When can we Devalue our Real Estate?

Who is responsible for identifying the market value of Real Estate in the United States, California and in Orange County in particular?  Orange County has been Redlined for almost a year now.  Oh sure, you can buy Foreclosed Property if you have all the cash yourself.  But what about “Joe Average”?

Here are some things to consider; your mom and dad bought their house in Orange County back in 1969 for $34,000 dollars.  It has been paid off for almost 10 years.  Their annual taxes have risen…and they are probably paying almost $800 bucks a month…just for taxes.  The Market Price in early 2007 was $878,000 dollars in Costa Mesa.  Today’s price is now closer to $475,000 dollars.  You have five foreclosed properties on your street and they are going to seed.  As the current Market Price continues to errode and fall, the more that other neighbors go into foreclosure or can’t make their inflated payments due to APR’s, ARM’s or the dreaded Sub-Prime, Liar Loans.

If the above mom and pop were frugal, made every payment and did not borrow any equity out of their home of 40 years……then they probably have a chance to keep their home!  When they pass on, they may even be able to pass on the property to their kids or grandkids.  Of course, those kids and the Executor of their Estate will have to pay taxes and all the rest if they want to keep the property.   Passing on the Family Castle….has never been an easy issue.  Usually, there are more than one sibling and the property will need to be divided, sold or put into a living trust.  Meaning that the property could be rented and the renumeration divided by the trustees.  Sounds complicated….doesn’t it?

OK, how about someone that was not so frugal or responsible?  How about someone that was speculating on rising property values?  How about someone that took a flyer and in 2006 bought a $1 million dollar home in Costa Mesa with no money down.  They got a Liar Loan, providing no employment information or annual pay or credit through Country Wide Bank.  The property value went up from $1 million dollars to $1.4 million in March of 2007.  The property in today’s market might go for $510,000 dollars with current monthly mortgage payments of $10,000 a month – plus annual taxes!  Call U-Haul….or Bekins and get out of Dodge immediately!

There is no government program that can save those in the second category.  There is no Bank, no matter how liquid that can take that property and renegotiate that loan.  The Lender to that property should be fully at risk.  However, Country Wide sold that loan to another company, which sold it to another company in a foreign country, that sold it to another company in a off-shore Bank.  So, who does the “borrower” go to?  Who does the FED with all their $700 Billion dollars of liquidity go?  Who pays who for what?

This is called an Economic “Shark Feeding Frenzy”!  The current owners of this falling value property are going to walk away – lock, stock and barrel, realizing that even if they could make the payments for five years….there is every chance that the property value then….may not be restored to the original purchase price.  It is quite akin to buying $848 dollar a ounce gold in March of 1980…and then having to keep it for 28 years…until the full value could be restored to what you paid for it!  The biggest difference of course, is that with a house, you have to keep making the payments every month!

So, what can be done?  What can governments do?  The answers do not include Bailing Out…..various ill gotten gain people, or banks that bet on the come thinking that profits of 40%-60% were fair and equitable and more than that – sustainable!  They all need to fall on their own swords.  We need to immediately call for a devaluation of Real Estate values across the board.  We need to bite the bullet and make 1998 prices a reality.  Phillipe’s Sandwich Shop in Los Angeles recently celebrated its 60th Anniversary, rolling back prices to those early days:  10 Cents for a Pastrami Dip Sandwich with fries!

What is shocking is that the whole world bought into this great pyramid scheme and now will all have to pay the price.  The United States cannot bail them all out.  Right now AIG, Inc. has already spent $99 Billion dollars of the $123 Billion that the FED has lent them.  We need to cut off the AIG Credit Card – right now!  We don’t need to pour anymore water down that economic rat hole!  CALPERS has lost 25% of it’s immense value….CALSTRS 15%.  We need to stop the sucking chest wound…..we need to get real.

About Ron & Anna Winship

Independent News Producers/Writers and Directors for Parker-Longbow Productions. Independent Programming which includes a broad variety of Political, Entertainment and Professional Personalities. Cutting Edge - a talk show...is the flagship of over 30 URL websites developed or under development. The Winships have been blogging for the Orange Juice since back when nickels had buffalos on them, and men wore onions attached to their belts, because it was the fashion back then.