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Busy Week

June 27, 2008 4:56 PM

Spent a day this week in Poughkeepsie, New York, the Dutchess County seat, testifying in an arbitration hearing for a woman who made the same sad mistake I did -- of hiring a particular contractor to renovate our houses.  If you've never testified in a court proceeding, don't.  It is a nerve-wracking experience.  You're in the same room -- in this case even sitting at the same table -- as the person you despise, dredging up painful memories you'd rather forget.  But all for a good cause.  Got a bad contractor story?  Then sit down right here next to me.  We can commisserate.   

Even with this and more going on, I was watching for news of the housing rescue bill making its way through Congress.  The House has passed its version, now the bill is sitting in the Senate and may not go to a vote until after the 4th of July.  Sen Christopher Dodd (D-CT) is not happy with the delay (and says he's not exactly thrilled with the bill itself, but feels it's a good compromise)-- noting that more than 8,000 Americans enter foreclosure each day.  The bill would offer government-backed help to homeowners with subprime loans in danger of losing their homes.  So how do you see it?  As a life preserver for the little guy, or a bailout for big banks? 

Something to ponder as we head into the weekend. 

June 27, 2008 | Permalink | User Comments (0) | TrackBack (0)

Britney on the Move

June 18, 2008 12:03 PM

Ordinarily I would shy away from writing about Britney Spears -- I mean, leave the girl alone, for crying out loud. 

But today looks like there's some good news:  People Magazine reports that her father is selling her hillside home in Studio City. 

Why good news?  For so many reasons, none rooted in science or direct knowledge.  Pure opinion.  But here goes:  1) It's been the scene of much happiness but also much woe in her life.  Lately, too much woe.  2)  She's been hounded by paparazzi there.  And 3) Ed McMahon may finally be able to sell his house! 

In case you haven't read about Ed McMahon, I started this blog with him and his wife and their brush with foreclosure.  But one thing I didn't mention is that he lives down (up?) the street from Britney, and says part of the reason he hasn't gotten any offers on his house is because the paparazzi chasing her scare off potential buyers. 

You think you've got problem neighbors -- imagine having BS down the street.  That circus might be entertaining for a day or two.  But long term, that'd drive you right out of your mind and your 'hood. 

So now Britney is moving.  One "source" says BS has wanted a place with "privacy and wide open space" for a while... Let's hope she gets it.  And let's hope the circus packs its tent and moves on, too. 

June 18, 2008 | Permalink | User Comments (7) | TrackBack (0)

Car-Free Zone

June 17, 2008 1:39 PM

This won't make you jump on a plane and fly to New York... but if you're already coming here summer, be sure to check out our newest tourist attraction:  a pedestrian-friendly Park Avenue. 

Yep, for three Sundays in August, Park Avenue will be closed to traffic and open to walkers, strollers, rollerbladers, bikers, dancers, yoga fanatics -- anything on legs, paws, or small wheels.  Mayor Michael Bloomberg, in his quest to green the city, is turning one of Manhattan's most trafficked roadways into a promenade. 

Nearly seven miles, from the Manhattan Bridge in Lower Manhattan, up to East 72nd Street and across to Central Park will be a car-free zone. 

Now, it's only August 9, 16, and 23rd.  And it's only from the hours of 7am to 1pm.  But can you imagine what a wonderful street fest that will be?  I heard the city's Transportation Commissioner on the radio this morning say there will be no booths selling funnel cakes or tube socks.  Just the beauty of all those stately old white-glove Park Avenue buildings, and thousands of people out for a daylight passaegiata.  We'll show you how friendly New Yorkers can be! 

Oh, and why did I mention dancers and yoga fanatics?  Because they'll be holding dance, yoga and fitness classes out there as well.  Sweet! 

Some business owners aren't happy -- their customers won't be able to park right outside and run in.  Some of the tony apartment residents aren't pleased that their grand boulevard may resemble the boardwalk at Coney Island.  Others shrug and say 'whatever' -- they'll be in the Hamptons anyway. 

The mayor responded to any hint of negativity in his usual no-nonsense deadpan.  "Look, there will be minor inconveniences," he said. "There's minor inconveniences when it rains, when you have snow, inconveniences when it's hot, when it's cold, inconveniences when there are people on the streets, when there’s not."

