July 31, 2007

Paying The Price For A Housing Bubble In California

Reuters reports on California. “‘The golden dream by the sea’ is how Gov. Arnold Schwarzenegger has fancifully described California. Yet for thousands who bought homes during the Golden State’s latest housing boom, foreclosures have turned recent months into a nightmare. Dorothy Hicks, a retired federal employee in Oakland, California, is seeing her American dream of owning a home teetering on the edge of collapse.”

“After refinancing into an adjustable-rate mortgage last year, she faces possible foreclosure on her home of nearly 40 years.”

“Hicks says she was told the mortgage was a fixed-rate loan, but was soon overwhelmed by soaring payments when its interest rates rose. ‘By the time you pay (utility) PG&E, the telephone and the mortgage, you don’t have any money,’ she said.”

“‘We have a lot more of these shady mortgages out here, so that doesn’t bode well,’ said Christopher Thornberg of Beacon Economics in Los Angeles. ‘We’re due for a very traditional consumer-led downturn.’”

“‘Business is picking up and I think it’s going to continue,’ said Patrick McGilvray, president of a Sacramento firm that matches distressed homeowners with investors and home buyers.”

“‘In the early 1990s we were losing a major industry and losing it for good. Now we’re paying the price for a housing bubble, but housing will come back,’ said Howard Roth, chief economist for the state Department of Finance. ‘We really haven’t lost jobs yet. That may happen. But in the early 1990s we lost over 500,000 jobs.’”

From NBC San Diego. “Local homebuyers looking for bargains will have dozens of prospects to choose from at a major foreclosure auction next month.

“More than 125 single-family homes and condominium units are being listed for sale by the Real Estate Disposition Corporation August 18 at the San Diego Convention Center.”

“The property with the highest ‘previous value,’ $670,000 - is a four-bedroom, two-and-a half bathroom house on Vista San Guadalupe in Otay Mesa’s Vista Pacific neighborhood. It was owned by a couple who, according to neighbors, also bought, rented out, and defaulted on two other houses in the area.”

“The starting bid price: $289,000. But real estate observers point out that the sellers have a higher, undisclosed ‘reserve price,’ or minimum - below which bids will not be accepted.”

“The auction-list property with the second highest previous value, $619,000, is a three-bedroom, two-and-a-half bathroom house on Fieldbrook Street near Chula Vista’s Heritage Park. Starting bid price: $309,000.”

“Next-door neighbor Andy MacNeill tells NBC 7/39 that the couple who defaulted on the house ‘got in about two years ago and actually did a lot of upgrades and stuff. But I think they got into the wrong type of mortgage and couldn’t handle it. It kept goin’ up every other month.’”

The San Diego Union Tribune. “For some home sellers, putting up a for-sale sign is getting to be a costly exercise. In its latest price report, DataQuick Information Systems found nearly 17 percent of homes sold in the county last month closed escrow at a price less than the previous sale.”

“That’s way up from 2.7 percent a year ago. The median difference in price was $61,000.”

The LA Times. “Possible household foreclosures in Riverside County are up 281% in the second quarter compared with the same period last year, according the real estate tracking firm RealtyTrac.”

“The firm reported 12,759 filings of mortgage default notices, auction sale notices and bank repossessions during the quarter. Los Angeles County led the state with 24,054 foreclosure-related filings, the firm said.”

The Daily Bulletin. “Foreclosures are continuing to climb locally, and it’s a trend that should continue for at least the rest of the year.”

“The two Inland Empire counties were among the hardest hit in California during the first half of 2007, with Riverside up 207 percent from the same period in 2006 and San Bernardino up 186 percent, according to RealtyTrac.”

“‘We haven’t seen the end of this,’ said Redlands-based regional economist John Husing. ‘The situation will get worse before it gets better. We are moving into a period when more homes will be at risk.’”

“Statewide, the number of homes in foreclosure was up 170 percent from a year ago, as California is being hit much harder than the nation as a whole.”

“Every one of the six Southland counties was up at least 125 percent from a year ago.”

