Our news seems to be filled with stories of the present financial crisis--the real estate market being hit particularly hard. Like everyone, I have been hearing constant stories of Americans all over the country foreclosing on their homes as a result of defaulting on subprime loans. The story really hit home for me when I visited parts of California’s Inland Empire last week. It’s an area between Orange County and San Diego and just five years ago it was booming.
It’s eerie to drive into the Inland Empire. There are brand new looking housing developments as long as the eyes can see wherein all construction has just stopped. It was like driving around massive movie sets as entire neighborhoods have been built, but hardly occupied. Almost all the billboards lining the highway depict paradise living and owning one’s dream home. They are obviously outdated signs that don’t reflect today’s reality. I was told that 70% of the homes for sale in the area are bank owned, foreclosed houses. One can’t drive into a neighborhood without seeing dilapidated homes with brown grass that have been vacant for sometime.
I spent much of the day with a company that has been hired by banks to “trash out” homes that have been foreclosed. The bank will give the person or family that has defaulted on their loan about three weeks to move everything out of their home, after which, this company will bring a crew in and literally remove every single item out of the home and clean it from top to bottom to make it presentable and therefore sellable. Upon entering one home, I was shocked to see multiple flat screen TVs, computers, stereos, DVD players, fax machines and loads of furniture. I was told that very often people can’t afford movers or storage so they end up having to leave all that they can’t easily transport. Sometimes, houses are left totally in tact. Other times, the previous owner is so distraught that they’ve lost everything that they end up intentionally trashing the house themselves. In one home, the trash out company found feces smeared all over the walls and signs that said, “are you happy now, you’re taking our dream.”
This community is just one of thousands all over the U.S. It begs the question, how did we let this happen? Didn’t we remember what happened during the Dot-com bust.? How did so many millions of people allow themselves to get in so over their heads?
When the U.S. President extols the virtues of home ownership and banks unconscionably offer loans to people who have exceptionally poor credit and have no business taking out home loans, how could we not have predicted this crisis? Granted, we have to take personal responsibility for our actions, but shame on banks for taking advantage of people and not sufficiently explaining the fine print.
The good news is that the real estate market is picking back up again, and first time buyers who could have never dreamt of owning a home five years ago are getting an opportunity that they would otherwise never have. I was in a house that sold for 700k six years ago and is now listed for 250k, less than half.
One can only hope that we will have learned a lesson from all this, but do we ever?
