Otay Ranch, a 3,500-acre housing development near San Diego, has been among the communities that have been "hit particularly hard" by the recent housing downturn, according to a recent Los Angeles Times story. The news caught my attention since I visited this development in 2003 during a National Association of Real Estate Editors conference. At the time, my impression of the place was largely unfavorable.
Otay Ranch was being touted as a model of "smart growth" with "native habitat neighborhood parks, protection of biologically sensitive areas, traffic calming roundabouts, walk-through cul-de-sacs, pedestrian walkways and bridges, recreational areas and mixed-use buildings," according to a story I wrote for Inman News.
But the development had a high density of eight dwellings per acre and many of the houses were "boxy two-story structures squished into small lots." The development has no doubt changed over the last four years, but in 2003, I described it as being characterized by "an almost oppressive feeling of sameness on all sides" since all of the houses were painted in slightly different shades of desert brown and the streets were so completely indistinguishable that the developer's representative had to hop off the bus during our tour to glance at a street sign.
Prices were comparable with other communities at that time, but homeowners in Otay Ranch also faced an annual Mello Roos tax of 1 percent of the value of their home for construction of schools, community buildings, transit centers and other infrastructure and association fees of $756 annually for street maintenance, manned gated entrances and upkeep of the landscaping and parks in addition to state property taxes.
Given this bit of history, I'm not surprised at Otay Ranch's current woes. Even smart growth and good intentions don't necessarily produce a community that's an attractive and affordable place to live.
A Sad Day for Real Estate Writers
Inman News today reported the death of Bob Bruss, one of real estate's most prolific and respected writers. I had the privilege of working with Bob when I was employed at Inman News and of meeting him at a National Association of Real Estate Editors' conference some years ago in New Orleans. I know he'll be missed not only for his informative weekly newspaper columns about real estate law, but also for his kindly presence in our midst.
Pirate-Speak
Ahoy, mates! Ter-day be "International Talk Like a Pirate Day," wich be meanin' yer all appose ter yak like ye rule the 7 seas for these 24. And which also be meanin' there ain't no idea too daft to capture the wondrous human imagination. Now if we could just figure out how to say "Arrg!" in Elvish.....
September Reading
Here's a quick list of the books I've added to my reading pile so far this month:
- "Dust," Martha Grimes (unfortunately, I figured out "who-done-it" on page 71)
- "Seven Up," Janet Evanovitch (audiobook)
- "Prince Caspian," C.S. Lewis (audiobook)
- "Solstice Wood," Patricia A. McKillip (this book was an award winner at Mythcon last month)
- "C.S. Lewis and J.R.R. Tolkien as Writers in Community," Diana Pavlac Glyer.
Real Estate IS The Economy
The White House and the Federal Reserve have suggested they'll take a hands-off approach to the worsening crisis in mortgage lending unless the situation appears to threaten the broader U.S. economy. The obvious flaw in this thinking is that housing and lending can't be isolated from the broader economy and that's not just in the U.S., but globally as well. Higher mortgage payments force consumers to stop spending. Car showrooms are empty due to lack of home equity appreciation. New-home builders are stuck with standing inventory. Manufacturers of home products must downsize. Remittances to Mexico dry up as construction laborers are thrown out of work. That's not to say that the federal governement or the Fed should act, but rather that there are consequences for inaction as well.
Copyright Scofflaws
Blatent disregard for U.S. copyright law has become so notorious and widespread on the Internet that some of my real estate articles have been cut and pasted onto other people's Web sites hundreds of times without my permission or payment. What most astonishes me about this complete disrespect of my work is the utter shamelessness of these people (most of whom, I'm sorry to say, are Realtors) who try to argue that their free use of my articles is somehow supposed to be in my interest. If you broke into my home and stole my belongings, how would that benefit me? If I used your services and then refused to pay you, how would that benefit you? If you're not willing to pay for my articles, please don't put them on your Web site.
All Over the Map Indeed
A fascinating map in today's Los Angeles Times shows the August 2006-to-August 2007 rises and falls in median home prices across the Southland, a region that encompasses Ventura, Los Angeles, San Bernardino, Riverside and San Diego counties. What's most striking about the map--apart from the washed-out pink and green colors and its prominence above the fold on page 1--is the degree to which the housing market's gains and pains vary from one ZIP code to the next.
