Why are you doing this REALLY?

Sometimes there is a higher purpose behind what you do, and it's important to always keep an eye on that. Here's what I mean:

Jini is a single mom of two, living in Marin County, north of San Francisco. She makes a bare bones living as a therapist, and on the side, she fixes houses to sell, which supplements her income. She does a house every few years -- after all, it's not her main work, and she has a teenager and a pre-teen to raise.

She sold a house about a year ago, made some money, moved herself and the kids into a comfortable 3 bedroom rental until she could find another fixer. That took about 6 months, and then it took a few months to negotiate the agreement (short sale, the bank dragged its feet) and close.

The house, originally a vacation cottage, is tiny (2 small bedrooms and 1 bath) and so old that it doesn't have central heat, not to mention insulation. It's also missing many of the comforts she's used to, like closets, a dishwasher and two full baths.

She immediately knew what to do with this house -- besides the obvious heat and insulation, it needed an addition to function well -- a master bedroom with its own bath, which could sit over the newly enlarged kitchen/family room. She figured she could pay a contractor to do the major construction while she lived in the rental, then move in and do the interior finish and other renovations while living in the house, which, while unpleasant and inconvenient, would save paying rent and carrying costs on the house simultaneously, which she could ill afford.

She didn't count on the fact that in the hills of Marin, your neighbors can stop an addition if they don't like it. They may actually prefer something falling down ("character") to something a little bigger and newer. And of course, this is what happened. ONE neighbor decided that, after asking Jini for all sort of (expensive) concessions on size and siting and materials, to which she reluctantly agreed, he still wasn't satisfied. He filed an 11th hour complaint at the planning board, which torpedoed her approvals. Thus a drawn out fight at the planning board loomed ahead.

Even worse, she was going to have to move into the tiny house with the 'evil' (her word) neighbor. She envisioned this as literally moving into the lions's den, with danger all around -- constantly. She dreaded moving into this house. Her dread was so intense that she'd barely begun packing, despite the fact that she was scheduled to move in three days.

As we talked, I pointed out that she probably wouldn't see her neighbor all that much. Even if they were going in and out of their houses at the same time, which probably wouldn't happen very often, their driveways were situated so that they couldn't actually see each other. And there was only the one 'evil' neighbor. Others were pretty cooperative.

As I 'looked at' the situation for Jini, I saw her having a big housewarming party -- to which she could invite ALL the neighbors, as well as her friends and family. It looked to me like this would not only create community in her new location but also like this would eventually create some sort of healing both for her and the neighbor who'd objected to the addition. It looked like there were many spiritual lessons in the situation -- for her, her kids and her neighbor.

Jini agreed with my assessment, and because she saw the spiritual purpose behind moving into the lions' den, she began to see the possibilities. She could use the garage to store all the things that wouldn't fit in the tiny house. She could use some rugs that wouldn't fit on the floors as insulation by tacking them up on the insides of the exterior walls. She could buy some freestanding wardrobes to replace the missing closets. She could make friends with enough neighbors that eventually she'd find a way to the obstructionist neighbor's heart.

And with renewed energy, she began packing.

The View from Sacramento

I've been in the Sacramento area for the past couple of weeks -- that's why I've been so quiet. The view from up here is significantly different from that of the Bay Area. I haven't had to spend much time here in the last 2 years. I'm shocked at how many small businesses are just... gone. There are check cashing places in areas where there didn't used to be check cashing places -- always a bad sign. My 2 favorite family owned cafes are gone, along with a Starbucks. A couple of chains, too: the local JoAnn Fabrics closed, as did (of course) Mervyn's, and Linens n Things. The only stores that seem to have any foot traffic are the grocery stores and the thrift stores.

The place is a forest of "For Rent" signs, both residential and commercial. Whole retail buildings, which used to have half a dozen stores, as part of a bigger complex, are vacant. You don't see much residential real estate for sale that isn't a short sale or foreclosure -- and believe me, I'm looking.

The most extreme case is some 2 bedroom/1 bath condominiums in an okay area, that were clearly remodeled with the intent to sell. They came on the market in 2006, and the first sales were for around $225,00. The high price was $245,000. Want to guess what they're going for now? Go ahead, guess.