“Husing said to really understand the numbers, it’s important to know where are the at-risk properties. ‘I’m not at all surprised to see more foreclosures out here than in Los Angeles,’ he said. ‘If you look at home sales in 2004, 2005 and 2006, you’ll see that there were more homes sold in the Inland Empire than in L.A.’”

“Bill Velto, manager of Tarbell Realtors in Upland, said many of the people in foreclosure now clearly fell prey to unscrupulous lenders. ‘Some of them put people into loans (when) they knew there was no way that they could make the payments,’ he said.”

From KGET.com in Bakersfield. “As the housing market fizzles, the number of foreclosures is on the rise, and scams and real estate frauds that went unnoticed amid a flurry of mortgage applications are now coming to light.”

“Local attorney Kathryn Fox said her phone has been ringing with local people claiming they were the victims of real estate fraud. ‘I have a lot of people that are not in the financial position for this type of home, something really out of their price range,’ said Fox.”

“But what if the homebuyer is in on the scheme? Here’s a typical property flipping scenario: The flipper buys a property for a specific price, $300,000, for example, and then artificially inflates it’s value by obtaining a false appraisal.”

“Now the overvalue of the home is repurchased at the higher price by associates of the flipper. The flipper pockets a profit, and usually offers kickbacks to the appraiser and associate who helped buy the home. But the associate never pays the mortgage, and the home goes into foreclosure by the lender, who is left holding the bag.”

“‘When you qualify people on facts that are not true, or embellish the facts or leave out bad facts, or you assist them in buying and know they are not going to be able to service the debt, or service the loan, you’ve got a problem,’ said Fox.”

“‘You can do anything with the property as long as it keeps going up in value,’ said Attorney Cal Stead from Borton, Petrini & Conron. ‘It’s when the increase in value tapers off is when you start having these foreclosures.’”

The East Bay Business Times. “Home building permits in the Oakland metropolitan area were down more than 50 percent in June compared to the same period a year earlier, according to the California Building Industry Association.”

“Permits were down nearly 30 percent year-over-year last month in the Vallejo-Fairfield metro area.”

“Overall, California’s total housing starts fell more than 50 percent year-over-year: 9,536 permits in June compared with 19,637 in June 2006. The total last month dipped 14 percent from May, when 11,064 permits were pulled.”

The Fresno Bee. “For the first time in years, sales-tax revenues are dipping in many central San Joaquin Valley communities — raising the possibility that some cities might have to cut services.”

“Valley cities have based their spending plans on the assumption that those revenues would keep going up, as they have for years.”

“Local officials said they suspect the decline here is tied to the Valley’s worsening housing market. Consumers worried about decreasing home values or their ability to make home payments may spend less in stores, they fear.”

“Riverside and San Bernardino counties received less sales-tax revenue in the holiday 2006 season than they did in the same period the year before. Sales-tax revenue dropped in Sacramento County the past two quarters in which figures are available, compared with the year before.”

“Clovis had a 3% decline in sales-tax collections during the first three months of this year, the city’s first quarterly decline in at least four years, city figures show. ‘I’ve never seen two quarters in a row that were flat or down since I’ve been with the city,’ said Rob Woolley, a city employee for 20 years.”

“In a market where prices for new homes have skyrocketed over the past 10 years and forced some buyers out, there’s actually a positive side to high-priced housing.”

“That’s the conclusion the California Homebuilding Foundation recently came to in a study published this month on the fiscal impact new housing has on local governments.”

“With higher-priced new homes, more money is being made off of property taxes, one-time taxes, and home-building fees, said John Frith, VP of public affairs for the California Building Industry Association, which works with CHF.”

“A surge in housing prices over the past five years is fuel for CHF’s argument that new housing pays for itself and then some, Newman said. Besides more revenue from property taxes, one-time taxes and home-building fees, new housing attracts wealthy middle-income residents which in turn attracts commercial development that’s vital to the existence of several cities.”

“However, new housing’s positive economic impact on local governments only came about in the past three years, according to Redlands-based economist John Husing.”

“Husing said Inland Empire cities have consistently argued over the years that new housing doesn’t pay for itself, and they’ve been correct in doing so. New housing has only been paying for itself since 2004, Husing said, a time when prices were peaking or still climbing in some areas.”

