Tag Archives: real estate

LOS ANGELES TIMES CARTOON: Roommates from Hell

Roommates

 

Southern California has always had one of the priciest real estate markets in the United States, but in recent years the gap between what people can afford to pay for rent or mortgage and median housing prices has opened to a gaping chasm.

Tim Logan of the Times reports about new data that reflects just how bad things have gotten for most Southlanders:

            Nearly half of all working-age adults in Los Angeles and Orange counties live in a home with another adult who is not their spouse — a higher percentage than any other big city in the country, according a new report by real estate website Zillow. In second place: the Inland Empire.

Economists at Zillow crunched U.S. census numbers and found that 47.9% of adults in metro L.A. lived in “doubled-up” households in 2012, a number that has grown rapidly — up from 41.2% in 2000 — as the recession and yo-yo-ing housing market have pushed more people to share apartments.

“You’ve got a lot of households that are blending together,” said Zillow economist Skylar Olsen. “They’re doing that to make housing more affordable.”

That’s especially true in Southern California, where relatively high costs and relatively low wages combine to create what is, by some measures, the least affordable housing market in the country, especially for renters.

One has to wonder: how is this sustainable? Although there’s been some improvement in the economy, unemployment, especially long-term, remains stubbornly high. Wages remain stagnant. You can’t squeeze blood out of a stone. Won’t people just move away to somewhere more affordable?

Maybe eventually. For the time being, the pull of family ties, whatever work they currently hasveand just plain inertia is keeping hundreds of thousands of people stuck in houses and apartments that they can’t really afford. Until things turn around, maybe, someday, who knows when, they are doubling up and tripling up with friends, lovers and random people they find on Craigslist. As someone who has from time to time been forced to participate in the so-called “sharing economy” to make ends meet, I have nothing but sympathy for this situation.

Having a roommate you don’t want, simply for economic reasons, violates your privacy and sense of personal calm at least as much as secret government surveillance programs that intercept your email. This goes double if, like me, you are an introvert.

For this week’s cartoon, however, I do appreciate the fact that this predicament makes for a fun sight gag. If I had the ability to add sound here, imagine all the characters either snoring or growling ominously like zombies.

LOS ANGELES TIMES CARTOON: Bootlegging the Bootleggers (Apartment Edition)

Home Sweet Sign

Every year in Los Angeles, the city housing department learns that 600 to 700 enterprising urban homesteaders have built “bootleg apartments” without bothering to obtain permits. According to a Times piece by Emily Alpert Reyes, this activity has brought an “unusual alliance of landlords and tenants” who want the city to issue an amnesty for those units that conform to safety codes.

“Landlords argue that many of these nonconforming apartments are perfectly safe. And tenant advocates say they often provide rare patches of affordable housing in a city of whopping rents,” writes Reyes.

Current practice, Amos Hartson, chief counsel and director of legal services at Inner City Law Center, is to “evict tenants and rip out the unit” after they’re discovered. Both sides see this as a waste of perfectly good housing.

Reyes: “The details are still being worked out, but backers say the idea is simple: Landlords could come forwardand fix plumbing, wiring or other issues without enduring a lengthy, expensive process to comply with city codes. Tenants could avoid being displaced from decent apartments.”

Not everyone is cool with this. “If you follow this lawless path, you’d very quickly see the quality of life deteriorate for residents in lawful, permitted apartments,” said Steve Sann, chairman of the Westwood Community Council. “It’s a fiction to say you can cram more people in the same space and nobody loses out.”

Though seemingly novel, there are precedents for retroactively legitimizing living spaces that began outside the normal legal strictures. New York’s SoHo district, now a tony tourist neighborhood choking with high-end boutiques, was populated during the bad old 1980s days by artists roughing it in former industrial lofts, sometimes without running water, much less certificates of occupancy. A “Loft Law” allows people who can prove they’ve been in their now-seven-figure spaces since the “C.H.U.D.” period to keep them. Also in New York, squatters have occasionally been allowed to keep “their” homes — sometimes even collecting city loans to help them make improvements.

In Los Angeles, the police won’t arrest a squatter unless there’s proof a crime has been committed — and he can only be evicted as the result of a civil proceeding, which can take many months. But that’s an ad hoc, not a systemic, policy.