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Ready? $50,000. Yes, that's an 80% loss for that poor bastard who bought at the top. And his payments are probably what, at least $1200/month if he put down 20% and had a good loan, plus HOA dues of $200, plus taxes of $204, unless he's petitioned to have them lowered (which is easy to do). So that adds up to what? In the best case scenario, about $1600/month. Want to guess what they rent for? $825 - 850. This is the heart of the foreclosure crisis. This is the essence of jingle mail. Even if you have a good job, you're going to walk away from this one -- and remember, Sacramento is the state capital of California, the home of the unbalanced budget, lawmakers who won't budge on raising taxes, which means cuts, cuts and more cuts. Everyone knows someone, usually more than one, who has lost a job and/or a home.

On the other hand, people are pretty sanguine. Most of those who have been displaced in one way or another are looking forward to the next chapter in their lives. That's very heartening.

Who's in charge here?

I've been privileged to be the listing agent on a home that is in short sale. It's not something I went looking for, it fell in my lap because of the good reputation I had in the days when I was a real estate broker for a living. The lesson here is: It pays to maintain that license -- you never know when it will come in handy.

The home is in good condition, well-maintained, but it was built in the 1930s, when building codes weren't what they are today. That means that the foundation is considered inadequate, though it held up fine during the 1989 earthquake, the sewer lines are too small by today's standards, etc.

We had an agreement for a purchase price that satisfied both the first and second lenders. The first lender was getting almost all their money back, and under CA law, can't get a deficiency judgment on a purchase money first mortgage. They agreed to this amount because the offer was about the same as the value put on the house by the bank's appraiser. The second lender was getting pennies on the dollar at close, because the first lender knows they won't settle without some payment. Although the second mortgage holder can get a deficiency judgment against the (former) homeowner under CA law, apparently it's common to settle these after the sale, for a few more pennies on the dollar. (I really have to wonder about the financial strength of the banks here, and the efficacy of the stress tests -- I suspect that these junior liens are being carried on the books at a lot more than 10 cents on the dollar.)

It's common for a buyer to try to renegotiate a bit after inspections, when the termite, contractor's and other inspections put a price on the repairs to be done. And usually, you can finesse a few thousand dollars, by everyone kicking in some -- seller, both agents, and the buyer compromising their request. But holy carp! The buyer is asking for a price reduction so big that it wipes out the pennies on the dollar for the second (which they would never agree to in any case), both agents and a huge chunk of the first mortgage. I really don't know if this is posturing, or if the buyer doesn't really want the house, but figures, hey, if I can get it for that much less than the appraised value, hell, then it's worth it.

Here's the weird part: the owner/seller of the house is not in a position to decide what happens, what counteroffer is made. The first lender is. So who really owns the house? Who's in charge here? And in fact, since the seller realizes that the amount that the house sells for won't change his situation one iota, he's pretty neutral. The homeowner here has effectively become the agent of the bank. How weird is that? There used to be an old joke, something people would say when they bought a house with a mortgage, which was that the bank owned the house. In a short sale, it's pretty much true. The seller owns the house in name only, and the banks make all the decisions.

That brings me to the bigger questions. What happens when someone has no equity? And what is equity, anyway? I think that here, equity doesn't just mean housing equity, it means a stake in the economy, a stake in our society.

One can definitely have a stake in society without a financial stake -- that's called community, or emotional connection. But so much of what used to be supplied by community has been replaced by market forces (think restaurants instead of home-cooked food, cleaning services instead of the family cleaning the house, car detailing instead of Dad washing the car, child care centers instead of Mom or Grandma or a neighbor watching the kids), that non-financial equity has declined substantially, over at least the last 30 years, replaced by financial equity -- money, in one form or other.

So as our financial equity declines, we have to/are substituting community again. That substitution, though, has consequences for the economy. As more people are out of work, they are substituting community for things they used to pay for. That puts more people out of work. So the monetary economy declines, while the non-monetary community grows stronger and larger.

But what happens to someone who has no financial equity, and no community ties? Do they become violent, because they're angry, and don't care what happens to them? Do they become depressed and suicidal? And as a society, what do we do about that?