December 8, 2007

A Correction That Needed To Happen In California

ABC 30 reports from California. “You can find homes on the market that have, in just one year, dropped $100,000 in price. But realtors say those properties were way over-priced to begin with. Some of these homes have been on the market forever it seems. A year ago a three-bedroom Visalia home in a desirable neighborhood listed at $280,000. 229 days later the price has dipped to $200,000.”

“Brad Maaske, Visalia Realtor, says ‘In Visalia houses that had crept up to that $225-$240,000 range have slipped back down to the $180’s.’”

“A four-bedroom home in Fresno went for $254,000 just six months ago. This week it sold for $179,000. And one home on five acres in Sanger listed last year for about $800,000. It sold for $607,000.”

“We used to have more gentle ups and downs. This one went pkew, pkew, you know,’ he said.”

“Lennar Homes of Visalia have come down $60,000. The Lexington model cost $335,000 a year ago. It’s now $275,000 and with a quick escrow incentive. One just sold for $233,000.” Michelle Scott, Lennar Homes, says ‘We have drastic savings compared to a year ago so prices. It’s great for first-time homebuyers; people that don’t have a home to sell.’”

“Prices continue to fall but Maaske says serious home-buyers shouldn’t wait. ‘Maybe the house prices will go lower. Yeah they’re doing that and you know what they’re foolish,’ he says.”

The Recordnet. “The auction of 61 foreclosure homes in San Joaquin County last month resulted in the sale of two out of three of the homes offered in no-minimum bidding in Stockton.” Crystal Wright, spokeswoman for Hudson & Marshall, said banks have sold about 65 percent of the houses for which top bids were accepted in the auction.”

“Typically, more than 90 percent of top auction bids are accepted by highly motivated banks, with accepted bids coming in as low as 20 percent less than list prices, said Hudson & Marshall, which specializes in foreclosure-property auctions nationwide.”

“‘Banks may not have a complete understanding of the Stockton market yet, so expectations may be above what’s happening in the market,’ she said.”

“Frank Orello, a real estate agent in Stockton, said all six of his foreclosure listings in the auction were sold, but banks didn’t accept any of the top bids…with sales negotiated afterward. The accepted sales prices ranged from as low as 70 percent of list price to 91 percent of list, he said.”

“Another agent with a half-dozen listings in the auction, Cindy Mello, said not one of the bids for her listings was accepted or negotiated to a sale. ‘It says the auction doesn’t work, that it’s a marketing ploy,’ she said. ‘I don’t think the banks are ready to negotiate yet.’”

“One San Andreas bidder, Mel Schell, said his top bid of $180,000 for a house in San Andreas was rejected outright, but his agent was told that the foreclosure owner wanted to negotiate. Neither he nor his agent has heard anything more, although his agent was told that the auction company was overwhelmed by the bulk of the auctions, he said.”

The Sacramento Bee. “C.C. Myers, the contractor whose road-building exploits have become the stuff of California legend, said Friday he is working to stave off foreclosure on his Auburn area country club development.”

“Wachovia Bank, in a complaint filed Wednesday in U.S. District Court in Sacramento, alleged that Myers has defaulted on more than $61 million in loans and is seeking to foreclose on the 1,100-acre Winchester Country Club.”

“More than 110 families live in Winchester. In fact, Myers was building an 8,000-square-foot home there for himself and his wife. It was to be a showcase that drew buyers.”

“Court records show that troubles began for Myers’ development in January as defaults on principal and interest began to pile up.”

The Signal. “For the month of October, single-family home sales in the Santa Clarita Valley fell 42.3 percent when compared to last year, according to statistics released Wednesday by the Southland Regional Association of Realtors.”

“A total of 116 homes closed escrow, which is 85 sales fewer than the 201 transactions of October of 2006. Three years ago in June of 2005, the record high of 405 sales was reported.”

