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Sunday, June 27, 2010

Housing Bust in the Exurbs

by Calculated Risk on 6/27/2010 04:45:00 PM

From Thomas Curwen in the LA Times: Undone by their dreams

In 2005:

Amid the imposing two-story designs, they settled on a modest single-story home — yet with 2,400 square feet, it was large enough for their growing family. The sales representatives told them ... if they put down a $3,000 deposit they could lock in the price at $365,000.

They could barely scrape together the deposit, and they didn't have a down payment for the mortgage. The sales representatives didn't seem worried. ... Countrywide Financial Corp. turned them down. [they had filed bankruptcy 4 years earlier] Freedom Plus Mortgage said yes.
Every weekday morning at 6:30, the family would get into the minivan and head over the Cajon Pass. The commute was a little more than an hour.
And the result in 2009:
They spoke to the bank but were told that they didn't qualify for a loan modification ... In October, the house was sold for $125,000.
The buyers could "barely scrape together" a 1% deposit, they could hardly qualify (even Countrywide turned them down!), their commute to work was more than an hour each way ... the 2,400 sq ft tract house could probably be built for under $150K today on land that is very cheap ...

Update: I've upped the cost estimate. This is very low end construction (the only "upgrade" was a microwave). Perhaps my original estimate was too low (based on info from a builder), but I've heard some very low quotes recently. This could still be low.

This was an interesting story of boom and bust, but the ending was very predictable.