February 28, 2008

The Foreclosure Situation Is Affecting Prices In California

Bloomberg reports from California. “A muddy gravel road winds uphill through a redwood forest to Jake Terhune’s $985,000 home just outside of Geyserville, in the heart of California’s Sonoma County wine region. Terhune, a self-employed cabinetmaker put down $100,000 and agreed to pay about $6,900 a month for 30 years to buy the three-bedroom house in 2006. Things started going wrong almost immediately after he moved in. Demand for Terhune’s custom cabinetry dried up. His business’s income, which had been about $20,000 a month, plunged 50 percent.”

“After making his first payment, he fell behind. Unable to persuade Ameriquest Mortgage Co. to modify his loan, he stopped paying and ignored calls threatening to take his home. By the summer of 2007, Ameriquest, once the biggest home lender to people with credit problems, put the loan up for sale.”

“‘I was working on two houses, but they got foreclosed,’ Terhune says. ‘If my customers can’t pay what they owe me, the mortgage company can’t get what I owe them.’”

“Terhune was in trouble almost right from the start. When his second $6,910.89 mortgage payment came due, he didn’t have the money.”

“‘I called AMC and told them I only had $5,000,’ Terhune says, referring to Ameriquest Mortgage Co., which is no longer doing business. ‘I asked them if we could work something out, but they were not interested,’ he says.”

“The following month, Terhune owed $14,000; he says he had $10,000. ‘I had worked on a house but that house got foreclosed, so I’m not going to get paid,’ he says.”

“A mortgage collector told him not to send any money unless he could pay the entire amount, he says. By the time National Asset Direct bought the loan and offered a plan to reduce his payments, Terhune was $70,000 in arrears. Even with the easier terms, he missed the December payment.”

“‘I’m keeping good faith and trying to catch up,’ he says. ‘I’m flying by the seat of my pants.’”

The Record Searchlight. “When it comes to the sagging real estate market, Siskiyou County is not immune. Local real estate agents and sellers are taking a hit. Realtor Shelley Sarason (who) specializes in sales in Mount Shasta and Lake Shastina, knows the pain.”

“‘We didn’t have enough homes for sale in ‘05,’ she said. ‘Lots in Lake Shastina were selling like crazy, and we had a few bidding wars on houses that were priced to sell.’”

“Season Johnson, a loan officer in Mount Shasta, thinks the change began as early as 2002. ‘In ‘02 real estate began to really appreciate. More people began investing, and Wall Street did, too. More money led to more loan programs and some people began upgrading to bigger homes while others were getting into the market and often into homes they couldn’t afford in the real world,’ she said.”

“The county has seen fewer foreclosures, however, than other areas of the state. Augusta Meyers, owner of Augusta Meyers Realty in Mount Shasta, had some advice for first-time buyers: ‘Remember, you are not buying a dream home. It’s your dream to own a home.’”

“The last time the median sales price in Shasta County was lower was in January 2005. January home sales in Shasta County dipped to their lowest level in the 14 years DataQuick has tracked the area.”

“‘It’s almost like a bunch of people are standing on the side of a pool and waiting for somebody to jump in,’ lender Ken Lawrence said of the state of the market.”

“Joe Rodola, a Redding credit counselor who leads monthly first-time home buyer classes, believes prices are still falling because consumers are still scared.”

“‘I think it’s generally created by the national media, they report another 100 homes foreclosed today, and it’s oh my gosh,’ Rodola said. ‘The other side of it is people still don’t want to get one of these bad (subprime) loans. I tell people they’re not making them anymore.’”

“Redding Realtor Ron Largent said home prices rose so sharply during the boom years that the fall has been long and hard. ‘Is it going to drop more? That will be a question of supply and demand. If buyers surface, then prices will hold,’ said Largent.”

The Telegraph. “Quick, where’s the foreclosure rate higher – upper-middle class Folsom or low-upper class El Dorado Hills? It’s higher in suave El Dorado Hills, significantly higher – by 50 percent.”

“‘We’re still going to see foreclosures increase, as long as people can’t get out of adjustable-rate mortgages,’ said mortgage lender Barbara Ott, in Placerville. ‘Banks are eating hundreds of mortgages.’”

“‘A lot of ’stated-income’ programs are gone,’ she said. ‘Lending limits on stated-income are dropping — instead of 80 percent of (home) value, it’s now 65 percent.’”

