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How Bad Can The Housing Crash Get?... Look At Stockton, CA

news.bbc.co.uk — The city of Stockton in California is at the center of the mortgage crisis now sweeping America. Because, with house prices tumbling, more people in Stockton face the repossession of their homes than anywhere else in the US. Stockton is also a place where you can really get a feel for the amounts of easy money banks loaned during the boom.

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  • PageCountyGirl, on 01/02/2008, -87/+6Hey Look, 45 diggs and no comment. This digg system sucks...
    • gamer31, on 01/02/2008, -4/+45What the ***** does digg to comment ratio have to do with the digg system?
    • Jexie, on 01/02/2008, -2/+21You should show your rage by leaving digg and never posting again!!
  • brbeaird, on 01/02/2008, -2/+172FTA:

    "People went to the bank and got a loan on the increase in the price of their home. They went out and spent all that money," he explains.

    "Price of the home went up again, they went back to the bank and got another loan. They went out again and spent that money on cars and jewellery and furniture - whatever they wanted."

    I have a really difficult time feeling sympathy for these people. Their carelessness/willingness to pay $700,00 for a $200,000 house along with banks' insatiable greed have really done one over on the housing market.
    • howitzeral, on 01/02/2008, -6/+68Agreed. People like that DESERVE whatever financial troubles they get themselves into.
      • duckfigg, on 01/02/2008, -3/+35sure, they do. but this mess is so big it's going to hit everybody, deserving or not. and in the end, responsible taxpayers will be stuck with the tab for these greedy fools.
        • howitzeral, on 01/02/2008, -1/+14Unfortunately that's true as well. But it's not the individual homeowner that got a home equity loan to buy luxury items that's causing the problem with the rest of the economy. The banks/lenders have a lot more to do with it than the homeowners do. They're the ones who issued all these loans but then turned around and sold off the risk to investors. Seems to me that the institution that assumes the risk should bear that risk. I could explain a lot more in detail, but nobody wants to read a 10 page rant.
      • koko775, on 01/03/2008, -0/+2What about the people who depend on it to go to college? *ahem*
        :/
        Not everyone uses it on jewelry and luxury cars, you know.
    • kingmanic, on 01/02/2008, -5/+55Except the real victims aren't those morons, it's your pension fund, your tax money, your stocks, and your home value. So you can sit and be snobby about it but the people paying for this fiasco aren't just the idiot borrowers or the idiot lenders. In fact the lenders and idiot borrowers will have the blow softened via your tax dollars if your are an american or your investment dollars if you are anyone else.
      • ChaosMotor, on 01/02/2008, -1/+14Not to mention this type of behavior has been encouraged ceaselessly by the banking and financial systems who implore these people to spend like this. People wouldn't be acting like this if not for regular reinforcement that it's okay to do so. In the end, the people are milked of all their assets by the unscrupulous lenders who encourage them to take on debt and spend their cash. Eventually all the assets are held by lenders and all the debts held by the individual. Yet another way to milk the unsophisticated commoner. There is a damn good reason that previous generations were sticklers for savings and distrusted financial interests - and this is case and point for their skepticism.
        • theutopian, on 01/02/2008, -2/+8Remember if we don't spend our money, the Terrorists win.
        • aukxsona, on 01/02/2008, -0/+3Seems our children might catch the clue.....I doubt it though.
      • Dysarthria, on 01/02/2008, -0/+3The point is, they shouldn't have their blows softened by my tax money. These people had dollar signs in their eyes, bought homes that were way too expensive, and expected their homes to rocket in value and for interest rates to remain at 2003-2004 record lows. They were speculating, plain and simple.
    • webtekie, on 01/02/2008, -2/+43Exactly. An where the ***** does the government get off "helping" these people? May be I can send them my holiday shopping bills and they pay for them too?
      • banzai26, on 01/02/2008, -1/+24The government won't help these people - they showed that when they passed the bankruptcy bill. They will, however, help the banks that were stupid enough to make loans they knew would go into default.
        • kingmanic, on 01/02/2008, -1/+6The gov did pass legislation freezing mortgage rates. Thus rewarding the stupid borrowers and unscrupulous lenders by screwing the shareholders of that debt.
          • StGhurka, on 01/02/2008, -0/+2The mortgage rate freeze is not a law. It's a program that the government brokered with the lenders. It does not legislate a freeze.

            If it WERE legislation, it would run up against so many obstacles that it would never happen.

            That said, It IS insulting to those of us who remained calm during the home-buying frenzy. It turns us all into suckers.

        • isellmacs, on 01/02/2008, -1/+4The mortgage rate freeze isn't what most people expect. It only freezes interest rates for borrowers who COULD make their payment as is, but when their ARM adjusts next month, they WON'T be able to make their payment. That is a very select group of people, one that will shrink as the domino effect from the foreclosures tank the economy.
          • DooM, on 01/02/2008, -1/+4No, it actually freezes ARM rates so that they don't readjust to where they can't make their payment. What use is a rate freeze on a FIXED rate??
      • rockefeller2, on 01/03/2008, -0/+1No different than the government bailing out United right after 9/11. And how much did the CEO of United make the following year? Total *****. Should have just let the company go bankrupt. The airline industry would have worked itself out.
    • Changa, on 01/02/2008, -1/+9It's a real shame the banks were so damn greedy as to let them.

      I don't have much love for the people that took the loans but damn I wish the banks has used a bit of responsibility when they gave out loans.

      • BossKey, on 01/03/2008, -0/+1The problem is that it has become easy to pass off the responsibility. In the old days, a bank would loan you money and you would pay the bank for 30 years. Now, some office loans you money, sells your loan in a package with others, washes its hands, and makes more loans. They don't want to make money from the interest, they make it on the transaction fees. It has been in their best interest (no pun intended) to churn through as many loans as possible and dump them as quickly as possible, separating their actions from their consequences as far as possible. That's what's evil about this whole thing. The offices making the bad loans never had to suffer the repercussions of what they were doing.
    • Chirp08, on 01/02/2008, -4/+10The housing crash is nothing but good, its going to weed out the people who took advantage and ***** up the system. Around here houses are going up every day, there's no shortage of new developments, and many are million dollars homes.
      • Dysarthria, on 01/02/2008, -1/+4You shouldn't be dugg down, 'cause your at least half right. In places where idiots gambled bankruptcy and artificially drove up prices through greed and speculation, prices will fall. Sober buyers will step in and buy these homes at their year 2000 prices, before the insanity began.
    • jbird71, on 01/02/2008, -0/+8Sure, I have no sympathy for them either. But unfortunately there are lots and lots of these people around, and collectively they are going to screw us all into a deep, deep recession.
    • nonsequitor, on 01/03/2008, -2/+3The American Dream
      1) Buy Home
      2) Spend hundreds of thousands from equity cashed out from home
      3) Declare Bankruptcy, leaving the bank with the tab and the house
      4) Profit!!!

      Its much easier to recover from bankruptcy than pay back hundreds of thousands you don't have so why not spend it all then leave the banks with the tab. Of course that same logic applies to those who recently purchased houses which are likely to drop 50% in value, declare bankruptcy now. Better to rip the bandaid off and begin on the road to recovery. Most home owners often pay more than double the value of the house back to the bank over the course of the loan so abandon it if you can because otherwise its just an albatross dragging you down.

