The Great Experiment Is Over
It’s Friday desk clearing time for this blogger. “Sixteen houses and 273 lots ready for building, many of which are in Lapeer County, will be on the auction block April 19 in Rochester, as two southeast Michigan builders look to sell properties in a slow new housing market. Opening bids on the houses and condominiums is $60,000, well below listing prices that were as high as $2.5 million for a nearly 6,000-square-foot cedar log home in Northville.”
“Andrew’s River Estates resident Vern White says he bought a lot in the subdivision as an investment about four years ago and would love to see prices and demand rise. ‘I figured I’d make more,’ he said. ‘Now I won’t even get my money out of it.’”
“When Christine first purchased her three-unit house on University Place in 2004, she was thrilled at the prospect of finally owning her own home. She had a husband of 14 years, a comfortable commuter job in New York City and manageable mortgage payments for her new residence — $2,800 per month.”
“Now, Christine pays $5,109.26 every month for her house. Facing foreclosure, she has exhausted all her savings, is deep in debt and calls her mortgage company every day to try to negotiate a better payment plan.”
“‘It was a good mortgage,’ said Christine, who asked to have her surname withheld. ‘I remember wondering why it was so easy — they just looked at our last two years of taxes. That should have been a red flag.’”
“Realtors and their lenders have conflicting viewpoints when it comes to the real estate market in Denton. ‘This is more of a slowdown, not a crisis,’ said Stacy Curtis, president of Curtis Mortgage. ‘And it’s a slowdown from the record-setting pace of the last few years.’”
“Curtis, who joined others with his own upside-down mortgage on one his properties, said he would stick to his house and others should as well.”
“‘I purchased a investment property for $180,000 in June of 2005. Last summer, it appraised for $194,000; now it is at $175,000,’ he said. ‘I’m holding on, assuming by the end of this year or next, it will be back up.’”
“‘People who live in this area and want to own a home, need to stop listening to the national doom-and-gloom reports and get out and buy,’ Curtis said.”
“East Valley real estate agent Kathy Ciaccio has called Maricopa County about a number of pools, but sees the foreclosure epidemic becoming an epidemic of neglect. ‘Typically, I show six or eight houses to one client on a weekend,’ Ciaccio says. ‘Half of those houses have murky, green pools.’”
“In northeast Phoenix, Bill Hostert, couldn’t believe what he saw when he peered over his fence. ‘This pool was pretty sickening looking, I’ll tell you that,’ he said. Bill says the new, absentee owner from Canada had no idea what shape the pool was in.”
“Now he’s worried about the consequences. ‘The mosquitoes that are gonna be flying around here, the West Nile disease and all that’s flying around, I don’t need that.’ he said.”
“Construction of $1 million condominiums overlooking the Animas River is on hold pending an upturn in the economy. The tipping point came probably a month ago, Mynders Glover, a partner in the Animas Riverfront project, said Monday. He cited the stumbling economy and a weak real-estate market for delaying construction.”
“‘We’ve been following the news all along,’ Glover said. ‘There were different factors, and professionals were asking, ‘Are you really going to build this?’”
“In addition, sales haven’t been brisk at The Villas at La Campanella. According to La Plata County assessor records, three of 13 villas priced in the mid-$800,000s have sold. Two of the units were purchased by the developer’s husband and the husband’s company.”
“Chicago Spire, which will be the world’s tallest residential building when completed in 2012, has come to Malaysia to attract investors in the mega project. ‘We think property in Chicago has good value globally compared to other cities across the world,’ said Edward Lewis, director of global real estate service provider Savills. ‘The dynamism and strength of economy in Chicago makes this incredibly good value.’”
“According to Lewis, the credit crisis in the US subprime market has not affected Chicago’s top-end estate market which is more resilient due to limited supply. He said investors could capitalise on the upside potential of the US housing market which was now at a downturn.”
“Savills Rahim & Co’s executive chairman Datuk Abdul Rahim Rahman said there was further room for capital gains from investment in property with the expected strengthening of the US dollar in the coming years. According to Abdul Rahim, demand for prime properties anywhere in the world will continue to attract investors.”
“‘There are no signs of slowing down. There are not enough properties to sell,’ he said.”