“Also disappearing is a lending habit of loaning to borrowers who had proven they were bad risks. ‘The sub-prime market is gone,’ said Greg Clines of Century Oak Mortgage of Folsom. ‘There will be more ’short’ sales and foreclosures in the next one and a half years. They won’t be a majority of houses offered, but they will be a majority of houses actually selling.’”

The Daily Pilot. “After watching the foreclosed home down the street slowly devolve into a state of dilapidation, Mary Dinius said she was forced to take matters into her own hands. The Mesa North resident paid her gardener an extra $40 to mow her former neighbor’s lawn on Cheyenne Street.”

“Dinius didn’t know the home’s former residents, but it is only one of many foreclosed homes in the Mesa North/Del Mar neighborhood that have slid into a state of disrepair.”

“Costa Mesa real estate agent Larry Weichman said the neighborhood reflects a growing pattern: the rise of neglected, foreclosed residences throughout the city that will most likely get worse before it gets better.”

“‘People will no longer take care of the properties because they don’t have any vested interest in them,’ he said. ‘Sometimes you’ll even find them stripped of appliances, or with holes left in the wall.’”

“‘[These homes] will affect the values of surrounding properties — there’s no doubt about it,’ he added.”

“Costa Mesa Chief Code Enforcer Jim Golfos said that the city has fielded such complaints about a number of such homes. Technically, whoever owns a property, in this case, a bank or other loaner, is legally responsible for its maintenance. But, given the vast size and influence of national banks, a number of properties tend to slip through bureaucratic cracks, Golfos said.”

“‘Recently, it took us about three weeks to get through [a lending institution’s] lawyers — that can be a lot harder than dealing with an individual resident,’ he said. ‘This is a phenomenon that just came to light [in] the city three to four weeks ago.’”

The Desert Sun. “Palm Desert housing sales in January were up 10.4 percent from a traditionally slow December, according to DataQuick. The median price for 92211 was $377,500, down 17.8 percent from January 2007. The median for 92260 is $340,000, down 21.8 percent.”

“In the Coachella Valley, 526 homes were sold in January. It’s been nearly 12 years since monthly sales in the Coachella Valley dipped that low. In September 1996, 493 homes were sold, according to DataQuick.”

“Relatively steady sales in the desert’s condo market are helping make up for plunges in sales of new home construction, January’s numbers show. ‘If condos were down as much as other categories, then the overall decline would be sharper,’ DataQuick analyst Andrew LePage said.”

“The median price for the valley stands at $330,000, down 13.2 percent from January 2007.”

“In January, new home sales took the biggest year-over-year sales hit. Only 80 new homes were sold last month - a drop of 64 percent from January 2007. The local Building Industry Association is projecting fewer than 1,500 permits will be issued this year, down from the more than 8,000 issued in 2006.”

“‘A lot of contractors are having to lay people off,’ said Aimee Schrumpf, executive director for the Desert Contractors’ Association. ‘Because of the layoffs, we’re hearing more and more of people just trying to feed their families.’”

The LA Daily News. “The median price of a San Fernando Valley home plunged a record $113,000 in January from a year ago and sales sank to an all-time low as credit and foreclosure problems further pounded the market, a trade association said Wednesday.”

“The 18 percent price drop, to $500,000 from $613,000, is the first double-digit percentage decline since the early 1990s, said the Van Nuys-based Southland Regional Association of Realtors.”

“The latest median is nearly 25 percent below the record $655,000 set last June and is at the same level as in December 2004.”

“Similar conditions are now also in play in the Santa Clarita Valley. The report showed that last month the median price there plunged an annual 21.8 percent, or $127,900, to $460,000 and sales fell 42.4 percent, to 99 transactions.”

“The condominium median price fell 20.9 percent, or $75,100, to $284,900 and sales tumbled 57.5 percent, to 31 transactions.”

“Prices would have to fall further to make them affordable and turn around the sluggish sales market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge.”

“‘I’m still not seeing a light at the end of the tunnel,’ Blake said. ‘If there is one, we’re looking at it about this time next year. And I hate to say that to a Realtor.’”

“Nevertheless, the Realtors group still believes that fire-sale prices won’t result from the market upheaval. ‘Buyers need to realize that prices are not nose-diving, especially in a mature market like the … Valley where there is a finite supply of homes for sale,’ said Jim Link, the association’s executive VP.”

“While January’s big price decline is surprising, it came down from a high level, Link said. Nevertheless, January brought the fourth consecutive month of price declines.”

