A Look at a Life Ruined by Debt

Here’s a story every American should read:  It’s a New York Times article entitled “Given a Shovel, Americans Dig Deeper Into Debt.”  Apparently The Times is planning a series of articles, called “The Debt Trap: A Series About the Surge in Consumer Debt and the Lenders Who Made It Possible.”

It’s a story of how in two generations America went from a nation of prudent savers to a nation of reckless debtors. How?  Largely because of marketing campaigns by credit-card companies that made borrowing seem safe, fun, positive, and necessary. To millions of people living humdrum lives, barely making ends meet, credit cards offered a solution, an escape. 

The Times story focuses on Diane McLeod, a suburban Philadelphia woman whose debt is out of control, to illustrate its larger point.

Years of spending more than they earn have left a record number of Americans like Ms. McLeod standing at the financial precipice. They have amassed a mountain of debt that grows ever bigger because of high interest rates and fees.

While the circumstances surrounding these downfalls vary, one element is identical: the lucrative lending practices of America’s merchants of debt have led millions of Americans — young and old, native and immigrant, affluent and poor — to the brink.

The fact is, it’s much harder to make ends meet these days.  Incomes have remained stagnant for the last couple of decades.  With life so hard, why not pull out a card and create some “priceless” memories?  After all, “Life Takes Visa!”

Thousands of people who tried to buy Orange County homes fell into the same trap.  They took out huge mortgages to live in houses that were way above their means.  They were hoping to get rich, but living in a nicer home also made them feel good about themselves.  But it was an illusion — just like the idea that credit cards make life easier and more pleasant.

The sad fact is, the only people who should use credit cards are the people who don’t have to use them.  People who are having trouble making ends meet should not be obligating themselves to 19%, 22% or even 28% annual interest payments. That’s how Diane McLeod ended up spending $20,000 of her $48,000 salary (before taxes) on interest expense last year.

There’s only one solution:  living within one’s means.  But tell that to today’s college graduates, who often begin their adult lives saddled with five to six figures’ worth of student loans.  How are everyday people going to get out from under?

There is some heartening news:  Credit-card companies are hurting right now because so many people can’t pay their debts.  That’s another kind of payback.

Recent Redfin posts:
Santa Ana:  Opening a Bank Now?  Something’s Not Right
A Price Slash Here, A Price Slash There
The 80s Are Back

Santa Ana: Opening a bank now? Something’s not right.

The Orange Juice Blog had a post yesterday that I just love the title of “Was this a good time to open the Santa Ana Business Bank?” The author Art Pedroza wonders why when banks are going down, there’s a group opening a new bank in Santa Ana. And that’s Santa Ana! The OC city with probably the most despair from the housing market crash. According to the Santa Ana Business Bank, they’re legit and ready to serve Santa Ana businesses:

“Santa Ana Business Bank was organized by a group of local leaders. Our founders include entrepreneurs and professionals from many fields including real estate, legal, health, and accounting. Our Board of Directors is composed of prominent civic and business leaders and our management team is highly experienced and committed to operational efficiency. . .

We take great pride in calling Santa Ana home and opening our doors for business. We are ready to help your business grow.”

However, in a time when Santa Ana’s economy is anything but booming, you have to question how this makes sense. And, after reading Pedroza’s commentary, I’m a little suspicious of the whole operation. Is it really just a place to put the public’s money and make a quick buck? I’m outraged at the thought of other’s capitalizing on the public’s money this way. Pedroza writes:

“I wonder if they were planning on putting public bond money in their bank? Amezcua was the co-chair for Measure G, the latest property tax increase from the crooked folks at the Santa Ana Unified School District. He is running his daughter Valerie for the SAUSD school board in November. And I am told that the SAUSD will be putting yet another bond on the ballot in November too.

Amezcua himself will be pimping for two new bond measures being put on the ballot by the Rancho Santiago Community College District, where he serves as a board member. They passed a bond a few years ago but Al and company spent most of the money on the Santiago campus and the Carona Sheriff Training Facility – they ignored Santa Ana College for the most part. Then they didn’t fire the Santa Ana College president after she got caught building a secret shower in her office and after she got caught having fire alarms turned off rather than fixing the fire alarm system.