      And to those who are wondering, I'm in favor of the market correcting itself. I'm in the market to buy a home so the faster this recession goes to work, the better.
    • sjbdallas, on 01/03/2008, -0/+5I really like the BBC's site because they write such good articles. This is the first time i've seen something on this housing crisis that explains the problem in a way that makes sense to someone that doesn't have a finance degree.
    • pitlord, on 01/03/2008, -0/+3It's not that big of a deal, almost half of the victi... errr, "home buyers" aren't even U.S. citizens and they used stolen identities they bought from the local gangbangers to get the loans. If they don't get bailed out by the "compassionate congress" the banks will end up eating most of this and passing it on to us.
      Why do you think it is so hard to get a loan now even though the prime rate is at historic lows?
      >.>
      • Eskapismus, on 01/03/2008, -0/+1"almost half of the victi... errr, "home buyers" aren't even U.S. citizens and they used stolen identities they bought from the local gangbangers to get the loans"

        Never heard that before. Do you have any proof of that?

        Keep in mind that a lot of those banks buying those packages with the crappy mortages were foreign banks as well.
  • swimmer88, on 01/02/2008, -0/+35i went to school in Stockton up until last year. You can't drive down a single street in the entire city without seeing multiple houses for sale.
    It just makes things worse because the city is already poverty stricken and filled with gang activity and crime. (#1 violent crime city in California).
    • joshearl, on 01/02/2008, -3/+3Where did you get the #1 fact from? I would love to see a source. Being a stockon resident myself, this city has vastly improved over the last few years
      • cameronism, on 01/02/2008, -2/+7That #1 fact came from the Stockton Record. Other than a few new restaraunts and a crappy hockey team, the Stockton is a crappy city and is hecka ghetto.
        • kreneskyp, on 01/02/2008, -1/+4and i thought "hella" was a horrible slang word.
    • brjndr, on 01/02/2008, -0/+4I worked in Stockton and grew up 1/2 hour away in Tracy. Stockton was also recently on a list as one of the top 10 most unaffordable cities, which compared median income versus median home price. So take homes that are way overvalued, and people who can't afford them but are given loans anyways, and this is the result. I've moved to SF now, where homes are much more expensive, but my salary also increased dramatically.
    • raada, on 01/02/2008, -1/+2Well.. Welcome to America... Same everywhere nowadays... Vote Bush & Cheney 2008. They will win again.
      • BossKey, on 01/03/2008, -0/+2But won't they do our voting for us, again?
    • Reyshell, on 01/03/2008, -1/+0HAHAHA greedy people getting theirs! What goes around comes around, huh? I don't feel bad at all. I just can't wait until the houses go really cheap then I'll jump on it!! I hope those people like living in a cardboard box and cleaning peoples windows while the light is red. They all deserve what they get!!!
    • hakkamacher, on 01/03/2008, -0/+0It's no different in my town, and I'm on the other coast... For Sale signs are on every street.
      Maybe in Stockton they borrowed against their home, but the sub-prime situation really has little to do with that.
  • trajomoreno, on 01/02/2008, -1/+44FTA: "Everyone was making too much money to be worried."
    I live in Sacramento (about an hour north of Stockton), and I worked in the accounting department for a real estate brokerage during the peak of the boom and the start of the slide. In the beginning, it was insane to see the commission checks pouring in for our agents. People who had just gotten their licenses were getting tens of thousands of dollars each month. People were jumping into the game for a the chance at a legit "get-rich-quick" scheme. Boy did things change in mid-to-late 2005. Agents were jumping ship left and right, and Sacramento had over 10,000 homes listed for sale.
    It's really sad to see America making many of the same mistakes in regard to their pursuit of debt as were made during the 20s. I don't think we'll fall into a depression again, but we're certainly in a major down-turn that doesn't look to be improving anytime soon.
    What's really sad is watching naive people who bought nice homes for their families lose those homes to the banks and have to uproot their children out of desperation--all because they lacked the foresight to see the higher interest rates and the balloon payments on the horizon.
    • jbird71, on 01/02/2008, -1/+6I bought my house as a long term nest egg investment. Saved up a nice down payment, and made sure that we could survive in only one income if needed. What makes me so upset about this situation is that everyone knew it was coming, but was too busy feeding their faces to say anything. And now I can't sleep at night, worrying that my nest egg investment may vanish or at least be severely reduced.
      • walkable, on 01/02/2008, -0/+3If you bought it for a long term investment, you will probably be fine. With population growth and the demand for housing, you probably will see a rise in prices again in the future.

        Although, if you bought a house in the suburbs, you could be in trouble if you listen to some experts. This is holding to be very true right now in the suburbs of Sacramento (just north of Stockton). Prices in the core of the city have held fairly steady, while suburban prices in some areas have fallen over 25% in just two years time. See the peak oil comment below...
        • Reyshell, on 01/03/2008, -0/+0Yes as long as your living in it you should be fine. ARM loans are exactly what it sounds like huh? Lot of my friends got the 30yr fixed and they are quite happy.
      • CedEx, on 01/02/2008, -0/+0It would also depend on how "long" his long term investment is. If he's just a young guy with 30+ years of employment ahead of him, he'll be fine. However, if he's an older guy, with maybe
    • Smuikas, on 01/02/2008, -1/+10"I don't think we'll fall into a depression again"

      Think again. Peak oil; greed of our administrators worming its way through congress and the federal reserve; collapsing housing economy entwined with lending and banking; plummeting value of the US dollar; most of our debt owned by China - with whome we have mutually assured financial destruction. We stop buying from them, they call in their debt, we go bust and them shortly after. Or: They call in their debt, we go bust, and can't buy from them anymore - and with no one else buying their crap goods, they go bust.

      Worst case, be prepared to buy self-destructing GE crops from big agribusiness (you have to buy new seeds every year + special fertilizer), make a mad rush to buy plots of land from said agribusiness, and learn how to farm. quickly. Without oil.

      Best case, we come up with scalable renewable power in the next five years, prosecute the criminals responsible for the rampant greed and corruption in our agribusiness, banks, government, and defense contractors, and then.. well, we'd have to vote for brand new electorates, because they'd all be out of a job!

      It'll never happen though, so get ready for some rough times ahead. Give it five, ten years for things to get bad - then get used to bread lines.
      • ClaudiuUSA, on 01/02/2008, -0/+2So, uh, who thinks kittens are cute?
        • matthewtb, on 01/03/2008, -0/+1I studied economics and accounting while in school and agree with Smuikas; this country will experience a depression again. Our currency is nothing but a mere piece of debt and it will fail.

          Claudiu - hilarious comment...dugg
      • Sdiggmatism, on 01/03/2008, -0/+0I can haz debt.
      • BossKey, on 01/03/2008, -0/+1"...most of our debt owned by China - with whome we have mutually assured financial destruction. We stop buying from them, they call in their debt, we go bust and them shortly after. Or: They call in their debt, we go bust, and can't buy from them anymore - and with no one else buying their crap goods, they go bust."

