Was it a surprise to see two “People Are Walking Away From Their Homes” stories in both the New York Times and the Wall Street Journal today? (I’ll just mention I talked briefly about the “walking away” phenom in my “Arson is Not Your Friend” post three weeks ago — yeah, yeah, I haven’t gotten around to writing about it. I will, though. Swear. But it’s nice to know they’re reading me!)

Weird part about it all? They highlight two different Bay Area families! (At least one from Vacaville!) Can’t they find any in New York?

From the New York Times article:

Christian Menegatti, lead analyst at RGE Monitor, said the firm predicted more homeowners would walk away from their homes if prices continued to drop, regardless of their financial circumstances. If home prices drop an additional 10 percent, Mr. Menegatti said, 20 million households will owe more than the value of their homes.

“Will everyone walk out?” he said. “No. But there’s been a cultural shift. Buying a house used to be like entering a marriage, a commitment for life. Now, if you see something better, you go back into the dating market.”

From the Wall Street Journal:

Many are speculators who had planned to quickly flip the home, but others appear to be homeowners who had second thoughts about their purchase.

“It may not be a big thing yet, and hopefully it won’t be,” says David Berson, chief economist for mortgage insurer PMI Mortgage Group Inc., of Walnut Creek, Calif. But if it turns out to be a significant trend, he says, it means that “delinquencies and defaults could be higher than the industry is estimating.”

So, we are all big news, according to New York City media. So, is it OK to walk away when you know there’s very little chance of holding onto your property? Apparently our government says that it’s wrong. According to the Associated Press:

(U.S. Treasury Secretary Henry) Paulson said that homeowners who could afford to make their monthly mortgage payments should honor their obligations even if their loans were currently “underwater,” meaning the mortgage at the moment is higher than the value of the home because the steep housing slump has pushed home prices down.

I wouldn’t listen to him, though. He wants to get rid of the penny.

I love a bargain! And so do home buyers. Yet the question always seems to be, when is it really a steal? And how can I do better than my neighbor?

My story today talks about buyers taking their time but still considering buying in a downturning market. (Full disclosure: I am also looking for a house, but am not feeling any urgency.) I enjoyed the frankness of Will Birdsey who’s looking for a place in Lamorinda:

“I’m not bullish on house prices,” said Birdsey, a commercial real estate project manager. “My wife and I believe prices will continue to decline, but we still want to look. We’re not buying this as an investment.”

Birdsey said that if his house’s value drops in the next few years, it doesn’t matter because he plans on holding the property for 20 years or more. “It’s not the end of the world,” he said. “We’re being selective and feel time is on our side.”

That’s cool. But are buyers now becoming a bit too selective? Are they somehow gaining some pleasure in tormenting homeowners who bought in the boom (”Nyah, nyah, you were dumb to buy and we’re not! So take this miniscule offer and like it!”) because they were priced out? Because sometimes it feels like they are.

From The Free Republic:

Stupid people lent stupid money to stupid people and I’m supposed to care….why?

From L.A. Land:

I am more bitter and resentful of the fact that I make nearly 100k and cannot afford a home in California. Using my tax dollars to help irresponsible people keep homes they can’t afford, while at the same time keeping me out of the market, will be enough to send me over the edge …

Since I’m attempting to buy a historical property, this may be my reality (except I have a husband and cats.) My favorite was Joe Mantegna saying, “(We’ll start work) when your check clears.”

Zero-interest loans in San Pablo. Yes, Virginia, there is a Santa Claus. Check out this story for more.

The Khettavongs — Deneisa, Paul and their son, Mark — got help from San Pablo’s First-Time Homebuyer Program, which can help low- and moderate-income homebuyers with a 30-year, zero-interest second mortgage.

That second mortgage can be as much as $200,000 for moderate-income buyers. The Khettavongs received a $179,200 zero-interest loan from San Pablo toward their home, which cost $370,000, according to Deneisa Khettavong.

I’m not sure how many people will want the second-mortgage set up, but hey, it doesn’t hurt. For more information from the city, you can visit the Web site.

If you read my story today, you would know that KB Home unveiled its plans for a smaller homes in Antioch. Well, sorry, that may not be happening. I got a call from someone claiming to be from the City of Antioch telling me that KB Home’s plans are still under review and have not been approved. Furthermore, she said, staff has advised that the new plans not be approved.

 So, you may not see them at Almond Ridge, but maybe someplace else. But apparently not in Antioch. I will keep you all apprised.

