Investors own about one-fifth of Bay Area homes in foreclosure

[Newsjock]

Source: San Francisco Chronicle

Israel Medina admits he got too gung ho about the idea of getting rich by flipping Bay Area real estate.

Medina, a Concord resident who ran a limousine company before wading neck-deep into the housing market, has seen not one, but 11, of his Northern California properties move into foreclosure in the past year, he said.

"I was a real estate tycoon; I had everything," said Medina. "Now I have nothing."

A Chronicle analysis of public records shows that speculators like Medina played a significant role in the region's subprime loan meltdown.

These real estate gamblers are hardly the struggling home buyers often portrayed as victims of the Bay Area's and nation's foreclosure crisis. Some bought houses as often as other people buy shoes, rarely putting down any money. The speculators were betting that home prices would continue to shoot up. Instead, when the market started softening and prices sagged, many of their properties ended up as foreclosures.

More than one-fifth of 6,557 Bay Area properties that fell into foreclosure from January through September this year were owned by investors, according to a Chronicle analysis of public records compiled by DataQuick Information Systems. Of properties repossessed by lenders, 1 in 6 had been owned by people who had two or more foreclosures in their names. Eighteen Bay Area investors had five or more foreclosures.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/15/MNT0TM9V4.DTL&tsp=1

[Webster Green]

1. Tough shit!

Yuppie scumbags deserve everything they get.

[wake.up.america]

4. Why is becoming RICH is important? How about relative security?...

I mean, just how big does your plasma TV have to be?

[midnight armadillo]

32. Security is about wealth

When the top few percent own most of the wealth, real economic security means clawing your way into that income bracket.

[silverojo]

8. It *IS* tough shit for the renters who occupy these homes

We're currently renting a home owned by a guy like this...someone who bought 5 houses with intent to flip and/or rent them for profit.

Thank God he's a VERY, VERY nice person...he's filing for an extension on the foreclosure so that he'll have time to sell it to another investor. Otherwise, we would literally have been on the street as of December 7th.

Nobody's talking about the many, many renters who are having their lives disrupted by this.

Cable networks like HGTV have done a lot to encourage people to "flip" homes, and they should be drawing a lot of fire for their contribution to the foreclosure crisis. These people are the ones who made people all over the nation think that you could just buy a home, do some improvements, and resell it for a profit.

This creates three problems:

1) If it works, it raises home prices, which makes homes less accessible to buyers.

2) When it fails, investors are stuck with homes they can't sell or make payments on, resulting in foreclosures.

3) When renters are involved, it results in people getting thrown out of their homes. EVEN IF YOU HAVE A LEASE, IT BECOMES NULL AND VOID WHEN A HOME GOES INTO FORECLOSURE.

All the way around, it's a lose-lose situation. Flipping homes should be made illegal--if you're not living in it or renting it, DON'T BUY IT.

[harmonicon]

9. blame tv!

blaming TV for this is like blaming TV and video games for school shootings.

[HowHasItComeToThis]

11. I AM IN A SIMILAR SITUATION.

MY LADY LADY IS A WOMAN WHO OWNS SEVERAL SUCCESSFUL BUSINESSES AND WE RENT A HOUSE SHE BOUGHT YEAR AGO ( AT LEAST A DECADE AND A HALF).

WE HAVE HAD OUR RENT INCREASED BY 175 DOLLARS A MONTH WITHIN TWO AND A HALF YEARS.

[TheWatcher]

12. Since no one else seems to want to bother I will respond

You bring up EXCELLENT Points here, but as usual, when many see a story like this, they focus on the ire that the spin directs them to, in this case "The Evil Speculators, Investors."

There are MANY renters and families who will be affected by this and everything in your post is dead on.

But no one wants to talk about it or even acknowledge it.

Just narrow the focus, get everybody outraged, and then we all go back to sleep.

[BearSquirrel2]

23. What happens after the renters are booted ...

Honestly, I think all of this will be a boone for people who are currently renting. There will be a lot of empty houses and the banks will be scrambling to find ANYONE to make monthly payments on these properties to cut their losses. It's not like they're going to bulldoze these properties or let them sit empty out of spite. They'll find some other candidates to "buy" the homes so they can make payments.

