From msnbc.com:
Sherrilynn Palladino lives in a modest three-bedroom home with an affordable mortgage about a mile and a half from the ocean in Grover Beach, Calif. She’s never missed a mortgage payment during the 10 years she’s lived in the neighborhood. In fact, she says, she’s never late on any bills. At 60, she’d like to retire, downsize and escape spiraling property taxes in the suburb about half-way between Los Angeles and San Francisco.
But she can’t. The house next door is empty. It’s been vacant and in various states of disrepair for three years. Palladino is a quiet victim of the housing market crash. Call her collateral damage.
“I’m stuck,” she said. “I can’t sell my house for what I paid for it with an empty eyesore next door. I can’t afford upkeep, maintenance, and property taxes. And I can’t retire until I downsize … I don’t know what to do. It’s all just a mess and I feel like it’s out of my control.”
Palladino is one of an estimated 14 million homeowners in America who are now under water — they owe more on their mortgage than the value of their homes.
She has the misfortune of living in California, where one in three mortgage holders are under water. Things are even worse in other states: In Florida and Arizona, half of mortgaged homes are under water; In Nevada, the number is 70 percent.
While consumers facing foreclosure and banks facing bankruptcy dominate the economic headlines, millions of other Americans are suffering effects of the housing market collapse that, while subtler, are very real. Homeowners who are under water often can’t move to take advantage of new job opportunities, they can’t refinance and take advantage of low mortgage rates, and they generally feel rotten about their prospects.
Palladino, who is single, would sell her home if she could, move into a cheaper condo and trim her annual property tax bill of $4,700. But the house next door means that’s not in the cards.
“I didn’t buy more house than I could afford. I did everything I’m supposed to,” she said. “The mortgage is nothing. But it’s the taxes that worry me.”
What frustrates Palladino is that as far as she can tell, she’s done everything right. Ten years ago, she owned a condo in San Francisco and sensed that the market had become overheated, so she sold and moved to a more modest neighborhood three hours south.
“I had watched the peak and the Internet bubble break and decided to get out of that,” she said. “I made a killing selling that condo.”
She wanted to live at the beach, but instead took her hefty down payment and chose a modest single-story home that was a long walk away from the water.
“I still get the sea air. I can still smell it,” she said.
Following traditional financial advice, she bought as much home as she could afford without stretching too far — a three-bedroom, two-bath home with a fireplace for $419,000. Even with a modest return, she figured she’d be able retire in five to 10 years.
Now, she stares at the overgrown weeds covering the yard of the empty house next door and wonders if she will ever be able to retire — or if property taxes will slowly drain her life savings while she waits for a housing market rebound that may never come.
“Every year I wait for a chance to put my house on the market but no luck as that eyesore continues to exist,” she said.
Things didn’t always look so bleak. At one point, they seemed positively magical. In April 2005, the house next door was sold to a family for $589,000. Palladino counted her lucky stars.
“I should have jumped, but I wasn’t ready,” she said. “I remember thinking, ‘Gosh, I can sell for a lot of money and use that for retirement, like you’re supposed to.’ “
More here:
What was she doing taking out a 30 year mortgage at 50?
If I were her I would look at the big picture. If she sold th condo for a larger profit and put that into the house she may still come out ahead even if she sold the house at a loss.
I think I’m just going to rent for the rest of my life…
If she bought the house 10 years ago, her property taxes are based on her pre-bubble assessed value and wouldn’t exactly be “spiraling.” In fact, with the negative CCPI last year, her tax bill went down this year ever so slightly. If she can’t afford the $4,700 she pays in property tax, she shouldn’t be considering retirement.
BooHoo… Big freaking crocodile tears. She made a bunch of money selling her condo and now is a “victim” because she can’t make money again.
These people are annoying. At least shes paying her mortgage though.
Yeah, cry me a river. Zestimate is still $409k. She has had a Make-Me-Move price since 2006, now at $525k:
http://www.zillow.com/homedetails/1070-Bodega-Ct-Grover-Beach-CA-93433/15435527_zpid/
Yeah the continual reference to “spiraling property taxes” had ME scratching my head to, as they were locked in when she bought the damn place.
This has all the hallmarks of a poorly researched and analyzed article by another mainstream media organization.
“Following traditional financial advice, she bought as much home as she could afford without stretching too far — a three-bedroom, two-bath home with a fireplace for $419,000. ”
– If she followed advice, then property tax would be a consideration into the monthly cost of ownership.
“The mortgage is nothing. But it’s the taxes that worry me”
She bought 10 years ago with a substantial down payment. I assume so because she also says the $4700 ANNUAL property tax is her biggest concern. So I guess her mortgage is not a lot more (or at least enough to concern her).
