February 7, 2008

An Ironic Bright Spot For California

The Contra Costa Times reports from California. “Zena Hall figured the eagerness of lenders to sell foreclosed houses would help her capture a great price on her next home. About $380,000 later, Hall found out she was right on the mark when she bought a foreclosed townhouse in San Lorenzo. ‘I think I got an excellent deal,’ Hall said. In 2005, that townhouse sold for $532,000. That means Hall’s price was 29 percent below the 2005 price. That was 5 percent below a $400,000 appraisal done on the home just before Hall bought it.”

“Banks and other lenders now account for a sharply rising share of the homes being sold in the Bay Area and East Bay. A year ago, 1 percent of all home resales in the Bay Area involved a foreclosed house.”

“During November, 446 foreclosed homes were sold in the nine-county Bay Area. That’s 11 percent of all the home resales in the region in that month, according to an analysis by the Times of sales data compiled by Dataquick. In the East Bay, 229 foreclosed homes were sold in November — 16 percent of all the resales in that area.”

“All of this is an ironic bright spot for a Bay Area housing market tainted by mortgage defaults, real estate job losses and plunging homes sales. The housing bust has created something of a boom in transactions involving foreclosed houses.”

“‘They were anxious to sell,’ said Alex Almendarez, who with his wife bought a Martinez house in December for about $290,000. The seller, World Savings Bank, foreclosed on the house through a trustee’s deed in July 2007, according to Contra Costa County property records.”

“At that time, county files show, the bank valued the house at $382,000. His purchase price was 24 percent below the bank’s value.”

“A small sample of East Bay agents disclosed they are listing for sale hundreds of foreclosed homes in the area. Other brokers say they have hundreds more homes that banks are preparing to sell.”

“Carlos Gaytan and two family members bought a foreclosed property in Mountain House in western San Joaquin County. ‘Initially, they dropped the price, but they were still asking over $500,000,’ Gaytan said. ‘Two weeks later, the bank called my agent and said they had cut another $30,000.’”

“Katherine Prinzivalli, an agent in Antioch, pointed to one house in that city that has been listed by the lender for three months. This house’s fate underscores the dismal Bay Area residential market.” “The prior owner paid $650,000 for the Antioch house, Prinzivalli said. The bank took back the home for $503,000. The bank now seeks $413,000 — more than one-third below the original sales price.”

“‘That’s a huge hit and no offers,’ Prinzivalli said. ‘There is so much inventory out there.’”

“Frank Carbone in September bought a house in Oakland’s Glenview district, deemed a desirable neighborhood. The bank first sought $525,000. Carbone countered at $450,000. He ultimately bought the home for $465,000.”

“‘I got a good deal, but I couldn’t pay more for it because it needs a lot of work,’ said Carbone, who does his own construction work. ‘It remains to be seen if it’s worth it.’”

The Mercury News. “Home price declines in California this year will be steeper than she originally forecast, an economist for the state’s biggest real estate trade group said.”

“‘I’ve obviously had to eat my ’soft landing’ words,’ said Leslie Appleton-Young, chief economist for the California Association of Realtors, referring to a refrain from the statewide housing forecast she delivered in October.”

“Last fall she predicted median prices in the state would drop about 4 percent this year. Wednesday, she said she’s in the midst of revising that forecast, and that a median price decline of 8 to 10 percent is more realistic.”

“Appleton-Young exhorted real estate agents to double their efforts to cultivate prospective clients, especially first-time buyers who are finally seeing conditions turn in their favor.”

“‘Believe me, they are out there,’ she said, and waiting until they think prices are reasonable. ‘Nobody rings a bell at the bottom of the market,’ Appleton-Young said. ‘Everybody’s waiting for the bell.’”

The Recordnet. “A second major foreclosed-home auction will be coming to Stockton next week, with about 85 Stockton-area houses going up for sale at the San Joaquin County Fairgrounds. Real Estate Disposition Corp., based in Irvine, will hold a series of seven foreclosure auctions in Northern California in coming days, with about 950 houses up for bid.”

“Each property has an undisclosed minimum acceptable bid, but sellers, generally banks, mortgage companies and investor groups, can later accept high bids that fall under that minimum.”

“Jerry Abbott, president and co-owner of Coldwell Banker Grupe, said about 70 percent of current sales are foreclosure properties.”

“Abbott said that with about one-third of the properties sold at high bids and another third negotiated to sale, ‘Auctions are going to become commonplace,’ he said.”

The Modesto Bee. “Diablo Grande’s financial troubles continued this week when the company that runs the community’s water treatment plant threatened to terminate the contract because bills weren’t paid.”

