April 21, 2008

Restoring Some Measure Of Affordability In California

The LA Times reports from California. “They filed into the Eagle Rock open house alone and in groups. Twenty-three families checked out the bedrooms and kitchen during the four-hour open house on a recent Sunday. Three expressed interest in buying the three-bedroom ‘character home,’ as agent Denise Barnes described the 1,364-square-foot 1922 California bungalow, reduced to $605,000 from $645,000. But most said they were waiting for prices to drop further.”

“‘It’s pretty ugly out there,’ said longtime broker David Toyama, who specializes in Eagle Rock, Glassell Park, Highland Park and Azusa. His business is down 50% from a year ago, he said, ‘and that wasn’t our best year either.’”

“The market slide means bargains galore in areas hard hit by foreclosures, such as Hemet 92543 in Riverside County, where median prices plummeted 48%, to $130,000, during the first quarter this year, compared with the same period a year ago, according to DataQuick.”

“Step outside the inland valleys, however, and some sellers still are stuck in the fantasy world of 2005, insisting on prices that buyers won’t entertain for a minute, then despairing when their homes attract no offers.”

“Elizabeth Powell, 28, learned how tough the market is. She first listed her four-bedroom West Covina house for sale for $600,000 in February 2007.”

“Two buyers fell out of escrow due to lending problems — they had difficulty qualifying for jumbo loans — so she lowered the price to $550,000, then $480,000, $460,000 and in August, $430,000. She sold the 1,489-square-foot house in January for $440,000.”

“‘I’m very glad it’s over with,’ Powell said of the selling experience she described as frustrating and stressful. ‘The loan terms kept changing; neighbors started selling their homes for less. I can’t imagine having to sell another property.’”

The Orange County Register. “To say Orange County’s housing market got off to a rocky start in 2008 would be an understatement. Sales and prices are down. But, perhaps more troubling, the total of 2,232 foreclosures during the first quarter was the highest in at least 20 years and up 328 percent from a year ago.”

“During a similar period in the ’90s slump, foreclosures rose at a 123 percent annual clip.”

“Santa Ana tops the list of foreclosure concentrations with two ZIP codes – 92707 and 92701. These two areas saw steep price declines in March. Last month’s median price of $219,000 in 92701 was the lowest in the county and down 37 percent in a year.”

“Each month foreclosures and short sales take up a greater portion of homes on the market, according to Steve Thomas at Re/Max Real Estate Services in Aliso Viejo. In early April there were 5,335 such distressed properties on the market, up 42 percent from Dec. 27 and accounting for 34 percent of all properties for sale at the time.”

“Walter Hahn, a real estate economist in Irvine, said foreclosures either peaked during January’s record high of 802 foreclosures, or they will by June. But it’s not straight down from here, Hahn said.”

“The end of low introductory teaser rates on mortgages are spurring foreclosures now and will do so again in 2010 and 2011, when studies show many loans will see a jump in payments, he said.”

“‘It’s not over,’ Hahn said. ‘It’s not going to be over until 2012.’”

The Daily Bulletin. “Faced with the most severe economic conditions in nearly two decades, Los Angeles County officials today will unveil proposed budgets that are expected to call for wide-ranging service reductions while also asking residents to pay more.”

“The budget squeeze comes as property and sales taxes have plummeted. The last time there was a drop in year-over-year sales- tax revenues was in the early 1990s amid a national recession.”

“‘It is a long, dark tunnel for local government these days,’ said Jack Kyser, chief economist at the Los Angeles Economic Development Corp. ‘You have the housing situation at one of its worst points, retail sales are down, and there is no immediate end in sight.’”

“Adding to pressure on all local government was the decision by county Assessor Rick Auerbach to launch a reassessment of properties as the housing market has plummeted. Auerbach said he plans to review the values of more than 300,000 properties purchased between July 2004 and July 2007 - when prices were at their highest.”

“The average reductions have been $66,000, saving the average homeowner $660 a year in taxes - but also reducing revenue to local government.”

“Jerry Nickelsburg, a senior economist at the UCLA Anderson Forecast, said the problem for local government is that the sectors it relies most on for revenue have been the hardest hit.”

