Episode-410- The Death of the Neighborhood — 28 Comments

  1. Got the Seed Bank… GREAT stuff. May even plant a few of the packets and begin rotating crops and collecting my own seeds from the heirloom variety they provide. Solutions from Science is an interesting site to check out…

  2. I live in California… and agree. Many have over extended themselves. Hement (pronounced ‘him-ent’) is but one example. Even my neighborhood an older one, has been hit…(I don’t live in Hement) We now have two foreclosures on the street… mainly due to ‘house-flippers’ that came in bought a home – stayed in it for about a year, did a few improvements, than ‘flipped’ it when the market was hot. The final owner – that wanted to live in one of them – was wayyy over extended and lost it all. Since they’ve left – the house has been broken into a couple times – regardless of the rest of us keeping watch. It’s up for ‘rent’ now… because it can’t be sold. Hopefully we’ll turn it around… if not I’m outta here. My home is almost paid for… lived here for lots of years – but not tied to the house – lots of memories but that’s not the crucial issue. I’d still make money – just not as much…

  3. Excellent show, lots of good information, and a really interesting topic.

    A useful website for determining home values is You can set up alerts that let you know if average home values are changing. This is a very useful tool.

  4. While you are mostly talking in generalities, some more information on Hemet CA, and the surrounding Riverside county. Recently there has been what can only be considered a war against the police and the administration of the municipality.

    John Robb of the blog Global Guerrilla’s which is where I heard of these stories, is the writer of the book “Brave New War”, has been working on a new book on Resilient Communities, has been posting stuff that dovetails with your podcast rather nicely.

  5. Forgot the link to John Robbs blog its not a wannabe survivalist rambo site, unlike what the name gives images of. But a really good information source on stuff he wrote about in his book Brave New War, and more recently stuff on Resilient Communities which is the subject of his new book.

  6. FYI Hemet is also the city that has gang members placing bounties on Police Officers. They placed a gun rigged to go off on the fornt gate missing an officer when he opened the gate. They also drilled a whole in the roof and place a natural gas line in that opening to fill the building with the gas and explode. Last year the City of Hemet laid off over 30 Officers and has the influx of all the new population. The area is so over built that the mini mansions are sitting on les than a 10th of an acre. Sad to see this happening but we all know that this over building and over pricing of housing was doomed the day they broke ground.

  7. Hemet in the 1960s and before was a homesteaders paradise with many full time and weekend ranches. People had orchards out there. You could go hunting for rabbits and quail. The water level was close to the surface and ponds could be built using a windmill pump to fill them. It was close to Los Angeles so you could go out for the weekend (3 hour drive)

    Turns out it was too close to LA. People started to retire out there. Property values went up and the ranches were sold and broken up. Housing developments were built with backyards the size of a couple sheets of plywood.

  8. On the other side of the coin, this is an incredible time to be investing in real estate… if you are extremely careful.

    I’ve done rather well renting my old condo the last few years, and intend to rent my current one once I find a house.

    Geared right(modestly low morgage, 1/2 way descent tenant, and correct attitude on the part of the landlord) there is a lot of money to be made. I believe even Jack has conceded that.

    With that said, there is no such thing as an investment without risk. Even people like me still have to be very careful of the decay that jack talks about. I worry far more right now about the neighborhood of my rental than the one I live in and still keep in touch with my former neighbors.

    Anyway, my 2 cents.

  9. Jack,

    Another great podcast. I do disagree with you about one point. While I understand and generally agree with you regarding honor and personal responsibility, I don’t think people should be advised to treat a home loan as an honor issue in all cases.

    It is one thing if you get a loan from your local community bank. In that case, the bank is likely making an investment partially based on an analysis of your financial situation and partially on you as a person and your honor.

    What has happened over the last ten (twenty?) years is that the large mega-banks and investment firms have chosen to treat home loans purely as business contracts with no regard to the person behind them. In fact many of these loans were written with the full knowledge that the loan could never be made good on and the person would refinance as property values continued to escalate. These banks and investors lost all sense of financial good sense. Any business that abandons good financial business practices must be prepared to go bankrupt and we as a society must be prepared to allow (or even force) that to occur, or else we risk losing one of the real benefits of capitalism (the risk and reward spectrum).

    In these types of situations, I think it is only fair for both sides to treat the mortgage as a pure business contract. Banks and businesses break contracts all the time (even on real estate) and the contracts (the mortgage) clearly spells out what will happen if the contract is broken. Make payments – you can live in the house. Stop making payments – they take the house.

    Please consider doing a follow up show going into more depth on this issue. I don’t believe it is as black and white as being honor bound to pay in every situation.

    If your loan was written by a mega-bank or sold to an investment firm (i.e. NOT held by a local bank) and you are underwater and need to move on, I would advise you to speak to a lawyer who specializes in this area to find out what your contractual duties are. It may be possible (and completely moral) for you to hand over the keys and walk away with no future financial obligation.

