From the latimes.com – click here for full article:
Wynn Bloch has always dutifully paid her bills and socked away money for retirement. But in December she defaulted on the mortgage on her Palm Desert home, even though she could afford the payments.
Bloch paid $385,000 for the two-bedroom in 2006, when prices were still surging. Comparable homes are now selling in the low-$200,000s. At 66, the retired psychologist doubted she’d see her investment rebound in her lifetime. Plus, she said she was duped into an expensive loan.
The way she sees it, big banks that helped fuel the mess all got bailouts while small fry like her are left holding the bag. No more.
“There was not a chance that house was ever going to be worth anywhere near what my mortgage was,” said Bloch, who is now renting a few miles away after defaulting on the $310,000 loan. “I haven’t cheated or stolen.”
Time was when Americans would do almost anything to hang on to their homes. But that commitment appears to be fraying as more people fall behind on their loans while watching the banks and lenders that helped trigger the financial crisis return to prosperity.
Nearly one-quarter of U.S. mortgages, or about 11 million loans, are “underwater,” i.e. the houses are worth less than the balance of their loans. While home values are regaining ground — median prices rose 10% in Southern California last month to $275,000 compared with a year earlier — they remain far below the July 2007 peak of $505,000.
Many homeowners are just coming to grips with the idea that prices will take years to reach the pre-crash peak: as long as 14 years in California, according to economist Chris Thornberg.
Stuck with properties whose negative equity won’t recover for years, and feeling betrayed by financial institutions that bankrolled the frenzy, some homeowners are concluding it’s smarter to walk away than to stick it out.
“There is a growing sense of anger, a growing recognition that there is a double standard if it’s OK for financial institutions to look after themselves but not OK for homeowners,” said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject.
Just how many are walking away isn’t clear. But some researchers are convinced that the numbers are growing. So-called strategic defaults accounted for about 35% of defaults by U.S. homeowners in December 2009, up from 23% in March of 2009, according to Luigi Zingales, a professor at the University of Chicago’s Booth School of Business.
He and colleagues at Northwestern University’s Kellogg School of Management reached that conclusion by surveying homeowners about their attitudes and experiences with loan defaults.
They found that borrowers were more willing to walk away if someone they knew had done it, and that the greater a homeowner’s negative equity the more likely he or she was to default, even if the monthly payment was affordable.
An analysis released last year by credit bureau Experian and consulting firm Oliver Wyman estimated that nearly 1 in 5 homeowners who were seriously delinquent on their mortgages in the last three months of 2008 were walkaways.
“The fact that people are strategically defaulting — there is no question,” Zingales said. “The risk that the number of people doing this might explode is significant.”
A flood of walkaways could damage the nation’s fledgling housing recovery by swamping the market with foreclosed properties. Still, some experts are dubious that millions of underwater homeowners will pull the plug as Bloch did. Homeownership remains the cornerstone of the American dream. Moving is a hassle. And the stigma associated with a foreclosure is likely to keep many hanging on for a recovery.
The biggest surprise is that so many underwater homeowners continue to pay, said White, the Arizona law professor. He’s convinced that personal shame, as well as moral suasion by the government and financial institutions, has kept many homeowners from walking away, even when they’d be better off financially by dumping their homes.
Strategic defaulters are the early adopters of “it’s just business” for J6P. Moral hazard for thee, but not for me is working its way down the food chain.
I ran the walk away scenario by my wife two years ago and again a year ago and from a business decision it makes perfect sense. That said, social stigma is high for some so we continue to pay. I’m trying to refi with the bank who is only servicing our loan now and perhaps they will play ball with those who can really qualify for a loan in todays economy. I want this house paid off in 15 years and back in the day that would be the right decision. Today, making the right decision is very hard given all the conflicting legislation and gov’t uncertainty. Is history going to repeat itself? If so, then real estate is going to come back. We are all in now – Bahhhh.
Deadbeat…
Notice how the article leaves out how much $$$ she got back at close.
Also notice that at 5.375% with 20% down 385k monthly payment = $2,156 (Assuming of course that she put any money down)
Considering that Wynn is 66 she wouldn’t be able to pay off the loan until she was 96! How many people do you know that earn 2k+ every month at 90 and above?
I love how these articles paint the grifter/deadbeats as victims.