“In a press release, Larry Gasinski, president of the Association’s Santa Clarita Valley division, said, ‘It was inevitable that sales would slow down and prices soften. It’s a correction that needed to happen. That’s the natural outcome whenever there is an irrational expectation that prices will go up forever.’”

“Gasinski reminds people to not try to time the market and if a house is needed, to go ahead and buy it. ‘There are incredible opportunities out there now, a wide selection and attractive financing available if you have what used to be the traditional requirements — a good credit history, documentation and a reasonable down payment.’”

“Strapped homeowners could get some relief from a plan negotiated by the Bush administration to freeze interest rates on subprime mortgages. While the Santa Clarita Valley will see the effect of increased subprime rates, the Antelope Valley will be harder hit, said Jack Kyser of the Los Angeles County Economic Development Corp.”

“It was in the Antelope Valley, he said, that there was a greater instance of many affordable homes being bought, many of them likely with subprime mortgages.”

“Realtor Pam Ingram agreed that the Palmdale and Lancaster areas will be harder hit, though Santa Clarita Valley won’t be foreclosure-free. ‘

The Reporter. “Housing and mortgage professionals in Solano County saw some good in the administration’s relief package for homeowners, but many expressed concern that it might be too little, too late.”

“That could be bad news for owners of the 2,443 homes that RealtyTrac reports are in ‘pre-foreclosure’ status in Solano County. The company, which monitors real estate transactions, recorded that more than 1,000 of these homeowners received foreclosure notices in October alone.”

“Tim Kearns, owner of Fairfield-based First Priority Financial, said he’s seen more adjustable rate mortgages written in the past few years than were necessary. ‘The backlash is that lenders and investors alike will likely be much more skittish about investing in adjustable rate loans in the future,’ he said.”

“The average client doesn’t go into foreclosure because they don’t understand their loan, according to Kearns. ‘Most people had an assumption that the future was going to be better. They knew the loan would get a lot more pricey. But they thought that would be OK, because hey, real estate always goes up in value. And that’s the misnomer they were told.’”

“‘I’ve certainly heard anecdotally about people who had that opportunity in the Bay Area, to take out loans with very little paperwork,’ said Cynthia Kroll, a senior real estate economist at the University of California, Berkeley.”

“A local mortgage lender with 20 years experience in the business agreed. ‘I kind of saw this coming a couple of years ago,’ said the broker, who asked not to be named. ‘As soon as appreciation went away, the lending criteria became too easy. If you could breathe, you could get a loan.’”

The Orange County Register. “DataQuick reports this AM that home sales in the 22 business days ended Nov. 20 were 46.8% below a year ago. Prices continue to run about 8% below a year ago and 12% under the summer of 2006 peak.”

“The Fed meets Tuesday with a dormant real estate market, a slumping overall economy and curious inflationary signals (like gas prices) on its mind. Will we see another cut in the widely watched Fed Funds rate?”

“Lender Jeff Lazerson: ‘I think they will lower rates by 1% because the economy is swirling the drain, they have to do something before this turns into a depression…Specific to Orange County, our economy is generally better the rest of the nation but our property values went up much more so they have a lot more to fall if we cannot down this slippery slope.’”

“Orange County is the only major government agency in California with public money invested in controversial securities known as structured investment vehicles, or SIVs.”

“The state has stayed away from the securities. So have the treasurers of the six largest counties other than Orange. The only major county to invest in SIVs is San Diego, which never bought as much as Orange County and cleared out its last one in November.”

“‘We did not want to risk any of our assets,’ San Diego Treasurer Dan McAllister said.”

“Last week, Moody’s Investors Service said it might downgrade $105 billion in structured investment vehicles, including 11 in which Orange County has invested $460 million. A downgrade would reduce the securities’ potential sale value.”

“Treasurer-Tax Collector Chriss Street defended Orange County’s investment in this type of security, which increased during his year on the job. The investments are suffering from ‘guilt by association’ with subprime mortgages, although none of the county’s investments contain subprime mortgages, he said, adding that he’s not buying more.”