But I digress. The Santa Ana City Clowncil is also going after millions of dollars in OCTA funding for a streetcar system that will link the lame Santa Ana downtown with the lame Garden Grove downtown. And where will that money be kept? Hmmm…. Sure enough the guy whose engineering company is involved with the streetcar plan, George Pla, is also a board member of the Santa Ana Business Bank.

What gives? Are these people really that confident that they can pull the wool over everyone’s eyes? Or are they prototypical dumb criminals who will eventually get caught red-handed? Who knows? But we do know this – right now is a bad time to be in the banking business.”

Seems like enough corruption ready to be scripted into a made-for-TV movie. What Santa Ana really needs is less of these hooligans and more leaders that actually care about the welfare of the City and its citizens (not their pocketbooks!).

A Price slash here, A price slash there

The price of Newport Beach homes have been slashed considerably since this time last year, but has only seen marginal decreases in that past few months. Writing about price reductions in Newport Beach always presents a particular challenge of sorts. When a house is originally listed at 3.5 million and is reduced to 3.3 million, I am not quite for sure what to make of it. I assume that if someone only has 3.3 million to spend and not a penny more, then I guess that would be great news for them. Of course, how many people actually fit into that category? If you can afford 3.3 million certainly 3.5 million would be in your range as well. Another fun challenge about Newport Beach is that it totally throws off the curve when doing price comparisons with the rest of the country. Of course living there gives you benefits and amenities that are hard to find elsewhere. Below is a median home price and sales breakdown of each area code in Newport Beach, along with what it was at this exact same time last year.

                           CITY                      ZIP     MEDIAN    %CHG  SALE   %CHG          

Reduced homes in Newport Beach

16 Cape Andover: 5 Beds, 5 Baths, 4,180 SQ. FT. The list price was “$2,395,000″ and changed to “$2,095,000″

8 Ima Loa Ct: 4 Beds, 3 Baths, 1,909 SQ. FT. The list price was “$799,000″ and changed to “$750,000″

1000 Nottingham Rd: 4 Beds, 6 Baths, 5,400 SQ. FT. The list price was “$2,750,000″ and changed to “$2,599,000″

539 San Bernardino Ave: 3 Beds, 4 Baths, 2,000 SQ. FT. The list price was “$1,859,000″ and changed to “$1,775,000″

215 Dia Dijon: 3 Beds, 2 Beds, SQ. FT. not listed. The list price was “$1,585,000″ and changed to “$1,550,000″

Home Prices Taking a Cut in Huntington Beach

Things continue to look up for those wanting to buy a home. Home prices throughout the nation, California and Orange County continue to be cut. Home prices dropped 7.7% nationally, which took the median home price down to 196,300 according to Cnnmoney.com. Of course this is drastically different from the $818,593 median home price of Huntington Beach. As it has been stated before in my post, a large reason for these sharp declines is foreclosures. This is pretty much a given, but what is not so obvious is the fact that foreclosures have created a huge backlog of inventory, with a record high of 2.9 million unsold homes on the market nationally according to the census bureau. The decrease in home prices in Huntington Beach is certainly a reflection on what is going on in the rest of the country.