“‘If you are a seller, you’ve got to be realistic and realize you will not be getting what you would have 18 months ago,’ Link said.”

“Randolph Rogers knows that all too well. ‘The third time was the charm,’ said Rogers, as movers loaded the last of his family’s belongings into a big van Wednesday.”

“He put his 1,500-square-foot home on the market last May for $539,000 after retiring from the Los Angeles Unified School District. He dropped the price three times, finally striking a deal for $425,000.”

“Why that price point? ‘So they could get a conforming loan,’ he said of the buyers. So on Wednesday they locked up the house they bought new in 1987 and moved to Leisure World in Camarillo.”

“Last month, home sales plunged an annual 43.2 percent, to 323 transactions, 246 fewer than a year ago. That’s the lowest monthly total since record-keeping began in May 1984.”

“Association President Mary Funk said short sales are becoming more common now. She said some offers are coming in ‘way under’ the list price but that lenders are submitting counterproposals. And some are willing to pay the buyer’s closing costs.”

“That’s good for buyers, she said. But severe problems persist. ‘The foreclosure situation is affecting prices. The problem is the buyers feel that homes that are owner-occupied should be going for the same price as a foreclosure or a short sale,’ Funk said.”




A Real Estate Hypochondria

A report from the Oklahoman. “The mess in the mortgage industry is hitting home for some Oklahomans. Bob and Dorothy Harper of Yukon grudgingly put their dream home up for sale Jan. 16. They had it custom built in 2002 to fit their every desire. ‘It’s not easy to come out of this house,’ Bob Harper said. ‘It’s everything we worked our whole lives for. We’ll never own anything like this again.’”

“A real estate broker with variable income, Harper took an adjustable loan, figuring he’d refinance it later. He took out a second to furnish it.”

“Three years later, the interest rate on Harper’s 30-year loan reset from more than 6 percent to 11 percent. The hike coincided with Harper’s wife’s hip replacement surgery, which caused her to lose her livelihood as a beautician.”

“‘We were like deer caught in the headlights,’ Harper said. ‘We liquidated our 401ks, Roths, everything to hang onto the house and pay our bills.’”

“Refinancing wasn’t an option because in today’s crippled mortgage industry, lenders are making few, if any, stated-income loans — the type of loan that helped the Harpers buy the house. The couple have listed their 2,153-square-foot home for sale and priced at $220,000, $8,000 less than what they paid for it.”

“Tamela McSwain married and moved into her husband’s home in Mustang in September, but has been trying unsuccessfully to sell her home in west Edmond since late July. The newlyweds have been carrying two mortgages, at about $3,500 a month.”

“‘I’d like to dump the second mortgage, but I don’t want to be silly and just dump the house,’ McSwain said. She already has dropped the price on the 1,975-square-foot home $3,400 to $198,500.”

“Houses that sold in January took an average of 95 days from listing to closing, according to the Oklahoma City Metro Association of Realtors. That was three days longer than in December, when marketing came to a virtual standstill after an ice storm knocked electricity out for days across the metro area.”

“‘We’re doing pretty well,’ said Marolyn Pryor, president of the Metro Association of Realtors. ‘I think the word’s getting out. We haven’t had near the low offers we were getting.’”

“Pryor said the slowdown isn’t surprising considering the increase in the number of houses on the market since the end of the 2002-2005 construction boom.”

“‘Builders are certainly exercising discretion in regard to inventory, and keeping tabs on the pulse of the market,’ said Jeff Click, VP of the Central Oklahoma Home Builders Association. ‘It’s really a psychological condition within the market marked by delusions that Oklahoma City is suffering from the same ailments found elsewhere in the country, a real estate hypochondria of sorts.’”

The Enid News and Eagle from Oklahoma. “Anna Blubaugh, of Century 21 Homes Plus, said the Enid market is doing well. Some owners also are helping with closing costs, but have not taken discounts, depending on where they choose to start the listing price.”

“‘It’s market driven. Condition, location and price are always the same. I’ve been at it for 50 years and it hasn’t changed,’ said Jim Nicholas, of Nicholas Realty.”

“The only down market in Nicholas’ career was the period between 1984 and 1990, he said, but a recovery began in 1987. Rates in the last five years have allowed people who thought they could afford $200,000 homes to buy a $400,000 home, because the interest has been reasonable, he said.”

From Tulsa World in Oklahoma. ” The approximately 5,670 foreclosure filings in the metro area represented a 3.66 percent drop from the year before, according to RealtyTrac …although the city’s foreclosure rate of 0.912 percent of all households made it the 56th highest.”