I agree with Paul. If the above items are correct, then she probably has >> than 20% equity in the house. Is her problem that she’s unwilling to lower her price? Seems like a lower price can solve part of this.
“I had watched the peak and the Internet bubble break and decided to get out of that.”
– Maybe true, but she also moved to a location that is so far away from major work centers that it is basically a small coastal town, probably with a lot of second homes. ie. People can’t commute from there. I think she violated the #1 rule in real estate, Location. If she chose a location with more jobs, good schools, etc, then I doubt she would have so hard a time to sell.
I think you guy’s miss the big picture here,
Ready here it is…
The economy will never recover (create Jobs at a rate to get us below 6% unemployment)
Until home prices are back near peak values ..
Sorry there are just too many underwater home owners..
It’s not a question of blame, fault or anything else,
it’s just economics period !!
Jiji – you are missing the bigger picture.
Home prices are closing in on true values right now.
It was a housing bubble, those prices were not sustainable because people could no longer afford them without exotic loan products guaranteed to blow up in the long run.
Jobs are a problem for the next 10 years. We took all of our manufacturing and easy-skill jobs and shipped them to countries with lower wage bases. We replaced those jobs with jobs building houses and selling houses. We now have an extensive oversupply of houses, so there will be very little building going on for a long time.
The big picture is that high unemployment is with us for a very long time. Years. So, we have high unemployment coupled with stagnant and dropping wages and global wage arbitrage takes its toll on the American worker.
Those underwater home owners are screwed.
Ask the people who have been doubling and tripling up, and that we are and have been building home far below population growth and household formation rates.
I don’t think those people see an over supply of homes.
You have an undersupply of Jobs and opportunity,
And yes it seems un-extractible the high unemployment situation we have now.
Ben would love for you to get a 50% raise but he can’t figure out how.
I don’t see enough “jobs” coming back to satisfy the masses. People need to fend for themselves, not send out 10 resumes per month, hoping something falls in their lap.
It’ll probably take 5-10 years for everyone to embrace the thought, but we’ll be better off for it. In the meantime, sellers like this one will resist lowering their price for years. Instead, she should be trying to figure out how to live on $100,000 less, because if she lowered her sights that much, she’d be sold.
Agree with Myriad above about her current payment being $400/month or less, and her loan balance being around $100K. I’m guessing that she hasn’t sat down for a minute to see how she could “retire” on $300,000, instead of the $400,000 she thinks she deserves. She just thinks she needs more, and some goofy reporter took her up on it without probing further.
The MSM is complicit with the government/bankers, insisting that people wallow in the mire.
This is “the seller’s disease”.
They fight or ignore the basics of supply and demand, and leave their house on the market for weeks and months hoping that some young family will come along and love the house like they did, but are willing to pay a lot more.
They aren’t coming.
They aren’t going to repair all the things you never fixed, they aren’t going to be enamored with the junk you have all over the house, and they sure aren’t going to fund your retirement just so you feel good.
Sellers, get with the program!!!
Put a sharp price on it, and if you don’t get offers in the first couple of weeks, lower it early and often. It is in YOUR best interest to sell when the urgency is the highest. Once your listing goes stale, buyers will lowball you – of course you’ll be insulted – and that’s set you back another few weeks or months while you recover.
This lady could have sold for mid-$400,000s in 2006 or 2007, now she’s staring at $420,000 or less, and still complaining about how everyone has done it to her.
“Why was she taking out a 30 year mortgage at 50?” Art Electric
I rented from 2002. Yep, I now have a new 30-year fixed mortgage @ 4% and I’m (*Gulp*) over 50. Cheap money to me and my PITI is about 45% less than my previous rent. The money I save every month will go toward investments and college costs for my two kids. My property taxes in “Potato Land” will be less than $1,800/year (Exemptions of $100K/year for homeowner and “circuit breaker program”).
I took JtR’s advice and moved out-of-state. I wasn’t happy with what my money could buy and was concerned w/ what my future CA property taxes would be. (They increased last year to 1.35% of purchase price when I lived in Santa Barbara County.) It took me 14-months to make the jump (I was born in CA.) Most of my friends live there–that was my biggest hurdle to overcome with the move. Just my two cents…
“I don’t think those people see an over supply of homes.”
True, to a point. What we have is an oversupply of homes in relation to what people can afford to pay for housing. I guarantee that when prices drop to the right levels, buyers will be plentiful.
There has to be a re-alignment of the cost of housing in relation to incomes.
“You have an undersupply of Jobs and opportunity”
We do have an undersupply of jobs where people can just show up at 9 am, do the same work they did yesterday and punch out at 5 pm. There is plenty of opportunity for those that are willing to take the leap and have the right skill set.