The Bakersfield Californian. “State tax officials filed a lien against David and Jennifer Crisp this week for taxes owed from 2005.”

“Separately, Cole recently transferred three southwest properties into the sole and separate ownership of his wife, Rebecca Cole. The homes are located at 5802 Laurel Canyon Drive, 1706 Sainsbury Court and 12504 Crown Crest Drive.”

“When reached by phone Friday and asked to explain the rationale behind the transfers, Cole initially said, ‘It’s none of your business.’”

“‘Eventually you guys will figure everything out,’ he continued. ‘It will be all right then,’ he said, then hung up.”

Some People Made Dumb Bets

Readers suggested a topic on the news of the week. “We might as well have a weekend discussion on the bush pseudo-bailout. (It will be spread over the all the posts otherwise…). The abbreviated summary of positions so far:”

“1. ‘Bailout will accomplish nothing and is just political positioning.’ 2. ‘If retroactive modification of mortgage contract occurs, new loans will dry up.’ 3. ‘Bailout is interfering with the free market! I’m leaving the country.’ 4. ‘FHA and appraisers will conspire to keep prices artificially high, believe you me.’”

“For my own point of view, I think it’s 1. Initial reviews of phone calls to the toll-free number seem to consistent with this view.”

One reported. “CNBC received an avalanche of emails about the plan and if those idiots are to be believed 80%-90% were vehemently against the plan and any bailout. A few of the emails were read on air and based on the emails read it sounded like CNBC was flooded with a bunch of HBBers. Maybe there is hope yet.”

One saw consequences, “The basic question is: Are you more worried about the popping of the current bubble, or the prevention of future bubbles? Policies that mitigate the effects of our current crash are diametricly opposed to those which seek to prevent another bubble. Do you try to make it possible for FBs to refinance out of foreclosure, or do you try to limit the stupid financing?”

One questioned the planning, “The way it was released does have some of the markings of a trial-balloon. The idea can’t have been hatched in secret, having time to get the bugs worked out, so it’s immature at best.”

“Experts are still weighing in on it’s effects assuming various unknown conditions and limitations.. and who knows.. maybe even bloggers ideas are contributing to the plan as govt lurkers keep tabs.”

Another said, “This thing will sink when JJ has a million-FB march on Washington demanding much more than a rate freeze.”

One points to the politics, “The real issue is rising and record breaking foreclosures. At this juncture, the housing crash is like a rapidly unfolding natural disaster. It cannot be stopped from wreaking havoc. It’s a national disaster with global consequences.”

“Consequently, you cannot fault the administration for trying to get ahead of the burgeoning political foreclosure firestorm. It does not want to be accused of doing nothing while 2 million or more families are thrown out on the streets. It had to act.”

One looked at the road to hell, “I think the plan will actually make things worse. The market for MBS was dismal already. Now I imagine it will cease to function unless much higher interest rates are paid by all future borrowers. This in turn will cause housing prices to drop even more than they would have if the bubble had been left to collapse on its own.”

The Courier Gazette. “Collin County real estate agents and mortgage brokers are tempering their enthusiasm for President Bush’s subprime mortgage bailout. Concern stems from the fear that it is prolonging the inevitable, they say.”

“Since Monday, the Collin County clerk has posted 49 trustee sale notices, properties that have been foreclosed on and are scheduled for a Jan. 1 sale on the courthouse steps.”

“‘A large class of people that bought homes misstated their income or did not have the willingness to pay debts on time. Homes were sold to those people in record numbers. Those people will return to being renters,’ said.”

“Investors make up another large chunk of those who defaulted on subprime loans. ‘The biggest problem is spec buyers and pseudo investors who bought when they didn’t have the money long term,’ he said. ‘They bought in droves in Collin County when prices got too high in other states.’”