“‘We didn’t enjoy the bubble, so now we’re not going to feel the pain of the bust,’ said Steven Admire, president of Advantage One Mortgage.”

“Margo Mitchell, executive director of Consumer Credit Counseling Service in Tulsa, welcomed the news, though she expects local foreclosures will start piling up soon.”

“‘We’ve had a lot of calls in January with people struggling, and we’re now seeing a lot more past-due situations than we did in the fourth quarter of last year,’ she said.”

The Times Record News from Texas. “The Wichita Falls housing industry took another hit in January, but Wichita Falls Association of Realtors president John Wilson it not rattled by the numbers. A total of 85 homes were sold last month, compared to 148 in January 2007, and the total number of active residential listings for January hit the 916 mark.”

“‘We anticipated it would be down, but I didn’t know it was going to be that much,’ Wilson said. ‘If you are a buyer, it is tremendous for you now.’”

“‘The national media still has people scared. They have been bombarded by the national media. People get to believing it,’ Wilson said. ‘It is a mental thing right now. People are sitting and waiting for the sky to fall. All the economic indicators here show it is a great time to buy a house, or a car.’”

From NBC 5 in Texas. “A North Texas Realtor is making the most of the flood of foreclosed homes on the market. Real estate agent Tess Langevin started a bus tour to connect buyers with foreclosed houses. Foreclosures throughout the Dallas-Fort Worth area are setting record numbers. More than 4,100 are scheduled for next month’s foreclosure sale.”

“‘We have felt it, you know, but we have a steady stream of buyers,’ Langevin said. ‘I think what they’re looking for are deals. We don’t want all of these houses sitting empty and deteriorating.’”

“Take one home on the tour — it’s $180,000 cheaper than other houses in the neighborhood.”

“In one Desoto subdivision, 13 homes are for sale between $150,000 and $250,000. Of those 13 houses, 10 of them are foreclosures. Robert Zitske’s house has been on the market for nine months. He’s lowered the price three times and still hasn’t found a buyer.”

“‘I think at this point, I’m able to break even with the price listing that I have,’ Zitske said. ‘Beyond that, I’m losing money.’”

“The banks now own many of the homes in the neighborhood. They are willing to sell at deep discounts, making it difficult for people such as Zitske to compete. Realtors said some sellers end up with 30 percent less than what they paid for their house.”

“‘They’re not going to be able to leave this neighborhood, leave this house, without having to spend money,’ Jon Warren of Realty World said.”

“The only upside is for buyers. One 3,900 square-foot foreclosure is selling for $181,000.”

The Palestine Herald from Texas. “While national news media have broadcast stories about slumping real estate markets and rising foreclosures, local realtors say that’s not reflective of Anderson County.”

“Demand for homes has driven prices up over the past three years, said realtor Mike Whitworth, noting that homes in Westwood which sold in the $62,000-$72,000 price range in 2005 now were averaging more than $80,000 each, with many selling in the $90,000 to low-$100,000 range.”

“A combination of lower-than-average cost per square foot, more people wanting to leave larger areas such as Houston and Dallas and supply and demand are helping drive home prices higher, he said.”

“‘We have been cheaper for a long time. We used to have over half of our inventory (of homes for sale) in the $50,000-$100,000 range. Now more than half of our inventory is over $100,000,’ Whitworth said.”

“While that may push some home ownership out of reach for those looking for housing under $60,000, he said, the same home may seem like a bargain to someone moving from an area with much higher housing costs. ‘They’re selling homes for $200,000 and coming here and getting more for their money,’ Whitworth said.”

The Killen Daily Herald from Texas. “Fort Hood Area Association of Realtors president Marcia Worthington thinks the negativity in the news might have had some effect. She credits the industry with offsetting any jitters by maintaining good media relations and pumping up morale with the association’s newsletter for members and regular advertisements about the good points about the local housing market.”

“Although home sales dipped in the local area while so many troops were overseas, market forces seem to be taking hold for hope on the horizon, regardless of what the national market does.”

“‘We’d see more effects of the nationwide troubles here if we didn’t make a conscious effort to combat them,’ she said.”

The American Statesman from Texas. “Sales of Central Texas homes fell 10 percent in January, the seventh month in a row that year-over-year sales dropped. The 1,321 sales last month were a two-year low, based on data from the Austin Board of Realtors. The number of Central Texas homes on the market increased by 24 percent to 8,727 active listings.”