        It isn't mutually assured destruction. It is more likely that we go bust and they do not. Why? Middle classes in China and India are booming, and their populations are much larger than ours. That means all they have to do is wait until the China/India middle class is larger than that of the US. Once that happens, they can safely call in our debt. We can't pay, they take the collateral and own our assets, and survive just fine because they will then sell to the new larger Asian middle class markets. making up for the loss of the US market, for a net gain.

        Thus we become the next Spain, a shell of its former imperial self after allowing other countries to own the debt after overextending leveraged lifestyles. (It is said that for a time the Spanish treasure galleons went straight from their colonies to Northern Europe in order to make the interest payments.)
    • Reyshell, on 01/03/2008, -0/+0Sure there will be a depression again. So you better start learning how to do use your hands, cause blue collar jobs are going to reign supreme! Get your fat ass out from behind that desk and start digging that ditch, biatch!
    • OttawaMarcin, on 01/03/2008, -1/+1Hahahaha. I'm laughing because this will not effect anyone but Americans. For some reason Americans think their banking system of greenbacks effects everyone else. It will be hilarious when the Saudis are buying all the American debt at discount prices and purchasing all the homes in your rich suburban neighborhoods.
      Flip that house!
  • sfrench, on 01/02/2008, -0/+11Stockton is a interesting case as well because of it's location. While there isn't a whole lot of high paying jobs in Stockton itself, it's at the outer limits (~90min) of commuting distance to Silicon Valley and therefore there were/are lots of people looking for homes that they could get for less than what they would pay if they lived in SV itself.
    • ngmcs8203, on 01/02/2008, -0/+8There were many better options than Stockton if you were willing to put that much into your commute. If you consider Stockton (with traffic) is nearly 2hrs to Santa Clara (heart of SV) you could have taken your money and moved somewhere a little nicer. Stockton is full of crime and was destined for a crash. I don't think there are many options worse than Stockton when it came to choosing a 2hr commute for cheaper housing.
      • sfrench, on 01/02/2008, -0/+3I wholeheartedly agree. If you were gonna drop 700k on a big house in Stockton, you would have been better off finding something smaller in the east bay. I used to live in Walnut Creek which is pretty swanky and regularly saw smaller homes for 600-700k there. But then again, regardless of location or how much a house costs, if you can't afford it, then you shouldn't be buying a house anywhere at all.
        • Innova69, on 01/02/2008, -0/+4Your last sentence is the best on the page.
          Wisdom: "..regardless of location or how much a house costs, if you can't afford it, then you shouldn't be buying a house anywhere at all."
    • zdiggler, on 01/02/2008, -0/+1I know people who drive to form Stockton to San Jose everyday to goto work.
      There are people form Modesto drive to San Jose for work as well.

      There been problem with people felling in sleep on the way home, they were going to put a sleeping area past Livermore at some point.
      • diulei, on 01/02/2008, -0/+1While obviously homes in Stockton are cheaper than in San Jose - with gas prices these days I can't see the point. It's about 160 miles round trip. Reasonably that would take 5-6 gallons, at $3 a gallon that's $15-18 dollars per day. Seems to me savings might be negated by the extra gas money - not to mention the hours spent on the road.
        • zdiggler, on 01/02/2008, -0/+1Yeah, Wake up around 4am, start driving around 5, with traffic you get to job around 6:30. get off work at 4:30 drive thru traffic etc, get home around 6:30, eat dinner, watch one TV show and goto sleep.

          What a life!

          For most of them that's only way to afford a house.

          Like Modesto, there are no good paying job. In fact there are more adult living in Modesto then jobs, even if you count the farming jobs.
          My step son moved back to Modesto and he's not having good luck finding a good job.
  • Rotzooi, on 01/02/2008, -29/+15Free market people, this is Ron Paul's way.
    • citizen782, on 01/02/2008, -16/+7The "free market" is over rated - like Ron Paul. Now quick, call me a socialist and Digg this down in a blazing display of ignorance!
    • purpmint008, on 01/02/2008, -3/+13Paul doesn't like fiat currency.
      • DangerMouse9, on 01/02/2008, -3/+3Paul doesn't like you. If he had the choice to save your life or pick up a shiny penny from 2007, guess which he would do. You're right. He'd be a penny richer.
      • ChaosMotor, on 01/02/2008, -1/+2But the gold standard only benefits those who own gold, and those who can get free mining contracts to mine more gold and leave the pollution for everyone else to deal with. We need commodity-backed currency, not fiat or gold currency. A basket of good representing a set value from a wide enough range of items to remain stable over the long term.
        • logandurand, on 01/02/2008, -0/+1I think the issue is that whenever you let government control the value of the currency, they're always to print more and more of it until it's worth less than toilet paper. Using a fixed amount of gold takes control of the currency away from the government and gives it back to the market. It's not perfect, but it prevents politicians from simply printing truckloads of the stuff.
          • ChaosMotor, on 01/04/2008, -0/+2Which is why I say to use an index of common goods that all people have access to, instead of a monopolistic resource like gold. You might be able to monopolize one item of the index, but you certainly can't monopolize or control the entire basket.
        • GreyICE, on 01/02/2008, -0/+1I agree that the gold standard is not an option. The thing is, there has to be a way to limit these moronic money games. The banks were essentially lending money that didn't actually exist, which is going to create shockwaves on the economy when they have to call it. Either we have to severely limit what banks can do to prevent this stuff, or we have to accept that our economy is going to be a giant roller coaster (we had the lending crisis last decade, we've had runs on the bank before that, banks are just idiots constantly).
    • duckfigg, on 01/02/2008, -2/+6what a moronic comment.

      Ron Paul is totally against fed meddling and government monetary manipulation, which is the direct cause of this situation. if it were a true free market, without any government interference, this would not have occurred.
      • alphasixtyone, on 01/02/2008, -0/+1dude. isnt this pretty much caused by banks doing whatever they want? thats the feeling i get from it. if federal gov had more strongly regulated the terms of loans that banks could offer, wouldnt that have prevented this problem? I think the op is right. ron paul is a great guy, but this is free market capitalism here guys.
        • toddhenkel, on 01/03/2008, -0/+1This is about the financial markets finding a way around existing regulations. The vehicle of choice were the SIVs. Not regulated.

          It's much like malware. Close a vulnerability and they will find another. It's like taxes. Close a loophole and people will find another.

          When this situation gets rectified and more legislation is put in place to "prevent it from EVER happening again", someone will get creative and do it again. History repeats itself...
    • Authustian, on 01/02/2008, -1/+6Close, but with Ron Paul's economic policy we wouldn't be having this problem. He wants to do away with the reserve system, the 10:1 loan ratio, and put our currency on a value based standard not this debt based system we use today. In such a system banks would lose their power to manufacture money from nothing. Then the banks wouldn't have been able to loan people such outrageous sums of money without sufficiently being sure of repayment.

