Tuesday, September 23, 2008

Crazy Carnes'

Chandra & Michael Carnes, Loco House Buyers Debtors
(or Chaundra Carnes)
2008-09-23: Wow, just days later, their home is reduced in price another $60K. Desperation is setting in!!!

No Mas, Crazy Carnes'!!! No Mas!!! Looks like the family from the PBS video that prompted the creation of the Hall of Shame is back to wheeling and dealing houses. Although, I'm not sure they'll be able to find a greater fool to get them out of this mess. Could be the end of the road. If you haven't already, watch the PBS video, also available on YouTube. (NOW - PART 1)

Remember that buyers are also to blame for this bubble. With a household income of just over $100K, why would the Carnes' delve into no-interest loan for over $700K!! They can answer that question best:
Past Due and Pay Day
Michael runs production at a winery and Chaundra manages the office at an auto body shop. Together, they earn just over $100,000 a year.
Back in the days when 30 year fixed rate mortgages were the norm, the Carnes would've been advised to borrow about twice their annual salary - around $200,000. In this market, that old ratio of salary to loan seems positively quaint: the Carnes have borrowed $700,000 — seven times their yearly income.
CHANDRA CARNES: To have a 30 year loan almost seems like you're giving away too much of your money. If you have to take a loan out anyway, why not borrow the most you can borrow. You know if it helps you get the home that you really want to live in.
MICHAEL CARNES: With the value increasing the way, at the rate it is, why not get an interest-only loan to free up more spendable cash per month? And so we ran the numbers. And the guy says, "Yeah, it looks good." And we couldn't believe him. And so we did it. And here we are. And we're really happy. And like I said, we just barely made it. They told us that.
MICHAEL CARNES: In 10, 15 years, we'll have to be a little bit more conservative. But right now, we're living it up - have a house on a hill and we're very happy.
CHANDRA CARNES: You know, the only risk is if housing values go down. And I guess that's a risk we're willing to take. And I think a lot of other people are too. So we're not alone.

Sacrifice your future if it gets you what you want right now! And don't be afraid to do foolish things if "you're not alone." And would you believe they took some equity out of their home for decorating.
Why did the Carnes' risk their future on a $700K loan for a home? Cuz we wannit!!

---------- update: 11-12-2007 --------------
Looks like the Carnes' got lucky and found some bigger fools.
Found this on Zillow:

5903 Mountain Hawk Dr Santa Rosa CA 95409
Sale History:
02/25/2005: $951,000
09/17/2007: $925,000

Summarizing: The Carnes' were very, very lucky. They lost $25K on the price, and with their interest only loan, ended up renting that house for 2.5 years, also having to pay property taxes, upkeep, etc. They now live in a home (APN 161-410-040-000) at an assessed value of $280,698, however, the purchase price was $640,000. I love her comment above: "a 30 year loan almost seems like you're giving away too much of your money". How is paying rent on a $1M home any better? If her husband had any backbone, he'd
'smack that bitch up'.
1086 Elsbree Ln Windsor CA 95492

Zillow: 09/21/2007: $640,000

---------- update: 09-23-2008 --------------
Zillow: 1086 Elsbree Ln
Windsor CA 95492
For Sale: $669,000 $659,000 $599,000 $540,000
Price Paid: $640,000
ZEstimate®: $552K
ZEstimate®: $545K (5/1/08)
ZEstimate®: $536K (9/19/08)

Tyrone-Est®: $335K

Looks as though the Crazy Carnes' are figuring out their house isn't worth what they paid. BWAHAHAHA

Listing site: Wine Country Dream (how apropos... Dream)

Other nearby houses for sale:
1026 Elsbree Ln, Windsor $599,000 (bigger lot, about same sqft for house) Taken off market
1032 Elsbree Ln, Windsor $749,500
1020 Lisa Ct, Windsor $649,000
1040 Elsbree Ln, Windsor $589,950 $559,950 $499,950
9950 Troon Ct, Windsor $974,500
317 Jessie Ct, Windsor $695,000


tom12008 said...

thank you for an update on the Sonoma County market. I like the idea of comparing your estimate along with the others. I'm interested to see which figure will come closest to the eventual selling price.


Tyrone said...

No problem, Tom. And I wasn't kidding when I said this was the family that started this blog. I was so furious when I saw that video featuring Chris Nunez and the Carnes'. I decided then that I did not want to forget what/who caused this debacle.

On the sale price of their home, if they price it a bit lower, they will probably find a foolish buyer. It'll take a while, but my price will prevail. And if what I hint at below happens, think much lower.

On an aside, I had a feeling of dread this weekend... a feeling that there was a possibility, perhaps remote, that our currency could go to zero value. I'm making my first silver purchase and taking possession.

tom12008 said...

you read my mind on the last comment. I thought about your last comment to Christian Dunn not that long ago, as well studying up on deflation. It seems even if one is not a PAW but a UAW, it seems that this is the time to eliminate as much debt as possible, in case wages deflate, interest rates skyrocket, and one's nominal debt remains unchanged.