[JDPriestly]

13. But your house flipper is renting the house -- to you.

So the if you're not living in it or renting it thing would not help in your case.

[sneakythomas]

21. I don't know about California

But that's not true here (Washington). A lease is binding upon future owners for the life of the lease.

[BearSquirrel2]

22. Not nice people

House flippers are not "nice people". They are business people and they drive up the cost of homes by churning the market.

If foreclosure came down, chances are the bank would probably quickly flip that house to another rental owner.

[electricmonk]

30. Happened to me twice in 3 years

They were both investors not flippers though. First time I got out before the bank took over. I knew something was up when first the gas got cut off then the water. The second time, back in June, a representative of the bank came by and told me I had 3 to 6 weeks to get out depending on how fast things went through the courts. They did give me the option to move out in 2 weeks and they would give me $500. Of course after I made arrangements to move out they changed the rules on me and said that the people downstairs had to move out in that time too. So I ended up staying there for about 5 weeks as my mortgage ap went through and I bought I house in mid July. Quite honestly I would rather be a renter but I got tired of dealing with landlords.

[midnight armadillo]

33. HGTV

Cable networks like HGTV have done a lot to encourage people to "flip" homes, and they should be drawing a lot of fire for their contribution to the foreclosure crisis. These people are the ones who made people all over the nation think that you could just buy a home, do some improvements, and resell it for a profit.

I've noticed when I've seen "Flip My House" that almost always the flippers lose their shirts and can't sell their property. The only ones who ever make money are pros who do modest improvements and turn properties around fast. To me it's a show that really discourages the flipping of homes...if you're paying attention.

[Thothmes]

35. Up to 18 months ago

that was a real posibility.

[provis99]

2. these professional arbitrage clowns can just suck it up

Tough luck losers! Thats how predatory capitalism works!

disclaimer: I'm not bashing the people who bought homes to live in; those people I have sympathy for. The slimy real estate speculators can kiss my ass however; they're the ones that drove the house prices skyhigh in the first place.

[Demobrat]

3. How about the other 4 out of 5?

You know, the ones who bought houses cause they needed a place to live, and wanted to get in before they were priced out forever?

[mac2]

7. Real Estate people gone amuck

Many Americans unable to find jobs have become real estate people. There was good profit in it until now. Real estate was one of the last careers with good income open to women who didn't need a degree.

Even foreign investors are buying land and homes in the retirement areas of the country driving prices double other areas. Real estate people turn over these properties among themselves. How do I know this? We looked at a piece of land that was $250K for an acre in Asheville, NC. Two years later it is $800K and still for sale.

Europeans come here to retire because our dollar is cheap and our homes big. I guess they can always return home when they get sick.

Remember when American elderly retired to Florida, Arizona, North Carolina, etc. because the home prices were cheap? That bubble has burst. They can no longer afford it. Only the few from the large cities like LA and NY City think they are reasonable. Investors and locals turned over homes to make quick money off "snow birds". I heard of 55yr. olds buying property in retirement village only to sell them for profit. Speculation off the retirement sector of our society seems rather immoral to me.

Does anyone think those homes for sale on TV are really one million for a three bedroom ranch (50 years old)? It seems to be real estate propaganda TV advertising (acting like real life) trying to get people to believe that property is worth that price. Some couple or family is willing to pay for it too. Programs such as turn over and remodel. Decorate to sell, etc. Who only looks at three houses before they buy without reading it, having a lawyer go over the contract, or having a home inspector?

It is speculation and greed at the expense of homeowners. Americans will soon be priced out of the home market just like the old Russian society. I never lived in Russia but I can see how greed and corruption has devastated that country for a long time. Is it coming to America?

We already have old Russian like laws and removal of rights. Our treasury plundered for "unending" war and "democracy"(in old Russia against Capitalism). We attack other countries "to protect them from bad dictators", etc. So why wouldn't we be headed in the same direction?

Orwell is here to sell or buy our house!

[HughMoran]

5. This is the "20% is the main problem" argument by the right-wingers who don't want to help

...most of the rest are owner/occupier.