“‘The areas the government relies on - real estate, sales tax and construction - are sectors that are not doing so well,’ Nickelsburg said. ‘We think the home-building sector will reach the bottom sometime this year so that it might come back beginning in 2009. But we don’t expect it to be like the volume of the past few years when government was able to generate a lot of revenue during a speculative boom.’”

The Desert Sun. “Justin Martin found his calling in teaching. He and his wife, Pandara bought a home in La Quinta in 2006 and began settling down. But with the state’s $16 billion budget crisis spilling over into every school district in California, he’s on notice that if the school district can’t cushion a $13.4 million funding shortfall, his job won’t exist next year.”

“Martin is not alone. Some 20,000 teachers, counselors and support staff across the state are in limbo, too. That doesn’t stop the unknown scenarios from running through Martin’s head as he drives to school and works on the house.”

“Instead of dinner out, they use the barbecue. He’s applied to teach summer school. Plans for a December trip to Thailand, Pandara’s home, aren’t so certain.”

“Except for a lone orange tree that’s been planted and the donated cacti they’re getting next month, the yard improvements have to wait. It’s what you do ‘when you have something that could be taken away,’ Martin said.”

“The one thing the couple is committed to is keeping the house, their dream of staying in the Coachella Valley. Between his wife’s fitness jobs at local gyms and private studios, they hope to make it work.”

“They’re committed that, whatever comes, they won’t become one of the 1,200 desert homes that are in stages of foreclosure. ‘I’ll do what I need to do,’ he said. ‘If that means working two or three part-time jobs, I’ll do it.’”

“‘I looked at my house differently. I look at my car differently,’ he said. ‘It makes you question what you need.’”

The Recordnet. “At a Dec. 13 gala to celebrate the opening of downtown’s Sheraton Hotel, a crowd sipped scotch and applauded the largest private investment downtown since American Savings Bank built its Main Street headquarters in 1989.”

“Yet even in December there was trouble at the hotel. San Joaquin County’s housing market - as elsewhere - was collapsing, and hotel owner Regent Hotel LLC had failed to sell any of 42 condominiums atop the hotel.”

“The housing market was more robust in 2004, when Regent promised to build a hotel…on land the city would sell to Regent for $1, and it required a city subsidy of $500,000. The following year, Regent obtained financing for the hotel’s construction, based in part on its expectation of an infusion of revenue from the sale of condominiums at the hotel.”

“And then the housing market fell. ‘The condos, that’s what’s killing us,’ said Rick Oshinski, chief operating officer of the parent company of Regent Hotel. ‘The condo market has gone totally into the toilet.’”

“The condominiums are not yet finished but are in a ‘fairly advanced stage of construction,’ hotel VP Jeroen Gerrese said. The number of people who have committed to buy one has fluctuated between eight and 14, he said. None has sold yet.”

“Since Dec. 21 - eight days after the hotel’s opening gala - 26 companies have filed mechanic’s liens against the property, demanding a total of $8.9 million for work they claimed to have done.”

“‘They keep putting us off and keep telling us, ‘Oh, we try to have meetings with the bank. The bank is holding our money,’ said Mike Jackson of Tracy’s Artistic Terrazzo and Tile. ‘It’s just turned into this fiasco at this point.’”

“‘I’m going to go to the hotel, and I’m going to rent a room,’ he said. ‘And in the morning when I wake up, I’m going to go, ‘I’m sorry. I don’t have any money. I’ll pay you in about six months’ — because that’s what (Regent) did.’”

The Sacramento Bee. “Only a year or two ago analysts were predicting that Sacramento’s traditionally dependable job and population growth would soon trim supply and create an atmosphere to raise rents. But the housing bust has proved unexpectedly severe and led to reassessments.”

“When a foreclosure on his landlord booted Aaron Myers from a house he rented with friends, it took no time at all to find another place in Citrus Heights. His new apartment came with a quick move-in date and cost him less than $900 a month. Best of all, it wasn’t a house where the same scenario could happen again.”

“‘It seems like there’s a lot of openings,’ Myers said.”

“Because the region dramatically overbuilt during the housing boom, there are plenty of apartments – about 111,000, according to some estimates – to go around. And a curious ’shadow market’ of new dwellings for rent – units that have come on the market principally because of foreclosure and the housing downturn – has kept monthly payments flat, they say.”