Which brings us to Sann’s point. If anyone can create a bootleg apartment anywhere he or she wants, aren’t those of us who pay rents and mortgages — not to mention real estate taxes — suckers to play by the rules? The median price of a three-bedroom house in L.A. county is $668,000. Wouldn’t it be smarter to set ourselves up anywhere we want, then get legal later?

For this cartoon, I fantasize about moving into the ultimate view, from the top of the Hollywood sign. Because the setting doesn’t have a lot of intrinsic detail, I worked a little harder than usual on the foliage.

SYNDICATED COLUMN: Toxic Assets

Many Foreclosed Houses Are Infested by Mold

The next time someone tells you that capitalism is efficient, remember the mold houses.

I used to be a banker. Some of my customers had trouble making their loan payments. We usually had recourse to some sort of collateral—often real estate. But my bank really didn’t want to foreclose.

“We’re bankers,” my boss told me the first time this issue came up. “Not landlords.”

Back in the 1980s most banks held this view. Bankers sat on their butts in air-conditioned offices. They didn’t want to manage vacated properties, much less try to sell them. They understood banking. Banking was a straightforward business: take deposits, issue loans, collect the difference in interest as profit.

It was boring. Just the way they liked it.

My bank did a lot to avoid declaring a default. We lowered interest rates. We allowed skipped payments. Sometimes we even reduced principal.

Banking became exciting during the 1990s. Glass-Steagall got repealed, allowing formerly staid bankers to compete with high-flying Wall Street financiers in the securities business. Bank consulting firms invented big new fees for services that used to be free, like using an ATM.

Banks issued millions of home loans to borrowers whom they knew couldn’t afford to pay them back. Crédit Suisse estimates that such “liars’ loans” accounted for 49 percent of originations by 2006. Why they’d do it? Like mobsters, bank executives were “busting out” their companies—generating false short-term profits in order to collect annual performance bonuses. By the time the toxic chickens came home to roost, as they did in the form of the September 2008 financial crisis, they and their paychecks had moved on.

As the global financial system was in the midst of total collapse, greedy bankers conjured up a way to profit from the very misery they had caused. Rather than work with distressed homeowners who faced foreclosure (for example, refinancing subprime and adjustable rate mortgages into old-fashioned 30-year fixed mortgages) they dragged out the process in order to collect more late fees.

Banks were eager to foreclose. They were merciless. They evicted homeowners while they were on active-duty serving in Iraq and Afghanistan, a violation of federal law. They even evicted people who didn’t owe them a cent.

Now banks are sitting on top of nearly a million homes. “All told, [banks] own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider,” reports The New York Times. “In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.”

Which is where the wonderful tragic tale of the mold houses comes in.

“In most homes,” reported NPR recently, “as residents go in and out and the seasons change, natural ventilation sucks moisture up to the attic and out through the roof. It’s called the ‘stack effect.’ And in many parts of the country, it’s driven by air conditioning in the summer and heat in the winter. But no one is going in or out of most foreclosed homes—regardless of climate—and the effects can be devastating.”

Far from the profit center imagined by freshly-minted analysts with MBAs, empty houses depreciate faster than a new car driving off the lot. They fall apart quickly. Mildew and mold sets in, some of it toxic.

“In some states, it’s estimated that more than half of foreclosed homes have mold and mildew issues,” reported NPR. “Realtors across the country say they’re seeing the problem in everything from bungalows to mansions.”

Turns out those old-fashioned bankers were on to something. Bankers shouldn’t become landlords.

A minor mold problem starts at $5,000 and can easily run $20,000 or more. Considering that the average house in the Midwest is valued at $136,000, that’s not insignificant. Many houses with toxic mold have to be demolished.

Greed may be good. But it doesn’t always pay.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is tedrall.com.)

COPYRIGHT 2011 TED RALL

SYNDICATED COLUMN: Thrifty Families and Other Lies

Like Their Government, Americans Live on Debt

his State of the Union address President Obama repeated this ancient canard: “We have to confront the fact that our government spends more than it takes in,” he said. “That is not sustainable. Every day, families sacrifice to live within their means. They deserve a government that does the same.”