Favorite part from the article:
“Ken Henrich purchased his Marysville, Calif., home for $187,000 in 2004. He and his wife later refinanced the property, tapping their increased equity to pay off credit cards. They now owe around $300,000 on a place that’s worth about $132,000. They let the four-bedroom residence slip into foreclosure and are waiting for it to be sold at auction.”
Are we suppose to feel sorry for this guy? He got to live in a place for who knows how long rent-free, had all his credit card debt extinguished, and got up to $113k cash. What part of this scheme is not criminal: a) put little to no money down on a house, b) squeeze out all money out of the house, c) spend money, d) walk away from debt with minimal consequences.
Rosenberg: The US Housing Market Is “Definitely” Weakening, And You Can’t Just Blame The Weather
Vince Veneziani
Business Insider
Mar. 17, 2010, 10:30 AM
Analyst Dave Rosenberg speaks about the sour state of the US housing market in this morning’s appropriately titled “Guinness With Dave” newsletter.
As month-over-month slides in housing continue to increase, we are running out of ways to shield ourselves from the cold, hard truth. Housing starts are toast, like it not. And you can’t blame the weather on that:
Guinness With Dave: The U.S. housing market is definitely weakening. That 5.9% MoM slide in housing starts, to 575k at an annual rate in February, was far more than just a weather report because even excluding the Northeast, activity still fell 5.4% on the month.
The single-family sector dipped 0.6% MoM, to 499k at an annual rate. Single- family starts appear to have bottomed out last spring/summer, but the problem is that there is no follow-through despite all the stimulus — in large part because of the still large overhang of supply.
The multi-family sector was the key culprit, falling 30.3% MoM in February back down to 76k at an annual rate. Moreover, there is no reason for the weather to have played a role in the fact that building permits were down 1.6% in February — the second decline in the past three months. And, the NAHB index is highly suggestive of further declines in both home sales and housing starts in coming months. Single-family starts and the NAHB are both back down to June-July levels and yet the S&P Homebuilding index is up 40% from that time. That is what you call …. a whole lot of air.
http://www.businessinsider.com/rosenberg-the-us-housing-market-is-definitely-weakening-2010-3
I have mixed feelings on this. The walk-aways signed a contract, they should honor it. But if the contract has provisions for foreclosure, then aren’t they still honoring it? But they are NOT victims. They bought a house, or refi’d a house, and should accept the terms of the deal – that includes the consequences of losing a house, taking a credit hit, etc, having a harder time renting because of bad credit.
There’s enough blame to go around – there should be consequences for all the parties who screwed up!!!
They signed a mortgage and the collateral in case of default was the house. They didn’t sign a “contract” to pay X dollars for Y years. If a purchaser defaults on a house, the lender gets the collateral, ie. the house. It just doesn’t get any simpler than that.
If a business can intentionally default on a loan because it doesn’t make economic sense, so can an individual.
“You got to know when to hold ’em, know when to fold ’em, know when to walk away…”
Kenny Rogers – The Gambler
“If a purchaser defaults on a house, the lender gets the collateral, ie. the house. It just doesn’t get any simpler than that.”
Except that these deadbeats are getting a windfall from the IRS that was not part of the deal when these contracts were signed.
Also, these cash-out refinances were “supposed” to be full recourse were they not? I mean they used the money for credit cards, vacations, hummers and stuff like that. They never added value to the “collateral”.
Interesting scenario shaping up right now… while there are more strategic defaulters, the value of the collateral is increasing. Banks need to step up the foreclosures to work through the backlog. It will be interesting when people who haven’t been paying for 2+ years realize their house is now worth a lot more than they thought and suddenly they want to start paying again…
Shadash, actually all of the nonagenarians (people 90+) I know are millionaires and earn 2k+/mo in interest alone. I think once you get to that age there is a high correlation between money & health… you’ve either got both or you’ve got neither.
White’s opinion that morality is what’s keeping underwater borrowers paying is only part of the story. There are alot of underwater borrowers who are enjoying very low mortgage payments now thanks to the historically low LIBOR rates that their ARM rates are based on. It’s much more difficult to walk away from a payment that is equivalent to or even lower than renting (in post tax write-off dollars) as opposed to riding it out for the time being and seeing what happens.
If the one year LIBOR was 5% it would be a whole different story out there right now.
No question, Shadash, that this psychiatrist is no mental giant. I’m sure she can think of a term to define herself.