“Investors are buying foreclosed homes in the suburbs and turning them into rentals. Since 2007, more than 15,000 people in the Sacramento area have lost their homes to the banks. Homeowners who can’t sell their houses or don’t want to sell at these prices are renting out their houses.”

“Charlene Vomacka, a homeowner in Roseville, has added to the supply. She’s asking $1,600 a month for her three-bedroom, two-bath house. ‘We just purchased a new home,’ she said. ‘We decided to take this one off the (for-sale) market because we aren’t going to get what we want to. I’m thinking a lot of people are losing their homes, and they need somewhere to go.’”

“Home builders who can’t interest enough buyers in their new condominium projects are renting out their units for now. In Rocklin, Pacific West Cos. has added 171 units to the rental supply. Its Montessa development at Whitney Ranch was built to sell in the low- to mid-$200,000s.”

“Now, the condos are priced as rentals at $1,000 to $1,400 a month and have attracted 80 renters in three months, said Taylor Cohee, a Pacific West sales executive.”

“Apartment industry consultant M/PF YieldStar ranked Sacramento ranked almost dead last in the critical ’shadow market’ category that makes investors wary of buying or building new apartment complexes.”

“‘What really hurts it is what is happening with the ‘for sale’ (home) sector. There is too much available product out there. That is going to lead to a lot of shadow market rentals on the single-family side,’ said M/PF research chief Greg Willett.”

The San Francsico Chronicle. “It’s clear that some sectors carry more exposure to the perils and pitfalls of the national economy. Financial services companies, already battered from the subprime mortgage fallout, are likely to undergo more woes in 2008. Retailers are already feeling the pinch as newly house-poor consumers tighten their belts.”

“The housing slump affects the local economy in ways that can’t be measured in corporate financials. As home prices plummet and foreclosures mount, many residents will undergo wrenching personal changes.”

“‘It’s obviously very hurtful to middle-class working families who were able to buy a home and are now being pushed out of the home ownership market,’ said Jim Wunderman, CEO of the Bay Area Council.”

“But the painful process is also likely to help mitigate one of the region’s biggest problems, the lack of affordable housing. Falling prices could put home ownership within reach of a wider segment of the population. ‘Housing affordability is a challenge to our economic competitiveness,’ said Stephen Levy, director of Palo Alto’s Center for the Continuing Study of the California Economy.”

“‘Lower housing prices, while painful to people, overall are helpful to the Bay Area by restoring some measure of affordability. You cannot run an economy, even in the Bay Area, with housing prices that are four times the national average. The salaries here are not four times the national average,’ Levy said.”




Bets That, In Hindsight, Seem Reckless

Some housing bubble news from Wall Street and Washington. MarketWatch, “Bank of America Corp.’s first-quarter profit fell 77% as credit-loss provisions jumped $4.78 billion, driven by weakness in home-equity loans as well as credit extended to small businesses and home builders, the company said Monday. In addition, the bank said it had increased its loan-loss provisions to $14.89 billion as of March 31, compared with $8.73 billion a year earlier — a function of tightening credit markets and a sluggish housing market.”

“‘Credit quality deteriorated in several areas, most notably in regions that have experienced the most significant home price declines, which includes the former high-flying areas such as California, Arizona and Florida,’ said analyst Walter O’Haire.”

From Bloomberg. “National City Corp., Ohio’s biggest bank and subprime lender, said today in a statement the net loss for the first quarter was $171 million. National City posted three consecutive quarterly losses as homebuyers struggle to repay loans.”

“National City lost about 83 percent of its market value in the past year. The lender will raise $6.37 billion selling convertible securities. ‘Shareholders continue to get penalized,’ said analyst Gerard Cassidy. ‘It’s another major company going to the capital markets to enable them to survive in this incredibly deflationary environment.’”

From Reuters. “Swiss bank UBS AG released on Monday its ‘Shareholder Report on UBS Writedowns’, a document that might be better named ‘How Not to Run a Bank.’ The report is part of a forensic exercise ordered by Swiss banking regulator EBK in the wake of UBS’ $37 billion in writedowns on the subprime crisis — the biggest by any bank.”

“Analysts said some of the most disturbing passages relate to UBS’ apparent belief then that it was immune to the same problems that were facing the broader market.”