  10. @OneLegLonger

    I could not disagree more! You rationalize well and you are even right about many particulars but it doesn’t change the honor quotient. Honor when real is NOT flexible. No matter what you say this is how I feel.

    When YOU sign YOUR name to any contract and YOU agree to those terms and were aware of what those terms were (providing they were legal) than you have chosen to give YOUR word. In any case where the other party have met their obligations it is up to YOU to meet YOUR obligations. Whether the other party factored YOUR honor or not doesn’t matter a hill of beans. What matters is what YOUR honor means to YOU.

    We know a man’s real sense of honor based on how he acts when choices are hard, not how he acts when choices are easy.

    Just because you gave your word to Bank of American vs. Bank of Local doesn’t matter. While the bank name may change your word is always yours, to me it is all we really have.

  11. The other side there may be a point where you have to walk away. Sometimes there is no choice, when you loose safety in the area, when you are going to default sooner or later and know it can’t be avoided, etc.

    Protecting your family by leaving is honorable. Telling the bank you can’t pay and short cutting the inevitable is honorable. Working out some sort of deal is honorable. Living in the place for 6 months and not paying a dime because you know that is how long eviction will take then walking at the end with a pocket full of cash, is highly dishonorable.

  12. Perhaps I put too much emphasis on the ways that banks have failed to do their due dilligence and how they worked to fraudulently inflate prices for their benefit.

    The key point is any contract spells out what happens if both parties make good on the prime agreement and what happens if they don’t. The bank also has the option to demand payment in full at any time, just as you have the option to cease payment and return the property. It isn’t a moral or honor issue, purely a business decision.

    Banks owe it to their shareholders to only write loans to people who can afford them and who have a sizeable down payment. Doing otherwise opens them up to getting properties returned at less then what is owed.

    I’m not arguing that people should count on being able to stay in the home because the bank refuses to kick them out. However, that could happen. Just like a person could discover a way to store water on a piece of rural property and still use the argument that the well dries up in the summer to negotiate down the price. In business both parties ought to be honest, but also do full due diligence and assume the other side will take the best course of action for themselves.

    We the people should not be encouraged to become debt slaves for the banks by mistaking a business contract for a binding word of honor “I’ll pay no matter what” agreement.

  13. @OneLegLonger, You said – “just as you have the option to cease payment and return the property.”

    First, NO YOU DO NOT, you have just described defaulting on the loan, it is an option but it ain’t as clean as you claim. No where doe it say anything like that in the contract, it say the lender can claim the property under default. So sure you can do it and no one will put you in jail BUT the bank can sell the property and chase you for the amount you still owe after the sale.

    Second, you are not arguing the point anyway, you are attempting to argue the legality. Honor is NOT ABOUT LEGALITY. When you sign a contract you give your word. Sorry that is the way it is. If you default with out making every reasonable effort to settle the contract you have broken your word, to me that is highly dishonorable.

    Sometimes banks are STUPID and don’t work with the person going into default. Many times the person makes every reasonable offer they can, not just “loan modification” but short selling, return and carry the difference, etc. Sometimes no matter what the person offers the bank says no, when that occurs they should and most often do choke on the mortgage.

    But if you think it is just a business decision to simply walk away and return the house after signing the contract with the bank, I don’t want you doing business with me. I do mean that!

    You also stated, “The bank also has the option to demand payment in full at any time”, that is not the case at all. There are always conditions under which they may do that, however, they can’t just do it because they want to.

    The sad truth is Americans have made this mess for themselves and very few are honest enough to admit it. Blame the bank, blame the congress, blame your neighbor.

    I think it is all bullshit myself. No one was calling the banks evil when they were asking for the loans and getting them. At that point the banks were evil when they refused the loan.

    Pass the buck if you want to man but if you think a mortgage has an “option of return” you are out of your mind or listening to the wrong people.

  14. I’m not arguing the cause of the mess or whom to blame. It would make an interesting debate though.

    Why should there be a double standard in which businesses are treated better than the common man? It would be very hard to “not do business” with anyone who has never broken a contract (including real estate) since businesses do this regularly. They pay a financial penalty when they do it (as spelled out by the contracts and legal precedence), but we don’t judge their moral character for doing what is best big picture for them. Why then should a person who is essentially the CFO of his household (the smallest business there is) not have the same flexibility to determine that a business contract (mortgage) no longer makes sense and that he must take the penalty to get out of it. To me this is a dollars and cents decision, not a moral one.

