College kids capitalize on post-foreclosure-crisis prices

posted at 3:40 pm on November 14, 2011 by Tina Korbe

Maybe it’s that the Occupy Wall Street protests have reawakened a latent sense of avarice in me. Maybe it’s that Michael Moore’s vacation home makes me believe I need not be super rich to have a huge house. (After all, according to him, he’s not a member of the 1 percent — and he has two megahomes!). Maybe it’s just that I’ve visited one too many an antebellum mansion (I do do that). Whatever the reason, I’ve found myself fantasizing about my dream home a lot lately.

To make it a reality, I should move to Merced, Calif. There, University of California at Merced students have scored a luxury lifestyle at astonishingly low prices:

Merced, in the heart of San Joaquin Valley, was ranked the third hardest-hit city in the country for home foreclosures, leaving whole communities of sparkling luxury homes vacant and depreciating, the New York Times reported. For these UC students, the “housing crisis” is an embarrassment of riches.

“I mean, I have it all!” Patricia Dugan, a senior majoring in management, told the Times from her master bedroom suite flooded with California sunshine.

The five — sometimes six — bedroom manses that often feature chandeliers, Jacuzzis, walk-in closets and swimming pools can be had by students for peanuts. Several thousand McMansion dormers who have their own bedroom and a private bath pay just $200-$350 in monthly rent.

As Heritage Foundation housing expert Ron Utt said in an e-mail, “It’s nice to see some productive, revenue-generating uses for otherwise vacant property.”

But while the students strike it lucky, their mortgaged, non-foreclosed neighbors are still underwater, some paying $3,000 a month for homes that were once worth half a million and now would draw just a couple hundred thousand. Sadly, they’re not alone. Some 11 million — or nearly a quarter — of homes are in negative equity, according to Jim Pethokoukis. We’ve already seen that President Obama’s recent unilateral proposals to help homeowners are likely to be ineffective. Negative equity is a problem that can’t be solved just by helping folks to make their payments: Home values will go back up when an increased number of qualified buyers swell demand. For that to happen, we have to solve the unemployment problem — and, to do that, we have to implement common-sense solutions, chief among them a reduction in regulations.

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Maybe it’s just that I’ve visited one too many an antebellum mansion (I do do that).

Haha, you said doodoo.

Now back to your irregularly scheduled blog postings…

Abby Adams on November 14, 2011 at 3:09 PM

Those McMansion rents are paid for by the federal student loans.

Apologetic California on November 14, 2011 at 3:14 PM

Those McMansion rents are paid for by the federal student loans.

Apologetic California on November 14, 2011 at 3:14 PM

You could say that. If the student received a loan to cover 100% of tuition, books, room and board.

BigAlSouth on November 14, 2011 at 3:18 PM

Both of my children go to college. Both of them rent houses that were recovered from foreclosure, allowing them and their roommates to spend as little as $200/month for a fully remodeled home. The houses have new carpet, windows, bathrooms, and have yards big enough to play in.

The houses are being used, real estate taxes paid, and the home improvement stores go some business. Stimulus, baby!

Bigurn on November 14, 2011 at 3:18 PM

All wealth is created in manufacturing, mining and agriculture. America needs more wealth creation. We cannot do that without ending the government attack on all wealth creation.

Environmental regulations frequently yield little or no environmental benefits but they always drive up costs. Same goes for Obama Care.

The Rock on November 14, 2011 at 3:19 PM

Not just college students. Plenty of people – myself included – are renting or have rented really nice houses for pennies on the dollar that it would have cost to buy.

Tina, hold off for another year. Prices have more to fall.

angryed on November 14, 2011 at 3:45 PM

well .. at least they aren’t squatters.

upinak on November 14, 2011 at 3:47 PM

All wealth is created in manufacturing, mining and agriculture. America needs more wealth creation. We cannot do that without ending the government attack on all wealth creation.

The Rock on November 14, 2011 at 3:19 PM

If the year were 1900, I’d agree.

In 2011, this is no longer the case. Facebook, Google, Ebay, Amazon, Microsoft, Yahoo, Oracle don’t manufacture anything. Yet those and similar companies have created hundreds of billions of dollars of wealth.

angryed on November 14, 2011 at 3:49 PM

Dad buys the home at foreclosure.
The kids pay him rent and cover all the taxes and bills.
His kid keeps an eye on the property.
Four years later he sells the house for twice what he paid for it.
It pays for half his kid’s tuition.
It’s a smart move.