“Countrywide CEO Angelo Mozilo…fought back against his board’s attempts to curtail his pay two years ago by hiring his own consultant…John England, paid for by Countrywide. Later, Mozilo writes to England about having to pay taxes when his wife travels with him on the corporate jet. ‘In order ‘to avoid extraordinary travel expenses,’ Mozilo complains that his wife ‘would have to travel commercial or not at all, which is not right nor wise.’”
“At last month’s hearing, Mozilo testified that he had ‘to pay an enormous amount, a substantial amount of money, to have her on the plane.’ But, ultimately, he conceded that he might have been making too much of a fuss. ‘In today’s world, I would never write that memo,’ he said.”
“The state budget is chronically in deficit, California’s schools rank near the bottom of the states in academic achievement, and a severe water supply crisis is looming, all issues that the state Legislature has managed to sidestep for years or even decades.”
“But lawmakers are Johnny-on-the-spot in responding to matters ripped from the headlines.”
“A political feeding frenzy has erupted over the housing industry meltdown, for example, with dozens of measures that purport to alleviate the pain of those whose subprime mortgages have been foreclosed, even though most of those mortgages should never have been issued in the first place.”
“Whether any of the proposed nostrums would ease the mortgage situation is almost beside the point. Lawmakers, especially those from regions with high foreclosure levels, are scrambling to demonstrate their compassion by throwing bills into the hopper, seeking media notice and political credit for doing something.”
“Legislating in ignorance about a situation that hasn’t yet played itself out would appear to be the height of folly. And history would indicate that hasty lawmaking almost certainly would have unanticipated and perhaps very negative consequences.”
“The Hope for Homeowners Act of 2008 is an ambitious effort to address the crisis created by the collapse of the housing bubble, and the epidemic of predatory subprime mortgages over the years 2003-2007.”
“I…argue the effort to stabilize prices in bubble-inflated areas is counter-productive. Insofar as it succeeds, it makes homeownership less affordable for young people and families moving into the area.”
“If the sale price-to-rent ratio is 20 to 1 (in many cities it is higher), then this house would rent for just 5 percent of the sale price. This means that owners would end up paying 77 percent more in housing costs than a family who rents a comparable unit.”
“In addition, since house prices will continue to decline in these areas as the bubble deflates, it is unlikely that many of these families will accumulate any equity by the time they sell their home. In fact, most of the homeowners in these areas are likely to end up underwater.”
“If prices did temporarily stabilize at bubble-inflated levels, it would only lead to more construction, which would then place further downward pressure on prices.”
“A government house-price stabilization program that tries to maintain artificially high prices would face all the same drawbacks as farm price support programs that target artificially high prices, except the housing market is far larger.”
“Furthermore, it is difficult to see why it would be desirable to sustain artificially high prices, even if it were possible. Sustaining bubble-inflated prices means that it will be much harder for young people and families moving into an area to afford to buy a home.”
“Tess Vigeland: When we talk about the psychology of home ownership, you really have to address this idea of the American dream and that a big part of that is owning a house. Should our notion of well-being be so tied to the idea of home ownership, because it certainly isn’t in other Western societies?”
“Chris Thornberg: Absolutely not. Again, so much of the rhetoric going on out there in the context of the current crisis seems to be wrapped around this idea that ‘My God, we have to keep people in their homes no matter what.’ Home ownership is not the be all and end all. Home ownership is not the Holy Grail. There are plenty of people in plenty of circumstances for whom living in an apartment is a very logical thing to do.”
“The great American experiment with homeownership for all and mortgages for everyone is over. Millions of homeowners will lose their houses. The government is scurrying to minimize the damage to the nation’s economy and banking system. Wall Street is picking shards out of its hide. Academics are straining to find the right historical analogy and tally the losses. And the press is looking for people to blame.”
“Making every American adult a homeowner was always imprudent and impractical; now that’s obvious. Some Americans don’t earn enough to pay for a mortgage and maintain a house; in recent years, mortgage brokers worried little about the first concern and never mentioned the second.”
“Homeownership can give Americans a stake in society and help build savings — but not if they don’t have any equity in their homes. Better to help them open savings or retirement accounts.”