Republicans have used this “families balance their budgets, so should government” line for years. Now Democrats are doing it too. Everyone is jumping aboard the pseudo-austerity bandwagon. (Why pseudo? Neither party really wants to balance the federal budget because it can only be done by bringing home the troops, shrinking the Pentagon by 90 percent, ending corporate welfare, and soaking the rich—i.e. major campaign donors—with higher taxes.)

The family budget talking point is a fascinating meme that reflects a rarely considered national blind spot. As with other cases of mass denial (we think we’re generous do-gooders around the world, foreigners see us for the crazy mean torturers we also are), we give ourselves more credit than we deserve.

We Americans value thrift and personal responsibility. We believe we should live within our means. These cultural ideals stem from our Puritan history.

But we don’t live up to our ideals. Not even close.

Americans are up to the ears in debt.

Four out of five individuals have at least one credit card. The average family has an outstanding balance of $10,700. It spends 21 percent of its monthly income to pay interest on that balance.

The average American family has assets: It owns a house worth $160,000. But it owes $95,000 to the bank. As the housing market continues to crash, equity shrinks.

Our average family’s savings are virtually nonexistent: $3,800 in the bank, no retirement account whatsoever (for half of families, average retirement savings $35,000 for the other half), no mutual funds, no stocks, no bonds.

The claim that American families live within their means is a joke.

To be fair, it’s not entirely their fault. The typical American family only earns $43,000. It’s hard to buy much of anything, much less the house that embodies the American Dream, with that. And it’s impossible to save.

So they/we borrow.

As grim as a life of indebted servitude may seem, imagine what the American economy would look like if families really did live within their means, spending no more than they earned. No debt. No credit.

Markets for big-ticket items—homes, automobiles, major appliances—would crash and burn. Countless businesses would go under.

According to the National Association of Realtors 23 percent of homebuyers paid cash in January. That’s more than ever before but that still leaves at least 77 percent relying on mortgage financing. (Why “at least”? Most “cash” transactions include money borrowed from banks and credit unions.) Take 77 percent of purchasers out of the buy side of the equation and million-dollar homes would be worth five figures.

Pop! Credit is the biggest bubble of all.

If credit went away, most Americans’ biggest asset would vanish. Everyone would be “under water” to their lenders. The burbs would soon look like Afghanistan.

The same goes for cars: At least 88 percent of buyers take out a loan.

What would happen if these buyers had to save actual cash money before they could hit the showroom? They wouldn’t buy a car. Air would get cleaner but the economic collapse that began in 2008, which has put one out of five Americans out of work, would accelerate dramatically.

Two-thirds of the U.S. economy directly relies on consumer spending. People can only purchase goods and services using one of three sources: income, savings or credit. As we’ve seen, the average American family doesn’t have savings. Its income has been falling since 1968.

That leaves credit. If consumer credit vanished, the corporato-capitalist system currently prevailing in the U.S. would deteriorate from its current, merely unsustainable form into total chaos. Without credit cards and other loans citizens would seethe, trapped between the mutually irreconcilable forces of falling wages and the aggressive advertising and marketing of products they would never be able to afford. There would only be two possible long-term outcomes: revolution, or the ruling classes would be forced to pay substantially higher wages to workers. To corporate elites, the latter choice would be too unpalatable to countenance.

The typical American family cannot live within its means because it cannot earn enough to sustain its lifestyle. Were it to downgrade its living standards to a level it could afford, there wouldn’t be enough consumer spending to drive the economy. This would force further personal austerity. Eventually we’d all be living outside.

You know what’s funny? Unlike the American family, the U.S. government can spend less than it earns. It can increase revenues by raising taxes. Unlike families, it spends trillions of dollars on stuff—wars—that it doesn’t need and actually makes things worse.

It could even use its power to force employers to pay workers what they deserve. If the government did that, families might not need credit.

They could (finally) live within their means.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is tedrall.com.)

COPYRIGHT 2011 TED RALL

The American Hallucination

A wag in the New York Times pointed out that the current ARM mortgage crisis owes at least as much to predatory borrowing as it does to predatory lending (which is admittedly a huge problem). I own a home now, but I can’t help wondering why renters–people who can’t afford to buy a home–should pay higher taxes to support those who own? It’s already pretty crazy that the Army Corps of Engineers spends millions to shore up beaches to save homes owned by multimillionaires.