“Many times, homebuilders would sell spec homes 10 at a time to investors to close out a neighborhood, he said. Bob Baker, president of the Collin County Association of Realtors, believes many of the current foreclosures probably were new homes just a couple of years ago.”

“‘Collin County has a lot of new homes,’ he said. ‘These foreclosures are probably buyers who bought new homes. I would say about two-thirds of the builders use the adjustable rate’ for their in-house mortgages.”

The LA Times. “The success of the Bush administration’s plan to stem home foreclosures will hinge in large part on whether the investors who own sub-prime mortgages will play along and accept lower interest payments to keep people in their houses. That may be asking a lot.”

“Thanks to the alchemy of modern finance, investors who put up funds for the same ‘pool’ of thousands of sub-prime mortgages can face very different levels of risk, depending on the section of the pool they own.”

“At the bottom are investors whose tranches pay high returns but could face wipeout if too many homeowners fall into default. Therein lies the problem in getting investors in a pool of mortgages to agree to change the terms of the underlying loans.”

“Modification is ‘clearly going to favor the guy at the bottom’ of the pool, said Jeffrey Gundlach, chief investment officer at Los Angeles-based TCW Group Inc., which manages more than $50 billion in CDOs for investors.”

“‘The guy at the bottom is starving for modification,’ Gundlach said. On the other hand, investors at the top of the pool, who know they have little risk of loss from a wave of foreclosures, could be hurt by modifications that could lead to reduced interest earnings for the pool overall.”

“There also is a fear that many struggling sub-prime borrowers who would be initially helped by the Bush plan’s interest rate freeze could default even before the freeze period is up. Investors might well prefer to just cut those people off now.”

“Some analysts said the risk of borrowers returning for more forbearance could be intensified by a provision in the program that calls for fast-tracking hundreds of thousands of loans for a rate freeze, as opposed to undertaking a detailed and time-consuming study of the borrowers’ finances.”

“‘To decide if a modification is beneficial,’ analysts at brokerage Deutsche Bank Securities wrote in a note to clients Friday, a mortgage servicer needs to assess the borrower ‘with the same degree of care as a new borrower walking through the door.’”

“Determining eligibility for a rate freeze based on just a few criteria, as the Bush plan proposes, ‘is to repeat the same type of underwriting shortcuts that got us here,’ the analysts wrote, referring to the no-questions-asked frenzy of 2005 and 2006 that gave home loans to almost anyone who could fog a mirror.”

“This is the kind of stuff governed by detailed contracts between investors and loan servicers. And in general, Gundlach said, ‘if you’re going to modify more than 5% of the loans [in a pool], you’re in blatant breach of contract.’”

“As for the idea that the servicers would get permission from every pool investor, good luck. Specific pools can have hundreds of investors, many of them foreign. The logistics of achieving some kind of consensus are daunting at best.”

“Josh Rosner, a managing director of financial consulting firm Graham Fisher & Co. in New York, figures that a rash of legal challenges to loan modifications is inevitable. ‘I think that’s exactly where we’re going to be’ in 2008, he said.”

“Well-intentioned though the rescue plan may be, Rosner said, to some investors it will amount to confiscation of their assets with the assent of Uncle Sam.”

“Edward Yardeni, a veteran economist who heads Yardeni Research in New York, may echo many Americans’ views when he asserts, perhaps only partly tongue-in-cheek, that lenders who made sub-prime loans under the terms targeted by the rescue plan ’should be charged with usury, arrested and thrown into lenders prison.’”

The University of Arizona. “Gerald Swanson, a professor of economics in The University of Arizona’s Eller College of Management, said that extracting the country from the subprime mortgage morass promises to be painful.”

“‘For the past two years, I’ve said allowing people to buy homes with interest-only mortgages is letting them rent with the option to buy,’ Swanson said.”

“‘That’s a dangerous game because if the housing market goes down and the mortgage flips, guess what will they do? Stop renting,’ he said. ‘Why continue to pay into an asset that is falling in value? So, houses are flipping and people are finding good reasons to just walk away.’”