“‘It really had a lot to do with assessed valuation,’ Husing said, noting that CHF’s report might not hold up if home prices continue declining. ‘Going forward, it probably will fall into a different dynamic.’”

The Record Searchlight. “Pulte Homes may have dropped its option to buy the Nine Mile Ranch property, some 3,100 acres near Cottonwood it had pegged for the ‘active-adult’ Del Webb community Sun City Tehama. But neither the mega-homebuilder nor the land owner is talking.”

“Former Del Webb spokeswoman Judy Bennett said Monday that she heard Pulte has walked away from the project. Bennett and former project manager Brendan Leonard were among 45 people let go in June.”

“Bennett said it was at a June 29 party with former Del Webb employees at her house that she was told Pulte wasn’t pursuing the land deal in Tehama County.”

“Leonard said he couldn’t speak for Pulte or Nine Mile Ranch. But he did say, ‘If they’re (Pulte) not out of the picture, they’re not spending money on it (Sun City Tehama).’”

“With foreclosure notices up in Shasta County, the opportunity for mortgage fraud has jumped. The FBI reported in May that California is a hot spot for lending predators.” “In Shasta County, the number of homes in some stage of foreclosure in the first half of 2007 is up 118 percent from a year ago.”

“‘I have talked to several different agents who have come across clients who have fallen victim; it is getting prevalent,’ said Nicole Dutell, branch manager of The Prime Financial Group in Redding.”

“The distressed property owner gets a call from someone who wants to help. They offer to lend the homeowner money, but in doing so the homeowner will have to transfer title.”

“Dutell says, use common sense. Who’s going to lend $100,000 to a homeowner who can’t make a mortgage payment on a house with zero equity?”

“There are some areas in the north state where home sales are actually up in 2007, bucking a countywide trend that has seen a 10 percent dip in sales. Take, for example, Lake California…near Cottonwood where prices have dropped about 12 percent from a year.”

“Homes are selling for about $279,000, down from $320,000 a year ago, added Bob Neher, co-owner of Vintage Realty.”

“And the typical-sized home selling in Lake California is about 1,600 square feet, a floor plan dwarfed by some of the 2,000-plus-square-foot monsters being built in Redding. ‘It doesn’t seem that many people are looking for homes that big right now,’ Neher said.”




Rising Number Of Foreclosures Signals Return To Normalcy

A report from the Arizona Republic. “The fallout from the country’s real-estate slump continues to reverberate in Arizona and across the nation as more homeowners and lenders turn to foreclosure to solve their financial woes. New data released Monday show that foreclosure-related filings in Arizona jumped during the first half of 2007, compared with the same period a year ago.”

“Experts say it will likely take time before things get better. ‘By any calculation, things are going to look bad compared to 2004 and 2005,’ local economist Elliott Pollack said. ‘There will be a transition period over the next couple of years as those people who took loans that maybe they shouldn’t have taken have to deal with the issue.’”

“Numbers released b RealtyTrac show that foreclosure-related filings in Arizona increased by 128 percent in the first half of 2007, over the same period a year ago. In Maricopa County, for example, there were 19,394 properties in some stage of foreclosure in the first half of the year, up from 7,671 during the year-ago period, the company said.”

“Data from Glendale-based Information Market are different but reflect the same upward trend. That firm shows that 2,952 homes were foreclosed on in Maricopa County from January through June, up from 208 during the first half of 2006.”

“‘They are at an all-time high, but it’s also following a period of very high sales back in 2005,’ said Tom Ruff, a principal with Information Market. ‘I just look at it as a market correction, myself.’”

“While most experts agree the rising number of foreclosures signals a return to normalcy both locally and nationally, it still can have a very negative impact on neighborhoods.”

“‘If you go into a neighborhood and there’s a lot of foreclosed properties, they’re empty, you don’t know who’s going to buy them, they’re probably not being maintained at the moment,’ said Jay Butler, director of realty studies at Arizona State University.”

