Has the Fallout Just Begun?

Thanks to Incline Jim for this doozy… a chart and graph lover’s dream! This informative slideshow presents a compelling case for the we’ve got a long way to go baby argument. Honestly, my head is spinning and I think I may be turning into, gasp, a pessimist. (Say it isn’t so!) Highlights include the salient point that consumer borrowing power is anywhere from 39-41% less than it was just nine months ago, and a sea of questionable loans are still scheduled to reset later this year. These sorts of numbers want to make me downgrade my latest, ever-changing, possible-but not-so-sure local, bottom prediction from 2009 to 2011… What do you guys think?

One new client today was telling me about his experiences with foreclosures and mayhem in the early 90’s in Houston. To him, our current local troubles were mild in comparison thanks to continuing economic growth. He told me the story of a new house that originally sold for $120,000 (a lot at the time in Houston), then sold again to an investor for $80K, then again to another investor for $40K, then again at auction to his landlord for $21K. (When the lumber is worth more than the house, I guess it’s time to buy.) Though neither of us think it will play out that dramatically here, a small part of me says, who knows? Two years ago I was blowing off all the bubble talk as an unimaginative metaphor.

I do watch our numbers with a very close eye. The only positives in our market I see so far are increased pendings, which are suspicious because I wonder how many are useless, fake, short sale escrows that will ultimately fall through as banks take back the houses. I’ve also noticed more builders utilizing the MLS, which means their pendings stay on for months on end as the houses are built, because no builder seems to be building on spec these days. And then of course, it is spring, which always brings a seasonal bump in activity.

The other bright spot is Cyan, the only new home builder I know of doing brisk sales and actually reinvoking the lottery system. With this development, Centex seems to have hit the right price point, the right location, the right value for the dollar, which of course translates into to pending contracts and hopefully closed escrows. I am glad to see that somebody is doing well in this market. It gives me hope. I need some hope.

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60 Responses to Has the Fallout Just Begun?

  1. Avatar smarten says:

    John, with your permission I want to go off on a tangent [since you’ve volunteered “to provide information on landlord/tenant issues”].

    I am a renter in Incline Village. We have a wonderful Golden Retriever.

    For many, many months last year, we attempted without success to find rental housing in a number of local condominium complexes. To a “T,” they all had discriminatory homeowners’ association rules or CCRs which permitted pets if the occupant of the property were an owner; yet prohibited pets if the occupant were a non-owner. Because of these rules, most owners [and their rental agents] attempting to rent their properties were spooked and would not challenge their homeowners’ associations.

    We heard there was a case involving a unit in the Crystal Bay Cove Towers in which the owner successfully [at least at the trial court level] challeneged this discriminatory practice since it directly affected his/her ability to alienate his/her property. But as you point out, the case never got to The Supreme Court so it never became precedent.

    Word has it that this homeowners’ association subsequently amended its rules/CCRs but it hasn’t spilled over to any other complex we’re aware of.

    So the question: can a homeowners’ association enforce such a discriminatory restriction if an owner wants to rent his/her unit to a tenant with a pet?

    Thanks in advance and I apologize to the rest of the blog for straying off subject.

  2. Avatar SkrapGuy says:

    There are some good questions here. And some insightful commentary. But maybe Diane ought to start a legal questions forum?

  3. Avatar John Newell says:

    Smarten,

    That is an interesting question. I do not have an answer off the top of my head. Generally, CC&Rs and home owner’s association rules are very difficult to challenge as purchasers of real property take the property subject to existing restrictions. Let me think on it.

  4. Avatar stjoe says:

    While I am an attorney, I am not licensed in Nevada.

    You have no discrimination claim. You can discriminate like heck provided you don’t discriminate against a protected class in a protected activity/ Pet owners per se are not a protected class.

    So you have to base your claim on another right. Since the putative landlord accepted the CC&RS before he/she acquired title, he/she was put on notice that the prohibition existed. As a general rule CC&Rs are deemed valid restrictions unless they interfere with a protected right. (e.g. you may always bring a service animal into a condo that restrictes a tenant’s dog.)

    But if I may make a suggestion: instead of getting indignant about how a condo restricts your rights, why not rent from the owner of a single family home. That was it is up to a single landlord. It will far cheaper to pay more to pay extra for a house than pay attorney fees to fight the restiction.

    SJ

  5. Avatar smarten says:

    Thanks stjoe. That’s what we ended up doing [renting a SFR (and I’m not being “indignant;” I’m merely raising the question to our resident landlord/tenant expert who has volunteered to answer questions like these)].

    But with due respect, my issue goes a bit deeper. HOAs can’t adopt any restrictive provisions. Restrictions must be “reasonable.” When unreasonable, they end up impermissibly restricting an owner’s right to freely alienate his/her property [this represents the other “right” you refer to upon which my issue is based].

    A good example is a lender’s right [under a mortgage where the mortgagor has agreed in advance] to accelerate an indebtedness secured by a mortgage where the owner hypothecates his/her property “subject to” that mortgage. You’ll recall that in California [Wellenkamp v. Bank of America] this restriction was deemed to represent an unreasonable restraint on alienation.

    Here if CCRs prohibited ALL pets uniformly, I would agree with you. But the fact they pick and choose based upon an occupant’s ownership [versus occupancy] status creates the unreasonable restraint, at least in my view.

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  7. Avatar John Newell says:

    Smarten,

    My initial reaction was substantially the same as stjoe outlined in his post, and I have not found anything to make me change my mind. The only detail that gave me pause was that owners could have pets but renters could not. However, I found an out of state case that found reasonable an HOA rule that allowed new owner occupants to bring in an existing pet but not to replace that pet. Furthermore, even though Nevada has a statute regarding discriminatory restrictive covenants — NRS 111.237 — that statute only addresses restrictions “based on race, color, religion, ancestry or national origin.” I suspect that courts would find the rule not to be unreasonable, although you indicated a case that might be to the contrary. Was it a 2nd Judicial District Court case?

  8. Avatar Gregory Bain says:

    Am I reading this correctly? Those who are in the business didn’t see it coming, but are now predicting the future outcome? Many who are writing blogs are claiming it is now a buyers market. Hello! It will be a buyers market when and only when a person can buy cheaper than they can rent. And, with about as much money in their pockets as the average rental security requirement is needed to secure a mortgage. Home ownership is not a stock market type investment. Anyone using a 2,3, or, 5 year fancy graphs to show the value in housing must be a very green MBA or worse. You can not compare the dot com fiasco to the housing market. Silicon Valley? Best to use the silicon for implants. Maybe Zillow is hiring?

  9. Avatar Sully says:

    Greg, its silicone for implants – silicon for semi-conductor chips.

  10. Avatar Gregory Bain says:

    Yes, Sully. I am aware. It was a play on the word.
    Why do you stay autonomous?

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