“‘The various parties involved with the portfolio were aware of the content of the portfolio and the deterioration in the subprime markets generally. However, those persons seem to have believed that there would not be an impact on the highly rated ABS in the portfolio,’ the report said.”

“The report also offers a clear warning sign to regulators wondering whether their attempts to forestall a systemic collapse through massive liquidity injections would pose a moral hazard, or entice others into more risk-taking.”

“UBS admits as much, saying specifically that its traders abandoned caution, knowing that they could always exchange their assets against government bonds as collateral at a central bank.”

“‘Further comfort was taken from the continued acceptance of the respective assets as eligible collateral with the relevant Central Banks,’ UBS says in the report.”

The Observer. “British expats desperate to return home are having problems selling their Spanish homes due to plummeting house prices, the strong euro and potential buyers being put off by press reports of illegal building practices.”

“‘We’re amazed at how difficult it’s been to sell,’ says Maureen Renno of her four-bed apartment at Calahonda, near Marbella on the Costa del Sol. ‘We thought it would go really quickly, but it’s been on the market for over two years.’”

“Maureen and her husband, both retirees, sold their home in Horsham, West Sussex and moved to Spain four years ago, buying their property outright for €325,000 (£262,000). Maureen, however, found it hard to settle in Spain and began pining for home and her family. After two years, the couple decided to put their flat on the market and move back to the UK.”

“They were shocked to discover that, instead of appreciating in value, their apartment was worth, at best, only what they had paid for it two years earlier. The glut of new-builds in their area was stifling the sales of older properties, as investors were seeking to buy off-plan.”

“After several months without any interest, the Rennos dropped their price to €299,000 and moved back home. Now living in rented accommodation costing £900 a month, the couple are running out of savings. ‘We need the money from the Spanish property to be able to buy in the UK,’ explains Maureen. ‘Without it we’re stuck.’”

“Maxine Crooknorth, from East Sussex, decided to move to the Costa del Sol with her six-year-old son in 2005 in search of a fresh start. She bought her two-bedroom, golf course apartment for €247,000, paying half of the purchase price upfront. She believed she would be able to comfortably afford the remaining mortgage and that the property would be a great investment.”

“‘It seemed like a good idea to buy then,’ she says. ‘Everyone was saying how good Spain was, how cheap the lifestyle was and that property prices would go up. In hindsight, I bought at totally the wrong time.’”

“Within a year of moving into her new home, Crooknorth discovered that, as a single mother, she was not able to find work as easily as she’d thought. The cost of living was also higher than expected, and within months she was in financial difficulty. She struggled on until her only option was to sell her home.”

“Nine months ago she put the apartment on the market for €265,000 based on the valuation she was given, but has since had to drop the price to €220,000.”

“‘I’m finding it quite a struggle,’ she says. ‘But I can’t really drop the price any more because all my equity is tied up in it and it’s a lot of money to lose. I can’t rent it because the payments wouldn’t cover the mortgage, but if I don’t sell soon I’ll be facing repossession.’”

“‘There is a lot of property for sale right now,’ she says. ‘Lots of people are desperate and there are some real bargains.’”

The Washington Post. “If you thought buying a new home was expensive, wait until you see how much it costs you to back out of the deal. With appraised values coming in below the contract price, buyers have to come up with more cash to follow through on such a deal. Sometimes walking away from a purchase is the least painful, most financially prudent option.”

“As you might imagine, builders don’t relinquish that money gladly. Builders typically ask for 10 percent of the contract price as a deposit, said Harvey S. Jacobs, a Rockville real estate lawyer. ‘If you can get away with paying less, great,’ he said. ‘But they ask for 10 percent.’”

“In addition to the cash deposit, builders frequently ask buyers to sign a promissory note for an equal amount of money, Jacobs said. If buyers are willing to forfeit $50,000 to walk away from a $500,000 home sale, maybe being on the hook for $100,000 would keep them in the deal. ‘I’m definitely seeing more letters saying, ‘We’re going to enforce your promissory note if you don’t close,’ Jacobs said.’”

“What’s more worrisome, Jacobs said, is that many people don’t even realize they have signed such a note, just one page among the many included in a sales contract.”