 Toll Bros., the luxury home builder (really, I thought they just built homes, anyway …) said in their quarterly report that the press and everyone’s “ceaseless talk” about recession is ruining their business.

“Ceaseless talk of a recession continues to dampen the mood of consumers in general, whether or not a recession actually occurs,” said CEO Robert Toll. “We believe that revived buyer confidence is paramount to getting the market moving again.”

Aha. It’s not that your product is overpriced, it’s that buyers are cowards and believe this foolish recession nonsense! Stupid people! Don’t they know your luxury homes are so great you should buy them no matter what the price?!? Idiots!

I talked to Christopher Thornberg, economist and thorn-in-the-side of the real estate industry, and he said, “We are in a recession. You can’t spin it any other way. … How anyone can have this glad, pretty view of the economy is beyond me.”

The Los Angeles Times also released an opinion piece on the need for increased taxes during California’s recession and how “taxes” have become a bad word for GOP legislators, despite Ronald Reagan’s reliance on them when he was governor.

But no real progress will be made as long as Republicans support a fat sales-tax break for millionaires buying yachts and airplanes and the governor relies on closing state parks to balance the budget. Even Reagan, at his most tightfisted, wouldn’t have done that.

I’m sure all of you have noticed there seems to be a bit of a discrepancy between those asking prices from individual owners and those bank-owned properties in the same neighborhood. Not sure? Here’s an example:

 Take this foreclosure, a 4,000-square-foot house on 3825 Mandy Way in San Ramon. According to ForeclosureRadar, it was sold at auction last November to its trustee (acting for who owns the loan) and has been on the market for the last 42 days at $1,074,900 (dropped from $1,199,000 earlier this month.)

A couple of doors down,  there’s 3882 Mandy Way, which is on the market for $1,499,950. OK, they’re not exactly the same floorplan (it has one more bathroom and a saltwater pool) but it’s only 51 square feet larger, which may not make up for the 39.5 percent price difference. And would you want to pay that price when you know a house down the street is $500,000 less?

This graphic from Trulia puts it into visual perspective across the country (see top) and you can tell the Bay Area seems to be slower to get it.  You can see the whole report here. The gist: The median bank-owned home price in California is 24 percent less than the median home sales price.

While the story today about Vallejo’s possible bankruptcy is big, I don’t think it’s all based on salaries and pensions.  But here’s an excerpt:

Orange County Supervisor Moorlach said Vallejo’s problem is that it’s spending more than it’s taken in each year, and it’s “creating obligations it never could afford and never should have made.”

Vallejo’s situation could be a forecast of what faces other municipalities which have agreed to “unsustainable employee and pension agreements,” he added.

While that may be part of the problem, the story ignores the elephant in the room. The elephant, in this case, is Vallejo’s massive foreclosure market. The city has 487 foreclosed homes, and another 1,041 homes in some state of foreclosure, according to ForeclosureRadar.

From BusinessWeek (yes,  that Business Week):

 Officials blame the financial woes on a combination of factors including climbing police and firefighter salaries along with overtime expenses, while tax revenues decline because of a weakening housing market.

“It’s pretty dire,” said City Councilwoman Joanne Schivley.

 So the city is losing what used to be a lot of property and sales tax, just like the state. And without that money, the money cushion that fed city and county coffers for the last five years, it’s getting kind of rough.

Let’s hope Vallejo survives this.

An article today in the New York Times again tackles the question if the government should help homeowners who owe more on their home than its real value. Apparently the numbers of homeowners who are in that situation are growing, mostly in the West.

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com.

The article is the usual here’s-the-dire-situation-and-the-government-is-doing-nothing. But what I was most disturbed by was this little tidbit towards the end.

Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans.

Oh, I bet they would want that. Then they get rid of all their crappy paper (loans) and get the federal government to absorb all the risk as well as the administrative costs. Don’t be fooled, this is part of the bank’s desire to head off any regulation or legislation that will make them clean up their own mess. The government should absorb all the costs, right? And that means you and me, Cisco.

There are other plans, too. Check them out and be sure to tell me what you think!

There, I don’t think I could make it clearer. I am writing a couple stories on people who are looking to buy a house right now. My questions are:

 1. What is making you decide to buy now?

 2. Would you be interested in buying a smaller detached home (a house around 1,600 square feet) if the price was attractive?

Please call me at 925-952-5063 if you can answer any of these questions and be part of a story coming out this week. Let your voice be heard!