Just pointing out the obvious here:
“I can’t afford upkeep, maintenance, and property taxes.”
and
“I didn’t buy more house than I could afford. I did everything I’m supposed to.”
These two statements are contradicting. She bought that house ten years ago, right? So what did she do, cash out some bubble equity? My sympathy for her is around zero, probably negative.
Susie – My parents (65) and grandparents (90) moved out of Huntington Beach, CA to ‘potato land’ 4 years ago just outside Boise and love it.
Left all their friends behind, however, they have made more new friends than they had left behind.
Most of their new neighborhood is ex CA residents who left for the same reasons they did.
Enjoy the new adventure!
Clearfund ~ I’ve discovered “Aloha spirit” is alive and well here in “Potato Land”.
Funny story ~ When I was waiting for the movers at my new house, a neighbor (Mike) came over and said, “I wonder who’s gonna buy this house.” I exclaimed, “I did!” He then asked where I was from. I shyly replied, “California–the Santa Barbara area”. He flipped out and started yelling at me! But quickly laughed and said, “I moved from CA two years ago!” “Whew!”, I replied.
My next door neighbor is from Northern CA, another neighbor from Ventura and a guy I met at a store is from Santa Maria. (We both miss BBQ tri-tip).
It’s been quite a solo adventure for me. Yes, I left paradise (24/7 sun) behind, but so far have no buyer’s remorse.
Hat tip to JtR! Without his awesome advice and videos over the last 18 months, I very much doubt I’d be a homeowner today. Mahalo nui loa, Jim…
Rent a room! Some Cal Poly, SLO students live in that area or do short term for vacationers. $350/mo. x 9 months of the year = 3150
Susie – Don’t tell people you are from CA, tell them you are from Santa Barbara.
Try it both ways and watch the opposite reactions. I did that in Colorado (CA vs. San Diego) and got gruff responses to being from CA, but smiles and “I love San Diego” from that response.
My family settled in Meridian/Eagle, ID.
The airport in Boise makes SD’s airport look like a crowded trailer park. Boise’s is so new, nice, clean, and modern compared to what we’ve got here.
Clearfund ~ *Grin* I’ve only mentioned Santa Barbara after that first joking reaction by my neighbor! But my license plate still gives me away.
I love the Boise airport. I took my friend there 10 days ago to fly back and–with just basic directions–was able to find my way home. (It’s a family joke how directionally-impaired I am.) And yes, I plan on buying a GPS coming from a little town north of SB…
It seems for every one that moves out of CA, one moves in. Most of our recently new neighbors here in La Costa are from out of state–go figure–Utah, Arizona, Boston etc…
Local Boy is right, as far as I can tell.
Like any place, there is always churn, but I don’t see any signs that there is about to be any fundamental shift of people out of state. Besides, like the person mentioned in the article, many established Californians actually have locked in very low housing costs relative to renting here. They’ll be surprised by all of the things they have to buy out of state somewhere else.
Rents are always a good gauge of housing prices; they show current value as a function of current demand. If they are out of whack of prices, there can only be so many reasons (we can argue what they are, but it doesn’t change the relationship).
Chuck
She should join the Tea Party, then. Oh wait, it’s California. The voters decided to shoot themselves in the foot two weeks ago.
“The mortgage is nothing. But it’s the taxes that worry me.”
Wait, what? On our mortgage, the taxes were this little addendum to the monthly bill. And by the way, if a 419k house is only paying <5k in taxes, you there in Cali aren't paying any property taxes. Or you certainly aren't paying any you need to whine about. Holy Karoly. Don't retire anywhere in the NE, Sherrilynn, Babe.
If she borrowed the whole thing (despite making money on the last sale . . . .) then her payments are 2.8k a month. And she has 375k left on the balance. That's if we use the 8 years she really has had the mortgage, not 10 as the bad math mentions. If she sank any of her former proceeds into this house, she is really not underwater, she's just sad about losing her invisible profits, or she refi-ed, which isn't mentioned one way or the other.
Surely the article could have 1) taken the time to fix the discrepancies and 2) found a better candidate to use as an example.
Chuck Ponzi wrote:
I beg to differ.
From the LA Times:
“I should have jumped, but I wasn’t ready,” she said. “I remember thinking, ‘Gosh, I can sell for a lot of money and use that for retirement, like you’re supposed to.’ “
Bad planning. Take out a 30 mortgage at 50, which you never intended to pay off, because you never intended to stay. Decide to retire at 60, only to find out that your “retirement fund” isn’t as liquid, or a profitable, as you thought. Reality bites when the prospect of living on half, or even less than you’ve became accustomed to turns out to be no picnic.
The rich have started renting: http://www.cnbc.com/id/40260336
Carlsbad Renter wrote:
From whom?