The Arizona Republic. “Instead of mailing in their monthly mortgage payment, a growing number of homeowners are sending lenders their keys. The growing trend, called ‘jingle mail,’ is pushing up foreclosures and alarming market watchers, particularly in metropolitan Phoenix, where home prices have dropped 18 percent in the past year.”

“Foreclosures across metropolitan Phoenix climbed to a record 2,365 in March, according to Information Market. That is more than quadruple the number from a year ago.”

“Joan Shaffer is turning in the keys of the north Phoenix Tatum Ranch home she bought with her daughter in late 2005. They put nothing down on the home, took out a loan that let them pay less than they owed each month and now their loan is $200,000 more than the house is worth.”

“‘We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado. ‘We would probably have to spend the next 20 years trying to get right on the mortgage. That’s crazy.’”

“‘Even if someone put 5 to 10 percent down but bought in the Valley during ‘05 or ‘06, they are likely upside down now,’ said Brett Barry of the north Phoenix office of Realty Executives. ‘I don’t advise people to walk away, but how do you convince someone to keep paying when they owe so much more than their home is worth? They can’t sell, and their lender isn’t going to forgive $100,000 in principal. It’s not good.’”

“Investors started the walk-away trend, but it has spread to the typical homeowner. Housing analyst RL Brown said he is hearing about young families who bought during the peak and are now walking away from houses as the interest rates on their loans reset and payments increase.”

“‘Instead of calling it a foreclosure, these couples are saying, ‘We’re giving it back to the bank,’ and then moving a couple of blocks away and renting a home for half their mortgage payment,’ he said. ‘These people are finding it easier to walk away.’”

The Star Tribune from Minnesota. “In the rush to find blame for the nation’s current housing crisis, the easiest targets have been the lenders and mortgage brokers who peddled predatory loans. But across the country, from the desert suburbs of Las Vegas to the treeless subdivisions of Wright County, many homeowners face a predicament of their own making.”

“Now, with home prices falling and mortgage payments rising, panic has set in. Investors are dumping houses on the market before prices collapse further, or simply turning the keys back to the lender. That, in turn, is dragging down values for even longtime homeowners, wiping out the equity they’d built up over the years.”

“Officials estimate that up to half of all houses that have gone into foreclosure during the past year are owned by investors. ‘You had people buying houses here that they have never even seen,’ said Dean Zachman, a sales agent in St. Michael. ‘They took bets that, in hindsight, seem reckless.’”

“Bruce McAlpin, a real estate agent in Monticello, said he was asked several months ago by a lender to evaluate a house in the early stages of foreclosure, in a new housing development called Norin Landing in Otsego. He estimates the house is worth $500,000, though an investor bought it in 2006 for $1.375 million and never lived in it.”

“‘I’m still looking for the gold chandelier, but it’s not there,’ he said.”

“Many of these investors are hardly the struggling home buyers portrayed as victims of the nation’s foreclosure crisis. ‘Once regular people stopped buying houses, builders had to create their own market,’ McAlpin said. ‘They preyed on people who weren’t savvy real estate investors.’”

“Norm Imholte, a truck driver from Freeport, said a builder paid him $50,000 for agreeing to buy a $425,000 house in St. Michael. The builder told him the house would be sold within 30 days and Imholte wouldn’t have to worry about making a payment.”

“Imholte bought a new truck with the cash, but the house never sold and has since slipped into foreclosure. He recently got a call from a state Department of Commerce official investigating mortgage fraud. ‘I never had any business owning a $425,000 house in Wright County,’ he said.”

“Other investors are clinging to their houses in the hope that the Wright County real estate market will bounce back to its pre-2007 peak. ‘I can’t sell these now,’ said Michael Morland, who bought two houses in separate subdivisions in Otsego. ‘But if I can’t get rid of these for a profit in five years, then I’m in trouble.’”

“For Bradley and Sarah Collin, buying real estate in Wright County seemed like a ticket to a better life. The couple and their three children, were living in a crowded trailer park in Blaine, when Bradley saw a newspaper advertisement touting real estate as the next quick way to make money.”

“With no money down, they could buy properties in a fast-growing new subdivision in Otsego known as Otsego Preserve. They would get $5,000 in upfront cash for each house they purchased.”