      The housing bubble filling / bursting is just a symptom of the larger problem. But there are people who've made millions off this fiasco, just liked they planned to, and now that it's popped, the banks get to repossess the house, and then they get to sell it again. Sweet deal for the rich bankers while we the people, get the shaft.
    • ChaosMotor, on 01/02/2008, -1/+2This is not an example of free market behaviors. If you think that the lending and real estate industries are free market you don't know what you're talking about. The fact is that America doesn't have and doesn't support free markets.
    • rodgerdodger5, on 01/03/2008, -0/+1Rotzooi you are so wrong it is just laughable. This is NOT FREE MARKET. The Fed is SETTING the interest rate to something that is way below what the free market rate should be. Therefore, easy credit, more buyers, more money out there to spend, inflation and higher prices for homes. It is the exact OPPOSITE OF FREE MARKET. GET IT?! Please go to Goggle video and google "money as debt" and watch that video. PLEASE WATCH IT. Lights will come on for you. Bells will ring. Fireworks will probably go off. I am not kidding.
  • Caalro, on 01/02/2008, -0/+41Having lived in Stockton for 3 years, as a Navy Brat, I can tell you that there are very few places I would never return. Stockton is the top of the list.
    • Reyshell, on 01/03/2008, -1/+0Hell yeh. Stockton is the kind of place where kids growing there up make songs about leaving that place.
  • lolkthnxbai, on 01/02/2008, -0/+35I live here in stockton California all I have to do is look down the street to know it's bad.
    • swicklund, on 01/02/2008, -3/+1How so?
    • iDiggIt42, on 01/02/2008, -0/+3I live near Stockton (Tracy), and even here just driving around there's usually at least one house on most blockers with a "Bank Owned" sign in front of it. It's even worse there.
      • iDiggIt42, on 01/02/2008, -0/+2Blockers? How the hell did I type that...
    • virtualmadden, on 01/02/2008, -0/+2Just went and visited my uncle in Stockton, didn't look to promising.
  • trer, on 01/02/2008, -2/+26"People went to the bank and got a loan on the increase in the price of their home. They went out and spent all that money," he explains.

    "Price of the home went up again, they went back to the bank and got another loan. They went out again and spent that money on cars and jewellery and furniture - whatever they wanted."

    Says it all.
    • founderofpork, on 01/02/2008, -0/+15Seriously. I fail to see how people who were too stupid to bother educating themselves about the HUNDREDS OF THOUSANDS OF DOLLARS they were borrowing should get any ***** sympathy. I realize there were some deceptive loan practices occurring, but jesus christ, some things are just obviously out of your ***** price range and you should know it.
      • Neiby, on 01/02/2008, -0/+2Many of them did realize it. They sold their homes for outrageous prices and then moved here to Colorado and jacked up our housing prices. They had money to burn and moved here in droves. All that extra money flowing in drove up prices like crazy. Builders couldn't build expensive homes fast enough. Now there are multiple homes for sale on every block and home values are dropping like mad.
        • toddhenkel, on 01/03/2008, -0/+1From what I heard, Colorado was the same as the area I just sold my house in. California margins were falling for investors so they moved east looking to flip houses there. I actually had a van of 6 "investors" from California run through my house looking for something to flip. Those "investors" ran up house values artificially. Unfortunately the landing may bounce a bit below what it was before those speculators arrived.
      • jdepp, on 01/03/2008, -0/+1so you need a ready supply of schmucks who'll buy overvalued properties, and you need financiers who'll go against the spirit, if not the letter of the law to dole out loans and collect their commission fees.
    • usafdave, on 01/02/2008, -4/+2George Bush hates homeowner-people. This is certainly his most clever ploy yet to screw folks over!
    • trane262, on 01/02/2008, -0/+3people in Stocton be blingin!
    • Reyshell, on 01/03/2008, -1/+0greedy greedy greedy. It like taking money from your mamas purse. You think its an endless supply then you get caught!
  • Richandler, on 01/02/2008, -2/+8All of California is going to be hit really hard. I already know of a dozen or so foreclosed homes that were recent. It's very fleeting to see so many houses just emptied with notices papers taped to the window.

    In case you guys didn't know it was some politician who wrote up a resolution so that people who couldn't afford these houses could buy them. Once again this is a saddening result of peoples best intentions with government back firing extremely badly.
    • tjdubya, on 01/02/2008, -1/+6"In case you guys didn't know it was some politician who wrote up a resolution so that people who couldn't afford these houses could buy them."

      Are you referring to Ronald Reagan effectively abolishing all State's Usury laws in 1980?
    • pitlord, on 01/03/2008, -1/+1No it was recent legislation passed with the intent of making it easier for illegal aliens to buy real estate. Why do you think so many foreclosures are in Stockton?
      -_-
      The problems aren't as bad in Carmel or Beverly Hills.
      ><
      Make no mistake, La Raza (i.e. MS13, Mexican Gangbangers) has declared it's mission to reclaim all of the land Mexico lost in the Mexican-American war.
  • dupswapdrop, on 01/02/2008, -12/+5You pays your money and you roll the dice, it's the same with stocks, bonds, money market funds, insurance and Las Vegas. Now stop whining and get back in the game.
  • nachomonkey, on 01/02/2008, -3/+15Money as Debt http://video.google.com/videoplay?docid=-905047436 ...
  • londubh, on 01/02/2008, -1/+22Looks like the lenders learned their creative accounting practices from Enron.
    • toddhenkel, on 01/03/2008, -0/+1Definitely. Wonder if we will see SARBOX type legislation soon?
  • orlyfactor, on 01/02/2008, -0/+33Why is cell phone earpiece man giving the "Oh ***** I crapped my pants!" look??
    • dondara, on 01/02/2008, -0/+5The Borg don't ***** themselves. Get a grip
      • RoboRay, on 01/02/2008, -0/+2Are you sure? I never saw a toilet in any of the cubes.
    • phy6uva, on 01/02/2008, -1/+1Isn't that strange how things differ in different regions of the US. Clearly in the midatlantic, that is the "I just screwed the pooch" face. Another one of those soda vs. pop things i guess.
    • jdepp, on 01/03/2008, -0/+1because he ***** his pants.
    • RedHairedMan, on 01/03/2008, -0/+1I would guess, from my experiences seeing my mom and the real-estate company she worked for getting into this, that he spent a lot of time and his retirement money on getting his real estate degree, marketing himself as a realtor, spending a lot of money on supplies and wine n dine trips with buyers and sellers on the hope that he might be able to make that initial investment of his retirement money turn into 10 times as much, only to find out he can't sell a single ***** house now and his retirement has fizzled away like a wet firecracker.
  • HoratioHellpop, on 01/02/2008, -1/+19Dug for the priceless "holy cow, I've got to find a new career" look on the realtor's face
  • peterlisanti, on 01/02/2008, -0/+63Dear Mr. Real Estate Agent in the picture,
    Please take your bluetooth ear-piece out of your ear when you aren't using your phone.
    You look like a retard.
  • mucello, on 01/02/2008, -3/+22Now why can't we see quality, insightful news articles such as this from the American press?
    • oderdigg, on 01/02/2008, -1/+5Because it hurts Rupert Murdocks' (sic) bottom line.
    • jrandyw, on 01/03/2008, -0/+2Honestly, have you even looked in the American press? There are plenty of articles explaining the housing/sub prime mess in the US media.
      • atticus8, on 01/03/2008, -0/+2Criticism of American media is a safe bet. The thing is that lazy posting of this kind is usually true, because the American media is terrible. However, as you say, there are great articles in the American media explaining this - just don't read USA Today, dig a little deeper - and here is the lazy assumption is wrong.
  • MindTrigger, on 01/02/2008, -0/+20People are stupid, no doubt, but handing out shady loans is no better. When I bought my first house12 years ago, my loan agent basically asked me to make a fake pay stub to make my income look 'more attractive' to the underwriters. At the time, my wife and I really wanted our first home, so it was very tempting. Looking back on it now, I can see it for what it was. A greedy loan agent willing to pull any stunt she could to get the deal done. Luckily, we were able to afford the house, so it wasn't a problem. Repeat stories like mine, and add ripp-off RE agents and greedy banks, and you have a recipe for exactly what we are seeing in Stockton and other cities.
    • HoratioHellpop, on 01/02/2008, -1/+1// A greedy loan agent willing to pull any stunt she could to get the deal done.// Wow. That really happened? Sheesh. Way to look out for your clients. I hope that agent is bankrupt.
      • isellmacs, on 01/02/2008, -0/+0I'm sensing a bit of sacrcasm, perhaps i'm wrong.