“Home building in metropolitan Phoenix continues to stumble, with permits dropping 23 percent from last year. But it’s not all bad news. We remain among the nation’s leading housing markets.”

“Valley housing analyst RL Brown said the traditionally strong Phoenix market retains potential even though builders have suffered some damage. ‘If you’re a home builder, you want to be where the action is,’ he said.”

The Review Journal from Nevada. “Apartment landlords are not able to raise rents in Las Vegas as much as they have in the past, partly because of increased competition from single-family homes, a multifamily broker said Monday.”

“Concessions such as one month of free rent and move-in discounts are going up and overall rents are staying flat, Spence Ballif of CB Richard Ellis said. He estimated 11,000 homes in Las Vegas that are not owner-occupied. Many of them are being offered for rent because they’re not selling.”

“‘What we’re experiencing is the amount of single-family homes being rented is giving us short-term supply,’ Ballif said.”

“Previous annual rent growth leaders such as Phoenix, Las Vegas and Riverside-San Bernardino, Calif., continued to slide, Chris Bates of RealFacts said. With a quarterly increase of 0.3 percent, Las Vegas will see an annual rent growth increase of 1.2 percent, dramatically lower than last year’s 5.4 percent annual growth rate, he noted.”

“‘I think it’s going to slow even more, particularly with decreasing occupancy,’ Bates said. ‘The other thing I’ve heard in pockets of California is all of these single-family homes are built and not sold, but they’re being rented.’”

“‘With Nevada having the highest foreclosure rate in the country for single-family homes and condos, we have seen the vacancy rate increase. This is surprising, but it seems the people being foreclosed on are moving into rental homes or upper-end apartments,’ said Carl Sims of Hendricks & Partners.”

“Also, with home prices on the decline, some renters are now starting to buy foreclosed homes, he added.”




No Signs Of A Slowdown Or Turnaround

Some housing bubble news from Wall Street and Washington. “IndyMac Bancorp Inc., a big Southern California mortgage specialist, said Tuesday second-quarter profit fell 57 percent as the deepening U.S. housing slump hurt margins and loan volume, and more customers fell behind on payments.”

“Lenders forced the company to buy back $219 million of loans because borrowers missed early payments, up from $48 million a year earlier. IndyMac specializes in ‘Alt-A,’ or ‘Alternative-A,’ mortgages, which fall between prime and subprime in quality.”

The Street.com. “IndyMac’s non-performing assets rose 342% to $516 million, while mortgage loan production fell 12% from first-quarter levels to $22.5 billion.”

“‘We anticipate that the second half of 2007 and 2008 will continue to be challenging for the mortgage and housing markets and for IndyMac,’ IndyMac CEO Michael Perry said. ‘We expect competitive pricing pressures on our [mortgage banking] margins to continue.’”

“‘In addition, we expect that the current, temporary volatility and reduced liquidity in the secondary markets will adversely impact secondary market execution, putting further pressure on MBR margins.’”

The Boston Globe. “Sowood Capital Management, a $3 billion Boston hedge fund launched just three years ago by former Harvard endowment manager Jeffrey Larson, sold most of its holdings in troubled debt markets yesterday after telling investors that it had losses of more than 50 percent this month.”

“Sowood told Bloomberg News last week that it did not hold any subprime mortgage debt in its portfolio. Nonetheless, it said its devalued bond holdings thrust it into a liquidity crisis and it was forced to sell securities to meet margin calls.”

“Last night an investor said Sowood had told clients it had lost 57 percent of its value and was being ‘completely liquidated.’”

“‘A loss of this magnitude in such a short period is as devastating to us as it is to you,’ Larson, said in a letter to investors. ‘We are very sorry this has happened.’”

From Bloomberg. “Shares of MGIC Investment Corp. and Radian Group Inc. tumbled the most since 2002 after the two home- loan insurers said their combined stakes of more than $1 billion in a subprime mortgage company may now be worthless.”

“MGIC and Radian said yesterday ‘unprecedented’ disruptions in mortgage markets this month may have destroyed their stakes, each valued at more than $500 million on June 30. The joint venture has received ‘an unprecedented amount of margin calls from our lenders,’ said today’s statement.”