NeoKong on November 14, 2011 at 3:58 PM

Four years later he sells the house for twice what he paid for it.
NeoKong on November 14, 2011 at 3:58 PM

LOL. So real estate is back to 100% growth every 4 years? Did we get transported back to 2004? In 4 years dad sells if he’s lucky for 10% more. Add in closing costs on the buy and the sell and break even isn’t even guaranteed.

But the 4 years of rent otherwise saved makes it a good investment, even if the capital gain isn’t there.

angryed on November 14, 2011 at 4:01 PM

The last time I was in Merced was in 1972. Their municipal courtroom was the size of one of the bathrooms in those McMansions.

Where would someone get a job there today? The unemployment rate is somewhere around 40%, I think.

platypus on November 14, 2011 at 4:07 PM

I guess this is just shocking for me to believe. I live in one of those McMansion neighborhoods. Our HOA rules are strict. Not only can no one come into our gated neighborhood without actually owning a house here, or having a written limited visit pass from the owners, our rules forbid the renting of our properties. Otherwise, you’d end up with all kinds of folks that ended up with three families pooling their money to rent one house, thus lowering property values, even more. We also have an agreement that we won’t sell our houses for xx amount below value, just to sell. How will these houses go for anywhere near their previous value after renting them to college kids, and having them trashed?

di butler on November 14, 2011 at 4:07 PM

angryed on November 14, 2011 at 4:01 PM

It will be though. Now Dad + Kids have a property that the kids have taken care of and paid the taxes on and it can be theirs one day to live in or have the kids rent out as a source of income etc.

Property paid off is always a gold mine!

Bubba Redneck on November 14, 2011 at 4:14 PM

The sooner young adults are (responsibly) introduced to property taxes, the better.

I dont have a McMansion, but Im quite pleased with the condominium unit I purchased this summer. Lowest price of a unit ever sold in the complexes 30-year history. It’s not McLuxury living, but it’s a step up from renting, and I hope to grow its equity over the next twenty years.

Jeddite on November 14, 2011 at 4:15 PM

All wealth is created in manufacturing, mining and agriculture. America needs more wealth creation. We cannot do that without ending the government attack on all wealth creation.

The Rock on November 14, 2011 at 3:19 PM

If the year were 1900, I’d agree.

In 2011, this is no longer the case. Facebook, Google, Ebay, Amazon, Microsoft, Yahoo, Oracle don’t manufacture anything. Yet those and similar companies have created hundreds of billions of dollars of wealth.

angryed on November 14, 2011 at 3:49 PM

The Rock is right, Ed.

Think about this for a second — without gas, coal, or oil, (courtesy of the Mining community)there’d be no source of power to manufacture the generators, nor to manufacture the powerlines (courtesy of the Mining community)to move it, to allow the esoteric non-producers to suck your money out of your pockets and into theirs for you to play with some kid’s toy, instead of being productive.

Not to mention all the wonderful things in your house and place of work which are MANUFACTURED by those of us who actually contribute products for the use of the entire world.

Like that car, Ed? Mebbe that TV? How’s about that computer, Ed?
Like carpet on your floor? No? Hardwood, mebbe? Like running water, Ed? Without any of that manufacturing, mining, or farming, there wouldn’t BE no Google, nor any of the other esoteric things you hold so dear.

It’s US, Ed. The machinists, the factory guys, the assemblers, the cutting dept., the guys who KNOW steel, and copper, and brass, and the difference between thermoformed and thermoset plastics, and glass, and rubber, and chemistry.

WE’re the ones who get it done, IN SPITE of those who look down their noses at our dirty coveralls, oil-stained hands, and dirty faces.

If you’ve got it, one of US made it.

Don’t ferget that.

Ever.

Farmer on November 14, 2011 at 5:20 PM

angryed on November 14, 2011 at 4:01 PM

I know a home owner from California who has a neighbor who bought a nearly identical house for half the price at a foreclosure two doors down.
The market does not have to double in four year but merely come close to recovering.

NeoKong on November 14, 2011 at 5:30 PM

Farmer on November 14, 2011 at 5:20 PM

It’d be amazing if people glanced at the post author every once in awhile, wouldn’t it, Tina?

preallocated on November 14, 2011 at 6:44 PM

Who in their right mind would rent an upscale home to a group of college kids??

disa on November 14, 2011 at 7:52 PM

It’d be amazing if people glanced at the post author every once in awhile, wouldn’t it, Tina?

preallocated on November 14, 2011 at 6:44 PM

Wasn’t he talking to angryed?

disa on November 14, 2011 at 7:53 PM

It’d be amazing if people glanced at the post author every once in awhile, wouldn’t it, Tina?

preallocated on November 14, 2011 at 6:44 PM

…….he said, without locating his preallocations.

