WSJ: Buyers' Revenge: Trash the House After Foreclosure

Absolutely no redeeming investment thesis from this article, but interesting nonetheless... I wonder what it says for our society. Or if people simply feel duped or bitter. What struck me is the huge % of properties left in this condition; if it were 10% I'd say it's relative isolated but 1 in 2 houses? Yikes.

• The stucco subdivisions of Las Vegas are caught up in the nation's foreclosure crisis. These days, bankers and mortgage companies often find that by the time they get the keys back, embittered homeowners have stripped out appliances, punched holes in walls, dumped paint on carpets and, as a parting gift, locked their pets inside to wreak further havoc.
• Real-estate agents estimate that about half of foreclosed properties to be sold by mortgage companies nationwide have "substantial" damage.
• The most practical way to ensure the houses are returned in decent shape, lenders and their agents say, is to pay homeowners hundreds or even thousands of dollars to put their anger in escrow and leave quietly. A ransom? A bribe? "Yeah, somewhat,"
• In Las Vegas, 1.9% of homes in the Las Vegas area were in the foreclosure process in January, almost triple the rate of a year earlier. Each day, auctioneers offer 150 to 200 properties for sale in the small lobby of the Nevada Legal News -- a high-speed inventory of dreams forfeited. About 95% of the auctioned properties, however, go unsold and revert to banks eager to get the properties off their books. Some owners just walk away peacefully. But agents say a significant number take what they can carry and take revenge on the rest.
• "I'm one of the thousands of people in town in foreclosure so I'd like to get as much as possible for the items," said one recent Las Vegas online ad offering a double wall oven, dishwasher and built-in microwave, all of which, in most cases, legally belong to the bank.
• "When you're losing your dream, and you're paying all this money to it...and you're hoping that it's going to go up, and you're going to make 100 grand like everybody else did, and it doesn't happen -- you know, people get upset," says Joe Kraemer, a broker with Century 21 Advantage Gold who deals in foreclosed homes.
• The original owner bought the house new in 2003 for $131,000. A year ago, Mr. Carver says, it could have fetched a quarter of a million. (sounds like madness now, eh?) The house sold for $170,000 in November, ferret scat included.
• One example house... Light switches, outlet covers and thermostats were smashed. There was what looked to be crowbar damage along the staircase. A large pool of paint had hardened on the living-room carpet. It appeared that someone had dripped motor oil in a trail that wound its way through every carpeted room. The appliances were gone, as were most light fixtures. A cabinet door had been removed and left soaking in a full tub of water. Not a wall was left without a hole the diameter of a closet rod, including the pink child's room once carefully decorated with a floral wallpaper stripe. It's damage that Mr. Carver described as "a vengeance-type thing."
• The former owners, who couldn't be located, paid $261,892 for the house when it was new in March 2006, borrowing $209,513 in their first mortgage, according to public records. Now it's listed for $149,000 -- as is.
• The owner, a 43-year-old man with two children who spoke on the condition that his name not be used, says he bought the property in 1993 for $140,000. Three years ago, he says he had the house appraised for $440,000 and took out a $207,000 home-equity loan to pay off credit-card bills and buy his wife a new van. His initial payments were an affordable $1,800 a month. (these are the people who the pundits miss when they think the damage is limited to "subprime people" who bought in 2005-2006-2007 - remember some people were serial refinancers - refinancing every year, drawing on that house ATM to live life, or redo the kitchen, or the new pool, or the SUV) He fell behind, however, after he went through a divorce and his landscaping business faltered, just as his interest rate was rising. The man worked out a payment plan with the bank and borrowed heavily from his father, but, including penalties, his monthly payments rose to $4,000, he says.

Now multiply this by thousands, and in some states like CA and FL and OH by hundreds of thousands - and let's discuss the recovery coming in 6 months. Even though most homes that *will* be in foreclosure have not even reached that stage yet.... KB Home (KBH) is not seeing it...

• Jeffrey Mezger, KB Home's president and chief executive, said a growing supply of unsold new and existing homes on the market, tight mortgage lending and industrywide discounting drove down sale prices and compressed margins during the quarter.
• "Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand," Mezger said in a statement. "We do not anticipate meaningful improvement in these conditions in the near term, as it is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve."

But anything to prop up the market... keep the mantra going... in 6 months, everything will be fine. Let's chant it together... 2nd half recovery.