19251 Lookout Ln:  4 Beds, 3 Baths, 2,538 SQ. FTThe list price was “$820,000″ and changed to “$799,000″

19164 Chandon Ln: 4 Beds, 5 Baths, 3,215 SQ. FT. The list price was “$1,525,000″ and changed to “$1,495,000″

18900 Delaware St: 1 Bath, 1 Bath, 561 SQ. FT. The list price was “$118,900″ and changed to “$116,900″

9332 Nantucket Dr: 5 Beds, 2 Baths, The list price was “$699,999″ and changed to “$659,900″

19771 Estate Cr: 4 Beds, 5 Baths, $3,500 SQ. FT The list price was “$1,695,000″ and changed to “$1,575,000″

19311 Suray Ln: 2 Beds, 2 Baths, 1,225 SQ. FT. The list price was “$519,900″ and changed to “$499,000″

8152 Mainsail Dr: 1 Bed, 1 Bath, 881 SQ. FT.  The list price was “$359,888″ and changed to “$341,888″

19052 Oceanport: 1 Bed, 1 Bath, 725 SQ. FT. The list price was “$295,000″ and changed to “$285,000″

8202 Prestwick Cr: 4 Beds, 3 Baths, 2,494 SQ. FT. The list price was “$769,000″ and changed to “$699,000″

18812 Gregory Ln: 3 Beds, 2 Baths, 1,730 SQ. FT. The list price was “$899,000″ and changed to “$749,000″

1821 Park St: 6 Beds, 5 Baths, 3,500 SQ. FT. The list price was “$1,350,000″ and changed to “$1,299,000″

8432 Danbury Cr: 3 Beds, 2 Baths, 1,549 SQ. FT. The list price was “$730,000″ and changed to “$729,900″

Good Things are Happening in Anaheim

As an Angels season-ticket owner, I spent the weekend attending the Boston Red Sox-Angels series.  The defending world champions have owned the Angels for the last several years, particularly during the postseason, so it was particularly cool to see the Angels win ALL THREE GAMES.  How sweep it was!

My husband and I talk about eventually getting a place near Angel Stadium when we’re older and walking, biking or taking the bus to the stadium, season-seat-holder seat cushions tucked under our arms. Anaheim’s home prices have always trailed the rest of the O.C., owing to the city’s older housing stock and Inland location, so others who think like we do may see some buying opportunities, now or in the future.

June’s DataQuick numbers show four Anaheim ZIP codes with medians under $400,000:

ZIP       Median      Change from June ’07
92801   $336,000   -39%
92802   $372,500   -30%
92804   $395,000  -24.8%
92805   $365,000  -21.9%
92806   $435,000  -27%
92807   $456,500  -30.8%
92808   $450,000  -31.6%

I previously blogged about “The Event” at Stadium Lofts, the condo development at State College and Katella, across from The Big A.  It’s next weekend, and the sign spinners (“Save Up to $125,000!”) and balloon bouquets were out in force.  Banners covered the balconies of individual condos, telling potential buyers how much they’d save. 

We paid a visit to Anaheim Garden Walk, the new three-level retail center at Katella and Clementine.  That corner used to be home to cheap hotels, but no more.  In addition to upscale chain restaurants (California Pizza Kitchen, P.F. Chang, Bubba Gump, McCormick and Schmick’s), there are clothing shops (Abercrombie and Fitch, Chico’s), a food court, and a 14-screen movie theater that includes an IMAX.  Most of the stores haven’t even opened yet, but this is a very promising development.

Several other condo projects are planned or under construction near the stadium.  The housing slump has put some on hold, but assuming they are built, the so-called “Platinum Triangle” could become an O.C. destination. So if you want an O.C. address for less, Anaheim may be an up-and-coming place to consider.  And the baseball team isn’t bad either.

Tustin Village Townhomes: First-Time Buyers’ Dream?

Tustin Village is centrally located just west of the 55 freeway and just south of the 5 freeway. The complex has two and three bedroom townhomes with two community pools, club house, and parks. The two bedrooms are popular with 1,080 sq ft and 1.5 baths. Like most townhomes, the bedrooms are upstairs. There are currently eight of these two bedroom models on the market. They vary in price from $149,000 to $195,000 ($149,000, $162,000, $169,900, $169,900, $170,000, $179,500, $180,000, $195,000).

Nearly all of the listings advertise these properties as “Perfect townhouse for first time buyers” or “Great investment property or First time buyer.” And what’s this “code” for? Not the nicest area and not the nicest complex, but, hey, good for you if you don’t plan on being there long or you plan on renting it out. Regardless, these units do offer families alternatives to the single families home and the ability to own their own place.

There have been several recent sales for this two-bedroom model. The overall trend follows the OC real estate market, prices continuing to fall. Makes you wonder what the sellers with their townhome listed at $195,000 is thinking. These places should be selling for $150,000 (or below) in July.

Sold Stats:

15500 Tustin Village Way #40, Tustin 92780; Sold for $140,636 on June 16, 2008

15500 Tustin Village Way #7 , Tustin 92780; Sold for $166,500 on June 13, 2008

15500 Tustin Village Way #65, Tustin 92780; Sold for $175,111 on May 29, 2008

15500 Tustin Village Way #19, Tustin 92780; Sold for $299,000 on May 9, 2008

15500 Tustin Village Way #13, Tustin 92780; Sold for $300,000 on April 29, 2008

15500 Tustin Village Way #17, Tustin 92780; Sold for $274,287 on April 18, 2008

The 80′s Are Back

 Photo courtesy of Styledash.com

While So Cal has been known to push the fashion envelope and preview and dabble with the latest fashion trends, I have noticing a disturbing shift – the 80′s.