“The problem there is that foreign banks bought many of these securities based on the assumption that as the interest rates on subprime mortgages went up, so would the value of their securities.”

“‘We’ve given the world McDonald’s, i-Pods, Coca Cola and the securitization of debt. Maybe they didn’t want that,’ Swanson said.”

“‘The moral hazard is that we gave banks the ability to issue loans, package them, sell them and avoid the risk. If you can make transactions taking cash off the top and then not have to assume any risk attached to it, would you do it?’”

“There’s a corollary in the early 1990s, when Japan’s real estate market came crashing down. Swanson said it continued to fester for a decade because Japanese government and banking officials initially refused to acknowledge the depth of the problem, a strategy he hopes the U.S. avoids.”

“‘We put up a bunch of incentives for people to try to make some money and now it’s starting to unwind and there will be some costs,’ he said. ‘We will not get out of this situation until we allow these losses to actually occur.’”

“‘Some people,’ Swanson said, ‘made dumb bets.’”

A National Question Everyone Wants To Know

The Chicago Tribune reports from Illinois. “Robert Gabriel never imagined he’d end up living in a virtual ghost town. Gabriel moved into an Antioch subdivision in April, before builder Neumann Homes declared bankruptcy last month. Now, he said, he worries about vandals, thieves and nasty critters creeping around his property, especially at night. Streetlights aren’t installed, roads aren’t paved and half-built homes stand as stark symbols of the builder’s financial woes.”

“‘It’s been like living in a ghost town since we moved in,’ Gabriel, said as he pointed to the skeletal frames of unfinished homes. ‘It can get scary when it’s dark out.’”

The Courier News from Illinois. “The high number of foreclosures in the Fox Valley cannot always be explained simply, as area lawyers and detectives are discovering. Details of a local multimillion-dollar mortgage fraud scheme have unfurled in federal court.”

“According to his plea agreement, Luis Uribe would use the ‘names and identifying information of former clients’ with ‘good credit histories’ to obtain mortgages for people who otherwise would not qualify for a loan.”

“Elgin Police Department Detective Jim Roscher got his first inkling of the scheme in October 2005, when a woman, Olga Trejo went to officials to report a case of identity theft. Trejo had moved to Georgia, and was trying to sell her Elgin home, Roscher said.”

“‘Washington Mutual had called her and asked her where her mortgage payment was. It was late,’ he said. When Roscher and Trejo looked at her credit report, they found four extra mortgages, from four different mortgage companies, listed there. ‘All the sudden, she owns houses up here she never bought.’”

“Trejo owed $551,000, according to the credit report, he said. Released on bond, Uribe went to Florida, where, court documents show, he was arrested on Sept. 5 for the same fraud crimes he committed in Elgin.”

The Journal Reporter from Illinois. “Park Ridge, Niles and Rolling Meadows have all seen foreclosures climb over 100% from 2006 to 2007, according to the RealtyTrac.”

“Jeff Metcalf’s company compiles data on foreclosures, and he’s followed the developments. He said while we’ve heard a great deal about the sub-prime mortgage crisis and unscrupulous mortgage brokers, that doesn’t tell the whole story.”

“‘The programs that were available for people to finance homes were more numerous than ever before. Home ownership has been at an all time high, 65%, over the last five years, and so you’re going to get more foreclosures.’ Metcalf said.”

“Metcalf said the housing boom gave people the impression that skyrocketing property values would make up for the amount of money they were having to borrow. In some cases, he said, people didn’t even have to verify their income to take out a loan.”

“‘The sub-prime crisis, it’s all we hear about,’ said Metcalf. ‘That’s what gets ratings. This daily, hourly pulse is going to make us all insane. The solution is going to be like any other financial problem we’ve gotten into in this country, it’s working through it. Let the market work, it’ll work itself out, it always does.’”