“The Collins were also told that home values in Wright County were appreciating at 8 percent a year, much faster than the national average. At that rate, the Collins could make $24,000 a year for every $300,0000 house they bought in the county. They were told that rental income would cover their mortgage payments until the houses were sold.”

“The couple purchased four houses — each for about $300,000 — hoping to quadruple their profits. The Collins received a $5,000 check after each closing. The cash payments were not disclosed on the mortgage statements sent to the bank, which Collin says he has since learned is illegal.”

“But the houses were rented for only eight months, and the income was never enough to cover the mortgages, Collin said. The couple, out of the trailer park and in an Andover rental, stopped making payments on the houses a year ago, and now owe more than $120,000 in back payments to the banks.”

“Creditors hound the Collins at all hours of the day. In a single day recently, the Collins received 175 telephone calls from banks and collection agencies.”

“‘They ask you, ‘Well, do you have any family members that you can borrow from? Do you have assets like cars you can sell? What kind of TV do you have?’ he said. ‘It’s not like I have a Lamborghini parked in the driveway that I can just sell and make everything go away.’”

“On a recent weekday evening, Collin visited his foreclosed houses, which are now listed for $160,000 to $170,000. The house had recently been vacated by a family that had ‘trashed the place,’ Collin said. ‘There was dog piss. There was rotten food. The smell was unbearable.’”

“Collin says it will take years for him to restore his credit record to the point where he can buy a house. And the guilt of not paying his bills could linger longer still.”

“‘All these mortgage companies are going down because of people like me who don’t pay their mortgages,’ he said. ‘I’m partly responsible for that.’”




Fifty Cents On The Dollar Is Not Good Enough

Reuters reports on Florida. “The surprisingly healthy market for oceanfront mansions and palatial condos in Florida, one of the most toxic states in America’s housing meltdown, may finally be showing some cracks. At a recent luxury property auction in Fort Lauderdale, the auctioneer took home after home off the block within moments after opening the bidding when nobody made an offer.”

“On one high-rise condo in the Miami enclave of Williams Island, a 3,100 square foot penthouse previously listed at $5.6 million, he opened bidding at $5 million, lowered his price to $3.5 million, $3 million, $2.5 million, and then closed the auction, all within a minute.”

“‘There’s just not that much enthusiasm or activity in the luxury market,’ said Jack Winston, a real estate analyst in Miami.”

“One man snapped up two bayfront houses in Miami Beach’s pricey Venetian Islands, one for $500,000 and the other for $1 million. The homes sold for $2.75 million and $2 million respectively in mid-2005, according to county records.”

“Guido Teichner, a would-be buyer who said he attended the auction looking to make a killing, put in a $500,000 bid on a two-story, 4,000 square foot (370 square meter) penthouse condo in downtown Fort Lauderdale that had previously been listed at $3 million.”

“The bid…was accepted at auction but still awaited seller approval because it was below the minimum bid. ‘Fifty cents on the dollar is not good enough in this market,’ he said. ‘I don’t think we’ve hit bottom yet so you’ve got to get a real steal to allow for a little remaining downside.’”

The Miami Herald. “Behind the guarded gates of Weston’s toniest neighborhoods sit multimillion dollar estates with lush landscaping, tennis courts and professionally decorated homes with guest quarters. But even in these luxury enclaves, the harsh realities of the struggling housing market are making themselves right at home.”

“‘If you talk to anybody and they say this market isn’t affecting them, they’ve got to be lying. It is affecting everybody — maybe some more than others — but everybody,’ said Robin Cervini, a Realtor in Weston (who) as worked in the area for nearly 15 years.”

“At the beginning of April, Cervini said, there were 107 Weston homes for sale that were priced at more than $1 million in the MLS system Cervini said only 11 homes in that price range have sold since the beginning of the year.”

“Gary Brown has had his 12,000-square-foot, six-bedroom home in Windmill Ranch Estates on the market for more than a year. It’s listed for $6.4 million. He is looking to downsize, perhaps along the water somewhere in Fort Lauderdale.”

“After lowering the price on his home by $1.5 million already, he would be willing to listen to alternative offers.”

“‘I’m guessing there might be somebody whose family is going in the other direction from where I am going — who is looking for a larger home and may not be in a position to acquire something that would turn out to be expensive tax-wise but who would find Weston appealing and trade their house for mine,’ he said.”