In the short term, though, inflation could get really ugly. With wild weather and some people still bullish on biofuels, high food costs and food insecurities, along with more ARM resets than this lender-bailout will cover, should make things interesting in the Chinese sense of "interesting times".

With credit tightening up, I don't know what's safest, but are you thinking silver in order to sidestep a gold bubble? I was thinking that last week and now you've posted on it,so I'm curious.

As for the Carnes family, I understand why they infuriated you so much. I know this is tangential to it, but this bubble makes me wonder what, if anything these people learned about say, 20th century history, especially the Great Depression and WWII.

I see a lot of marriages and long term relationships straining to the breaking point. Then again, when two can live more cheaply than one, there may be more couples who try to stick things out rather than lead separate lives. Sociologically speaking, this too is about to get very interesting.

I see the "nesting instinct" going haywire again and again, and, especially on TV shows, it seems to stem from confusion over money, wealth, debt, and other things that are uncomfortable for many to talk about. What do you think is going to happen a few years out, given recent events?

Thanks again for the site. I look forward to your next post. For the record, I am referring to the books "The Millionaire Next Door" and "Your Money or Your Life" in my comments.


Tyrone said...

are you thinking silver in order to sidestep a gold bubble?

I don't necessarily think gold is bubbling, but my preference is silver. That being said, I just purchased some gold. Why? Silver eagles are getting scarce. Rather than have no hedge against inflation or hyperinflation, I wanted to lock something in, so I opted for some gold. You can still get the silver coins in shops, but I was looking to acquire at least 2000. I'll keep checking.

What do you think is going to happen a few years out, given recent events?
Difficult question to answer. The "bailout" was just approved, but I think that thing will demand more and more money, which will drive inflation sky high. And with the coming ARM resets, I see a lot more pain for the next few years.

Returning to gold/silver, I think about it like this: if the value plummets, other things should do well, so I'm about even. In other words, the total financial collapse was avoided. However, if there is chaos, the values of gold and silver could skyrocket, while my currency becomes worthless, and perhaps I'm still even. Anyway, I'm very conservative; I'm a bit surprised by my increasing economic fears and that I'm worried enough to begin moving away from paper money.

tom12008 said...

I just followed the link to the "Morbo on the Housing Bubble" YouTube video. It was witty, funny, and on point. I just don't know what's coming up now that this bailout appears to be going through. Thanks for the link.


ChicagoRealEstateGirl said...

Tyrone, Your insight into this matter is just what the public needs to be reading.

The thing that is most infuriating to me is that the Carnes' alone aren't to blame for this crisis... they are just stupidity put into action. There are about 7 Carnes' families living on my street.

None of them have not cut their grass since last summer, All of them have 2 financed vehicles, All of them order pizza every weekend... and All of them haven't made a mortgage payment since December.

Accountability and personal responsibility are to blame in this situation.

I have never taken anything that doesn't belong to me. Why do people who are in foreclosure think the government owes them something now.

They are stealing the homes they are living in. When you use something you are not paying for it's called stealing!

Tyrone said...

The thing that is most infuriating to me is that the Carnes' alone aren't to blame for this crisis... they are just stupidity put into action. There are about 7 Carnes' families living on my street.

Exactly, ChicagoRealEstateGirl. People need to wake up and start thinking! If something sounds too good to be true, usually, it is. I'm glad you see that the Carnes' are merely examples, and examples are great to learn from.

I just saw a story today about people following fuel trucks in Georgia to find where the gas is. Scary stuff.

Thanks for posting.

tom12008 said...

I thought you might want to know that 1026 Elsbree Lane is on record at Trulia as having sold for $565K, or $34K under the last wishing price. Movoto shows 1040 Elsbree at $480K, or a $19K reduction. However, the same page at Movot shows 1086 Elsbree, the Carnes residence to be holding firm at $540K. maybe they are banking on the bailout and the hope of renewed liquidity in the market.

Tyrone said...

Thanks, Tom. I'm not seeing a sale at Trulia, or a change in MLS status at other sites, but I could see some fool jumping in at $565K getting a "rock bottom price."

I think CA is so screwed. How many people are stretched to the max? With resets coming, what happens next??? Now we got Arnold asking for billions for Kalifornya. I'm getting more and more nervous about a worst-case scenario coming to fruition.

tom12008 said...

I'm not too well read on California's situation, except insofar as many state employees may not get paid if something doesn't work out soon. The panic would be horrible if that happened for any length of time.

I'm not ignoring it so much as I'm overwhelmed by how much there is to know about both the current situation and the longer history of boom and bust cycles in California's economy.

Good luck to you, whatever the Governator does.