“Jim Gaines, research economist at the Real Estate Center at Texas A&M University, said the market was almost too tight last year, when there was about 3 months worth of homes for sale in January. He said that level ‘is almost unsustainable and probably not a good thing over a long period of time.’”

“Sellers must ‘get real or be prepared to take longer to sell, and even then you’ll take longer to sell with an adjustment,’ he said. ‘You have to deal with the market you’re in, not the market you wish it to be or the market it was a year ago.’”

“The struggles of the national housing market are changing the face of development in Central Texas, delaying some projects and causing big builders to back out of others.”

“‘The national home builders have almost completely pulled out of the market, not just from a lot-development standpoint but also from a home-building standpoint,’ said Chris Ellis, a principal with Endeavor Real Estate Group. ‘They have either dropped their positions and land they were looking at or sold their positions or are actively looking to sell their positions.’”

“‘The local guys know the demand is still there, and the national builders know the demand is still there, but Wall Street is cutting them off,’ Ellis said.”

“Dallas-based DR Horton had options on lots at Headwaters at Barton Creek, a project east of Dripping Springs that will have 1,000 single-family homes and a 1,000-acre park. Rather than develop the lots, however, Horton agreed to be bought out.”

“‘Their home office told them to cut back, and they agreed to back out on a mutually agreeable price,’ said Dick Rathgeber, who is one of the developers behind Headwaters.”

“Three of local developer Bob Wunsch’s Central Texas projects have been stalled because of the national real estate downturn. ‘Some of our projects have been delayed a year,’ said Wunsch, CEO of Waterstone Development.”

“‘Now that the large national builders have pulled back and walk away from deal after deal after deal, there are opportunities that have allowed … all the local guys to jump back in,’ said Clark Wilson (of) Wilson Holdings Inc. ‘We’ll take increasingly large shares of the market because we will be able to get in and get the land deals and get the good subcontractors and be positioned for the impending boom.’”

“Groundbreaking has been delayed for the condo project called 1155 Barton Springs. Yesterday, Elisabeth Waltz wrote in an email: ‘These times seem to call for a measured approach. It may take us a few more months to start construction; we will start when we have 50% or more of the residences sold. (Personally, having been a real estate broker for many years, I would prefer all of them pre-sold).’”

“Owners (will) be shelling out anywhere from $1 million to $4.3 million for the 27 units.” “And although it’s located next to a railroad track, the Waltzes have said the building’s concrete and sound-proofing insulation will minimize noise from the railroad.”

“‘Everyone is amazed on how little impact the train will have, if any. It moves very, very slowly in anticipation of the upcoming 90-degree turn across the lake,’ she said.’”

From KRIS TV in Texas. “As Richard Alligood stands on the corner of West Second Street and South Oak Street, he remembers Saturday nights downtown in the city he’s now mayor of.”

“But now, as the lunch hour approaches, the streets are vacant. The two-year mayor said this is largely due to absentee owners of the buildings. ‘It’s like a lot of downtown areas in West Texas,’ Alligood said. ‘It’s got a lot of potential, it just needs someone to come in and take it over.’”

“Alligood’s not just talking the talk about downtown. He’s actually moved there. He’s currently refurbishing a living space above his downtown telecommunications business. ‘I thought it was unique to do,’ he said. ‘I’ve seen them in Austin and Dallas. I’ve just been amazed by loft apartments.’”

“As part of Pecos’ downtown rejuvenation program, there’s interest in putting offices and restaurants on the first floor of the old Woolworth’s store, with apartments on the second floor. Other housing could soon be available, even for those with slightly higher incomes. Alligood said a California company is looking to build 120 town homes.”

“But Alligood knows he faces an uphill battle in a town where trailer homes sit next to restaurants on major streets. Zoning could take some getting used to.”

“‘It’s a complete change of mindset,’ he said. ‘When you have a city that had no growth and no economic development, and somebody says Let’s do this,’ you say, go ahead!’”




Reaping The Results Of The Excesses

The Chicago Tribune reports from Illinois. “Chicago-area sales of existing homes took their worst plunge since at least 1998 in January, and the median price dropped for the first time in at least a decade, according to the Illinois Association of Realtors. January sales of single-family homes and condos in the Chicago area were off 34 percent from January 2007. ‘We can’t blame it all on the weather, but we all know what January was like,’ said association spokeswoman Ann Londrigan. ‘Compounding problems with consumer confidence and mortgage tightening, there’s not much good about January that you can say.’”