        For anybody who thinks it's a good thing that a valiant and noble loan agent went to bat to get the poor down-trodden couple a loan from the big, evil and nasty bank... realize that the way the loan process qualifies people for the loan, is to protect BOTH the bank AND the borrower.

        One only has to take a look at all of the foreclosures on people who could not afford to buy a home yet did so anyway thanks to these 'noble' tactics to realize that the borrowers would have been better off renting.
      • Reyshell, on 01/03/2008, -0/+0she is prolly working on her hand and knees now.
    • superkendall, on 01/02/2008, -0/+1In that situation though it's two people being unethical if someone takes the deal. You can say they are wrong to offer but someone is just as wrong to take them up on it.
  • radink360, on 01/02/2008, -0/+11The problem is down to the fact that loaners were bending rules to get people loans who should have never been able to qualify.
    • toddhenkel, on 01/03/2008, -0/+1You mean people without verifiable income, lousy credit and no down payment other than the second mortgage they are taking out at the same time were not just as liable? You know, the people that have a $2000/mo mortgage when the ARM goes up but only have $2100 in real income. Come on... the debtors are just as culpable. People were reaching for more than their means. They wanted to live the perfect American dream instead of working for it.
      • one2gamble, on 01/03/2008, -0/+1no they arent just as liable because the people lending the money could have simply said "no" like they used to, people ALWAYS reach beyond their means. Its human nature. If a business wants to operate like the lenders then they should simply suffer the wrath of poor business decisions just like every other small to medium business owner.

        Nobody wants to bail out the "Big 3" so why would anyone want to bail these people or the lenders out. The people should lose their homes and the lenders should lose their ass.
  • ryanward, on 01/02/2008, -1/+10Buyers lying about their income to qualify and we are supposed to pay for it? I don't think this is good practice.
    It's time to stop looking at the real estate market from a national perspective anyway. Real estate is local.
    I'd write about it, but, it would get buried because I sell real estate.
    • banmaster, on 01/02/2008, -0/+3Banks letting them lie about their income to quality.....

      A few years when I got my loan I had to provide very detailed records about my savings and income and stuff like that before they even set the application process in motion.
      • toddhenkel, on 01/03/2008, -0/+1Sounds like you picked the wrong loan provider. No wait. If you had, you might be in this mess too. Instead you were smart enough and responsible for yourself. You don't deserve to call yourself American. We will look at doubling your taxes to bail out the stupid.
    • Fratm, on 01/03/2008, -0/+1@banmaster,

      Actually, loan officers who encouraged people to lie about their income to qualify.. I got my home loan 3 years ago, and my loan officer assured me this was how it was done..

      For the record, I didn't lie about my income, and I can afford my home.. But I was surprised that this was common and accepted.

      -Fratm
    • toddhenkel, on 01/03/2008, -0/+3Actually no one should be paying either the lenders or the homeowners. The lenders will get hit in the financial markets. The cheating homeowners (let's call it what it is) will lose their homes. Don't give anyone any bailouts with tax money. We will pay enough for the vacant homes in some areas that bring home values back to planet earth.
  • troycott, on 01/02/2008, -6/+21damn it feels good to be a renter
    • banmaster, on 01/02/2008, -3/+10To know that over your lifetime you'll have paid as much rent as it would have cost you to buy 5 homes?
      Yeah, I'd be feeling real good about that as well....
      • troycott, on 01/02/2008, -2/+16or maybe 10 houses if I buy in Stockton!
        No I just plan on renting until the crash. Then I'll buy your house for 60% less then you paid for it, sorry, borrowed for it.
        • HoratioHellpop, on 01/02/2008, -1/+1Not all markets are full of as many idiots as California is. My home's value grows at a steady 5-8% a year in the Midwest. But what do we know.
        • toddhenkel, on 01/03/2008, -1/+1Better check that 5-8% again early this summer. The Midwest is not exempt from this...
      • Dax420, on 01/02/2008, -2/+4Haha, you fail at the maths.
      • toddhenkel, on 01/03/2008, -0/+3Just hope your landlord was a real estate speculator and goes bankrupt themselves. Seriously.
    • Richandler, on 01/02/2008, -0/+3It's not good if your owner has gone through foreclosure and people show up at your door to clear out the place.
    • dupswapdrop, on 01/02/2008, -4/+1I love my renters, I buy all my toys with their money not mine.
      • troycott, on 01/03/2008, -1/+3I love my landlord, he buys me a new roof, replaces my plumbing, fertilizes my lawn, fixes my a/c...
    • Reyshell, on 01/03/2008, -1/+1yes troycott, indeed it is good to watch the mighty greedy rich people fall. Then we can jump on those houses at a good price and be slum lords ourselves!!!! MUHAHAHA!!
  • smacksaw, on 01/02/2008, -9/+4I love that guy in the picture. The expression is like "Oh *****, Jack Bauer" and Jack Bauer is like "YOU SCREWED UP CALIFORNIA'S PROPERTY MARKET BY SELLING ALL OF THESE HOMES YOU REALTY TERRORIST" and then busts a cap in his Bluetooth-wearing ass and sticks his finger in the bullethole screaming "GUANTANAMO!"
  • lpse2000, on 01/02/2008, -2/+29Well I hope it gets "worse", because I'm in the market for a house.
    • solidfusion, on 01/02/2008, -0/+7Amen to that as I'm in the market as well!!!
    • webtekie, on 01/02/2008, -0/+8Amen!
    • logophage, on 01/02/2008, -3/+4Unless you can pay 20% down, you won't get a loan. The credit market will be too tight.
      • Reyshell, on 01/03/2008, -0/+0too bad...if you would have served your country you would have received the VA Housinng Loan which says that YOU DON'T HAVE TO PUT A DOWN PAYMENT ON A HOUSE. I have one though, so POO POO on YOU!
    • yournamehere, on 01/02/2008, -1/+3Amen! However do we really want it to get too low though? I mean, if they lose too much money with this won't that turn this country into financial turmoil?
    • crazzy88ss, on 01/02/2008, -0/+4Yea but as the housing market gets worse, the whole economy gets worse.
    • pirloui, on 01/02/2008, -0/+1I'd love to be in the marked for a house..
    • matu4251, on 01/02/2008, -0/+1Nice mentality...
      • toddhenkel, on 01/03/2008, -0/+1So you don't subscribe to the notion of buy low, sell high? You'd rather pay $400K today and have it worth $375K next year?
        • matu4251, on 01/05/2008, -0/+1that's not what I was commenting about. It was more the selfishness of what lpse wrote that bugged me, the "I wish the whole country's economy to get worse so I, lpse2000, can get myself a house!". And I'm not defending people who got a house they could not pay, they probably got what the deserved but c'mon... not sure if you noticed but the economy isn't doing too good these days. unemployment is rising (it got over 5% last month).
    • Reyshell, on 01/03/2008, -0/+0Thank GOD i have a VA Loan!! I don't have to put anything down!! im drooling for my new house!
  • chaserm, on 01/02/2008, -2/+7So...basically you have a whole lot of stupid people that should not have qualified for loans now losing their homes. And banks that should not have made loans to these under qualified people.
    • radink360, on 01/02/2008, -0/+2Yes. but not everyone was stupid as you put it. Some people found homes that were reasonable, but due to having a bad credit history, got a loan because of the ***** loan practices. They shouldn't have gotten a loan, but did, at much higher interest rates, making the payments much higher than they should have been. People should have been more careful and realized that the payment was too much for them, even though it seemed ok. Alot of these banking crooks never give you a final payment amount until you close. At that point, what do you do?
      • Reyshell, on 01/03/2008, -0/+0If it looks too good to be true, then it probably is. There is a sucker born every minute.
  • cameronism, on 01/02/2008, -0/+6Stockton's local newspaper is the Stockton Record. Every day there are about 3-5 full pages that have legal notices on repossesions.
  • phy6uva, on 01/02/2008, -1/+9next step... all banks call in any and all margin loans and then we can hear president Bush declare mission accomplished... again...
  • ryanward, on 01/02/2008, -3/+4The ultimate responsibility is on the homeowner folks. Why is that so hard to understand. they are the ones who have to pay for it. You would think that they would be getting a little more blame here???
    • oderdigg, on 01/02/2008, -1/+2Why? If a Bank tells me I qualify for a loan, why wouldn't I take it?