Gotta love a gazillionaire mayor who's beholden to no one.   New Yorkers, for the most part, do.  His approval rating is an astonishing 67 percent, six and a half years into his term.  Lots of people wish he could run again, but term limits won't allow it. 

There also will be another amazing summer event, reminiscent of The Gates (remember that?):  waterfalls from New York's bridges...  Check out the city's Department of Transportation webpage for details. 

What does this have to do with real estate?  It's all about livability, what makes living on your block, in your community, your city, your town, pleasant.  And that's not always just bricks and siding and mortar.  So I'll ask you:  What makes your environment livable?  Should streets be closed to cars?  Would you like having your street closed to traffic?  Or maybe some downtown streets in your town?  How often, and for what purpose?  Or is it all about the car??

I hear other cities do this... including Boston, Bogota, London, Paris, Guadalajara, and El Paso.  Why not New York?  Hey, why not YOUR city?   

June 17, 2008 | Permalink | User Comments (17) | TrackBack (0)

A HELOC Bubble?

June 16, 2008 3:24 PM

Had an interesting conversation over the weekend with a friend, Ron Blaylock, about the next lending crisis we’re likely to face, and he said to watch the home equity line of credit (or HELOC) market.  Just as mortgages were 'securitized' and sold off to investors, so were home equity loans.  It stands to reason, he says, that if people are losing their homes, or having trouble paying their mortgage – which, after all, is the primary loan on their home – that secondary loans like HELOCs could be the next domino.   

Ron is a heavy hitter in investment banking, so I have no doubt he knows what he's talking about.  We talked about this Saturday night, then – voila – there was a piece about it in today's Christian Science Monitor. 

In an article titled, "Has the Credit Crunch Hit Your Home Equity Line?," the Monitor says that "(home equity) loans are now in the bull's-eye of regulators' concerns regarding lax underwriting standards by banks and are emerging as the next piece of fallout from rapidly declining home prices."

The Monitor reports that borrowers already are finding it harder to get these loans or are finding their credit lines frozen, primarily because banks are concerned that the value of the real estate they're written on is declining.  That means lots of people planning to use cheaper home equity rates to pay for home renovations or cars, and for parents planning to tap their home's equity to pay college tuition, may have to look for other sources of funding.  Which is a shame because private student loans usually have higher interest rates – and most other types of loans are not tax deductible. 

Full disclosure:  I have a HELOC that I used to renovate my house.  It's at 5.25% right now, but has been as high as 8%, give or take a fraction.  That was ugly.  When the Fed lowers rates, it drops.  And you know the converse. 

My friend Carole in St Louis had one – a mortgage broker talked her and her late husband into rolling their entire mortgage into a HELOC.  Uh-oh.  At nearly 8% that wasn’t pretty.  It was some complicated system where you deposit most of your paycheck into the credit line, then pay your bills from that, and whatever's leftover at the end of the month goes toward your principal.  "If you're savvy you can make it work," Carole says.  "It encourages you to put more toward principal than you ordinarily would, but you could get into a lot of trouble if you're not disciplined."  Well, Carole is anything but undisciplined, so after we talked about it last autumn (my end of the conversation was mostly confined to, "Huh? How does that work?"), Carole looked closely at the numbers and decided to switch back to that trusty old standby, the 30-year fixed mortgage -- at 5.5%.  You feelin' lucky? 'Cause floating rates are a gamble. 

The Monitor says there's $1.1 TRILLION outstanding in the HELOC market this year.  That's a lot of money with a question mark behind it.  So as much as we'd like to hope we're moving beyond the mortgage meltdown, like the floods in the Midwest, this river may just keep on cresting. 

So... what's been your experience with home equity loans?  Have a HELOC?  Considering one?  Why, and what would you use the money for?  Advantages?  Disadvantages???? 

June 16, 2008 | Permalink | User Comments (1) | TrackBack (0)

The Truth About Timeshares

June 13, 2008 4:19 PM

Wow -- the things you learn when you start digging for info.  Because of my aunt’s dissatisfaction with her timeshare, I wanted to know more.  That led me to TUG -- Timeshare Users Group.  Got off the phone at almost midnight Wednesday night, after an incredibly informative hour and a half talking with Brian Rogers, who runs the site.  His father William started it about 15 years ago, wanting to connect with other people to share their experiences, good and bad, about timeshares.  Brian took over from his dad two and a half years ago.