“Metcalf said when he talks to realtors, they say prices are going back to 2004 levels, and that eventually the housing market will turn around.”

“Another factor in the foreclosure situation may be investors buying multiple properties with the intent of ‘flipping’ them or selling them at a profit later. ‘Quite frankly, a lot of the homes that are in foreclosure are investors,’ Metcalf said. ‘These investors just extended themselves.’”

The Detroit Free Press from Michigan. “By springtime, many homeowners in metro Detroit could face an unwelcome and seemingly improbable trifecta: Higher taxes, lower home values and shrinking services. Many communities are anticipating reduced property tax collections in 2008 because of the foreclosure crisis. ”

“Angry reactions are likely when assessors explain to many homeowners why their taxes will increase even as housing values have plunged, said Robert Daddow, deputy Oakland County executive.”

“‘Explaining that to people is going to be very, very hard,’ said Frank Audia of Plante Moran, an accounting firm that advises dozens of local governments.”

“New development has been stalled or canceled, said Finance Director Todd Drysdale. The city invested more than $1 million to buy and clean an old industrial parcel for a development of 80 homes. After putting up 12 homes and selling just three, the developer has stopped.”

“‘We also have four to five other condo projects that have stalled,’ said Drysdale.”

The Daily Herald from Wisconsin. “Although there currently is a buyers’ market for housing in the Wausau area, people considering selling their homes shouldn’t be scared off by what they hear and read in the national news, local real estate agents say.”

“‘For high end homes, over $400,000, the market is saturated in inventory. It’s a matter of supply and demand. It’s not necessarily a bad market, there’s just too much inventory,’ said Heath Tappe, president of Main St. Homes of Wausau.”

“Competition has brought down home listings here to fair prices or slightly in favor of buyers, said Tappe, who has seen more flexibility in pricing recently than ever before. The company likely will build about eight to 10 ’spec’ homes, starting next spring, he said.”

“‘We see where there is a hole and then try to find lots we can build on in that price range,’ Tappe said. ‘The existing homes that we do are generally in that lower price range, $100,000 to $250,000, and that seems to move well.’”

The Capital Times from Wisconsin. “Dane County home sales dipped again in October, reflecting a downward trend in the market.”

“The Realtors Association of South Central Wisconsin reported that October sales of houses and condominiums reached 362, reflecting a nearly 14 percent decline from the 412 reported a year ago and about 44 percent below October 2005.”

“Foreclosures in Dane County hit a record high in October at 101 filings, 38.3 percent more than the 73 from October 2006.”

“Projections show that this year’s total sales will reach those of 2002, according to association Executive VP John Deininger, an all-time record at that time.”

“It’s customary, according to Deininger, for home sales to decline in the fall and early winter period. This year’s lower decline suggests ‘renewed confidence’ in the market on the part of consumers, Deininger said.”

“‘We have weathered the ‘mortgage meltdown,’ the foreclosure statistics, the national press and still have a consumer base that believes that buying a home is a great investment and lifestyle enhancement,’ stated Deininger.”

“The fifth annual First Business Economic Survey of Dane County conducted by the UW School of Business released today showed continued optimism among most local executives. But it also reflected the national economic slowdown.”

“Nearly 4 in 10 respondents said the housing slump has hurt their bottom line.”

“David Ward, president of Madison-based North Star Economics, said the slowdown in home building and home sales affects many sectors. ‘It runs deep into all areas you normally don’t think about like plumbing supplies, the guys who sell carpet and lay it, painters, wallpaper,’ said Ward.”

The MinnPost from Minnesota. “A bike ride down Chicago Avenue in Minneapolis feels like a tour of an abandoned city. Foreclosures have decimated a 10-block area of homes, duplexes and condos. A few blocks away, giant ‘buy here!’ banners wave in the wind and do dances of desperation on downtown condo facades.”