“Though Chicago real estate agents report that many sellers are cutting their prices, analysts see others clinging to outdated notions of pricing and remaining a roadblock to the recovery.”

“‘I do think there’s a stubbornness there, particularly in high-priced markets like Chicago,’ said Caroline Sallee, an economist for Anderson Economic Group. ‘People aren’t coming down on the price, so the home doesn’t sell and you continue to see inventory [of homes for sale] rise.’”

“Linda Rizzuto, for one, said she isn’t inclined to come down from the $444,900 she’s asking for the Northwest Side home where she has lived 17 years, though not one would-be buyer has looked at it since she listed it in January.”

“‘My friends think I’m crazy for putting the house up for sale now because the market is bad,’ she said. ‘If I had to sell, I would be panicking, but I don’t have to sell.’”

“Glen Ellyn real estate agent Karen Lippoldt said sellers ‘need to get more aggressive with pricing.’ Nonetheless, asking prices are coming down. ‘I had over $500,000 in price reductions for the year in 2007,’ she said.”

“She said that in her area, builders were skewing the price data with huge cuts just to get homes off their books. And homes do sell, she said. ‘I have three homes under contract,’ Lippoldt said. ‘None of [the sellers] got what they wanted, but was it a fair price? Yes.’”

“Hoping to avoid bankruptcy, home builder Kimball Hill Inc., said Wednesday that it will scale back on operations and reduce staff, including at its headquarters.”

“The Rolling Meadows-based builder will exit the Florida housing market. It also will lay off 132 employees at its headquarters and elsewhere around the country by December, the 39-year-old company announced.”

“Kimball’s fortunes have taken a radical turn since 2006 when it had more than $1 billion in sales. By the end of its fiscal year Sept. 30, it reported losses of $220.5 million on revenues of $894.7 million. It is holding 10,955 house lots that are in development or completed.”

“This year, ‘the marketplace is fickle, buyers are fearful and traffic has fallen off sharply’ during a frigid, snowy winter, said Kenneth Love, Kimball Hill’s CEO during an interview.”

“Property markets are reaping the results of the lax underwriting criteria that prevailed early in the decade and pumped up house sales to booming levels, he added. ‘We’re now seeing results of the excesses of 2003 through 2006,’ Love said.”

“At its Settlers Ridge subdivision in Sugar Grove, where it has sold about 100 units since May 2006, it still has approximately 800 unsold house lots, said Elizabeth Drozdik, director of market research for a Schaumburg-based real estate consulting firm.”

“The timing of the development was unfortunate. ‘Sugar Grove came on market when housing was already hurting, but the industry was in denial and no one understood how bad things would get,’ Drozdik said.”

The Beacon News from Illinois. “Allyn Burkett has shown her house five times in five months, and not a single offer. The Sugar Grove woman has concluded it’s not her but the market that is straining her finances and delaying her move back home to Texas.”

“And she should know. Burkett is a Realtor in Elburn who said she has tried ‘all the tricks of the trade,’ but ‘I just don’t know anymore.’”

“‘I thought I was going to get (an offer), but they decided my living room was not big enough,’ Burkett said. ‘It was one measly thing that broke the deal.’”

“Now that Burkett has stepped foot in her clients’ shoes, there’s some advice she has for sellers: ‘You just have to be patient.’ She also says, ‘If you don’t have to sell right now, don’t.’”

The Herald News from Illinois. “Over the last two years, Gladstone Builders has used a number of methods to stay afloat in a sinking housing market. When the company ran out of ways to reduce costs, it turned to village hall. In order to maintain its lower prices, Gladstone asked the village to consider slashing its fees if the company buys building permits in bulk.”

“‘I need the village’s help, quite frankly,’ said Adam Dontz, VP of Gladstone Builders and Developers.”

“Trustee Paul Fay said he was reluctant to support the plan and that the village’s first responsibility is to its taxpayers. Trustee Larry Vaupel noted that helping residential builders like Gladstone could send a message to commercial developers, who need residential rooftops to be successful.”

“‘I can hear naysayers and critics already, saying … we’re giving in to developers or letting developers off the hook,’ Vaupel said. ‘This isn’t government versus big business. I wonder how a half-built subdivision serves (taxpayers’) interests.’”

“Gladstone’s marketing campaigns gave the company a boost — an offer to reduce its single-family homes by $100,000 generated 20 sales in two days. Gladstone homes are priced at about $496,000 for single-family houses and more than $300,000 for townhomes.”