“Charles Voltz, president of Veolia’s western division, said he didn’t know how much Western Hills owes the company, but said it was in the neighborhood of $3 million.”

“The water issue was more aggravation for people who purchased homes at Diablo Grande, a 33,000-acre project in western Stanislaus County with plans for 2,300 homes, five golf courses, a hotel and conference center, winery, and commercial development. The resort is in the early stage of residential construction, with about 400 homes completed.”

“‘We moved here because of the promises they made of a hotel, a spa, a shopping center, and none of this has panned out, and now we don’t even have golf courses,’ said homeowner Kristina Ross-Ortiz. She said many residents don’t know about the water treatment issue.”

“‘The few of us who know are worried about it,’ said Christy Peterman, another homeowner.”

The News Mirror. “Despite losing nearly $100,000 in the now defunct Mesa Verde Estates project, the city of Calimesa could well end up the current fiscal year with a balanced budget. The failure of the Mesa Verde project, the downturn in the housing market generally and two lawsuits the city is involved in have created some financial problems.”

“The city learned just recently that Fiesta Development, which had secured approval for the Mesa Verde Estates project, had filed bankruptcy. ‘Fiesta has walked away from the project owing the city almost $100,000 for planning and engineering services,’ acknowledged David Lane, Calimesa’s city manager. ‘The city will have to pay for these services, but we won’t get that money back from the developer now.’”

“Lane reported that the downturn in the housing market hurt the budget generally. This year’s budget projected $150,000 in revenue from new building permits. At mid year, however, the new projection is for only $50,000.”

“‘With continued, judicious spending by departments, we could be all right,’ Lane said during the city council meeting.”

The Desert Sun. “Palm Springs Mayor Steve Pougnet promised during his campaign that he would explore eminent domain if developer John Wessman didn’t submit plans for the Desert Fashion Plaza within the first 90 days of his taking office.”

“Wessman Development VP Michael Braun wrote in a Jan. 29 letter to the city that a specific plan to turn the Desert Fashion Plaza into a lifestyle center with condos, a movie theater, hotels and shops would be submitted in the second quarter of this year.”

“This week, Wessman Development officials said plans will not be submitted until April - two months after Pougnet’s deadline.”

“‘The Desert Fashion Plaza, under the Wessman Development Company’s stewardship, remains not merely under-utilized; it has been poorly maintained and remains a blighted eyesore, creating an economic maelstrom that is draining the vitality of our downtown,’ Pougnet wrote.”

The Union Tribune. “After San Diego County dodged the last recession in 2001 – continuing to grow as the rest of the nation went into decline – some civic boosters boasted that the region was immune to recessions.”

“But as the nation appears to be heading into a recession, a growing number of economists fear that the county’s sagging housing market and weakening employment could pull it under as well.”

“Economist Christopher Thornberg said California and San Diego County are already in a recession.”

“‘Unemployment is rising. Consumer spending is declining. Home prices are continuing to fall. The foreclosure rate is huge,’ said Thornberg. ‘That’s why I’m not saying a recession is about to happen in San Diego. I’m saying it already is happening.’”

“Alan Gin, economist at the University of San Diego, agreed that the region has entered a ‘San Diego-style recession,’ meaning that job growth is lagging behind the population’s growth rate. But he believes the county’s diverse mix of industries will help it avoid the technical definition of a regional recess.”

“‘It’ll be very weak growth compared to what we’ve had, but it won’t be a decline,’ Gin said.”

“On the other hand, Gin said the housing downturn could affect consumer spending. ‘A key question is to what extent consumer spending was fueled by home-equity loans,’ he said. ‘With those loans drying up, what will happen to retail spending?’”

“The median home price in San Diego County last month was 13 percent lower than it was the year before. In some neighborhoods, such as Spring Valley and southeast Chula Vista, the decline was more than 30 percent.”

“A record 987 houses were foreclosed upon in December. Bankruptcy filings jumped from 471 in January 2007 to 839 last month. Residential building permits declined 31 percent last year, following a 29 percent drop in 2006.”

“The unemployment rate rose by more than a full percentage point last year, jumping from 3.7 percent in December 2006 to 4.8 percent in December 2007, its highest point in four years.”

“To Thornberg, the jump in unemployment is the clearest sign that the economy has gone into a recession. ‘The only time the unemployment rate jumps more than 1 percent in a year is when the economy is heading into a recession or is already in one,’ he said.”

“One thing the economists agree on is that the decline in residential real estate, which sparked the downturn, will continue.”