Some right-wing nut job called NPR last week and made this argument. The guest on the show made it clear that 71% of the subprime foreclosures were to owner/occupiers. This story is deceptive and I did not expect to see this kind of spin posted here on DU - what a shame :(

[sandnsea]

15. It's been a merry-go-round of blame

First it was poor people who lied about their income to buy houses they never should have been allowed to have. Then it was spoiled rich gen xers who couldn't wait to buy a house like their parents had. Now it's the speculators.

Blame anybody except the government and banking industry that put the regulations in place to push this to happen. It was the only economy they could create and after tearing down so many low income apartments, they had to figure out some place to put those people. What better than to create a phony home ownership program, and then blame the poor people when it failed.

[HughMoran]

19. I benefited from their criminal activity

...so I know they were bending the rules to get the loans. I didn't realize until this blew-up how widespread the "get the borrower a loan at any cost" greediness was. In my case, they would refinance me with a no points, no closing cost loan at a slightly higher than market rate. They, of course, made their money by selling the higher interest rate loan (so they were just a broker.) Anyway, I was upside-down(!) in my loan at the time and yet they were able to get me an appraisal that was 2x what my home's value was at the time! They paid off the appraiser! In my case, I was a lower risk with a lower interest rate and I would never even consider an ARM, so it was all good.

I did not realize that many of these current foreclosures are on REFI'S! I got a call-a-day from the "get rid of your credit debt" people, but I had no idea that those were the real sleaze balls selling people on ARMs to make the folded in debt not give them a larger payment (or so the duped people thought.) These people make me sick and it is 100% Bushco's fault for never considering regulating ANY industry in ANY way. Bushco is very much to blame for allowing this to happen, thus the "blame the victims" mentality is in full swing at this time. Makes me sick :puke:

What makes me even more sick were the plants here promoting the "blame the victim" attitude right here on DU!! :puke:

[Donnachaidh]

29. mortgage brokers are notorious *fiction writers* when it comes to pushing loans

Please -- even before this mess Mortgage brokers were known to FUDGE things to push through questionable loans. I'm sure they were behind every case of *fudged* facts. I'm not willing to dump this on the consumers -- the *three card monti players* were already working in the industry. Both the brokers, the realtors AND the greedy bankers thinking about selling off questionable loans to foreign investors.

The spin sometimes works it's way up to hurricane force.

[kurth]

6. These fuckers should jump out the window

[Captain Angry]

10. The purpose of this article is not to convey information.

It frames the response.

It keeps poor people angry at other poor people. Like all other articles on the subject, it does not explain what happened, how, and why. (My definition of poor reaches into the millionaires. They think they're rich, but they still work for a living.) It keeps us divided rather than taking a look at the people that created the situation. The ones whose bonuses are in the hundreds of millions.

Lending practices changed. No oversight. Hmm...

Appraisal standards still don't exist. Hmm...

BILLIONS were paid under the table to build houses as quickly as possible, and some of those houses are already falling apart. Some of the houses that will not foreclose were paid for in cash. There are $350K - $500K houses that were paid for in cash by the guys that were building the "cheap" ($150K-250K) houses so quickly.

When the growth stops, the guys building the homes, laying the tile, running the wires, roofing, insulating, landscaping... What happens to them? There isn't a boom in any part of the country, and there's not going to be much need for new construction for a while.

[amandabeech]

25. Here in the DC area, many of the construction workers were immigrants.

Many of them were either undocumented or were Central Americans who had a stay of deportation due to natural disasters in their countries.

Now, jobs are scarce, and some may return home. That may be the case elsewhere, as well.

[Scooter24]

14. There is still a lot of money to be made in the market

it's just that you have to be flexible and know where and when the trends are. Investing in just one or two markets doesn't create a stable portfolio and only increases your risk for something like this to happen.

For instance, I have a neighbor that bought five $1 million-plus properties in early 2002 when the luxury market was soft in Dallas and Plano. Today he has sold all of those houses for nearly double what he originally paid for them because the luxury market in Dallas and the need for multi-million dollar homes is increasing in our neighborhood. He sold off his NYC real estate in 2004 for modest gains because when he bought them the market was already pretty high. Amazingly bright young man that unlike these Bay Area investors does extensive research and knows when to sell and for what amount to sell it at.