“Of the 33 building permits the village issued in January, 14 were for Gladstone homes. However, faced with a local residential lot supply that far exceeds demand, Dontz said Gladstone likely would not issue 14 permits in a single month again without the village’s help.”

The News Democrat from Illinois. “Home sales were down about 25 percent in January from the same month a year ago in St. Clair and Madison counties, according to local Realtors’ associations.”

“Lynn Turpin, of Belleville, has been attempting to sell his condo on Garrettsen Drive for the last four or five months. ‘We’ve had an awful lot of people interested,’ the 77-year-old said, although no deal has come through on the two-bedroom condo with hardwood floors and a Jacuzzi.”

“‘I don’t think I’ve got it overpriced,’ he said.”

“Belleville Realtor and National Association of Realtors director Stan Sieron said the recent subprime market woes and declining sales have forced Realtors to work harder and smarter. ‘The days of order-taking are out the window,’ he said.”

From Crain’s Detroit Business in Michigan. “For local banks, 2007 was interesting. It was also a financial mess. Driven by much higher provisions for loan losses and by bad-loan write-offs — the bulk of which bankers said were caused by the collapse of land development, housing sales, and commercial and real estate development — most banks lost money.”

“Most had worse years than in 2006. Many of them finished with fourth quarters that would have seemed disastrous a year ago.”

“‘A lot of the home builders in Michigan have wiped away years of earnings and many have filed bankruptcy. It’s hard to say it’s stabilized,’ said Terry McEvoy, an equity analyst for Oppenheimer & Co Inc. ‘If there’s a continuing decline in home values, those banks with exposure to the real estate market will continue to face losses.’”

“David Scharf, senior equity research analyst with Cleveland-based FTN Midwest, said one positive note is banks are rethinking how aggressively they’ve been moving assets off their balance sheets, in some cases by selling foreclosed properties at fire-sale prices, which just creates problems for other customers trying to move inventory.”

“‘In some cases, they’ve been taking a 50 percent haircut. Now, they’re going to take a more thoughtful approach,’ he said.”

The County Press from Michigan. “With foreclosures of homes in Lapeer County soaring to new heights, the federal government is offering a beacon of hope to deter the onset of blight in neighborhoods devastated by the housing crisis.”

“The U.S. Department of Housing and Urban Development is offering local governments the chance to buy unsold repossessed HUD-owned homes for $1.”

“‘They’re vacant homes the Federal Housing Administration is unable to sell after six months,’ said Lapeer County Community Development Director Mike Partlo. ‘There is a 10-day window where local governments may purchase the single family homes for $1.’”

The Grand Rapids Press from Michigan. “A home in foreclosure, plastered with postings, warning signs and notices, is a symbol of loss for the previous owner. But for those participating in West Michigan’s first foreclosure tour Saturday, the bank-owned properties represented potential, at a deep discount.”

“‘This is what I do,’ said William Bryant, who owns four rental properties already. ‘I’m a businessman. I want to know how to get the best for my money; that’s why we’re shopping for foreclosures.’”

“Realtor James Goetzka started the tour by telling the group that the current housing market, although unfortunate for those losing their homes, is providing an opportunity. ‘It won’t last long,’ he said. ‘It will be a little window in history.’”

The Journal Sentinel from Wisconsin. “Twenty-one Wisconsin banks didn’t turn a profit last year, as the housing slump lingered and a slowdown in the economy deepened, a new report by regulators shows.”

“Banking consultant David L. Donihue said the housing market remains weak and that the slowdown appears to be spreading to commercial construction in addition to residential developments.”

“‘I think it’s going to take the rest of this year for things to turn around,’ Donihue said. ‘I think people are just kind of pulling back on what they had been buying and waiting to see what’s going to happen.’”

“Daryll Lund, CEO of the Community Bankers of Wisconsin, said the housing and economic slowdown have caused bankers to ‘hunker down’ for the time being and bolster lending standards.”

“‘Segments like the condo market have really kind of hit the wall a little bit,’ he said. ‘Some of those development projects that probably a few years ago were given the green light a lot more quickly are now demanding higher amounts of units be sold before the financing can be put in place.’”

The Sun Times. “While numerous suburban home builders are struggling, Chicago-based Terrapin Properties LLC is emerging as the first major condo developer here to see operations spin out of control in the current housing slowdown. A foreclosure suit filed against Terrapin over a project in Kenosha, Wis., indicates the company could be dissolved.”