    Why is this ok for Wall Street, but not ok for Main Street. To me the pundits (not you Jack, the MSM) who come out screaming about honor and duty regarding mortgages are hypocrites because they would never call out a Bank or major corporation for doing the same thing (which happens everyday and no one blinks and eye). Well, who is lining their pockets…

  15. BTW Jack, please don’t take this as a criticism of you or your work. I have extreme respect for what you have accomplished and have personally benefited from it. I only want to question something that many accept as fact (mortgage=honor), but that to me seems to result in a very unequal playing field favoring business over household.

  16. @OneLegLonger

    No worries but I still don’t agree with the premise of what you are saying, break a contract with out attempting to do your best to uphold it is dishonorable no matter WHO does it, Wall Street or Main Street.

    I will also tell you you are misinformed. No business breaks a loan agreement and just pays a fine. Unless you go bankrupt sooner or later the lender is going to get what ever the terms of the contract allow for. This crap belief that a business gets off scott free in a default is total nonsense.

    You are also adjusting the argument as you go and are now getting closer to my point than your own. Sure a business can default inside of the terms of the contract, so can a lender. There is a big difference though in just walking away and tossing the keys.

    Your entire argument is coming from a confused view of reality. You said and these are your words, PLEASE CONSIDER THEM DEEPLY.

    “just as you have the option to cease payment and return the property”

    Let us key in on one word, RETURN, how can you be returning the property to the lender? You did not buy from the lender, you bought from a seller, the bank gave you the funding to do so and YOU PAID THE SELLER WITH THE FUNDS.

    This really bothers me that people can even think that they are returning a house as though they are returning a car or the way some seem so casual about it returning a pair of jeans to Walmart.

    Putting it in full perspective I sell you my house, you go get funding and buy my house and I take that money and do what ever I want. I am now out of the equation. There is no way to “return the property”. The very fact that you even see it that way makes it clear that you are not arguing my point but one of the establishment and legality.

    As I said you can default on a mortgage with honor, there is a right way. That was is above board with every effort to make it as right as you can under the circumstances. Stopping payment, pocketing money and than skipping town while telling yourself you “returned the property”, is not the honorable way.

    That is at least the way you started out this debate.

  17. I said financial penalty, not fine. And it could be millions, plus millions more in court fees arguing over the details. And my initial statement was that people in a real bad situation (I don’t know, $100k+ underwater) should speak to a lawyer about their options, not stop paying and pocket the cash. In many states you would be worse off breaking the contract, regardless of the morality of it.

    You are right that you aren’t returning the property. I should have said cede the property or something similar. The point is that it is collateral for the loan and should be given up at the lenders convenience if you don’t mean to make payments.

    I realize that I jumped around and lost focus a bit, but if you look at what I wrote in the first post, I am saying that in some (many?) cases, other options besides debt slavery should be considered.

    I am glad to see that you feel Wall Street and Main Street should both consider breaking a contract dishonorable because that is at least consistent. My main complaint is that the standard view is not consistent. No one is ready to stand up and say ” I won’t shop at WalMart or own IBM stock because they have broken contracts, but people are ready to shame the average Joe into sticking to their honor, their mortgage, at a very high personal financial cost. That bothers me. I think this country is now (perhaps has always been?) a place where a mortgage is just a contract. Every individual should work with legal counsel and a financial advisor to determine if it still makes sense to keep paying or if they should tell the bank to take the asset and pay whatever burden comes with that.

    And I don’t think many people feel their house is like jeans from Walmart. If they choose to give it up, I suspect there will be tears even if it is the right move financially.

    Sorry if some of this doesn’t make sense. I’m pecking this out on a mobile phone.

  18. It’s sad that the neighbourhood is dying; that said, one thing that keeps interesting me is the co-housing idea; it’s both interesting and alienating as well. But if you’ve heard of it, it might be a way do a couple of interesting things:

    1. you own your own
    2. you work at growing a community together when you buy into living there
    3. you have neighbourhood gardening
    4. many have a community workshop

    So, I know many people might think there are some overly socialist ideals in the co-housing idea and there is. But at the same time, it’s on a local community level, it helps build neighbourhoods where they might be lost.

    For many members and survival/self-reliance minded people, it might not be your cup of tea; but for some who can’t get used to country living, it might be a way to rebuild community.

    Some links (if you’re interested) are: – known as Intentional Community in this context

    Also the idea can be modified to those who purchase a large tract of land and then give each purchasee a share of the land to build on and a communal section of land as well (I bring this up as a group I’m part of related to self-sufficiency has members looking into the idea).

  19. Jack – side question for you. How do you prefer to be paid for MSB? I’m very interested in the AOCS option because I like the concept. However if you can’t use the fifty I send in barter I would feel like you are getting less than the full MSB membership. I’ve avoided the specials you gave last month for the same reason – I feel the product you provide is worth full price.

    So, what is your preference here? Silver or FRN?

  20. @OneLegLonger,

    I prefer cash, heck I prefer paypal and an auto subscription but I will take what ever form of payment the buyer chooses.