Every time I see this kind of thinking (“It will be years before housing prices ‘recover'”), it bugs me because it implicitly attempts to validate the insanely inflated prices people and banks were falling all over themselves to pay two years ago.
May I humbly suggest the following maxims:
1. Never buy investments on credit,
2. Primary residences should not be thought of as investments.
To wit: For all the stories of people who took out loans on vastly overpriced houses, for every occurrence of the word “house” substitute “stock certificates.” If you were a bank, and someone walked in looking to borrow hundreds of thousands of dollars so they could buy, not a house, but a pile of stocks, how would you react? Why would you react differently than if they were seeking to buy a house, especially if they described the house as an, “investment?” And especially if they said that, “real estate prices never go down?”
It all starts to look eerily close to the descriptions I got in high school of the 1929 market crash, when everyone was buying stocks on margin (“Zoidbee wants to buy on margin!”). Stock prices rose (because stock prices always go up), then someone had the temerity to make a margin call, and all the dominoes fell over. (I wonder if they called it “strategic default” back then?)
Solution: Buying the house you’re going to live in should not be thought of as an investment. In fact, from many angles, it’s a liability (maintenance, insurance, property taxes, etc.). Is the house still standing? Does it still serve your needs? Are you still deriving value from it? Can you still make the payments? If so, why should the negative equity bother you? (Of course, the equation gets vastly more complicated if you need to relocate.)
“But I paid too much! I could have gotten it cheaper!” In an abstract sense, yes; if you had waited for everyone else in the market to snap out of their delusion, you could have paid closer to actual value rather than, “market value.” But then that begs the question: Why did you buy the house? I don’t begrudge the fact that the laptop computer I buy this week will be cheaper two months from now (because computer hardware always gets cheaper :-)). Because I’m not thinking of it as an, “investment,” but as a tool to meet my needs, a function it will fulfill just as well two months from now.
And by the way: Why does “negative equity” have everyone’s knickers in a twist, whereas no one bats an eye at paying interest over 30 years totaling 110% the cost of the house?
Apologies for the rant.
If lenders want to take away my right to default, then they need to lend to me at the risk-free rate!
ewhac, well said.
“Recovery” for the housing market will not consist of prices coming back up, but prices regaining whatever stability and predictability they had before they were pumped up to produce the illusion of a healthy economy. While it may annoy me to watch certain individuals walking away from their irresponsible choices without consequences, looking at the longterm we’re all better off if they do it ASAP and go away once and for all, rather than remain as they are to prolong things for everyone else.
In Vegas right now -there is not a stigma if you stratigiclly default. Quite the opposite.
If you owe over 150% or more of your home value and continue to pay there is a stigma that you are stupid.
You would be shocked at some of the people I know who are walking- many are wealthy.
Its buisness. Large and small buisnesses do it all the time.
who said there were no consequences???
The strategic default trend will result in higher mortgage interest rates as the lenders demand more return in exchange for the increased risk. Also I suspect that Ca and the other non-recourse states will be put under lobbying pressure to go recourse. In a recourse state walking away does not extinguish the debt, its just that today the banks aren’t going after the debts, but some collection bureau will build a plan and persuade the banks to let them do the collection for a fee. Ultimatly walking away will result in a need to file bankruptcy to clear the debt.
The elephant in the room is still inflation,the cost of bricks, sticks, land and labour goes up every year.
So does Americas population.
Do you think the people walking away today will be kicking themselves in 7 years time when prices have risen and you can no longer rent for less than todays mortgage payment?
i wonder if these people will have their credit repaired in a few years, just in time to inflate the next bubble.
ewhac – I agree with everything you said.
andrewa-
“The elephant in the room is still inflation,the cost of bricks, sticks, land and labour goes up every year.”
Inflation has been very low for many years, and in this market, the cost of construction labor is going down, not up.
“So does Americas population.”
What about household size?
“Do you think the people walking away today will be kicking themselves in 7 years time when prices have risen and you can no longer rent for less than todays mortgage payment?”
Considering the cash they have saved over the 7 year period, there should be no problem. Also the mortgage payment is only a part of the total cost of ownership.
Hard to take a side on this one. While I think it’s somewhat fraudulent-ish that there are people who have been living rent – free and some even cashed out a second mortgage, there is also a bank on the other side of this that was dumb enough to give them the money.
I disagree with most of what ewhac said.