      Who knew their house would lose value? I feel for home owners because they got *****.

      It's ok though, we don't matter and the banks are getting hands-outs as we speak from the Government.
      • Hamletlere, on 01/02/2008, -0/+2You know, banks and credit card companies tell me all the time that I qualify for loans and credit.

        Guess what? I know that just because I qualify doesn't mean I should take advantage of said loan or credit. It's funny that you seem to think people shouldn't have to be able to control themselves, and decide for themselves what they can afford. It's called fiscal (and self) responsibility, and I was taught it in my childhood.
      • TheYar, on 01/02/2008, -0/+1By "got *****" you mean they got to live in a house that was nicer than they could afford, for a while, and then got to skip out when they couldn't pay and call the government for help.
      • brbeaird, on 01/02/2008, -0/+2There's this process where you add up your monthly household income then subtract your monthly expenses. It's called having a budget and takes about an hour or less to throw together. Everyone should know what they can afford before they even step foot into a bank.
    • Authustian, on 01/02/2008, -0/+1Average Person : Walks into a bank. Finds a loan officer, and asks "What's the most I can get to buy a house?"

      Smart Person: Researches it themselves. They would find out how much they could spend a month on a mortgage, factoring in insurance costs, improvement/maintenance costs, etc. Then they would go to a bank, find a load officer, and say something like "Here's what I've been looking at. How close to this number can I get, and what kind of loans are you offering?"

      Now, with those scenarios in mind, think about the average distribution of intelligence. There are more average people (by far) than smart people. Banks are in it for profit. They don't care about you, your family, your dog, or anything else except for money and assets. Note: Banks, as in the business, not the person who gives the loan. The person giving the loan does make a commission, so they want to give you a bigger loan. And the more money the bank is then owed means they can then start loaning out the money you now owe them. And if you don't repay your loan, they get your house. And then they get to sell it, and keep the profit.

      I believe it was the banks responsibility to loan wisely, and if they did not do so, they should have to shoulder the burden of taking an unwise risk. The person who took out the loan is also harmed by their lack of understanding how the system works, and over extending themselves. But in the end, the homeowner gets shafted - ruined credit, and the bank gets bailed out by the government, and gets to keep the house. While it's value has depreciated a little, they can still make alot of money reselling it. But it doesn't hurt the bank nearly as much as it should. They manufactured money, basically causing the inflation of prices until the system collapsed under it's own weight. By doing so, they made themselves alot of money, and ruined thousands of peoples lives.
      • TheYar, on 01/02/2008, -0/+0The bank does shoulder the burden. They fork over the money to buy a house, the buyer doesn't pay, and now the bank gets stuck trying to sell the house to get some money back now that's its worth half as much. The owner just gets to live in a nice house, a default on his/her credit and loses no money.
  • ZenFountain, on 01/02/2008, -0/+8Banks should have never been allowed to sell securities, the root of the problem and the end of the problem as I see it, but I don't claim to be an expert in economics.
  • xyzunit, on 01/02/2008, -1/+5Part of the problem with Stockton is the fact that nobody would want to live there. Damn it sucks.
  • ericdano, on 01/02/2008, -0/+6Stockton is the place you send people you don't like. Really. It is the worst area in the bay area (if you can call it part of the bay area). Personally, Pleasanton and Dublin are worlds better than Stockton.
    • trer, on 01/02/2008, -0/+3Pleasanton and Dublin are worlds better than Stockton because Pleasanton and Dublin are about 10X more expensive to live in than Stockton. And no, Stockton does not count as being in the Bay Area even though many crazy people lived in Stockton and commuted to San Francisco to work.
      • gsadamb, on 01/02/2008, -0/+2How about.. The Bay Area stops where BART (and the Caltrain) stop. The Bay Area ends in Dublin then!
        • liquidated, on 01/03/2008, -0/+0Or maybe just use the county boundaries (where Dublin falls at the Alameda county line and Livermore/Pleasanton/Brentwood fall in Contra Costa, etc.) Stockton is in San Joaquin, which is definitely central valley.
    • pirloui, on 01/02/2008, -0/+1What's so bad about it? Isn't there some nice nature to compensate?
    • sterni, on 01/03/2008, -0/+1Pleasant on and Dublin I am sad to say started as suburbs of people who can't afford to live in the bay area. Yes Stockton has become that too in some way, but at least the town existed a hundred years ago on its own.
  • xdoute, on 01/02/2008, -0/+4Anyone that gets an adjustable rate loan is a retard anyway and deserves what they get. What, so the fed lowers the rate and you can get one better now, refinance you idiot, the only thing an adjustable rate loan can do for you is hurt you.
    • Reyshell, on 01/03/2008, -0/+0I agree. If you get an ARM loan, more likely your were trying to flip that house. Too bad. Now you have two mortgages to pay now. And wait until that balloon payment hits ya!
  • webtekie, on 01/02/2008, -1/+8In Brooklyn, NY where I live they can't sell all the ***** they built. Around my building there is condo that has not seen any tenants since it was built in 2004. I want to see blood! Lot's of blood!
    • theutopian, on 01/02/2008, -0/+6So do I. That's when us renters will finally be able to get on the ladder. A housing crash will only create new opportunities. You have to destroy to create. A basic economic principle.
    • Reyshell, on 01/03/2008, -0/+1I totally agree. I want those greedy bastards to clean my windows while im at the red light. Then give them a quarter!
  • Changa, on 01/02/2008, -1/+3I can understand why people have no sympathy for the people that took out the loans but why do people give a free pass to the company that did the loaning?