The North County Times. “In San Diego County and elsewhere, shrinking home equity has led consumers to cut back sharply. Optimists and pessimists generally agree that’s a return to earth from the freewheeling days of easy money from home equity loans and cash-out refinancing.”

“‘The question is, ‘How rocky is the road going to be?’ Thornberg said. ‘The answer is ‘pretty rocky.’”

“Even economists who hesitate to predict a regional recession, such as UC San Diego’s James Hamilton, acknowledge that the picture has darkened considerably in recent months.”

“‘This is not a wild or irresponsible forecast at all,’ said Hamilton, who studies the effects of federal monetary policy.”

“Kelly Cunningham, chief economist at the San Diego Institute, said the county has probably already weathered the worst effects of the mortgage mess. Home prices peaked earlier in San Diego County than in other parts of California, and the local bubble has mostly deflated, he said.”

“A wide range of businesses in the region are continuing to create jobs, a factor that Cunningham said will soon begin to boost demand for homes and reverse a 27-month decline in prices.”

“The Federal Reserve’s cuts in a key interest rate should help to prod the real estate market and business investment, in San Diego County and elsewhere. ‘It’s a good time for taking out loans,’ Cunningham said.”

“‘The (economic) slowdown seems to be driven solely by the real estate fallout,’ he added. ‘I think Chris might be overstating it.’”

The Daily Bulletin. “If the towering steel power lines on Edison Avenue don’t scare you away and you’re OK with living near a state prison, Bridlewood Estates in east Chino might be the perfect fit for your family.”

“Dairy farmers have sold out to developers over the last two decades. ‘About 2000 or 2001, the (Bridlewood Estate) properties were removed from the contract restrictions and the properties developed,’ said Brent Arnold, city planner.”

“These ranch-style homes enticed new home buyers from 2001 to 2003 with half-acre lots and plans ranging from 3,190 to 4,370 square feet. Equestrian white-picket-fenced paths enhance this pristine development even though most - if not all - of the neighborhood’s residents probably don’t own horses.”

“It was the ‘big yards’ and ‘bigger garages’ that drew Darren Russell and his wife to buy a new two-story house in 2003 on Whitebark Court for $567,000.”

“‘I’ve seen some sell for $1.2 million,’ he said about homes for re-sale in 2005.”

“On some days, the smell of cow dung hangs heavy in the air. Remnants of the agricultural preserve have survived, butting up next to cinderblock walls that encase newcomers in their stucco villages.”

“The view from Euclid Avenue: new homes … strawberry fields … new homes … Van Wyk’s Milk Testing Plant. And don’t forget Stockyards - the store is giving away ‘free bulk fertilizer,’ according to a big sign in its parking lot.”

“Russell doesn’t mind the cows for now. Besides, the city’s master-planned Preserve community just south of his neighborhood will offer a maze of bike paths and walking trails he won’t be able to pass up.”

“The California Institution for Men, lies about a mile away, but that doesn’t bother him too much either.”

“‘A lot of people are bothered by the prison,’ he said about his neighbors. ‘I’ve gone on bike rides over by College Park (neighborhood), and you can hear the gates slamming. (The inmates’) voices carry over.’”




Skimming Along The Bottom

Some housing bubble news from Wall Street and Washington. Reuters, “D.R. Horton Inc, the largest U.S. home builder, posted a wider first-quarter loss on Thursday, as sales fell by more than a third and new orders dropped 61 percent, reflecting the depressed U.S. housing market. Markets such as California, Las Vegas and Arizona, where builders once couldn’t get enough land to fill demand, are now stone cold and weigh on the balance sheets of the companies.”

“‘I don’t see a recovering California in the next 12 months,’ Donald Tomnitz, D.R. Horton’s CEO, said on an analysts’ conference call.”

“The results included land impairment and write-off charges totaling $245.5 million.”

From CNN Money. “Donald R. Horton, Chairman of the Board, said, ‘Market conditions remained challenging in our December quarter as inventory levels of both new and existing homes remained high while pricing remained very competitive. Lending standards continue to be more restrictive than during the previous year, and buyers continued to approach the home buying decision cautiously. We expect the housing environment to remain challenging.’”

“The Company’s cancellation rate (cancelled sales orders divided by gross sales orders) for the first quarter of fiscal 2008 was 44%.”

The Associated Press. “MDC Holdings Inc. said Thursday its fourth-quarter loss widened as the housing market slump deepened. The Denver company reported a loss of $281.1 million, or $6.14 per share. The result included charges of $175.2 million for asset impairments, $7.8 million for write-offs (and) $13.8 million on land sales.”