“‘I’m surprised. It’s a very quick time frame to have that change in valuation,’ Mark Patterson, a managing director at Los Angeles-based NWQ Investment Management, said before C-Bass’s announcement. NWQ was one of the three biggest investors in both MGIC and Radian as of March 31. ‘There’s been incrementally bad mortgage news every day, but the magnitude of this is quite severe.’”

“Climbing monthly payments for borrowers with adjustable-rate mortgages ‘forced many homeowners to default without the ability to refinance their mortgages,’ Radian CEO S.A. Ibrahim said in a conference call July 25.”

From CNBC. “GMAC posted a 63% decline in second-quarter profit Monday, hurt by subprime mortgage losses at its home lending unit. Results included a $254 million loss at Residential Capital LLC, or ResCap, compared with a year-earlier $548 million profit, amid what GMAC called ’severe illiquidity’ in subprime mortgages, or home loans to people with weaker credit.”

“ResCap slashed second-quarter U.S. nonprime mortgage production to $700 million from $6 billion a year earlier. It also kept fewer riskier loans on its balance sheet. GMAC CEO Eric Feldstein nevertheless projected that ‘widespread weakness’ in housing and mortgages will persist this year.”

The Associated Press. “Trading in American Home Mortgage Investment Corp.’s stock remained halted Tuesday. If things grow more dire, Citigroup analyst Donald Fandetti said bankruptcy is possible. In some cases, a company in this situation would sell itself at a big discount to the value of its assets.”

From Smartmoney. “The warehouse debt dealers to whom AHM used to sell its loans, the likes of Deutsche Bank, Wells Fargo and Countrywide Financial, have fewer buyers for their ’structured’ products these days, and none at all interested in anything but the choicest cuts except at 50 cents on the dollar.”

“Such dealers had extended $4 billion in credit to AHM, and with the securities stuck on the originator’s books depreciating by the day, the warehouse crew demanded more collateral. Hence no dividends for AHM shareholders.”

“‘I think this could drag out into the fall,’ says Paul J. Miller of Friedman Billings Ramsey. ‘The issue is that the market is frozen. I don’t know when it’s going to get unfrozen. I think people will get comfortable with credit at some point, but we don’t know how bad it’s going to get. Liquidity crunches like these tend to work themselves out, but we’ve never seen one like this. What’s going to happen is that there will be better mortgages originated, because that’s the only stuff that’s trading.’”

The Daily Telegraph. “Sales of bonds that finance the $US1.2 trillion ($1.42 trillion) US subprime home loan market have ground to a halt, as delinquencies by borrowers continue to rise and credit rating agencies downgrade the securities.”

“‘Moody’s and Standard & Poor’s finally got it into gear, downgrading hundreds of subprime issues and threatening more to come,’ Bill Gross, manager of the world’s biggest bond mutual fund.”

“‘When these loans reset, IO periods are over, what makes you think things are going to go favourably?’ said Darcy Morrison, an analyst at Evergreen Investments. ‘So the (new issue) market is kind of frozen.’”

“‘Rating actions caught the attention of investors who thought that if you bought a ‘AAA’ rated bond that it would stay ‘AAA,’ said Morrison. ‘Who knew it could get dinged as bad as it was.’”

“The market for new subprime bonds ‘has practically ceased activity’ because of the ABX sell-off and wider spreads on the underlying bonds, said Christopher Flanagan, head of ABS research at JPMorgan Securities in New York.”

“Big lenders including Countrywide Financial Corp and Wells Fargo & Co have stopped offering some subprime ARMs that customers with low credit scores may rely on to save their homes. Some 40 per cent of borrowers may no longer be able to refinance before their ARMs reset to higher interest rates, Mr Flanagan wrote in a note.”

The San Francisco Chronicle. “New data seem to confirm fears that Countrywide Financial is not the only lender facing problems with prime home-equity loans. Industrywide, the percentage of prime home-equity loans at least 60 days delinquent has more than doubled to 1.14 percent in May from 0.51 percent in May 2006, according to new data from First American LoanPerformance.”