Farmer on November 14, 2011 at 8:29 PM

But while the students strike it lucky, their mortgaged, non-foreclosed neighbors are still underwater, some paying $3,000 a month for homes that were once worth half a million and now would draw just a couple hundred thousand.

Dude.
“Half a million dollars” gets you a crappy little two bedroom, one bathroom brick house in the DC area.

Count to 10 on November 14, 2011 at 8:31 PM

Farmer on November 14, 2011 at 5:20 PM

I don’t think anyone is looking down their noses at you here, but not only is not all wealth to be found in hardware, the world is advancing away from it. More and more wealth will be in the form of information, it’s generation, and skills in analyzing it.
Alternately, you could view manufacturing as just another form of information processing, imparting it into raw materials. In some sense, all wealth is information, and one shouldn’t confuse it with the physical objects that happen to store it. Plumbers, electricians, or what have you, are all trading on the information they have that their customers don’t.

Count to 10 on November 14, 2011 at 8:40 PM

… not only is not all wealth to be found in hardware, the world is advancing away from it. More and more wealth will be in the form of information, it’s generation, and skills in analyzing it.

Count to 10 on November 14, 2011 at 8:40 PM

Count, you just refuse to see it, don’t you?

Nemme see if I can make this a bit easier … you can’t have that hot server to generate all that new information unless I figger out how to put those itty-bitty circuits on that itty-bitty chip correctly, every time, at a price which you are willing to pay.

That means that I have to MANUFACTURE the machinery to DO that, which means I have to ADD VALUE to steel; to chemicals to make polymers; ad yadda yadda yadda. In other words, unless I can provide SOMETHING which works more efficiently; more cost-effectively from NOTHING but an idea, I DON’T GET PAID. And you don’t get your hot new server.

See…A number years ago I was an innovative supplier to the circuit-board machinery industry, among other things like heavy equipment, aircraft, marine, robotics, automotive, and a few others. I came up with, and produced, any number of time-saving, and money-saving, products for those guys to use in the PRODUCTION of machinery to make circuit-boards. We solved the chemical problems which were limiting their electrical availability to certain areas of machine productivity. We came up with new ways to more efficiently and less expensively protect the people who were operating the machinery, etc. etc. etc.

Very simply, your electronical information gadgetry would not even exist if it were not for manufacturing, mining, and agriculture, and those of us who know how to make it WORK FOR YOU.

Get it through your head — PRODUCTION, PRODUCTION, PRODUCTION, the adding of value to raw materials, is the ONLY way to create wealth, and it has been so since the first guy knapped flint and traded it for food.

Do not discount production. It will be at your peril, should you do otherwise. If you don’t know what actually MAKES a buck, you’ll never have any.

No … we’re not easy to talk to. No … we’re not so easy to understand, nor to like. We live in a world where we must perform real actions, which have real consequences which directly affect our wallets, and our employees’ wallets, too. We can’t afford to make mistakes very often, so the ephemeral argument of the information or financial crowd holds very little worth to us.

Unless they need to improve their bottom line through PRODUCTIVE innovation.

That’s why some call us “Producers”, I’d guess ……………..

Farmer on November 14, 2011 at 9:46 PM

I don’t think anyone is looking down their noses at you here,….

Count to 10

That’s good. Not a good idea to irritate the guys who make yer stuff.

Farmer on November 14, 2011 at 9:52 PM

I don’t think anyone is looking down their noses at you here, but not only is not all wealth to be found in hardware, the world is advancing away from it. More and more wealth will be in the form of information, it’s generation, and skills in analyzing it.

Count to 10 on November 14, 2011 at 8:40 PM

I’m with Farmer on this.

I work in an industry where processing information is all we do all day: the design of high-performance integrated circuits; the kind of computer chips that make the interwebs work. Believe me, all we do all day is push bits around on a disk, looking information in a hundred different ways: simulation results, DRC results, timing reports, etc, etc, etc. We’re talking terabytes and terabytes of information.

But the wealth doesn’t get created until we do something with all that information. Specifically, until it gets shipped off to the foundry and turned into silicon, nobody gets paid for anything and the company doesn’t make any money. So, untill we actually make something, all that information isn’t worth a dime.

None of it is.

lovesthesun on November 15, 2011 at 12:06 AM

So, untill we actually make something, all that information isn’t worth a dime.None of it is.

lovesthesun on November 15, 2011 at 12:06 AM

BINGO!

THIS guy gets it!

Thank GOODNESS there’s at least one of ‘em.

Farmer on November 15, 2011 at 9:32 AM