    I thought one of the point of loaning money was to make sure you had a chance in hell of getting a return on it.
    • xdoute, on 01/02/2008, -0/+2Two things:
      1. my guess is that more often then not the entity responsible for giving someone a bad loan is the loan officer that wants to boost his numbers. the large bank is responsible for wanting to loan more money, and for getting around the 10:1 lending laws, but it really comes down to the LO persuading people to get a loan that is bad for them and then making it possible.
      2. the banks still make boatloads of money even when things go into foreclosure as long as the housing prices don't drop. so, they all thought they were still lending money they had a way to get back. the problem is that people can't afford their new adjustable rate's, and can't make their payments, and can't get a loan for another house because they are getting foreclosed on. so, there are fewer people that are able to buy the overpriced houses that just got repo'd and the banks are losing a lot more than they planned.

      -- that is my understanding of the current situation at least.

      (it seems to me that the banks just did with mortgages what they did before with credit cards -- gave people dumb enough to hang themselves a rope to do it with)
  • banzai26, on 01/02/2008, -5/+6I would like to know why the only newspaper that will cover this ***** is not even in the US?? WTF? You don't think our corporate whore media has something to hide do ya??
    • HoratioHellpop, on 01/02/2008, -2/+4Er, I've heard about a zillion stories about this for the past two years in the US. You need to visit sites other than Digg once in awhile.
    • Eric.S.Smith, on 01/02/2008, -1/+4The Wall Street Journal had a lengthy article on the sub-prime debacle's impact on a street in Detroit months ago. It was promoted above the fold on their front page, and was the only reason I've ever bought an issue of the Wall Street Journal.
    • mavere, on 01/02/2008, -1/+4Horatio's right. I read the NYT and this article is basically all old news to me. They must have had dozens of articles on the housing/credit turmoil so far.

      Seriously though, that comment was so ignorant it's scary. You don't depend solely on one outlet of news (digg), and judge everything from it.
    • Raerth, on 01/02/2008, -0/+3In addition to the above comments, really need to point out the BBC is not a newspaper...

      /pedantism
  • ganymede2010, on 01/02/2008, -1/+16Being in the Real Estate Business I can tell you first hand how bad it is in Stockon. The home prices have fallen 25% in the last quarter alone. There's plenty of families who currently owe more then what their houses are worth. And that's just sad. Because many of them qualified for zero down, pay option adjustable rate loans. With a 3 year pre-payment penalty (meaning, you'll have to pay 6 months of interest to get out of your loan). Most of the homes in stockton were new homes built by greedy builders. Who lured the home owners with ficticous *free-upgrades* if they agreed to finance thier loan through their lender. What the home owners fail to realise is, they were paying for those *up-grades* by the inflated closing costs being charged by the builders prefered lender. There's so many ways to screw over homeowvers that they simply stand no chance against a skilled Mortgage Broker. And that's what's sad, the banks would often turn a blind eye. And cash in on the profits.
  • JJ2K1, on 01/02/2008, -2/+6Bankers rule the world and are directly behind all of its problems in one way or another
  • banmaster, on 01/02/2008, -1/+8Its their own damn fault for borrowing way beyond their means (and their future means) and the banks' fault for letting/encouraging them!
  • cambob76, on 01/02/2008, -2/+13People are stupid. Banks are evil. America is going FUBAR.
  • brstilson, on 01/02/2008, -1/+23There is one principle that would have avoided this whole situation:

    DON'T BUY THINGS YOU CAN'T AFFORD

    I have no sympathy for people who bought a house without budgeting the costs.
    • ganymede2010, on 01/02/2008, -0/+4It's not that easy. Real Estate in general is vastly overpriced. The median home price in stockton us to be 350,000! And the average family who lives in Stockton make no more then 50k a year. And Stockton is the cheap area. If you go further south to Pleasanton, the average home price is 500,000.
      • jrandyw, on 01/03/2008, -0/+2How does this invalidate stilson's statement? If you can't afford it, don't buy it.
      • BossKey, on 01/03/2008, -0/+2brstilson is right.

        If you buy when you can't afford it, you maintain the unafforable price. That is bad for everyone, and as we can see, is not sustainable.

        If you refuse to buy when you can't afford it, and others do the same, the market works. No buyers means the prices have to come down. And then you buy.

        Every single person who took out an unreasonable loan contributed to keeping housing prices elevated. That doesn't mean they all did it intentionally or with malice, only that everyone who bought at too high a price helped to sustain a distorted market.
    • HoratioHellpop, on 01/02/2008, -0/+1Yup, even SNL understands: http://www.getrichslowly.org/blog/2006/07/29/dont- ...
    • jdepp, on 01/03/2008, -0/+1while I agree with you, the people who allowed it to happen at the banks need to be shot squarely in the face.
  • rowlodge, on 01/02/2008, -0/+7they just cleared like 20 acres across the street from our house to sell lots but nobody has bought any in 2 years.
  • airwalkery2k, on 01/02/2008, -2/+6Usury!
  • TinFoil209, on 01/02/2008, -0/+4I read my hometown in the listing and thought "something positive something positive". Nope. :( Typical sadly. I really don't understand who took those loans during the big housing boom. It was differ interest or pay principal later adjustable interest rate. Known as "this loan will swallow you hole whenever we want it to". What is even worse is that the banks take the house from a family that is atleast trying to do right in the economy and keep the place up (most of them do). Put a sale/liquidation sign on it, then watch that house grow weeds and rot. Graffiti is horrible here so those houses get tagged quick. Going to my uncle's house I drove by a bus called the "Foreclosure bus". With a bunch of people getting out to take advantage of another's financial misery. Sad state of affair were here locally and abroad.
    • bhos13, on 01/03/2008, -0/+0The people who took out the worst loans probably have trouble balancing their checkbook, so had little to no chance of understanding the papers documenting the loans they were signing up for (and probably couldn't afford a lawyer to review them.) Add to that the either stupid or unethical mortgage brokers, who were able to convince those people to take the loans under the guise of "but you can refinance at these record low fixed rates before your rate change once your credit is cleaned up/income rises/home value increases/etc, and home values are only going up, up up." Also, don't forget the home appraisers (in cahoots with the real estate agents/mortgage brokers) who certified these houses are worth far more than their real value, and real estate agents doing everything they could to inflate the price of the homes (and their commissions.) You also can't leave out the speculative investors who took out a lot of these loans to buy houses to resell, making these unconventional loans appear safe/popular/normal, and further driving up house prices by inflating demand and expecting more profit than they were due.
  • nobody0, on 01/02/2008, -5/+0i am not a economist,.. but, Don't the property developers have any responsibility to keep the the price of the property reasonable.... not just based on supply and demand...
    • Standeck, on 01/02/2008, -0/+2Repeat after me . . . "The market sets the price, the market sets the price."