The issue is finding the right people to occupy these properties that can sustain the payments.

[harpboy_ak]

16. There is no NEED for multi-million $ homes

the need for multi-million dollar homes is increasing in our neighborhood.

Bullshit! There is NO SUCH THING AS A "NEED" FOR MULTI-MILLION DOLLAR HOME.

If there is such a thing as a "demand" for such homes, then it's time for disincentives at the top end of the housing market, such as a reduction in the mortgage interest tax deduction on homes over a certain number of square feet per occupant, or over a certain total square feet. Such homes should no longer get the tax break on deducting mortgage interest that smaller middle class homes get.

We have an energy crisis, and such homes are part of the reason we use far more energy per capita than almost anywhere else. Pretentious oversized McMansions waste energy because they cost more to heat and cool, so we should also have disincentives for the excess energy they consume.

[TommyO]

24. Who are you to decide what is an appropriate house for somebody to live in?

I'm single, living in a modest townhouse that has three bedrooms. What does a single person need three bedrooms for, would you tax me more because of that? One of those bedrooms is my home office that I use two or three days a week to avoid commuting, does that change the equation?

If I suddenly came into money, you can bet your sweet ass that I would build a large house with more than a few creature comforts, and it would be built to be as energy efficient as possible, including ground-source heat pumps. It would be more than I need for my own day-to-day use, but it would also become the family home where anybody in my family would be welcome for as long as they need.

What I see from you is just rank bigotry against those who have more than you deem appropriate.

[SKKY]

28. Yea! What he said!

[SKKY]

27. You need to rethink your definition of a multi-million dollar home...

...2 million in Nashville will get you a very nice spread, however lets see what you get for that in Coronado, California. Not all multi-million dollar homes are McMansions. Some are just very comfortable homes in nice communities that require no more energy than your average townhouse.

[Scooter24]

34. LOL! I doubt that many residents here finance their homes...

especially when they are looking to spend $5-million on a new 10,000 sq. ft. home. When I bought my house last year I didn't finance a single cent, I payed cash. I have yet to meet someone who financed their house around here because doing so would double their costs in interest payments. You really think most people finance multi-million dollar homes? Most people here savvy investors, they aren't stupid.

And good grief, our energy rates are already among the highest in the nation. We pay 40% more for our electricity than the national average which comes to be about $153 per 1000 kilowatt hours here in the Dallas area.

[Sen. Walter Sobchak]

17. I. HATE. THESE. PEOPLE.

If there were a single group of people I could wipe off the face of the earth the amature real estate investor would be it.

Between the people who will buy a personal SuperFund site sight unseen on the court house steps and the people who put $100,000 of improvements into a starter home in a blue collar community and the people who did shitty cosmetic repairs to their flips and got their asses sued off I never encountered a stupider group of people - and by the time I was encountering them they were already bankrupt.

And the scary thing was as has been mentioned already, THESE PEOPLE GOT THEIR EDUCATION IN REAL ESTATE FROM REALITY TV AND INFOMERCIALS!

I would think most people smart enough not to plan their vacation around a reality TV show, but these fuckers were putting up paid for houses and going half a million or more further in the hole to finance their investments based on viewing REALITY TV!

I mean Anthony Bourdain makes alot of countries look pretty cool, but I am not going to jump on a plane to Uzbekistan because he made it look really good!

A crazy guy tried to flip a house a few miles from my house in the middle of Santa Ana, i.e. working class Orange County. He put floor to ceiling windows in, he put in a theater, he added a pool and cabana, marble everywhere and land scaping that will in a few years shower the roof with rotten fruit. Anybody who is going to be willing to pay for those upgrades isn't going to be willing to live in that area and those willing to live in that area sure as hell aren't going to pay his asking price.

It will be bloody, but I want the real estate market to crater like it never has before, total wipe-out.

[Rockerdem]

18. Losing the BIG money

As a poster above correctly notes, it's mostly the little fish who are going to lose their homes in this mess. But that doesn't translate into losing BIG money. Other people are going to do that. The little fish got into those homes with little down payments and early small monthly payments. Basically, they were paying rent - essentially below-market of what their monthly payments should have been (if their mortgage companies had been on the up-&-up).