“Indymac Bank, the primary lender on the 162-unit condo development in Kenosha, last month sued Terrapin for more than $13 million in back debts.”

“But the case isn’t a garden-variety foreclosure in which a lender has no recourse beyond getting the keys to the property. Terrapin’s principals, including James Geleerd and Michael Ezgur, personally guaranteed the loan, according to the suit. Indymac is going after them, as well as principals Sherwin Braun and Greg Braun, to collect.”

“As a result, the control of other Terrapin projects could be in play. Terrapin also controls units left over from previous projects. The company’s Web site said it also has projects in Arizona and Florida, plus commercial space in Chicago buildings.”

“Sources said Geleerd begged for time Friday on a conference call with a large number of creditors. They said Geleerd asserted he was close to selling the Burnham Pointe condo inventory to somebody whose cash would prop up the company.”

“‘The atmosphere was pretty intense,’ one person said. ‘And nobody believes that in this market, there’s an investor looking for condos.’”

The Pioneer Press from Minnesota. “The CEO of Franklin Bank in Minneapolis has watched during the past year as foreclosures in North Minneapolis have multiplied to the point where just about every block in the neighborhood has at least one vacant home.”

“‘I think there is opportunity in the midst of this chaos for community banks to be back at the table and be one of the main lenders in the mortgage industry again,’ Dorothy Bridges said.”

“For Bridges, North Minneapolis is more than a place to do business. She owns a home there, and…she also encouraged her son to buy a home there. Six years ago, Myron Bridges paid $130,000 for a new two-story beige and white house on Dupont Avenue.”

“Until recently, Myron Bridges’ home looked like a smart investment. In November, it was appraised at $171,000. But then a string of foreclosed homes on Dupont Avenue and in the surrounding area pulled the property value down. Last month, his mortgage company said the home was worth $105,000. He didn’t have enough equity in the home to refinance again.”

“To make things worse, his mortgage payment recently jumped $200 to $1,310 a month, when the adjustable-rate mortgage he got when he refinanced three years ago reset. ‘I can’t sustain that rate for a whole year,’ he said. ‘We’re stretching.’”

“As much as Bridges wants to help, there are limits to what the bank can do. She’s running a bank, not a charitable organization.”

“‘The risk and the reward is something we’re in the process of investigating,’ she said. ‘If it doesn’t have a mutual benefit (to Franklin and the community) then it doesn’t make sense for us to do. We still have to generate some level of profit.’”

The Minnesota Daily. “In the last year, the explosion of residential property values of the early 21st century slowed, partly because of repercussions of the sub-prime mortgage crisis. Though it wasn’t good news for Wall Street, the resulting higher vacancies and lowered property values could be a boon for renters in the Twin Cities, especially students.”

“V.V. Chari, an economics professor, said the foreclosures that came out of the sub-prime mortgage crisis have put downward pressure on housing costs. ‘Difficulties in the sub-prime mortgage debacle and the slowing of the economy in general, reduced land prices quite substantially,’ Chari said. ‘It has tended to reduce housing cost.’”

“While student neighborhoods have largely escaped the foreclosures that plague other parts of the Twin Cities, renters, who make up more than 90 percent of residents in the University neighborhood, still benefit from this spillover. Although students live in a region of Minneapolis with a low vacancy rate - about half that of the city as a whole - rent in the University area, at $818, is still below the city average of $868, according to the 2007 Minneapolis Trends Report.”

“The condominium boom of the early 21st century, which introduced thousands of units into the city, has also helped stabilize rent prices.”

“Cecilia Bolognesi, principal planner for Community and Economic Development, said a factor affecting rent could be the many condos transformed into rental units in recent months, in a sense, flooding the market.”

“In October 2007, three large condo projects in Minneapolis announced they were being foreclosed by lenders. Together, the three projects had a cumulative 553 units.”

“Bolognesi said another factor is that many developers in Minneapolis have turned to building rental units instead of condos or single family homes.”

“Senior Kait Sergenian said she currently lives in the Phillips neighborhood of Minneapolis. ‘It’s slightly easier every year,’ Sergenian said. ‘I had less people with me, and also we were looking outside campus, so the quality of houses was slightly better.’”

“Junior Skyler Nowinski said he pays roughly $400 a month to sublease a room in a house with three other roommates. ‘Personally, things have become cheaper for me,’ he said.”




Bits Bucket And Craigslist Finds For February 28, 2008

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