His dad originally bought a “new” timeshare in Hilton Head and while he's perfectly happy with what he bought, he realizes he could have gotten the same thing and saved a bundle. Brian learned from his dad and buys “used.”   

Brian tells me TUG has about 30,000 registered users, with about 200,000 browsing the site. A respectable number, but only a fraction of the four million timeshare owners.  But it’s quite an eye-opener to browse the site and talk with Brian. 

“Everyone who comes to the site is looking for help, probably half are looking to sell,” Brian says. Why is that?  They find out they can’t use it the way they’d like; it costs more than they expected (“Those maintenance fees never go down, they always go up,” he tells me); they get home from paradise, reality hits and they’re freaked (“Oh my God, what have I just done?!”).  They start searching the Internet and find that what they just spent $10,000, $20,000, $50,000 for is listed on TUG or Ebay for $5,000, $1,000, even $500! 

Talk about being dashed with cold water.  As I wrote in yesterday’s post, there is virtually no after-market for timeshares, yet the market is saturated with people wanting to sell.  But why, I ask Brian?  If you can get the exact same thing for THOUSANDS of dollars less, why don’t people buy in the aftermarket? 

“When you buy a new car,” he says, “you know it loses 15-20 percent of its value the minute you drive it off the lot.  We all accept that.” Timeshares, he says, lose 40 percent of value immediately, and usually more.  If you check the classified ads on TUG, they’re being sold for pennies on the dollar.  Yet people are leery of buying a “used” timeshare -- even more afraid than they are of buying a used car.

“People know they could buy the same car used and save money,” Brian tells me, “but they’d rather buy new because they figure they’ll get better quality.  But a room doesn’t fall apart,” he says.  “And with resale, you usually get the exact same benefit as someone who bought new.”  But still, people are afraid.  Or unaware. 

I asked if people think the ads on TUG are a scam.  “Some see the price disparity and just don’t believe it can be true,” Brian says.    “They think, ‘How on earth can it be that good if it’s 60 percent, 70 percent less than the developer’s asking price?’”   

Developers and sales agent are getting savvy in the way they handle resales, Brian tells me.  In some cases, they make sure those who’ve bought for less don’t get the same “VIP” benefits and perks that come from paying full price -- they don’t get bonus weeks or “Gold Cards”  or the use of the pool and sauna, things like that.   If that’s important to you, retail is the way to go.  But I particularly enjoyed the response of TUG member “Tombo,” to poster “Jasenj1”, who was thinking of rescinding his $10,000 timeshare purchase after seeing the exact same thing offered at resale on the Internet for $500:  “IF YOU BUY A $500 WEEK ON E-BAY, YOUR FAMILY CAN ENJOY THE EXACT SAME VACATIONS AT THE EXACT SAME RESORT WHILE KEEPING $9500 IN THE BANK.”  (emphasis Tombo’s)   

So (wth apologies to “Bud28dy” who’s not happy that I used my family as an anecdotal story) I asked Brian about my Aunt Liz.  What happens if she or someone in a similar situation just walks away from their timeshare?  Calls the company, says they want out, they’re through, take it back, they’re not paying anymore? 

“In most states, a timeshare is real property,” Brian says.  “Unlike a house, they can’t come and take the property away if you stop paying, but it’s like if you stop paying on a credit card.  They probably will send credit agencies after you.”  Though Brian says TUG doesn't condone walking away from your timeshare (you did, after all, enter into a legal agreement), he says he's heard of some older people who are willing to risk it.  He’s heard of some brave (or foolish?) 80-somethings saying, "Sue me!  What do I need credit for?"

I think Aunt Liz is planning to be around long enough that her credit score matters.  We certainly hope so! 

Next week:  Lots more timeshare information –- TUG is a fountain of wisdom! We'll also welcome some guest bloggers -- let’s call it Real Estate and the City. Nightline’s young staffers say they’ve got the job to die for, but will they ever be able to get on New York’s property ladder? 

June 13, 2008 | Permalink | User Comments (6) | TrackBack (0)