Santa Cruz Man Loses Shirt (and Everything Else) in Realty Bust
Drunk on the real estate mania, splurging on negative amortization loans, and staying invested in denial, has finally left a Santa Cruz (Calif., US) man naked and playing in the sand.
Steven Forgaard, 37, [not the person in the picture] has defaulted on nine homes and expects the banks to close all of them. He now says he considers it a mistake to have invested in the real estate market.
Forgaard – a software project manager – has become an insignia for all Bangalore software professionals who have done exactly the same, and stand to face a similar future in 6-8 months.
"I knew I was sitting on time bombs," Forgaard said. “I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance. I didn't anticipate a downturn of epic proportions such that home values are 40 percent less than they were,” he said.
Forgaard bought his first investment home in the booming housing market of North Las Vegas in 2004, followed in the next two years by eight others in such hot markets as Phoenix and Palm Springs, California, before he realized in 2006 that the situation was worse than he had feared. “I knew that the market was soft but at that point I'm realizing that this could really get ugly,” he said. “At that point I had a bad feeling in my stomach.” Forgaard thought he still had enough equity in the homes to “take a huge hit,” possibly losing most of his investment, but thought for a while that he could still ride out the storm. He is slated to lose his car and primary (home) and will have to exit Santa Cruz, where he was born and raised, and live by the beach.
Experts say speculators like Forgaard, who count on real estate values to keep rising to pay off their debt, play a risky game and doubly so when they use neg-am loans. The Forgaards likely will sell their Santa Cruz home and declare bankruptcy before banks start foreclosing on his properties. With a newborn son, they intend to start over in his wife's Northern California hometown. “Where I went wrong is I invested heavily in an area that wasn't my passion and I had a really demanding full-time job so I couldn't pay attention to nuances, the little indicators telling you the housing market was going soft," he said. "I was in over my head."
Read the Reuters story here
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