So I wasn’t surprised when I read in The New York Times about students at the University of California-Merced saving money that would be spent on expensive dormitories deciding to rent foreclosed houses — often ending up spending as little as $200 a month rent for luxurious digs with swimming pools and Jacuzzis and separate bedrooms. (link:http://www.nytimes.com/2011/11/13/us/homework-and-jacuzzis-as-dorms-move-to-mcmansions-in-california.html?nl=todaysheadlines&emc=tha23).
From the story:
“The finances of subdivision life are compelling: the university estimates yearly on-campus room and board at $13,720 a year, compared with roughly $7,000 off-campus. Sprawl rats sharing a McMansion — with each getting a bedroom and often a private bath — pay $200 to $350 a month each, depending on the amenities.
“Gurbir Dhillon, a senior majoring in molecular cell biology, pays $70 more than his four housemates each month for the privilege of having what they enviously call ‘the penthouse suite’ — a princely boudoir with a whirlpool tub worthy of Caesars Palace and a huge walk-in closet, which Mr. Dhillon has filled with baseball caps and T-shirts.
“The pool table in the young men’s Great Room is the site of raucous games and taco dinners. “You definitely appreciate it when you visit your friends at other schools and they say, ‘O.K., sleep on the floor,’ ” Mr. Dhillon said.”
What do the underwater neighbors think of this in this Central California town of 79,000. They don’t like it one bit! You wouldn’t either if you had Animal House as a next-door neighbor.
The story says that Merced, literally in the middle of nowhere — actually it’s between Fresno on the south and Stockton on the north — ranked third nationally in metropolitan-area home foreclosures, behind Las Vegas and Vallejo, Calif., said Daren Blomquist, a spokesman for RealtyTrac, a company based in Irvine, Calif., that tracks housing sales. RealtyTrac is the source of foreclosure stats for stories I contribute to this site on the subject.
“The speculative fever that gripped the region and drew waves of outside investors to this predominantly agricultural area was fueled in part by the promise of the university itself, which opened in 2005 as the first new University of California campus in 40 years.”
In California, as in few other states, builders put up houses like the gone-amok Sorcerer’s Apprentice, played by Mickey Mouse in Walt Disney’s classic and innovative 1940 movie “Fantasia.” In the movie, Mickey learns how to save time filling up the Sorcerer’s water storage area, but he can’t turn off his bucket-carrying clones. The Sorcerer’s place is soon literally underwater!
In most other areas, builders wait for a signed contract before building a new house. It makes sense and it’s the reason why tract building states like California, Nevada, Arizona and Florida contributed to the outsize housing bubble that continues to an inevitable solution as prices seek their proper level.
We bought our first house in California in 1977, paying $65,000 for a 3-bedroom tract house in Van Nuys, in the central San Fernando Valley. It was a long commute, 22 miles each way, to my job in downtown L.A., but the mortgage was affordable at $410 a month, cheaper than renting. We paid 10 percent down and signed on for a 30-year mortgage with Bank of America.
Back to the future, in dusty Central Valley Merced, where residents consider Fresno and Stockton and Sacramento to be sophisticated big cities. One of the annoyed neighbors is John Angus, an out-of-work English teacher who paid $532,000 for a house that is now worth $221,000. (If your mind boggles at a teacher living in a $500,000 plus house, so does mine. It reeks of a no-doc mortgage. I’m not blaming the victim, but Angus certainly is living way beyond his pay grade!)
Angus pays $3,000 a month on his mortgage, “while student neighbors pay one-tenth of that. ‘I think they’re the luckiest students I’ve ever come across,’ he said somewhat bitterly.”
The so-called “Ownership Society” — pushed by all the Presidents in recent memory — went into the Mickey Mouse, Sorcerer’s Apprentice mode in Merced and in much of the nation. It’s a sad story of inflated beyond belief housing prices and people losing their common sense — if they ever had any.
So read the story and consider how an entire nation went crazy over housing that wasn’t worth the price and is now seeking its true level. It’s enough to make a real estate writer weep! Even a grizzled veteran like the present writer!