The Minneapolis Star Tribune publishes part 2 of a 3 series on the housing boom (and bust) in Wright County.
The second part discusses how speculators staked their claim in the exurbs.
From the article (emphasis mine):
Every so often, his workday over, Bradley Collin Jr. steers his Taurus station wagon out of his driveway and onto the flat, windswept roads near his Andover home. Then Collin gets to thinking about his debts, and the decision he and his wife made three years ago to invest in a get-rich-quick real estate scheme in Wright County. Last year, four houses that he bought in Otsego -- for a combined $1.2 million -- sank into foreclosure.
Collin presses on the gas pedal, pushing his car past corn fields and grain silos, at speeds that top 70 miles per hour. "It's my way of unwinding and outrunning the guilt," said Collin, 27, a self-employed painting contractor and father of three.
In the rush to find blame for the nation's current housing crisis, the easiest targets have been the lenders and mortgage brokers who peddled predatory loans.
But across the country, from the desert suburbs of Las Vegas to the treeless subdivisions of Wright County, many homeowners face a predicament of their own making.
They gambled big that housing prices would continue to shoot up. Some bought homes as often as others buy new jeans, occasionally in return for thousands of dollars in kickbacks. These investors ranged from small-town working people looking for a quick payday to sophisticated real estate professionals who bet with other people's money, occasionally defrauding lenders in the process.
Now, with home prices falling and mortgage payments rising, panic has set in. Investors are dumping houses on the market before prices collapse further, or simply turning the keys back to the lender. That, in turn, is dragging down values for even longtime homeowners, wiping out the equity they'd built up over the years.
In Wright County, the number of unsold houses on the market has swelled to more than twice the national average. Officials estimate that up to half of all houses that have gone into foreclosure during the past year are owned by investors.
...
Bruce McAlpin, a real estate agent with Edina Realty in Monticello, said he was asked several months ago by a lender to evaluate a house in the early stages of foreclosure, in a new housing development called Norin Landing in Otsego. He estimates the house is worth $500,000, though an investor bought it in 2006 for $1.375 million and never lived in it. "I'm still looking for the gold chandelier, but it's not there," he said.
$1,375,000.00 for a house in Otsego??? Otsego?!? Since the house doesn't come with a gold chandelier, does it come with a working oil well in the back yard?
Oh, and more mortgage fraud:
Norm Imholte, a truck driver from Freeport, said a builder paid him $50,000 for agreeing to buy a $425,000 house in St. Michael. The builder told him the house would be sold within 30 days and Imholte wouldn't have to worry about making a payment.
Imholte bought a new truck with the cash, but the house never sold and has since slipped into foreclosure. He recently got a call from a state Department of Commerce official investigating mortgage fraud. "I never had any business owning a $425,000 house in Wright County," he said.
And the family who should have never bought one house--let alone 4--get caught up in a get-rich-quick scheme:
The couple and their three children, ages 2, 3 and 5, were living in a crowded trailer park in Blaine, when Bradley saw a newspaper advertisement touting real estate as the next quick way to make money.
"I didn't want to paint the rest of my life, and the trailer park scene was about as bad as parts of north Minneapolis," Bradley said.
Over a steak dinner at a Perkins restaurant, the couple met with two salesmen from Executive Premier Management Inc., a firm in Wayzata that described itself as a "property management company."
With no money down, they could buy properties in a fast-growing new subdivision in Otsego known as Otsego Preserve, near Interstate 94 and the Albertville outlet mall. They would get $5,000 in upfront cash for each house they purchased.
The Collins were also told that home values in Wright County were appreciating at 8 percent a year, much faster than the national average. At that rate, the Collins could make $24,000 a year for every $300,0000 house they bought in the county. They were told that rental income would cover their mortgage payments until the houses were sold.
Collin said the management company helped him apply for four mortgages within days of each other. The firm used a different lender each time, a way to hide from the banks the debt he was taking on and wouldn't be able to afford on his net income as a contractor, which averages about $60,000 a year. The "no documentation" and "no down payment" loans carried a much higher interest rate than conventional mortgages.
The couple purchased four houses -- each for about $300,000 -- hoping to quadruple their profits. The Collins received a $5,000 check after each closing. The cash payments were not disclosed on the mortgage statements sent to the bank, which Collin says he has since learned is illegal.
Let's take a step back... Still think this housing boom was sustainable?
What were the bogus justifications for the housing bubble? Prices only go up? No more land being made? (There's plenty of land in Wright County.) Baby Boobers were going to buy investment properties?
Humbug! Within a blink of the eye, all of that 'home equity' everyone was banking on is gone. It was never really there in the first place.
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