      Developers have no responsiblity other than to build according to code and to make a profit for their investors. If the market won't allow you to build a code compiant unit and sell at a profit, then they shouldn't build. The "market" owes you nothing. Having said that, if no one can afford the unit you build, you also shouldn't build it!
      • nobody0, on 01/04/2008, -0/+0make sense........ but then why blame the banks.they are also in it to make money...blame the people .....what obligation does government have to interfere in private contracts .....interesting isn't it...
    • Eric.S.Smith, on 01/02/2008, -0/+4No.
    • Tweekster, on 01/02/2008, -0/+0why? If 2 people want to buy the 1 candy bar i have and one offers more than the other, why should I sell to the person offering less. The same reality goes for real estate too
    • whorunbartertwn, on 01/02/2008, -0/+3If developers priced artificially low their houses investors would just buy & flip them for market price.
      • nobody0, on 01/04/2008, -0/+0developers would have to be dumb to do that
    • eryximachus, on 01/02/2008, -0/+2If you buy that big screen TV by maxing out your credit card, and then don't pay the bill - do you blame Best Buy?

      The developer gets cash. Where the buyer gets that cash from is not his responsibility unless he agrees to it.

      Seller financing has not been common since the 1970s when the federal government essentially allowed banks to create and lend an unlimited amount of money.
    • jdepp, on 01/03/2008, -0/+1OK, but the point is that the special investment vehicles are what allowed it to snowball out of hand the way it has. without all the financial wizardry there would have been a check on the issuing of stupid loans.
      • nobody0, on 01/04/2008, -0/+0make sense........ but then why blame the banks.they are also in it to make money...blame the people .....what obligation does government have to interfere in private contracts .....interesting isn't it...
  • Kamoo, on 01/02/2008, -0/+5Being from the UK I found this article very interesting given that we have been in the midst of soaring house prices which many now predict are set to crash. I also know people who have followed the route of taking out loans on the equity in their homes only to get themselves into financial difficulties. With interest rates rising and predictions of a credit crunch in 2008, we can only hope that we don't follow the same route as the US. As many have said, the best practice for many is to follow simple common sense and be more prudent in their spending habits.
  • Tweekster, on 01/02/2008, -3/+0Why do people keep talking about the banks. Banks are not going to be hurt by this one, mortgage lenders will be. There is a major difference. Typically the banks didnt offer ARMs to begin with.
    • brbeaird, on 01/02/2008, -0/+3Banks *are* mortgage lenders, and they most certainly did offer ARMs. If the rates were fixed, people would have nothing to worry about because their payments wouldn't be rising regardless of who the bank sold their mortgage to. Well, aside from the fact that they already couldn't afford the monthly payments on the original rate...
    • jdepp, on 01/03/2008, -0/+1The mortgage lenders have sold the debt on to the banks, hence disaster.
    • carver007, on 01/03/2008, -0/+1Depends on the bank - most small community banks did not retain ARM's on their balance sheet.
    • peppersauce, on 01/04/2008, -0/+0The banks finance the mortgage companies. They lend money to the mortgage companies for a profit who in turn lend it on to the house buyer. The whole system is crazy, the way all these vested interests converge to fuel a speculative bubble. The banks will still come out on top as most of the loans will be repaid. They just lent more money than they would've with out the house price bubble, without having to do much extra work. The bigger the loan and the longer the repayment period the bigger the profit. Basic finance and economics should be compulsary at school. And if the goverments can't get most people to a decent standard of numeracy so they can protect themselves from this kind of stupidity, then regulators should tightly control how the market works.
  • wilf_brim, on 01/02/2008, -0/+11I'm sorry that so many people are going to be hurt. But please, do NOT let the politicians bail out those responsible here. It isn't smart, and it isn't fair. Those that gave out the loans on overinflated properties need to go under. Some people will lose their houses. The reason that I'm so negative here is that the lessons are not learned. If the Wall Street and other banks get bailed out by the government, they will just do the same thing again. The market was fueled by overly low interest rates. It was sustained by insane lending practices, and the ability to hide some really crappy loans.
    The people who were smart, and either didn't buy homes at all, or only bought what they could realistically afford, will be punished for being prudent. And that isn't fair.
    • Vomitrific, on 01/02/2008, -0/+2Remember the Savings and Loan bailout of the 80s? American taxpayers are going to be bailing this out.
  • Rehnborg, on 01/02/2008, -3/+2It is there fault for buying homes they couldn't afford with non-fixed mortgage rates.
  • zdiggler, on 01/02/2008, -7/+2During the boom me and my parents were looking for house in Fremont/Newark area we keep getting out bid. Some houses were out bid double the asking price, trust me they're 1950 houses build with crappy stuff because there is no good materials due to war time, small houses with no insulations with small backyard. Market price was 300K according to property tax sheets, one house we look at it was sold for 500K , Another place was sold for 650K which was also a 300K house.

    We finally found a place in Newark where the guy was sick of seeing those prices, he just retired and ready to move. His house been paid for like over 20 years, so we put our bid in at asking price of 350K There was a lots of other offers up to 500K+ but he refused all of those bids and sold it to us for 350K. We were so lucky.

    Now the house is worth 650K.
    • dbzer0, on 01/02/2008, -0/+1And going to go down to like 200K soon...
      • zdiggler, on 01/02/2008, -0/+2I really doubt that, not Newark, too close to everything to drop that far but Tracy is like in middle of no where, where houses and location is actually only worth about 160K, if you look at job/school/crime and services offer.

        Where in Newark, its 40 min to SF, 20 to San Jose, a lots of job near by, good school, healthy Wealthy community near by, if it is to go down it will be in 400K range. We paid much less the our house those idiots doubling the prices for no reason.
    • rockefeller2, on 01/03/2008, -0/+1Funny, you first complain how housing prices were inflated when you were in the market to buy. Now that you own, you brag about the over inflated housing prices, as if you made some great financial move. Burried!!!!!
  • captspaulding, on 01/02/2008, -1/+3People got greedy and then got what they deserve.
    No sympathy here.
    • republicker, on 01/02/2008, -0/+1You dont need to give then sympathy, they are taking it in the form of your tax money.
    • skinjester, on 01/02/2008, -0/+1actually, their loss is my gain. Great time to buy. Not a great time to own.
  • theutopian, on 01/02/2008, -0/+1My mother-in-law bought into the whole real estate religion a few years ago hook line and sinker. She did pretty good but not nearly good enough. Now, she pours her time and energy into failing real estate while working as a bartender. My brother worked for a Mortgage broker a few years back and all they cared about was the altar of Real Estate and Mortgages, they didn't care how unethical their business practices were (he cared and quit). These mortgage brokers barely had any training on how mortgages worked, all they did was no how to fudge forms to get the bank's approval. Real Estate is the new Christianity. What happens when God (as in the property prices) doesn't exist? The country implodes. Things are not going to be good.
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