“Revenue dropped 42 percent. Average selling price dropped 9.7 percent. Closings fell 39 percent.”

“The company’s operating loss in the West _ one of the hardest-hit regions where home prices plummeted in Arizona, Nevada and California, ballooned to $159.3 million. MDC swung to a loss in its Mountain and East regions as well, as sales swooned across the nation.”

“Paris G. Reece III, MDC’s chief financial officer, said, ‘As has been the case in each of the last four quarters, the impairments this quarter primarily occurred in our West homebuilding segment, with more than 75% applicable to subdivisions in our Arizona, Nevada and California markets. Over the last six quarters, we have impaired approximately 60% of the 15,000 lots we owned at the end of our 2007 fourth quarter.’”

“Reece continued, ‘Of the $727 million impairment charge we took during 2007, $556 million related to our land inventory, which decreased by almost 65% year-over-year. In our West segment, where 80% of the impairments in 2007 occurred, land inventory decreased by more than 75% during the year. California’s land balance alone dropped by more than 90% in 2007, and most of the remaining $35 million of land is being held for sale to third-party developers or investors.’”

From MarketWatch. “M/I Homes Inc.’s fourth-quarter loss widened to $68.5 million, due to various charges totaling. Results from the latest quarter included land-related impairment and abandonment charges of $104.9 million, joint venture investment write-offs of $4.3 million and severance costs of $3.1 million, M/I Homes said Thursday.”

“Pending sales of previously owned homes fell a steeper-than-expected 1.5 percent in December, pointing to more dreary conditions for the beleaguered housing market, a real estate trade group report on Thursday showed.”

“The National Association of Realtors Pending Home Sales Index, based on contracts signed in December, a key gauge of future home sales activity, dropped to 85.9 from 87.2.”

“In a fresh sign that the nation’s housing crisis will worsen, home prices are likely to decline in 2008 for the second straight year, the NAR said Thursday.”

“The Realtors, in its monthly economic and sales outlook, is forecasting a 1.2% drop in prices of existing homes sold this year. Only a month ago, the association was forecasting that prices would be flat in 2008 and that the home market would rebound in the last half of the year.”

“The group was forecasting that the first quarter would see a record 5.3% drop from year ago levels. Now it’s expecting the current quarter to see even a larger decline in prices of 6.1%.”

“The group is also forecasting a 4.8% decline in the number of existing homes sold this year. A month ago it was still forecasting a 0.9% pickup in the sales. Existing home sales plunged 12.8% in 2007, according to the group’s figures.”

“‘We’re seeing a pattern that is consistent with skimming along the bottom of the cycle, and sales could ease modestly,’ said Lawrence Yun, the group’s chief economist, in a statement.”

“The Pending Home Sales Index fell 1.5% to 85.9. That was better than only the record low of 85.5 set in August.”

“The Realtors have been recently lowering their price and sales forecasts with each monthly update. The group still has a more bullish view of the market than other outside forecasts.”

From Realty Check. “In their never-ending quest to put a positive spin on the housing market, the Realtors today changed the way they report their annual housing forecast.”

“Usually, they just put the current year’s predictions of sales and prices and then the following year’s predictions.”

“This month they divided the current year into two parts, saying that existing home sales would run at an annual rate of 4.9 million units and then rise ‘notably’ to 5.8 million units.”

“This prediction is based on an assumption that Congress, as part of the stimulus package, will raise the GSE loan limits.”

“The increased share of housing debt taken on by Freddie Mac and Fannie Mae during the housing slump has put the two government sponsored enterprises at risk, it was charged Thursday.”

“The two outfits are ‘reducing risks in the market, but concentrating mortgage risks on themselves. These risks are beginning to take their toll,’ said James Lockhart, director of the Office of Federal Housing Enterprise Oversight, which regulates Fannie and Freddie.”

“The two government sponsored entities (GSEs) saw the housing debt they and the Federal Home Loan Banks carry grow by 16 percent to $6.3 trillion, more than the total public debt of the United States, according to Lockhart.”

“‘The conforming market supported by Freddie Mac and Fannie Mae is the only well-functioning segment of the mortgage market,’ said Richard Syron, CEO of Freddie Mac. ‘We’re experiencing greater losses as house prices decline, but that is not surprising since this is the market we were created to support it.’”

“And Daniel Mudd, Fannie’s CEO agreed. ‘Our business is meeting the increased demand for liquidity and our overall credit book has held up relatively well,’ he said. ‘Yes, these are tough times, but that is when you want a Fannie Mae.’”