That is the underlying economic basis for the collapse: too many normally-unqualified buyers were allowed to buy, get into something over their heads, and pay less than traditional prudent practices demanded.

The BIG money will not be lost by the mortgage companies, either. It will be lost by those who bought their paper in packages that understated the risk of lending to normally-unqualified people. Billions were soaked from: banks, real-estate investment funds, Europeans who expected American business honesty (lol), etc. Except for the latter class, I'm not too upset at seeing mostly comfortable people take the fall. There are some middle-class lenders who will lose money via their retirement funds. But mostly it will be the fat cats this time around - a rarity.

[SoCalDem]

20. The problem with flippers..

low-end fixer-uppers traditionally have been the entry into home ownership for first time buyers.

They get a lower priced house, that they can afford, and then use their sweat equity to revitalize that house into a real asset for when they move up a rung on the housing ladder.

Flippers snatch the fixers up and drive the prices up to equal or surpassing the neighboring property...driving the first time buyers even further and further away from home ownership.

Often the flippers are re-habbing these houses totally on credit, and if they have multiple flips going at the same time, it's not hard to see how the whole thing can start a major collapse.

The "flippers" are often not even licensed contractors, and some of them take a LOT of shortcuts, focusing on the chi-chi decorater items..

These sub-par homes were traditionally rentals or lease-to-own type propertiers, but everyone got greedy and just made it harder for everyone..

Like any good Ponzi scheme, timing is everything .. that schlub in the article stayed too long at the party

[EFerrari]

31. You don't have to be a contractor if you're the OWNER and

you still have to pass inspections to get your permits.

It's amazing to me how people on this thread are so quick to demonize real estate investors, overlooking entirely the predatory lenders who are actually responsible for this mess.

[BadgerLaw2010]

26. Dumbass. No sympathy.

:nopity::nopity::nopity::nopity:

[Javaman]

36. sorry no, Mr. Medina is not a tycoon and never was.

a tycoon, means he was making a profit and living very well. It would also mean that he could shrug off these losses and still be okay.

No what Mr. Medina is, is yet another person in the long line of fools who bought into the get rich quick ponzi scam that was perpetrated upon the American public to get money for nothing.

The real tycoons are the ones that got out before things went bad.

Part of being a tycoon is knowing when to fold them.

[Javaman]

37. Maybe I'm old fashion, but...

recently my wife and I bought a home. I met my wife 4 years ago when she was living in her old home.

She had been divorced for a few years and her alimony was running out and she knew she had to move. (texas alimony laws are just soooooo wonderful :sarcasm:)

Anywho, I come along. I move in about 1 1/2 years into the relationship.

She says to me, "you know we can't live here, our combined salary won't allow us". I was fine with that. It was a huge house by my standards 2400 square feet, her last child just moved out and it was just too cavernous for the two of us.

So off we go house hunting. She had amassed enough equity for us to use on the next home.

We found one. :) We sold the last one before the wave of foreclosures hit our area. Nothing like timing.

The new house we bought outright. After she and I talked to our investment councilor, whom advised us to "not pay it off and keep some debt", I spoke to my wife and said in plain English, "that guy is crazy, we need to buy this house outright, no debt. we have the cash so we have the power to negotiate a very good price".

We did. we now live in a 1300 sq ft house. I'm renovating it.

So one night after about 6 months there and the house is still very much in the "green acres" stage, she casually says to me, do you think we can flip this house? If I had hair it would have gone white.

"honey, I said gently, I'm not putting this sweat and blood into this house so someone else can enjoy it, I want to spend my life here and have a home with you".
That is 95% true, the other 5% was, "good god, haven't you been reading the papers?" But I just let that go being the good hubby I am. lol

I'm old fashion the sense that I just want to put down roots in an affordable home, that is cozy and peaceful to live in. Nothing gigantic, nothing ostentatious, just a funky little place that is our own.

The best part is, since we now live in a smaller place, we have grown much closer. And to me that is the biggest benefit of all.