Median prices that top $1 million rose dramatically in such luxury communities as Encino, Pasadena, Bel-Air, Fullerton, Newport Beach and San Juan Capistrano while median prices in the low-$200,000s and mid-$400,000 declined significantly in outlying places like Oxnard, Lancaster and San Berdoo. In between were communities such as Arcadia, which posted a 23% decline in its $739,000 median price, and Riverside, which posted a comparable gain in its $525,000 median.
In my neighborhood, the median price rose 2.1% to $832,500. Wow.
Median prices that top $1 million rose dramatically in such luxury communities as Encino, Pasadena, Bel-Air, Fullerton, Newport Beach and San Juan Capistrano while median prices in the low-$200,000s and mid-$400,000 declined significantly in outlying places like Oxnard, Lancaster and San Berdoo. In between were communities such as Arcadia, which posted a 23% decline in its $739,000 median price, and Riverside, which posted a comparable gain in its $525,000 median.
In my neighborhood, the median price rose 2.1% to $832,500. Wow.
Highly Recommended: "Death At a Funeral"
Don't miss Death at a Funeral. This new film is a genuine farce packed with coincidental, preposterous, irreverent and hilarious story lines that achieves a consistency of laugh-out-loud jokes even with no sex, no violence and a welcome absence of offensive slurs. Plus a memorable turn by Serenity veteran Alan Tudyk. Also highly recommended is Stardust, a lovely fantasy based on Neil Gaiman's novel about a boy who finds a fallen star incarnate. Avoid The Bourne Ultimatum, a tedious mess burdened with headache-inducing camera angles and a plot that's impossible to follow even for those who paid attention during Bourne 1 and 2.
Mortgage Crisis: Foolish Risks and Fraudsters
Many people have asked me about the subprime mortgage crisis, so here's my opinion:
Most of the homeowners who are in trouble with their mortgage either (1) knowingly accepted the risk of an adjustable-rate, interest-only or payment-option mortgage so they could buy a more expensive home or (2) were the victims of fraud, often in form of repeated ill-advised refinancings urged upon them by mortgage brokers.
Those who knowingly took the risk need to suffer the consequences of their short-term thinking. They had the benefit of those super-cheap mortgages and now they need to either pay the going rate or get out of the homes they can't afford to own.
A government bailout would trigger an understandable backlash from homeowners who chose fixed-rate mortgages and renters who declined to accept the financial risk of the new mortgages. A bailout also would teach those who are in trouble (and their children) that there are no adverse consequences for their decisions, a false lesson indeed.
Those who were victimized should have the right to sue lenders and mortgages brokers who committed fraud. There should be an investigation into loan applications that included mysterious phantom income at closing when it was all but too late for the victims to walk away.
The difficulty is to figure out who acted knowingly, who experienced a genuine hardship deserving of assistance, and who was defrauded.
Most of the homeowners who are in trouble with their mortgage either (1) knowingly accepted the risk of an adjustable-rate, interest-only or payment-option mortgage so they could buy a more expensive home or (2) were the victims of fraud, often in form of repeated ill-advised refinancings urged upon them by mortgage brokers.
Those who knowingly took the risk need to suffer the consequences of their short-term thinking. They had the benefit of those super-cheap mortgages and now they need to either pay the going rate or get out of the homes they can't afford to own.
A government bailout would trigger an understandable backlash from homeowners who chose fixed-rate mortgages and renters who declined to accept the financial risk of the new mortgages. A bailout also would teach those who are in trouble (and their children) that there are no adverse consequences for their decisions, a false lesson indeed.
Those who were victimized should have the right to sue lenders and mortgages brokers who committed fraud. There should be an investigation into loan applications that included mysterious phantom income at closing when it was all but too late for the victims to walk away.
The difficulty is to figure out who acted knowingly, who experienced a genuine hardship deserving of assistance, and who was defrauded.
The Truth About Life's Little Problems
My vegetable steamer, stapler, razor and CD player, all of which operate on electricity or batteries, stopped functioning this week of their own accord, without warning and for their own mysterious reasons. And my refrigerator started to leak water and hum in a frizzy electrical sort of way. Sometimes I wonder why my life is constantly interrupted by these sorts of annoying little problems, which take time away from my work and my writing. Then I have to remind myself once again that these little problems don't interrupt life; they are life and the expectation of a life that's free from such little problems is the true illusion.