    I take silver at 2oz (which is close to cash value) and I take AOCS at face value because I support barter and I support AOCS. I believe in consistency so if I support something verbally I also support it in action.

    Now on your last point on debate I think you have it backwards. Honestly most people don’t bat an eye at a man who walks a mortgage with out a second thought, they do though condemn “big business” when they don’t honor a contract or pay a bill etc.

    I think we should be consistent and either say both are wrong or both are okay, I consider both wrong.

    Again one last time I think it is okay to break a mortgage if you have to and if you do it above board and try to reach some settlement with the lender.

  21. You’re show was so depressing today…mostly because it’s true. We bought our home in early 2006 when our lease was up and housing prices were on the rise. We weren’t paying attention to what was going on around us all we knew is when housing prices go up here they don’t come back down. I wanted rural property but my husband wanted suburbs so here we are. The neighbors paid $30k more than we did so we felt like we made a good choice buying when we did…then it all crashed. Now we owe $60k more for our home than it will sell for. Our “hood” is littered with For Sale, For Rent, For Lease and Foreclosed signs. We’ve been robbed twice and every other day we get a notice that a child molester has moved within a mile of us. We’re praying things will improve but our suburb has become a slum. We can afford our mortgage but can’t sell for what we owe. We feel as though we’re putting our children in danger. What should people like us do?

  22. Ok here is a thought. If the neighborhood is ‘dead’, houses are boarded up, people are gone and you’re the next to last or very few people left in your neighborhood why not maximize on it? Meaning, sure it isn’t your property but why not utilize it until new owners show up?
    By using their yard or flower beds to expand your garden and plant various vegetables or turn into a community garden, if they have a pool, run a extension cord to it and use it for yourself. If they have firewood in the yard, utilize it so it doesn’t rot. It’s out of the box thinking but at least the area is being utilized while you’re “Stuck” in the dead neighborhood.

  23. OK – we just paid off our mortgage in full this month 5 years after buying our house damn near the top of the market. Our 30 year fixed loan was at the Fannie Mae maximum and at one point our equity was negative as the house is worth ~$200,000 less than what we paid. In retrospect, it was a dumb economic move and that money is gone. If you have the ability to pay down the mortgage, you will be in a better place where as long as you can still pay your property taxes, you will not loose your home even if you loose your job. By paying down the mortgage, we effectively have ~$1,400 more every month to invest, pay other bills, spend on preps, etc. If we have to sell, we would get 94% of the sale price after transaction costs with a very real recognized loss but we could move if needed without any short sale headaches.

    All that being said, I do appreciate the fact that the vast majority of people who stupidly bought when I did are negative and owe more than the house is worth. Job situations change as does one’s health. And not everyone was smart about their other spending. However, it is not personal, it is business. A mortgage is a contract that has multiple embedded options and rights to both the borrower and the lender. You have the right to walk away as the price of loosing the home and your credit rating (of marginal value given the banks are largely not lending even to those with high credit ratings). Your loan is secured by the property. Seek legal and tax counsel. For some, it does make sense to walk away. “Honor” and “your word” has nothing to do with your decision as long as you follow the contract terms. You are still honoring the your contract when you walk away because the contract gives you that option — just don’t steal from the new homeowner (the lender) by taking appliances, vandalizing the home, trashing the property, etc.

  24. One more comment – I’m 40 my wife is 37. We paid off the mortgage on the house in Virginia AND bought an apartment in St Petersburg Russia in five years because of our lifestyle:

    1) We own our two SUVs – no loans. They may be 7-10 years old and have 85,000 and 105,000 miles on them but they work. We didn’t buy a Mercedes sportscar like our next door neighbor or new cars like several others.

    2) We lived below our means even though I probably spent $1000 per month on various prepping investments over the past three years. This meant no hardwood floors, no kitchen remodel, no granite counters, and any home improvements were DIY except for the new roof and new furnace/AC (had to replace items). I haven’t paid for a haircut in almost two years. We cook at home (better food than restaurants) and don’t eat out much.

    3) We got some help from parents and were relatively lucky job wise even though I’m working part-time and my hours were cut back almost two years ago. We lived on my income and put all of my wife’s income plus gifts from family into paying down the mortgage and buying the apartment.

    4) All of this gives us flexibility. We’re not slaves to the house or Bank of America. I could go a year without any income just from food storage and preps in the house; longer if we raided IRAs and other investments.

    5) My preps include a very heavy investment in tools and skill development. I do my own maintenance and home improvement. Why pay someone else when we can do it ourselves. My wife wanted hardwood floors for 5+ years. She will finally get them later this year but I’ll do the install and the total price will be half that I would pay if I paid someone to do the job.

  25. This was the scariest tsp episode I have listened to because it is a crisis that can really sneak up on a person.