Yep, leggings, stirrup pants, and bright, bold colors are making their way back into prominent wardrobes.  Apparently enough people didn’t learn the first time and have decided to take part in another fashion disaster again. 

But alas, the fashion is not the only part of the 80′s we’re facing right now.  The real estate market is heading back in that direction quickly!  According to Housingwire.com the market for resale homes is as slow as it was back in 1988.

Other notable and discouraging bits of information: 

• Southern California saw comparatively much more foreclosure resale activity, relative to Northern California; Los Angeles and related areas in the southern part of the state saw foreclosures make up 41.1 percent of all resales, while Northern California saw 28.7 percent of resales represented by foreclosures.
  
• Around half the drop in median was due to depreciation, DataQuick said, with the other half due to shifts in the types of homes selling, and how those homes are financed; this is a critical point in assessing true price performance in any local market, and in California, indicates that absolute dearth of lending in the so-called jumbo mortgage market.

Some of the worst victims on the market today in Mission Viejo:

28051 Via Machado
2 beds / 2 baths / 1,437 Sq Ft
Listed at:  $427,000
DOM:  530 Days

28262 Driza
4 beds / 3 baths / 3,327 Sq Ft
Listed For:  $898,000
DOM: 747

131 Valley View Ter
2 beds / 3 baths / 1,1656 Sq Ft
Listed For:  $384,900
DOM:  462

28092 Tefir
5 beds / 4.5 baths / 3,782 Sq Ft
Listed For:  $1,650,000
DOM:  439

More Controversy over the Orange County Great Park Development: What Else is New?

Note: I hadn’t planned on writing about the Orange County Great Park development for a while, but a comment I received recently made it seem timely.

The Orange County Great Park development generates a lot of controversy. An example is a comment that I received to one of my recent Great Park posts. Here it is:

Marsha said:

You should see the article at www.newsOC.org that talks about the Great Park coverup–it really tells it like it is.

My reply is:

I don’t know enough about this right now to give an opinion, but this is certainly a question that needs to be addressed. And I imagine that counter claims have been stated, so I would have to hear the other side of the argument (from the Navy, Lennar, and the City of Irvine) before coming to any conclusions. I don’t have this information right now, so I will reserve judgment. The Great Park development seems to generate some very strong opinions, and whether this turns out to be a valid criticism or political maneuvering is a question that I am not ready to answer. I will keep it in mind as I look into the Great Park development.

Answering these questions will help me to understand the issue better and the motivation behind the criticism:

I noticed only one post on the newsOC blog (e-newsletter) that you linked to. Are there currently other posts on this site, or is this the only post? Also, I was looking for a date on the post in the newsOC blog as well as on the the Financial Times News article that was linked to but didn’t see any (other than a 2008 copyright). Do you have the dates that these articles/posts were written?

In addition, would you provide a link to the Financial Times News. This was cited as a source in your link, but I am having trouble locating it on the web. It would be helpful to know more about the publication. I am assuming that the Financial Times News is different than the Financial Times. Who are the publishers, and where are they located?

Reality Check: Costa Mesa Condo & Detached Stats, July 2008

Note: The Altos graphs and numbers, which are for detached homes, provide a good overview of market trends in each city. However, condos also play a big role in the Orange County housing market, so it is helpful to take a look at these numbers in combination with the detached home numbers. That is what we will do with the following housing numbers.

I also like these numbers for another reason: Comparing the average listing price to the average sales price reveals whether sellers are being realistic with their asking price. In other words, it provides a reality check for homesellers and homebuyers.

For comparison, I included the numbers from five years ago (2003). Predictions vary, but some predict Orange County housing prices will eventually return to these levels.

Yesterday’s post, which covered the status of the detached home market in Costa Mesa, revealed that a bottom has not been reached in this market. Today’s post, which covers the condo and detached home market in Costa Mesa, reveals the same. Note that the number of sales is about the same as it was this time last year.