“Minneapolis condo owners, in particular, are getting pummeled as the subprime mortgage saga unfolds, prices continue to fall and the glut grows.”

“Minneapolis now has a four-year stock of condos, according to a recent report by Metrostudy, a housing market-research firm. The 13-county Twin Cities area is suffering from serious condo overdose as well: There are 4,608 brand-new condos on the market and more than 3,000 previously owned units for sale, according to Metrostudy. That adds up to a 30.8-month supply of condos for the entire area.”

“Given the current slump, expensive condos will likely wind up empty for a while. Even if you could afford to snatch up one of the thousands of vacant spaces (just 49 of the 1,044 brand-new condos on the market in November were under $150,000), according to the Minneapolis Area Association of Realtors, the new requirements make it such that you’d have to perform various acrobatic acts just to get approved.”

“Take, for instance, Sam Osterhout, who has a credit score of 780, a well-paying full-time gig, and was willing to put down around 37 percent of his condo’s value. He simply wanted to move into an uber-modern window-filled condo on Washington Avenue that smells like fresh paint and new shoes.”

“His loan process, which began in mid-August, became such a hassle that his first mortgage consultant quit, saying he couldn’t find a single lender in town who could guarantee a closing.”

“So why were banks turning away such a stellar candidate as Osterhout? Because Osterhout was buying into a downtown Minneapolis condo building that is zoned 60 percent commercial and 40 percent residential. Even Osterhout’s wad of cash and payment history couldn’t keep banks from running from him like emus under attack.”

“Condo sellers aren’t faring much better. Paul Stepnes spent more than $500,000 restoring a building overlooking Lake Calhoun. He turned the duplex into two high-end condos.”

“The pristine condos, reduced since they first went on the market by as much as $200,000, have been sitting vacant for more than a year. ‘We’re going to have to sell them at a loss; we do realize that,’ says Stepnes, whose rehab work has appeared in magazines like Midwest Home. ‘What else can you do? They’re at a great price. It doesn’t make sense.’”

“Buildings with even as little as 10 percent in rentals are considered risky. Yet in an effort to not eat dirt, many developers are turning those could-be condos into rentals. The result? Further exacerbation of the condo glut.”

“It’s worse for condo owners trying to sell: ‘A building that has more than 15 to 20 percent commercial-use is also higher-risk because of the number of businesses that fail,’ says Ronny Loew, a mortgage banker in Edina. Put another way, you’re considered more of a loan risk if you have what ‘could’ amount to lousy neighbors.”

“Add investor concentration — where investors still own a large share of the units — to the volatile mix of cut-and-run neighbors, appraisal rules and increasing rentals, and the problem swells. ‘Investors still have control of so many buildings,’ says Vince Hunt, a senior mortgage consultant in St. Paul. ‘That makes it much harder for owners to sell.’”

“So, how many condos ’sold’ in the Twin Cities currently are investor-owned? That’s the million-dollar question. ‘There’s no way we can know that,’ says Ryan Jones, the Twin Cities director of Metrostudy. ‘That’s a national question. Everyone wants to know that.’”

“Yet another neighbor issue is compounding the condo problem. If a neighbor is forced into foreclosure or has to sell quickly, it affects the price of every condo in the building. And foreclosures show no sign of abating any time soon. In the third quarter, there were 2,363 foreclosures in Hennepin and Ramsey counties, according to RealtyTrac. That’s a 102 percent increase from the same time last year.”

“Experts predict the current glut will reel us into the 1980s condo crisis all over again, when the excess left behind a string of unsold condos and loan defaults that caused downtown home prices to sink deep into the Mississippi.”

“But so far there is one glaring difference between the two decades of condo-a-plenty: Few of the condo leftovers this time around could be refashioned as affordable rentals. According to the Realtors Association, nearly 70 percent of the newly built condos in Minneapolis are priced at $250,000 and above.”

Bits Bucket And Craigslist Finds For December 8, 2007

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