“Until last week, most analysts weren’t focusing on the home-equity market. Countrywide’s announcement was the first clear evidence that mortgage problems could spread to prime.”

“‘I don’t think (Countrywide’s announcement) should have been a surprise, but up until a month and a half ago, the majority of people were saying this was just a subprime problem,’ says Joshua Rosner, managing director of research firm Graham Fisher & Co.”

“Joseph Mason, an associate finance professor at Drexel University, expects to see more problems with mortgages that were disguised as prime.”

“‘Much of prime is not really prime. The Alt-A base (has) been found to be really subprime. And much of the subprime has turned out to be flat-out fraud,’ Mason says.”

“‘Borrowers over-borrowed, brokers over-lent, investment banks oversold performance and rating agencies overrated (mortgage-backed securities). What we thought was quality was not quality,’ he says.”

“The highest level of defaults in 10 years on subprime mortgages and a $US33 billion pile-up of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms.”

“‘The market is being driven by fear,’ said Mark Kiesel of California-based Pacific Investment Management, manager of the world’s biggest bond fund.”

“‘They’ve got a problem,’ said Daniel Fuss, vice-chairman of Loomis Sayles & Co. ‘It’s pretty bad. They’re going to have to go back to the private equity people’ to renegotiate their lending commitments, he said.”

“Scott MacDonald, director of research at Aladdin Capital Management, said: ‘Fundamental credit research does not mean anything at all in this environment. People are just trying to get out of the way.’”

The BBC News. “The UK housing market is slowing as interest rates begin to bite, the UK’s biggest homebuilder has said. Taylor Wimpey added that short-term conditions in the struggling US housing market ‘remained difficult to predict.’”

“In the US, the firm said that plunging land values in Florida and California had forced it to write down £60.9m from its books, on top of a £25m provision announced in May.”

“M/I Homes Inc. said Tuesday it flipped to a second-quarter loss, including tens of millions of dollars in write-offs, as delivery of new homes fell by nearly a quarter.”

“The homebuilder posted a loss of $42.6 million compared with the same period a year ago. Included in the second quarter figures are pretax charges of $72.1 million. These include $64.2 million in land-related impairment and abandonment charges.”

“The company, which focuses on the Midwest, Mid-Atlantic and Florida markets, said the ongoing housing slump and falling prices make it difficult to predict demand or margins.”

“Brookfield Homes Corporation today announced financial results for the second quarter ended June 30, 2007: Net income for the three months ended June 30, 2007 was $10 million, compared to $43 million in 2006. The decrease is primarily a result of fewer home and lot sales, and a decrease in the gross margin earned on housing to 18% from 27% for the same period in 2006.”

“Housing revenue for the three months ended June 30, 2007 totaled $155 million, compared to $193 million for the same period in 2006. The decrease in housing revenue is primarily due to fewer home closings during the quarter in the Southland/Los Angeles market.”

From MarketWatch. “Home prices in 15 of 20 major U.S. cities were lower in May compared with the previous May, Standard & Poor’s reported Tuesday. The Case-Shiller 20-city index fell 2.8% compared with a year earlier, S&P said. That’s the biggest decline in the seven-year history of the index.”

“In 10 major cities, prices were off 3.4% from the previous year, the largest decline since 1991.”

“‘At a national level, declines in annual home price returns are showing no signs of a slowdown or turnaround,’ said Robert J. Shiller, chief economist at MacroMarkets LLC., and the co-inventor of the price index.”




It’s A Boom Bust World

The Palm Beach Post reports from Florida. “The Briny Breezes sale is off. Ocean Land Developers sent certified documents this morning telling the corporate board the deal to buy the mobile home park for $510 million and convert it to a resort had fallen through, Ocean Land VP Logan Pierson said.”

“Real estate experts suggest Ocean Land’s demand for an extension was just a convenient way to make the deal go away because in today’s real estate market this deal no longer made as much sense.”

“‘Financing has become so incredibly difficult for just about any size developer. Huge developers are in a world of trouble, they are not even looking at new deals,’ said one expert, who didn’t want to be identified.”