“‘[GSEs] have become the system for secondary mortgages,’ said Senator Richard Shelby, and that creates a risk to the general economy.”

“Democrats sought to expand the role of Fannie Mae and Freddie Mac in affordable housing and the subprime market on Thursday as a proposed increase in the companies’ conforming loan limit ignited some protest from Republicans.”

“Congress is considering allowing Fannie and Freddie to buy bigger loans as part of an economic stimulus package. The idea drew fire from Richard Shelby, the committee’s top Republican.”

“‘Once again, instead of thinking of ways to further protect the American taxpayer, we are actually considering ways to further expose them for the benefit of those making healthy six-figure salaries,’ Shelby said Thursday.”

“Exelon Corp., one of the largest U.S. power companies, disclosed Thursday it owns securities backed by subprime mortgages in the company’s investment trusts.”

“The falling value of these investments could require Exelon to contribute additional funding to the trusts, which support the company’s pension plan and the future cost of shutting down nuclear power plants, Exelon said.”

“The disclosure, contained in Exelon’s 2007 report to the Securities and Exchange Commission, highlights how widely subprime investments sold by Wall Street banks have found their way into global investment pools.”

“‘Due to recent market developments, including a series of rating agency downgrades of subprime U.S. mortgage- elated assets, the fair value of these subprime-related investments may decline,’ Exelon said.”

“A review by Moody’s Investors Service of the top ratings of bond insurers is taking time because ‘we’re taking a great deal of care to get the answer right,’ Moody’s Chief Credit Officer Andrew Kimball said on Thursday.”

“Ratings agencies are under fire for failing to signal risks in mortgage-backed securities and in structured deals that include them, which had previously been considered very safe and in many cases held top ‘AAA’ ratings.”

“Kimball added that there is ‘hysteria’ in the markets over the expected cumulative losses from subprime residential mortgages, but at the end of the day no-one really knows how large they will be, saying ‘it’s a crapshoot,’ he told a conference organized by the New York Society of Security Analysts.”

“Kimball said that rating agencies, like markets, have been susceptible to ‘group think,’ and ‘fashionable think.’”

“Had the rating agency stepped back from its analytical models and looked at residential mortgage backed securities with its gut feeling, it may have been better able to predict the market downfall, he added.”

“‘I have to believe we could have done better,’ he said.”

“The woes in the U.S. financial sector are ‘poetic justice’ for bankers who designed and sold complex investments that have since gone sour, billionaire investor Warren Buffett said.”

“Buffett appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.”

“‘It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,’ he said.”

“He added: ‘What has happened is a repricing of risk and an unavailability of what I might call ‘dumb money,’ of which there was plenty around a year ago.’”

From Bloomberg. “The estimated 1 million homeowners with $500 billion of option ARMs are beyond the help of interest-rate cuts by Federal Reserve Chairman Ben S. Bernanke. While subprime borrowers face an average increase of 8 percent or less when their adjustable-rate mortgages reset, option ARM homeowners may see their monthly payments double after their adjustments kick in.”

“‘We call them neutron loans because they’re like a neutron bomb,’ said Brock Davis, a broker with U.S. Express Mortgage Corp. in Las Vegas. ‘Three years later the house is still there and the people are gone.’”

“Once option ARM borrowers’ loan balances reach a predetermined limit, called a negative amortization cap, usually 110 percent to 120 percent of the mortgage amount, their payment rates immediately increase.”

“‘These could be called long-fuse, exploding ARMs,’ said Kathleen Keest, former assistant Iowa attorney general. ‘I’ve heard people say they are the most complicated product ever offered to consumers. They are the real liar loans.’”

“The loans accounted for 8.9 percent of the almost $3 trillion in U.S. home loans made in 2006, up from 8.3 percent in 2005, according to Inside Mortgage Finance.”

“One in five option ARMs packaged into bonds last year covered more than 90 percent of the home’s value and required no proof of a borrower’s income, according to UBS AG, Europe’s largest bank by assets. Two percent required no down payment at all from the borrower, the analysts said.”

“Delinquency rates on option ARMs tend to be low in the early years, misleading some investors to think they will remain safe, said Sean Kirk, a debt trader at Seaport Group LLC.”

“Sophisticated borrowers can take out option ARMs and avoid problems, said Ira Rheingold, executive director of the National Association of Consumer Advocates. It’s just that mortgage sellers marketed them to people who didn’t understand the terms and couldn’t afford them, he said.”

