obtained from Fannie Mae and Freddie Mac from more than 32 million repeat transactions over the past 32 years. The more limited purchase-only index is based on 4.7 million transactions.
Jas
The trouble is, upgrades for one family are renovations waiting to happen for another family, Barker said
Well put. There's a reason that people who want to rent a place out or sell it tend to paint everything a bland "landlord off-white," shade.
What's the deal with granite countertops anyway? I can't say I've ever had the privilege of living in an "upgraded" house, but as someone who likes to cook, I can't imagine having to live with all stone work surfaces. Is there something I'm missing? Do these people spend all their time rolling out dozens of pies?
What's the deal with granite countertops anyway?
I thought that Granite was a trade-name for a solid surface material (similar to Corian). Reading this link, it looks like its.. granite. I have Formica in my kitchen, but I do have a Corian cutting board. Each material has its uses.
Comparison of Granite, Quartz, Solid Surface Countertops - Keidel Bath, Kitchen, Plumbing, Cabinetry, Appliances - Cincinnati, OH
"If that's true, it puts a different perspective on that story, eh?"
Skibum: Good catch.
That said, AHA! I KNEW IT!
I swear, everytime we get a story like this, it turns out to be not quite true...
I don't know if I'll every believe any of these stories again. (as I said above)
SD Renter, I agree. I was in a rental with granite countertops for awhile and you wouldn't believe the number of chipped plates and dishes that we've got as a result.
Jas makes a good point about "same home sales" perhaps not reflecting the recent surge in remodeling. Sure, the 1:1 return on upgrades isn't realistic, but something like, say, new windows or a new roof on a 30 year old townhouse would be worth something, if not 1:1. Here in SoCal it's amazing how many owners that I know who have had major remodeling work done in the past couple of years.
Here's the Redfin listing. Looks posh but I'm pretty certain that there's not more than about $200,000 of actual "improvements" (generously allowing $100K for the kitchen, $20K each for 3 baths and $40K for closet organizers and crown moulding). I suspect some HELOC or C/O refi action was used to finance cars and/or lifestyle during the past 5 years (note that the reporter mentions his business getting worse after 9/11, but they bought the house a year later?)
138 Wetlands Edge Rd, American Canyon, CA 94503
"Here in SoCal it's amazing how many owners that I know who have had major remodeling work done in the past couple of years."
Me too, but the game must have come to a sudden stop (or sharp slowdown). A buddy who depends on home improvement related jobs was complaining about depression (or deep recession) in the economy. He lives in San Fernando Valley.
Jas
What, no wallpaper? For $868,000, I at least want some wallpaper... (yes, that's my elipses rebellion coming thru...)...
Jas, home improvement industry is holding up pretty well in my neck of the woods in the northeast. All areas aren't equal yet.
Remodeling.....its an obsession for many here in the Bay Area....along with iphones and BMW's......used to be hot tubs and peacock feathers......but I'm showing my age :
daveinmarin, On the Peninsula, everyone already has a Bimmer--our new automotive obsession is the Prius, a morally superior vehicle.
The guy sitting in the cubicle next to me is determined to add the 199sqft addition to "his" Bay Area house, so that his suicide mortgage can be refinanced.
It's vitally important that he build this $250k addition, because he can't afford real payments on this 950sqft property, and it's going to reset him straight into foreclosure. Except that he owes more due to Neg Am.
The trick, you see, is in the sqft, since houses have been getting appraised almost on sqft alone, adding one for $100-$200 is a good deal when it's appraised at $400. It's making equity just by the miracle of being attached to the house!
To badly quote Spock, "Pure equity - value without form."
Heh, I'm in Indiana. Neighbors bought a brand new infill house and have spent their entire ownership experience (appx 1 year)remodeling everything. They're digging up and releveling the yard now. It baffles me why anyone would buy a new home and not get what they want.
Out of curiousity I zillowed the area and happen to find this place:
138 Wetlands Edge Rd, American Canyon, CA 94503 - Zillow
Interestingly its zestimate is $674K, although I don't know how accurate zillows tends to be.