Now for the reality check: Homeowners are asking on average about $170,000 more than the average sales price. Also, homeowners’ average asking price increased by over $9,000 from the previous period, but the average sales price decreased by over $36,000. It seems that Costa Mesa homesellers haven’t come to terms with current market conditions.

Here are the condo+detached Costa Mesa housing numbers for 2008:

• Average Listing Price for:
  • Week Ending July 09: $688,495
  • Week Ending June 09: $679,047
  • Week Ending May 07: $696,330
  • Week Ending April 09: $677,338
  • Week Ending March 05: $678,172
  • Week Ending Jan 30: $701,471
• Average Sales Price for:
  • Apr-Jun 2008: $517,483
  • Mar-May 2008: $553,586
  • Feb 2008-April 2008: $575,432
  • Jan 2008-Mar 2008:$591,601
  • Dec 2007-Feb 2008: $589,408
  • Nov 2007-Jan 2008: $620,022
  • One year ago (Apr-Jun 2007): $733,267
  • Five years ago (Apr-Jun 2003): $476,137
• Median Sales Price for:
  • Apr-Jun 2008: $493,307
  • Mar-May 2008: $520,148
  • Feb 2008-April 2008: $530,150
  • Jan-Mar 2008: $540,000
  • Dec 2007-Feb 2008: $540,000
  • Nov 2007-Jan 2008: $565,000
  • One year ago (Apr-Jun 2007): $705,000
  • Five years ago (Apr-Jun 2003): $425,000
• Average Price/SF for:
  • Apr-Jun 2008:$354
  • Mar-May 2008: $399
  • Feb-April 2008: $440
  • Jan-Mar 2008: $444
  • Oct-Dec 2007: $450
  • One year ago (Apr-Jun 2007): $502
  • Five years ago (Apr-Jun 2003): $362

• Number of Sales for:
  • Apr-Jun 2008: 220
  • Mar-May 2008: 194
  • Feb 2008-April 2008: 171
  • Jan-Mar 2008: 164
  • Dec 2007-Feb 2008: 134
  • Nov 2007-Jan 2008: 133
  • One year ago (Apr-Jun 2007): 223
  • Five years ago (Apr-Jun 2003): 342

Source: Trulia

Note: For more information on the Costa Mesa housing numbers, see yesterday’s post “The Costa Mesa Market Report: Detached Home Stats, July 2008.“

The Costa Mesa Market Report: Detached Homes Stats, July 2008

A look at this month’s stats tells us that the housing market turnaround hasn’t arrived in Costa Mesa. All the indicators except the number of days on the market show a market that is even more in the buyers’ favor than it was last month. And don’t get too excited by the decrease in the number of day on the market. The paltry amount of the change in this number makes it insignificant.

Here are the 2008 detached home statistics for Costa Mesa, as provided by Altos Research:

• Median Sales Price:

July 06, 2008: $682,521
June 08, 2008: $688,307
May 11, 2008: $690,275
April 20, 2008: $702,668
March 09, 2008: $716,286
February 03, 2008: $735,900
January 06, 2008: $748,007

• Price Per Square Foot:

July 06, 2008: $380
June 08, 2008: $384
May 11, 2008: $391
April 20, 2008: $403
March 09 2008: $415
February 03 2008: ~ $424
January 06, 2008: $430

• Market Action Index:

July 06, 2008: 15.87
June 08, 2008: 16.58
May 11, 2008: 15.96
April 20, 2008: 15.60
March 09, 2008: 16.04
February 03 2008: 15.91
January 06, 2008 16.03

Note: The Market Action Index shows the balance between potential buyers and sellers, in other words,
the balance between supply and demand. Above 30 is a sellers’ market; below 30 is a buyers’ market.

• Days on Market:

July 06, 2008: 94
June 08, 2008: 98
May 11, 2008: 108
April 20, 2008: 106
March 09, 2008: 105
February 03 2008: 93
January 06, 2008: 84

• Number of Homes on the Market (Inventory):

July 06, 2008: 305
June 08, 2008: 300
May 11, 2008: 301
April 20, 2008: 307
March 09, 2008: 304
February 03 2008: 315
January 06, 2008: 328

Note: For more information on the Costa Mesa housing numbers, see tomorrow’s post “Reality Check: Costa Mesa Condo & Detached Home Stats, July 2008.”