Housing is one of the biggest investments most people make, and should be considered as such by most people. Leverage is, and always will be a major consideration in most real estate transactions, and the 110% interest cost of an amortized loan if paid over 30 years is generally a great deal when you consider inflation, tax benefits, steady reduction of principal and the ultimate return on investment you get. The payment you would make on a fixed mortgate originated 10-15 years ago would seem like nothing today, far less than what it would cost to rent.
To consider a house the same as a laptop to me illustrates short term thinking, a lack of understanding of real estate, and an extreme fear of any kind of risk.
Isn’t a default on a non-purchase mortgage both taxable and recourse? If so, I would hardly call walking away for many of these people without consequence.
Can see both sides. You signed the contract so pay up. On the other hands these banks packaged sub prime loans and sold them as AAA for a tidy profit then bought insurance which the taxpayer had to pay to bailout AIG. They got paid coming and going and still needed a bailout. They are still paying themselves record bonuses. Hard for average Joe to justify his life earnings on a depreciating asset when he sees the bank’s behaviour.
I’ll freely cop to the last two, but short-term thinking?
I was the one standing around going, “These prices are fscking crazy.” In 1998.
Check out this place, which is my own personal example of how screwed up things have gotten. Back at the turn of the century it was on sale. I used to work less than a block away from there and wandered in on a lark during their open house.
The floor plan was a complete joke. It’s clear that the house was added on to — badly — at several points during its lifetime. It has an “in-law” unit that is part of the main structure, but only accessible (barely) from the outside. Because of all the adding on, there’s very little left of the yard. Even in the surreal market of the San Francisco Bay Area, I felt its actual value was perhaps mid-400s. Low fives if I was being generous.
Asking price in 1999: $970,000.00.
This was during the middle of the dot-com boom, where a vanishingly small number of market participants waving around dot-com stock options managed to exacerbate what was already a gob-smackingly insane market.
Ten years later, Zillow’s estimating it at $1.3E+06.
This is complete effing madness. I refuse to participate in the shared hallucination. I know these prices are not sustainable, and I will not put myself on the hook for them. That, in my mind, does not constitute short-term thinking.
would it be so bad to buy a house for a home and not an investment??? what happened to those days…….too many people in California with get rich quick schemes.
When people buy a house, it is a gamble. It may go up or it may go down. The banks did not make anyone buy these houses! It is crazy how people love to switch the blame and feel justified…
Ewhac makes some good points – a house is in many ways a liability – that I learned from Rich Dad, Poor Dad many years ago (a simple but great book). People also buy new cars that go down in value when they drive them off the showroom floor, but everyone does it. No one seems to bring back their 2 year old BMW which is now 30% less in price, and complain – it’s just a fact of life. Maybe I can get a refund on some bad stocks I bought???
And just because it’s been bugging me since I saw it, you may recall our gracious host’s recent video on the $1,000/sq.ft. club.
The first house shown was an utterly ordinary-looking Big Bomber(TM) that had recently sold for $5 million. Perhaps I’m irredeemably dim — who knows, maybe the interior is done entirely in gold leaf and inlaid virgin ivory — but I couldn’t see anything the least bit distinctive about it, other than the insane price.
On the other hand, if I could afford $1,000/sq.ft, then I would have been falling all over this. It’s priced at $2 million more, but it comes with another 2,000 square feet. And a guest cottage. And a pool. And a… Oh, just go look at it. You’ll see.
It’s much more difficult to walk away from a payment that is equivalent to or even lower than renting (in post tax write-off dollars) as opposed to riding it out for the time being and seeing what happens.
If the one year LIBOR was 5% it would be a whole different story out there right now.
dacounselor | March 17th, 2010 at 10:20 am
Excellent point, dacounselor.
It’s why the Fed is so determined to sit on rates for as long as possible. It’s funny when people suggest that interest rates don’t affect housing prices. Ever wonder what rates would be like if not for the Fed’s/govt’s (GSE) QE? What would housing prices do if we had 8% interest rates on 30-yr FRMs — a very average historical rate?
Lots of great posts on this thread, and also agree 100% with ewhac.
———————-
Okay, the most hillarious part about the “walkaway explosion” is that so many people didn’t see it coming.