“‘It was used to cheat people,’ Rheingold said. ‘It helped artificially keep housing prices higher than they should have been.’”

“Joe Ripplinger took out a $184,000 mortgage in 2006 and makes his payments every month. Now he owes $192,000.”

“The 66-year-old Minneapolis house painter has a payment- option adjustable-rate mortgage. It allows him to write a check for $565 a month even though he owes $1,300. The difference is added to the mortgage, and when his total debt reaches $212,000, or after five years have passed, he said his monthly minimum could jump to about $2,800, which he can’t afford.”

“‘We’re barely making it right now,’ Ripplinger said. ‘I never heard of a payment-option ARM before. We thought they were putting us on a 30-year fixed.’”

“Andrew Laperriere, managing director of (a) New York-based research firm, estimates that 85 percent of option ARM borrowers owe more than their original loan balance. ‘The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,’ Laperriere said. ‘That’s pretty ugly.’”

“About $460 billion of adjustable-rate mortgages are scheduled to reset this year, with the next spike in resets coming in 2011, when $420 billion in mortgages will adjust to new interest rates for the first time, according to New York-based analysts at Citigroup Inc.”

“That’s the year that Joe Ripplinger’s interest rate will jump, provided he doesn’t reach his negative amortization cap before then. ‘It’s the worst thing we could have done,’ he said.”




Some Air Is Coming Out Of The Housing Market

The Miami Herald reports from Florida. “A flood of foreclosures has forced county offices in Miami-Dade and Broward counties to expand their services to handle the load. With more than 1,000 foreclosed homes ready to hit the auction block in February, the Miami-Dade County Clerk’s office is increasing the number of days it hold auctions from two to three per week.”

“‘We’ve been running into some serious problems,’ said Michael Henderson, a spokesman for the Miami-Dade clerk. ‘We’ve needed an extra day for a couple of months now.’”

“The number of properties scheduled for auction nearly tripled from 2006 to 10,209 in 2007, plus another 1,467 in January, according to a Miami data services company. If recent foreclosure filings are any indication, the numbers will continue to swell. Lenders opened foreclosure cases on some 8,829 home loans in Miami-Dade County in the fourth quarter of 2007, and 10,207 in Broward. Another 3,247 cases were filed in Broward in January.”

“‘It’s never been like this, not for as long as I can remember,’ said Barbara Brown, court operations manager for the Broward Circuit, Civil and Family courts.”

“She pointed out the Broward court has been auctioning about 240 properties per week since January, up from about 30 or 40 per week the same month last year. Investor Julian Dominguez Jr. added that more than 95 percent of the properties for sale were being bought back by lenders.”

The Herald Tribune from Florida. “A new study shows that ‘occupancy rates are falling and the rate of rental growth is slowing’ throughout the state of Florida. The Sarasota-Bradenton metropolitan statistical area ranked as one of the worst performers during the last year in terms of both rental growth and average occupancy.”

“‘There’s a number of property managers and owners out there who perhaps haven’t been in the market long enough to know what needs to be done to move these properties,’ said Scott Corbridge, with Sarasota Management and Leasing. ‘People might be thinking about what they were told they could get in terms of cash flow back when they bought a property, and they’re not willing to budge just yet.’”

“There is a tremendous amount of competition in the rental market these days because many people who cannot sell their properties are turning to renting as a way to ride out the slow market, Corbridge said. ‘We’ve got a lot of accidental landlords out there,’ he said.”

“Alvin Holmes, who owns a number of rental properties in the Sarasota-Bradenton area, said local landlords have been getting hit hard from numerous directions. ‘The ones I work with say this is the worst they’ve ever seen it,’ Holmes said.”

“Holmes said the drying up of construction work resulted in many laborers, particularly immigrants, simply leaving town when the jobs disappeared. At the same time, the flow of people that has traditionally migrated to Florida from the northern states has slowed in recent years — primarily, Holmes said, thanks to rising property taxes.”

“‘People just aren’t coming here like they used to, and we need that influx of people,’ he said. ‘We depend on them.’”

“Carolyn Pearson is one such owner. Pearson and her husband have lived in the Sarsota area for decades, and say that ballooning property tax bills on their four rental properties combined with the soft market are pushing them to the breaking point.”

“‘We’ve lived and invested here for almost 50 years,’ Pearson said. ‘We weren’t speculators, we’ve worked hard, we tried to do everything right … and now this American dream has turned into a nightmare.’”

“It has gotten so bad, Pearson said, that she and her husband have started looking for jobs again just to make ends meet. They have not had much luck. ‘There aren’t a lot of employers that are falling over themselves to hire someone my age.’”

