Special Edition: Real Country of Genius: Today we Salute you America. Mortgage Implosions from Sea to Shining Sea.

In the last two weeks, the market has gone bipolar because of the credit market implosion. It turns out that housing does carry a lot of influence even in the stock market. Even after the Fed injection of credit heroine, the market is still down 10 percent from its peaks last month. Most housing market pundits actually think we are turning around. Suddenly we are in a recovering market because the Fed cut the discount rate by a few basis points. So today, we are going to inject some of our own reality and do a special edition of Real Homes of Genius. Today we salute you America, with our Real Country of Genius Award.

It is important to understand that the nucleus of the housing bubble is born in large urban metropolitan areas. You know, the areas where the bulk of Americans took out super crazy inflated mortgages? We realize that certain areas in Oklahoma or North Dakota are fairly priced but the trillions of dollars in bad mortgage debt permeate from these over priced areas. Today we will examine short sales and foreclosed homes in Florida, Arizona, Washington D.C., California, and Nevada. From sea to shining sea, buyers don’t seem to be biting anymore. Like a fish attracted to a shiny metallic lure recent buyers don’t seem so attracted to granite countertops or faux marble Jacuzzis. Even if they feel like a moth needing to dash toward the light, no longer are boiler room mortgage outfits there to feed their addiction. Let us present the evidence:

#1 Fort Meyers - Florida

Our first gorgeous home is located in Fort Meyers Florida. This massive home spans out over 1,072 square feet and includes 3 full bedrooms and 2 partial baths. Take a look at the beautiful peach color. I’m convinced! No housing bubble. The current price is $149,900. Any person in a high priced metro area must be saying, “how is this a Real Home of Genius? It is fairly priced.” Well everything is relative isn’t it? Let us take a look at the sales history:

Sale History

04/27/2006: $190,000

03/01/1995: $48,900

So this home is off a whopping 21 percent in one year. It is all about location, location, and location with real estate. It doesn’t look like a soft landing for this fruit inspired home.

#2 Phoenix – Arizona

Our next home takes us from the tropical climate of Florida in the east coast, all the way back to the dry arid desert of Phoenix Arizona. Arizona is the center of the housing boom. Builders came out in droves to erect McMansions in the middle of the sandy desert. But this home defies the McMansion granite countertop standard. Why go with a new home when you can have a tree covering up half of your property? This 1,248 square foot 3 Bedroom 2 bath home is priced at $199,900. Not a bad price. But what is the sales history?

Sale History

12/01/2005: $282,000

07/05/2005: $153,000

01/30/2003: $106,000

This is a nice discount of $82,100 in two years. If you want to be quantitatively driven, this place is down a whopping 29 percent. I’m not sure what constitutes a crash but we are approaching it in many areas. Does this look like a recovering market? Let us move on.

#3 Las Vegas – Nevada

Sin city baby! Flashing lights, all you can eat buffets, the sound of slot machines, and gambling. This gambling also spilled over into the current housing arena and meshed well with the speculative credit bubble. Our next home is actually a condominium but follows the same Real Homes of Genius rules. This condo has 3 bedrooms and 2 baths, and has plenty of space with 2,021 square feet. Vegas has gotten expensive recently hasn’t it? Well this place is currently priced at $650,000. But what was the previous sales price? Oh boy…

Sale History

05/04/2006: $850,000

A $200,000 hit in one year. Or a 23 percent discount. I’m curious to know who held onto this note or what kind of mortgage backed portfolio held this beauty. Again, I’m not sure how the Fed expects that giving lenders some breathing room is going to fix some of these over inflated areas. Many folks decided to tap out their equity and spend like drunken hyenas. When you see toxic mortgages hitting multiple metro areas maybe it is time for a serious correction without government corporate welfare.

#4 Washington D.C.

Welcome to the heart of the country, Washington D.C. A place of politics, the U.S. Treasury, and the most famous White House in the planet. I wonder if the current administration took out a home equity line of credit on 1600 Pennsylvania Avenue. But this place isn’t immune from the housing bubble. This gorgeous home is nearly 100 years old. This is a large 4 bedrooms and 3 baths home situated on 1,486 square feet. The current price is $250,000, which seems like a bargain for such a large home. What did this place sell for 2 years ago?

Sale History

06/21/2005: $360,000

Another massive discount. This place is selling for $110,000 below the previous sale price. Or to give you another perspective, a 30 percent discount. Now tell me again how injecting more liquidity in the market is going to help homes like this?

#5 Compton – California

Finally, we come back to the west coast once again and leave it to California to have a flipper in this current market! Not only a flipper, but a flipper in Compton! This massive 618 square foot home with 2 beds and 1 bath, is currently listed at $350,000. Let us dig into the details of this place:

Sale History

07/26/2007: $230,000

Price Increased: 08/18/07 -- $299,000 to $350,000

Some one picked up a property on the cheap and is trying to sell the place for a profit of $120,000. Instead of lowering the price, these folks actually shot it up by $50,000. You may be scratching your head but given that this home has only been on the market for 20+ days, they have yet to realize that the inventory here in Southern California is growing exponentially. They are using a different compass because every county in Southern California is heading south. Also, the summer selling season is coming to an end and the subprime market is now down and out. The income for a family in this area is approximately $48,000 a year so the only way a local buyer would qualify is with a subprime loan. The numbers do not work on this place as an investment property. Appreciation is non-existent. So I wonder who would buy this place. Any guesses folks?

Subprime. 2/28. Interest only. Option ARM mortgages. REOs. We’ve been talking about these topics for sometime now. As these words hit the mainstream media it seems that folks want an instant solution to a multi-year problem. Folks still want to tap their home like an American Express card and the housing syndicate is now telling folks that today is a good time to buy. Their logic is if you do not buy now, interest rates may be higher next year and the market will price you out. In addition, these above homes are hot commodities (some have been on the market for almost a year) that if you do not buy now, some renegade flipper will swoop underneath you and buy the home. The only folks that can get fantastic terms right now are those with solid credit and some sort of down payment; go figure that people that have managed their finances wisely do not want to jump into these homes. Could it be that the $5 trillion in pseudo housing wealth is getting ready to disappear? A more recent study by Dean Baker over at the Center of Economic and Policy Research puts the housing bubble wealth at $8 trillion. How do they arrive at this figure? 100 years of data has housing trending with inflation and if we are to adjust back to historical models, we are overpriced by 50+ percent in many areas. Seems hard to believe that we can drop by 50 percent but as you can see from digging into the market data, we are already dropping 20 to 30 percent. Are you ready to buy?

Today we Salute you America, with our Real Country of Genius Award.

Related Posts:

Real Homes of Genius: Special Edition, Lifestyles of the Poor and Notorious. 10 Southern California Homes that Prove a Gargantuan Housing Bubble.

$5 Trillion in Housing Wealth Gone: The Impact of the Housing Bubble Bursting

The Cost of Mortgaged Suburbia: 3 Modern Housing Psychological Shifts

Housing and the age of Affluence: Transforming the Definition of Income and Wealth

Mortgages 101: Rule #1, Read your Mortgage! Riding the Mortgage Default Wave.

The Foreclosure Story: What does the Process Look Like?

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