Giving people mortgages in a surging market with **NO DOWNPAYMENT** is like giving out free call options on housing…that pay a dividend (cash-out and HELOCs allowed if prices rise). Who in their right mind wouldn’t take that offer? Add to this the fact that nobody even had to qualify in any way — everyone was eligible, including dead people and dogs (true stories). There is no downside, as you can just walk away if the bet doesn’t go your way. The borrower has nothing to lose, and everything to gain.
Housing was marketed as an investment (let’s be honest and call it a gamble) to everyone, so why would anyone feel morally obligated to do anything that goes against their best interests (staying in a house and dutifully making payments when you **lose NOTHING** if you walk away). These people never had any skin in the game. Quite the opposite; they cashed out other people’s money on a bet they didn’t even have to pay for. Brilliant! And now, the govt is painting them as “victims” so they don’t even have to feel guilty for walking away.
Want to know the funniest part? They are doing it all over again with the $8,000 tax credit and 3.5% FHA loans (and other low-down mortgages).
So if a lender loans money on an asset that goes down in value, the borrow should be more compelled to pay?
I bet if home values had continued to go up, no one would really care if the owners walked.
No one has blamed the government yet, so I’ll take that tact.
If the Dodd bill included, “NO MORE BAILOUTS”, and they stuck to their guns, then the banks would be more careful.
With the government backing them up, no surprise that they are hatching the double bubble.
This wasn’t just another bubble after which things will just go on like they did before. Anyone expecting a return to pre-bubble norms is going to be disappointed.
Very true, Jim.
ewhac-What you are paying for when you buy a house in a prime area is about 90% dirt and 10% house. So, a lousy house in a prime area will still be worth a lot. If you don’t like it, buy in a not-so-prime area-you can get a very nice house for not much these days in such places. Of course, you then are either living in the sticks or the hood.
Jim, you make a good point.
Do you think Dodd bill will even pass after it’s waterdown by the special interest groups and they attach 10K amendments to it? Chris Dodd is retiring from congress in November after 30 years so this is last hurrah.
Whatever passes, if anything, will be wimpy and soggy and at least a year away. They should call it the old-spagetti bill.
tj – that is the real problem. The bubble stretched prices way out of line. If you take the Case-Shiller graphs of home value over time and extend the lines out following the natural trajectory pre-1998 when pricing really started to go off the reservation, it becomes clear that we are only 50% of the way back down to where pricing *should* be if there had not been a bubble.
At some point, we will work through the lagging demand from people who’ve been priced out since 2003 and then there will be stagnation since wages are not going up. Once all the people who CAN buy have gotten their homes, where does the future demand come from? Without jobs and rising wages, there are turbulent waters ahead.
Should have added – the Case-Shiller graph is here:
http://upload.wikimedia.org/wikipedia/commons/d/dd/Case-shiller-index-values.jpg
Ok, last one. I swear.
One thing these “walking away” articles never mention is that public sentiment has started to favor walking away/free rent because NOTHING has been done to the other sides of the trade. Sure, plenty of homeowners did bad things and hit the home ATM for Hummer money and sure, plenty bought “investment” houses with no money down and no skin in the game. However, there was another party on the other side of that transaction and that other party has been made whole by the taxpayer and damn few have met with the long arm of the law.
Where are the stories of fraudsters going to jail for altering mortgage applications? Why is Angelo Mozillo still walking the earth as a free man? Where are the penalties for all those people who were on the other side of these transactions? As long as there is no punishment on the other side, why the hell should homeowners be the only ones who get damaged? The lack of parity is what will keep driving people to make business decisions, and for that I can’t say as I blame them.
I will leave our gracious host to vouch for the prime-ness of the Luneta property. However, few would describe Mill Valley, CA, as not prime. Indeed, the only towns in Marin County more prime than Mill Valley are arguably Ross, Tiburon, Belvedere, and bits of Sausalito.
“who said there were no consequences???”
There are not the consequences that would have occurred in a default outside of the current situation, thanks to loan restructuring, tax exclusions, easing of credit repair, etc. Certainly not the consequences that usually persuade people not to default on their debts.
We will certainly not see “pre-bubble norms” in areas like SD County, where the housing stock was increased by many thousands of bubble-priced units that aren’t going away anytime soon. In places like the SF Bay area that are largely built-out and where supply was constrained from increasing, prices rose as they do in the usual 10-year boom/bust cycle (home prices merely took the place of whatever 10-year tech boom would have followed the dotcom bust but didn’t because the investors were all putting their money into oil, war and building bubble homes), and when the next “next big thing” in tech finally does hit, they’ll be taking off like a rocket the way they do every 10 years.