“If things do not turn around soon, they will likely have to move elsewhere, she said.”

“Southwest Florida’s four biggest and best-financed real estate brokers saw annual sales drop last year — to the tune of $728 million — but that was at half the pace of the drop of the prior year.”

“That has some of the big brokers voicing optimism about 2008, with some calling a bottom to the regional market.”

“Sales of single-family homes in the Sarasota-Bradenton market dropped 11 percent in 2007, one of the better performances statewide. Only Panama City, with 10 percent, saw a smaller decrease. Charlotte County-North Port slumped 25 percent, putting it in the middle of the pack for the 20 largest markets statewide.”

“Sarasota-Bradenton is ‘definitely at the bottom,’ says Prudential Palms President Scott Sosso, whose firm saw a decline of about 17 percent last year. Sosso points to many houses that are now selling for 2003-04 prices. The 2007 median sales price was $285,700, while the December price of $246,900 was comparable to overall prices in 2004.”

“Others are not so sure, noting that 2008 is likely to be another year marked by more mortgage problems. Southwest Florida is experiencing record foreclosures as a result of the speculative buying spree of 2004-2006, particularly in North Port, and that is adding to inventory of unsold homes.”

“The parent of First State Bank saw its profits cut 54 percent in 2007 because of provisions that it made for loan losses resulting from a troubled real estate market.”

“The Sarasota-based bank holding company revealed last month that it had boosted its total reserve for loan losses by 55 percent to a record $7.6 million. Of its residential portfolio, $5.6 million in loans, or 10.4 percent, are impaired, the bank said. Impaired commercial loans rose to $13.1 million, or about 8.54 percent of total commercial loans.”

“‘The continued decline in property values in our core lending markets have negatively impacted our profitability in 2007,’ said John E Wilkinson, the company’s CEO, in a statement.”

The Bradenton Herald from FLorida. “Stuck in the rut of the real estate downturn and facing various liens and litigation, the developers of the Bel Mare at Riviera Dunes condominiums are resorting to desperate measures to sell their units.”

“Tim Morris, CEO of Corvus International, the developer of the twin 15-story towers near the Manatee Convention Center, said the company is reducing prices on units by 25 percent or more and has instituted a unit buy-back program.”

“The deal caps Corvus International’s loss on each unit at $50,000 and requires buyers to pay brokerage fees and closing costs. There are other restrictions as well.”

“‘We just need to essentially get real buyers to become aware of what we’ve done and get them out there to take a look at the product,’ Morris said. ‘We’re trying to firm up their position and limit their downside.’”

“It’s been tough going for Bel Mare and other local condos that have faced dozens of lawsuits from investors seeking to have deposits returned because the projects weren’t finished on time. Units that had been priced from $750,000 to $1.8 million, now range from the mid-$400,000s to $1.3 million, Morris said.”

“Despite Bel Mare’s struggles, Corvus is moving forward with development of Sanctuary Cove, 252 single-family homes east of Bel Mare on the Manatee River that will range from the low $400,000s to more than $4 million.”

The St Petersburg Times from Florida. “A sweat stain has worked its way through a royal blue silk blouse and past the top polyester threads of 34-year-old Brandie McGowan-Fitzgerald’s black business jacket. Fortunately, Wednesday morning’s rush hour traffic buzzing past her left and right is moving too quickly to notice.”

“When they line up for the light at Busch Boulevard and Interstate 275 she walks car to car, dressed in full business attire, and shows her sign: ‘Single Mom Needs Work. Take a Resume.’”

“Last year, bad luck came in threes. She was laid off, had an adjustable rate mortgage push her monthly budget past her means and is separating from her husband.”

“‘Financially, right now the clock is running. I’m almost out of money. It takes a toll on you mentally. Especially as I watch my bank account slowly decrease. I have $1,000 in the bank right now until I get a job,’ she says. ‘What am I going to do?’”

The Orlando Sentinel from Florida. “Electricity to parts of the office-condo towers in The Plaza could be shut off for nonpayment at any time, and dozens of unsold residential units in the adjacent Solaire condominium will be auctioned off March 1 by that tower’s developer-owner.”

“Both actions are signs of the depth of the collapse of the downtown Orlando condominium market, which despite its troubles is considered stronger than those in other parts of the state.”

“Minimum bids for 24 of the one- and two-bedroom units in Solaire will start at $170,000. Bids for the other 18 will start at $250,000.”

