Uh huh…. my county is a 2nd home summer mecca. 40% of all housing (single family & condo) is 2nd homeowners. These are expensive 2nd homes – anywhere from $375000 – 3,000,000. Here are the stats to date:

1 foreclosure per 92 homes
1 foreclosure per 58 2nd homes
87% of the foreclosures are 2nd homeowners – and it could be higher but it wasn’t clear from the data
98% of the loans in default were made between 2002 -2006

It is not the locals who are defaulting – it is the upper income 2nd homeowners/property owners. They are going down to the tune of $285,000 (land only), $570,000 2 bdrm condo, and (the grand prize winner) $1,700,000 waterfront ‘cottage.’

The lenders are the usual suspects – WaMu, Countrywide, New Century etc, none of which even have offices within 150 miles of the place.

Even the realtors have faced reality and admit that whatever they thought the price should have been last spring, the selling price is now 31% lower at minimum.

One homewas on the market for 20 months. Started at $430,000, Dropped to $409,000. Dropped to $399,999. Dropped to $309,000 and said “consider any offer.’ It finally sold for $292,0000. Seller was the owner, not a lender, not an REO.

The two neighbors within rock throwing distance of that house are still in fantasy land. One is still asking $399,000 for a house thaat is 100 sq ft smaller although they did come down from $430,000 after the one sold. The other (brand new -never occupied) is hanging around at $343,000. Both have been on the market over 18 months.

One house just down my street just sold after 10 1/2 months on market – and a listing price that dropped 25% until it sold for 31% off the orginal list.

This is NOT an area where the locals used subprimes or 2/28s or option ARMS. (The small local bank deliberately steered people away from those and in a very small community, locals don’t use out-of-area banks or lenders.) That was one by 2nd home buyers trying to leverage themselves into a ‘summer’ place that cost more than the median house in the US in 2005-06, and in an area that can give Calif. a good run for its money on prices but doesn’t even have a freeway or an airport with a terminal bigger than a football field.

When the upper income people are crashing and burning on their 2nd home toys, there is a fundamental problem..

The mortgage problems are a symptom of a philosophy. A philosophy that goes against common sense, a philosophy that states that no problem is so bad that it can’t be ignored until solved by someone else.

A philosophy that says that debt is good, and that everyone (by virtue of breathing) is entitled to live beyond their means.

Not a privilege earned through years of hard work, not a reward for saving against the tide of blind consumerism, but a RIGHT, manna from heaven due to even the most reckless individual, a birth right.

America will be OK once this mortgage crash is over with. From the ashes common sense will once again come, the philosophy of “look big, be big” will finally be thrown away, and we will rebuild on a foundation far more solid than the house of cards created by the “quick buck artists” that have ruled us for too long.

Wow. Can I sell you a bridge in Brooklyn, swamp land in Florida, and snow in Alaska, too? If the people stomping through your open houses were “buyers”, wouldn’t it make a little sense for them to have, well, you know, “bought”? And not just looked? Buyers write offers. Lookers don’t. In case you haven’t done the math, the money factor for a PI payment at a 6% rate is $600 for each $100k borrowered. At 7% it’s $666 (what a nice number). So for a median priced LA home at $550k, 20% down = $110k down, JUMBO loan – but let’s be generous and still give you the conforming 6% rate – that makes the PI payment 600×4.4, or $2640. Taxes and insurance add another 640 or so. So that’s a $3280 payment. Take out tax benefits of some $600 per month and that leaves you with a net $2600 payment. When you can rent the exact same house for about $2000.

But what about ‘wasting your money on rent’, the classic newbie realtor / LO chant? Um, it cost you $110 THOUSAND dollars, plus closing costs, in order to acquire $440k in debt, for the privilege of paying $600 monthly over market price, for an asset that is declining in value and will likely decline for another 2 to 5 years, depending. Let alone the monthly negative – even if you to remove that from the equation, dropping value for an illiquid asset plus the lost opportunity cost of the $110k plus closing costs, makes purchasing a property right now an ill-advised financial move. Go to patrick.net for a good in depth analysis.

“I feel that next spring” – to quote Bill and Ted on their excellent adventure – “Dude”. If this were about feelings, we’d be holding hands chanting Kumbaya.

No, I dind’t make the money that the guys made the last few years but I’m doing well and I enjoy the business. It’s not that the loans have gone away….it’s that the menu has shrunk.

Like short sales with the Realtors, you have to change with the market, educate yourself and build clients with honesty.

But don’t be fooled because the buyers are out there.

Long Beach, CA.