I’d argue that the “supply-constrained” places just have yet to be fully impacted. The number of expensive homes still vastly exceeds the number of people that can afford to finance them conventionally. Historically this gap has been filled by large chunks of trade-up equity built up over past decades, but the bubble burst is effectively disposing of that.
So, why haven’t we seen more dramatic price reductions in those priciest of areas? Supply constraints. Very few homes coming available snapped up by those few that truly do have the means to buy them. That won’t last forever.
Prices in the SF Bay area have been impacted, they’ve fallen right along with the rest of the country. What’s different is the way people react to the falling prices.
People who have lived in that area for any length of time are used to the repeated boom/bust nature of the local economy. They don’t take equity out of their homes when prices skyrocket, and they don’t panic and run when they drop. Most of the homes that get sold at high prices during booms belong to people who are cashing out and leaving the area for retirement; most of the foreclosures during busts belong to people who bought high, didn’t put something aside for the next bust when the money was good and then lost their jobs when it hit, or who got in over their head trying to flip and didn’t get out in time.
There will likely be more dramatic price reductions when the largest group of boomers decides to retire and sell…unless they decide to retire in place, in which case the drop will have to wait until they die…unless their kids who had to buy in Gilroy because they couldn’t afford Palo Alto decide move back in.
Agree 100% with tj in #47.
The supply is constrained because the govt intervened right as the high-mid and high-end areas were being hit. The low end had already been hit, and the wave was crashing on the higher-end in late 2008. That’s when all the foreclosure moratoriums, etc. started taking effect, and we saw the beginning of the deadbeat fad where vast numbers of people stopped paying their mortgages, and nobody bothers to foreclose on them. Can’t exactly call that a “healthy” market, can we?
If you take the Case-Shiller graphs of home value over time and extend the lines out following the natural trajectory pre-1998 when pricing really started to go off the reservation, it becomes clear that we are only 50% of the way back down to where pricing *should* be if there had not been a bubble.
The graph you provided ends in 2008, and we’ve seen significant price decreases since then. San Diego has mostly reverted back to historical price/income and price/rent levels. Data via Piggington
We can argue about whether these historical numbers will hold in this economy, but acting like we’re 50% too high in prices based on the CS index is false. From looking at current US data, I’m not sure I’d agree that we’re that much above historical normal as a whole in the US. You can’t just trendline from looking at 90-97, because this was during a housing bust period for the US.
Jordan, what is your estimate of how much of an additional price drop we would have seen absent an $8k bribe and government shutting off the foreclosure spigot?
“There will likely be more dramatic price reductions when the largest group of boomers decides to retire and sell…unless they decide to retire in place, in which case the drop will have to wait until they die…unless their kids who had to buy in Gilroy because they couldn’t afford Palo Alto decide move back in. (Gene K at 1:18 pm.)
*Chuckle* Kids buying in Garlicville? I know a middle-aged couple who bought a 2,600 sf custom-built home(3/3)on a 17,000sf lot in late 2005 for $1.3 million there. That was at the peak of the market. Zillow now pegs its value at around $715K–a 35% drop. The property taxes were $11,000/year but in 2009 dropped to $8,800 with a homeowner appeal.
Jordan, what is your estimate of how much of an additional price drop we would have seen absent an $8k bribe and government shutting off the foreclosure spigot?
I’m just saying the data doesn’t support your assertion that we’re 50% above historical norms. House prices right now are in-line with historic norms with the question being if we’re going to drop significantly below that. You’re moving the goal posts by now having me state a number that I can’t really base on a data set.
If I had to guess for San Diego, I’d say we’re going to end up giving back all the gains in the CS Index since Jan’09, which seems to be around 10%.
“Kids buying in Garlicville? I know a middle-aged couple who bought a 2,600 sf custom-built home(3/3)on a 17,000sf lot in late 2005 for $1.3 million there.”
Most of the “kids” I know who went South because they couldn’t afford to stay in their parents’ neighborhoods in SV bought smaller and smarter; they had to in order to be able to afford the gas to commute up north to work. But there are fools who everextend themselves in every market, and I wouldn’t be surprised if there are more defaults in Gilroy/Morgan Hill than in Silicon Valley, because there seemed to be a lot more new big house development going on there during the bubble.