“Joseph Good of ComNet Realty has worked with Ocean Land and saidhe believes the decision to walk away was market driven. ‘It’s terrifying; there seems to be an absence of buyers and to do a high-rise multi-unit project, any lender is going to require pre-sale sand right now– it’s hard to get presales,’ Good said. ‘It’s a boom bust world.’”

The Orlando Sentinel from Florida. “Condominium hotels may go down as one of the briefest fads ever to sweep the real-estate industry as the market slumps in Central Florida, only a year after it peaked. Potential buyers are disappearing and financing commitments are falling flat, leaving condo-hotel developers with an uncertain future.”

“Last week, the first such hotel to open in downtown Orlando filed for bankruptcy protection, a failure the developer blamed on a rapidly changing market.”

“‘Our sales were good in the beginning, but it got bad, bad, bad and then even worse,’ said Barry Greer, an owner of The Lexington at Orlando CityPlace. ‘The market was red-hot when we started this, but it folded up before we could close it out.’”

“‘There is essentially no condo-hotel market left this year,’ said Dante Alexander, CEO of the National Association of Condo Hotel Owners. ‘Eighty-five percent of the buyers were relying on second mortgages to buy their units, and that is gone. The mad money is gone from the market.’”

“Mark Lunt, a senior manager with Ernst & Young Hospitality Advisory Services, said condo-hotel units are real estate, and interest in them has fallen with the unraveling of the real-estate market. ‘Condominium hotels are an extremely risky asset class,’ Lunt said. ‘I think the market is falling apart in the condo-hotel sector in much the same way that it is falling apart in the condominium sector in general.’”

The Miami Herald. “In Florida, the number of foreclosures is up 77 percent compared to the same six months last year, RealtyTrac said. In South Florida, foreclosures have tripled in Miami-Dade County and Broward County in the first six months of the year, according to data from the counties.”

“Payment shock recently hit Rene Asor, who lives in Key West. Caught unaware, his monthly payment soared from $2,400 to $3,799. Asor fell behind, then caught up. But he doesn’t think he can hang on much longer.”

“He said his lender, Countrywide Home Loans, has offered little help but to refinance. ‘I’m going to go into foreclosure,’ Asor said. ‘Even to do a refinance it costs more money, the closing and all that.’”

Frtom WTVJ. “Homeowner Robert Dodds is not unlike many others in South Florida. ‘I wanted to get the house on the market at a good price and see if I can be out of here before anything would progress such as foreclosure,’ he said. ‘I need to sell the house.’”

“Ron Sheffield, president of Esslinger-Wooten-Maxwell Realtors, told NBC6, ‘If half your neighborhood is in foreclosure, half your condominium buildings in foreclosure, that will certainly impact your value.’”

“Zip code 33160, Aventura/North Miami Beach, ranked No. 19 in the nation and highest in South Florida. In that area, 480 properties went into foreclosure this year. ‘Not really what you’d expect when you look at the socio-economic picture in the North Miami Beach/Aventura area,’ said Sean Donahue of lender HomeBanc.”

“‘You can look at all the statistics and they are pointing to more and more foreclosures coming and that will drive down prices,’ said realtor Felix Tristani.”

“‘I think we are seeing significant deals in all zip codes now,’ said Sheffield.”

The Sun Sentinel. “Mounting mortgage defaults across South Florida threaten to hurt more than just those homeowners who lose their properties to lenders.”

“In the Tree Tops development in Wellington, one property near the entrance is in foreclosure and has been on the market for months. The vacant house has a rickety wooden fence, missing roof tiles and, until recently, a front yard full of weeds.”

“A buyer just walked away from a $190,000 contract on the home, where comparable homes go for as much has $240,000. As a result, neighbors trying to sell their wood-frame homes built in the early 1980s could have a hard time getting their asking prices, said Deanne Lee, a real estate agent who lives one street from the house in foreclosure.”

“‘It’s a scary thought,’ Lee said. ‘I see this as just the beginning.’”

“The number of Palm Beach County homeowners behind on their mortgage payments topped 1,000 in June, almost a fourfold increase from 259 a year ago.”