Why People Have Lousy Credit
Those of us who are fortunate enough to have good credit may wonder (with a soupcon of immodest superiority) why others of us are so unfortunate as to have serious credit woes. The financial causes of poor credit vary from out-of-control consumption to burdensome medical bills, but these financial problems often contain a psychological component as well. In this case, defeatism--the belief that one's ruined credit is permanently beyond repair--is a typical barrier, according to Robin Chandler at my client LendingTree. For more on this subject, watch Maxed Out, a shocking Michael Moore-style documentary about the tragedies of personal debt.
The Existential Angst of Opportunity
I recently walked away from two business propositions: a real estate book contract and a job relaunching the real estate vertical of a newspaper-run Web site. The real estate book market is highly competitive and the compensation so small as to make the book a vanity project. The job offered a "six-figure" salary (the recruiter refused be specific) and benefits, but required a lengthy commute and the perils of full-time employment at a company that's had multiple rounds of layoffs. Still, I can't help wondering: Have I ruined my career or saved my life? Or both?
Back To Work on Real Estate Projects
Today marks the end of a two-month summer break during which I've been working full-time on my novel to the exclusion of my real estate projects. Despite two intrusions (an attack of tennis elbow and a trip to Real Estate Connect and Mythcon), my novel has advanced from 60 pages to 150 pages drafted, an addition of 90 pages in seven weeks. I'd like to thank my real estate clients because without their support this progress wouldn't have been possible.
Writers Workshop No Cure for Procrastination
Yesterday I received an unsolicitied e-mail invitation to join a writer's group on Yahoo! Curious, I looked up Mike's Writers Workshop in the Yahoo! Groups database and discovered it's an award-winning group of more than 8,000 members who've posted an average of 1,600 messages per month this year. I admit I'm tempted by the organizer's promise of "friendship and camaraderie" (how friendly could 8,000 online buddies be?), but I know from experience that writing is by nature a lonely pursuit and rightly notorious for being prone to procrastination for activities like, say, blogging, which elevates procrastination to an art. Should I join Mike's Writers Workshop so I'll be able to procrastinate about my writing by reading 50 messages per day from other writers? Thanks, but I think I'll just write a blog about it instead.
Death: The 'Gift' of Men
One of the world's most beloved authors, J.R.R. Tolkien, died on this day in 1973. He and his wife Edith Tolkien are buried in a single grave in the Catholic section of a small cemetery in Oxford. The inscription on their headstone includes the names of two of Tolkien's most beloved characters: Beren, a mortal man, and Luthien, an immortal elf who chooses mortality for her love of Beren. Death, which Tolkien described both as the "doom of men" and the "gift of men," is arguably the most important theme in his writings.
I had the privilege of visiting Tolkien's gravesite several years ago during Oxonmoot, an annual event organized by the Tolkien Society. It is a spiritually powerful place, full of memory and imagination.
I had the privilege of visiting Tolkien's gravesite several years ago during Oxonmoot, an annual event organized by the Tolkien Society. It is a spiritually powerful place, full of memory and imagination.
Mortgage Rescue Is Right on the Money
Plenty of people have heard me say that the Bush Administration has never introduced a program, policy or plan that I didn't passionately dislike. But at last, that perfect record of bad ideas has been shattered by, of all things, a Federal Housing Administration loan program.
The proposed FHA Secure loans, which are intended to help some 80,000 homeowners escape from burdensome adjustable-rate mortgages, have a lot of smart elements: Borrowers must have a history of on-time payments and sustained employment, 3% cash or equity, an interest rate reset from June 2005 to December 2009 and most importantly sufficient income to make the new payments. The loan cap, currently $362,790, should be raised, as also has been proposed, to $417,030, the current conforming loan limit at Fannie Mae and Freddie Mac. FHA mortgage insurance may be required.
Now that's smart underwriting: If only federal regulators had imposed those rules on lenders all along, this whole mess--and a lot of heartache--might have been avoided.
The proposed FHA Secure loans, which are intended to help some 80,000 homeowners escape from burdensome adjustable-rate mortgages, have a lot of smart elements: Borrowers must have a history of on-time payments and sustained employment, 3% cash or equity, an interest rate reset from June 2005 to December 2009 and most importantly sufficient income to make the new payments. The loan cap, currently $362,790, should be raised, as also has been proposed, to $417,030, the current conforming loan limit at Fannie Mae and Freddie Mac. FHA mortgage insurance may be required.
Now that's smart underwriting: If only federal regulators had imposed those rules on lenders all along, this whole mess--and a lot of heartache--might have been avoided.