“Bryan Disbrow, who lives in one of the penthouse residential units in Solaire and works across the street for SunTrust Banks in the mortgage division, said he has no doubt the tower and other downtown properties will weather the current slowdown.”

“‘I’ve been a suburban person, but now I love this,’ said Disbrow. ‘It’s very urban, and I can just walk everywhere.’”

“He said he paid $795,000 in 2005 for his two-bedroom, two-bathroom unit, which has western views, including the nightly fireworks at Walt Disney World in the distance. A similar unit of the same size, with eastern views that include rocket launches from Cape Canaveral, recently sold for $945,000, Disbrow said.”

“The building’s ground-floor retail spaces remain vacant, though, and the multiplex theater next door is still unfinished, giving parts of the complex a vacant, depressed look.”

From 11 Alive in Georgia. “The foreclosure tallies keep reaching all-time highs. On Tuesday alone, 7,000 homes were auctioned off on the steps of the Fulton County Courthouse.”

“In a mere four hours, 2,000 homes will be auctioned off on the steps.”

The Atlanta Journal Constitution from Georgia. “Atlanta homebuilder John Wieland said Wednesday he’s more ‘upbeat’ about his business now than he was feeling as 2007 drew to a close amid a flood of troubling economic news.”

“In November, his $350 million luxury condominium project across the street from the High Museum of Art suspended construction plans for at least 18 months. Just days later, John Wieland Homes and Neighborhoods confirmed that 59 company employees had been laid off in a streamlining move prompted by slow home sales.”

“‘The end of last year was the most miserable time of my life,’ Wieland said.”

“Wieland noted growing house inventories and rising foreclosures in remarks to EconSouth, the Atlanta Federal Reserve Bank’s quarterly publication, last summer. ‘I am shocked, and I don’t shock too easily,’ he said. ‘I don’t know anybody out there that is ‘doing well.’ And the bankruptcies of the builders in Atlanta are starting.’”

“A new promotion offering price discounts up to $100,000 and a lifetime structural warranty on Wieland houses produced 89 sales for the company between Jan. 25 and Feb. 3, twice the number of homes the company sold in the same period last year, according to Wieland officials.”

“That provided a welcome cash infusion of $50 million for the homebuilder, which is currently marketing 30 communities with more than 400 unsold homes around the metro area.”

“The homebuilder is so pleased with the outcome of the initial promotion that it has extended the offer for an additional two weeks, Wieland said.”

“He acknowledged the challenges Atlanta’s overbuilt housing market is facing this year. With 11 months of unsold inventory , companies with swollen backlogs of unsold lots will feel the pinch of carrying charges and razor-thin margins.”

“‘Some air, shall we say, is coming out of the housing market in Atlanta,’ Wieland said. ‘But that’s good for customers and it’s good for the housing market.’”

“Home prices are likely to remain very flexible until recovery begins, Wieland said. ‘Are people going to be able to negotiate? Sure they are,’ he said.”

“‘We’re just a little part of the Atlanta market. There are plenty of buyers out there to meet our needs,’ Wieland said. ‘Somebody’s going to shrink and I’m not interested in doing it. We’re going to make it exciting enough to buy from us that somebody else does the shrinking.’”

“The latest sign of hard times in the housing industry sits in the driveway of Lot 13 at Willow Wind Estates in east Cobb County. Well, the sign is in the yard, but the evidence is in the driveway.”

“‘This Car Comes With Home’ screams a banner-size sign in front of a $550,000 home. A new Toyota Highlander, a roughly $30,000 tangible, visible incentive, is parked behind the sign.”

“Builder-developer Nader Zarrabi knew that he’d have to offer something more than a fair market price for a new home. ‘We’re always trying to come up with incentives in this business, particularly now, which is the toughest time in my career. But everyone is giving some kind of incentive, so I figured I needed to do something big and something you could see physically.’”

“So how flexible is he on this Highlander and Lot 13? Flexible enough to move it to one of the other lots. Probably flexible enough to figure out a way to just reduce the price of the house.”

“Zarrabi believes keeping homes close to their appraised value will help the buyer in the long run, as well as the neighborhood. ‘These houses appraised at $600,000, but even when we were building them, we knew it was going to be a soft market, so we listed them in then mid-500s.’”

“‘It wouldn’t make sense to drop the price more because it drops the values of houses all around. This way, the price stays at mid-500s, and the incentives aren’t recorded on sales records. In five years if you want to resell, it helps, he said.”

“Oh yeah, the refrigerator, washer and dryer come with the home, too, the sign says in much smaller letters.”




Bits Bucket And Craigslist Finds For February 7, 2008

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