“In Floral Park, a foreclosed house went on the market down the street from Joe Rodriguez. It sold recently for just more than $263,000. As a result, Rodriguez is worried that he could have a hard time getting his $369,900 asking price, even though his four-bedroom corner property is bigger and includes a pool table as an incentive.”

“‘It’s a bad sign,’ Rodriguez said of foreclosures. ‘If the banks turn around and sell them for less, sure, it’s going to hurt [other sellers nearby.]‘”

“Because lenders don’t want to be in the real estate business, they’ll likely sell those properties quickly and at a loss that will reduce home values. ‘They’ll be bought by investors who will try to rent them out at a profit,’ said said Alan Hunter, a senior market analyst with Metrostudy.”

“Regardless, the downward pressure on prices actually will be good in the long run for overpriced markets, including South Florida, said Mark Vitner, senior economist for Wachovia Securities.”

“‘It’s going to help speed up the adjustment process,’ Vitner said. ‘More homes will get into the hands of more willing sellers, the banks or whomever. It’s a necessary thing.’”

From Florida Trend. “As Florida’s housing boom rolled along, Michael Wood read investment books and went to weekend real estate seminars to learn how to cash in. At the seminars, he was approached frequently by mortgage brokers offering loans to help him build a home and flip it.”

“Wood saw little risk. ‘It was strongly suggested that it was going to be 20% to 30% profit and that people were putting homes on the market and selling before construction was even complete,’ he said.”

“In early 2005, Wood signed up to build not one, but two homes, both in North Port. He had so much confidence in his friend that he let him handle everything from choosing the lots to the building plans. He took on more than $400,000 in debt and even started convincing his friends and family to sign up. ‘I’ve got seven or eight family members in this deal,’ Wood says.”

“But toward the end of 2005, Wood’s heavily mortgaged friends and family members began to harangue him with phone messages. They’d seen little or no construction activity on their lots, yet interest was piling up monthly on their loans.”

“In 2006, Construction Compliance finally broke ground on Wood’s first home. By August, it was nearly finished. But then ‘everything just stopped.’”

“Liens started pouring in on the house that was nearly complete, filed by subcontractors and suppliers who had never been paid. Then, Wood discovered that (the) firm had drawn $80,000 of his Coast Bank loan for work on his other home but had never started construction.”

“‘The bank allowed the builder to draw $80,000 without ever touching the lot,’ Wood says. ‘I am now out close to $90,000 for a lot that was never cleared — I don’t think anyone ever even walked on it.’”

The Independent Mail from South Carolina. “You’ve found the house you want but can’t seem to sell the one you have. It’s become an all-too-familiar problem for many people. As residential building and new home sales slow across the Upstate, housing is a buyer’s market, said Debbie Dorn, a Realtor in Anderson.”

“One of her clients, who wanted to move from Florida to Anderson, dropped the asking price on a home from $450,000 to $375,000 after 120 days on the market.”

“Ms. Dorn often hears similar stories, and local Realtors say the increasing number of people tied to their old houses is one of several reasons that a slowdown in the housing market nationally finally is reaching the Upstate.”

“‘There’s not too many people who can afford to buy a new house before their old house sells,’ said Tom Carr, a Realtor in Anderson.”

“The drop in sales could be…a sign that the baby boomers who have been driving the marketplace for lake homes, second homes and resort properties have reached the tipping point as buyers, said Dave Chamblee, owner of Anderson Area Properties.”

“At some point, baby boomers’ buying will slow. Then they’ll become sellers, Mr. Chamblee said.”

From WPDE in South Carolina. “The number of those who lose their homes to foreclosure is on the rise in South Carolina, up more than 50% since last year. The Homeownership Resource Center reports that there have been 224 active foreclosures in Horry County this year alone.”

“Realtors said the housing market went up in 2005 and has since adjusted, but not all investors are adjusting well.”

“Joni Burleson with Century 21 said, ‘A lot of investors come in buying at high peak, and now they’re selling for 10’s of thousands of dollars less, and they’re having a hard time making payments.’”




Bits Bucket And Craigslist Finds For July 31, 2007

Please post off-topic ideas, links and Craigslist finds here.