“While some people with homes on the market are downsizing, upsizing, relocating or selling for other reasons, Cervini also is seeing many homes going into short sales or foreclosures. Many are investors who bought hoping to flip the homes for a profit.”

“‘They just bought at the wrong time,’ she said.”

The Sun Sentinel. “A master plan that cost taxpayers $185,000 and lays out the framework for that new downtown could be overly optimistic in this economic slump. It calls for at least 1,000 residences centered on a future transit station in downtown Boynton Beach. But home sales have collapsed. New construction has stalled. At least eight planned housing developments remain on hold.”

“According to Metrostudy, there were 2,061 units that were either built or converted to condos in the greater Delray Beach and Boynton Beach area in 2006. A year later, there was a 65 percent decline. A total of 729 units were built or converted in 2007. In the last half of the year, only eight condo units were built.”

“David Levin, a housing consultant and analyst in Delray Beach, is skeptical a formula that paints such an elaborate downtown could work for Boynton Beach: ‘The build it and they will come mentality doesn’t work, not right now,’ he said. ‘There’s a limit to how many Las Olas [Boulevards] and Lincoln Roads you have. How many towns need them?’”

The Orlando Sentinel. “Darrell H. Johnson and Kevin C. Miller of Smith Equities’ special assets disposition group represented Winter Park Residences Corp. in the acquisition of the 209 unsold units in the 256-unit Summerlin at Winter Park Condominiums.”

“The new owners will complete renovations and begin leasing and sales of newly remodeled apartments in the project, creating a hybrid housing complex, Miller said. ‘We’re working on some others, but these are difficult to close,’ Miller said of the partially completed conversions, known in the industry as ‘fractured condo conversions.’”

“The property was converted to condos in March 2006 by Hialeah-based Puig Inc. After the condo market stalled, Puig filed for Chapter 11 bankruptcy protection in May 2007, and included the property in the filing.”

“The Summerlin was sold out of bankruptcy by Banco Popular, which held the senior debt. The price was $11.8 million.”

“Robert Smith, president of Smith Equities, said managing the mixture of individual owners and renters in a fractured condo conversion presents challenges for the investor.”

“Conversions result in higher property taxes that need to be appealed to reflect the lower value of reverting to rentals, Smith said. Accounting practices also must take into account shared costs and operation of the property between the investor and condo association.”

“Johnson said many potential buyers ‘are still waiting on the sidelines’ looking for ‘fire-sale’ prices, even though deals already can be negotiated at prices below unit-replacement costs.”

The Herald Tribune. “The father-and-son team behind an inventive offer to buy back certain condos they built if the properties lose value in the next three years have no real intention of doing so. Not that they will not honor the deal — they just do not think they will be asked to.”

“‘I have tremendous faith and confidence in this market, especially the Sarasota market,’ said Rob Morris III, who co-owns Ramar Group Cos. with his father, Bob Morris Jr. ‘This is absolutely paradise.’”

“The guarantee applies to 15 unsold units at Phillippi Landings and 25 at the Cape Haze Resort near Boca Grande in Charlotte County. The units range in price from $500,000 to $2.1 million.”

“Bob Morris said that as they sell the units it will provide the capital to build even more condos, which Ramar wants to do as foot traffic to their existing available units is up from last year.”

“‘That doesn’t mean we’ve had more sales,’ Bob Morris said. ‘Our customers are basically afraid to make decisions even though they found a place they like.’”

“Bob Morris had no guess as to when the housing market would turn around, but he does have a good idea what will happen when it does. ‘One of the most foolish things to do is call the bottom. Because when the bottom hits it will launch off and you’ll miss it,’ he said. ‘Once this inventory is sold off prices are going to increase with a vengeance.’”

“Figures from the Florida Association of Realtors show that condo sales during February were down 24 percent, with 210 units selling in Sarasota-Bradenton. The median sales price of $211,500 was down 41 percent when compared with the same time in 2007.”

“In the Charlotte County-North Port market, the association reports that sales were down 20 percent, with 24 units selling. The median sales price was $110,000, down 20 percent from the same time a year ago.”

“If you own or plan to buy a condominium, an ominous new phase of the mortgage credit squeeze could be looming on your horizon.”

“As a result of underwriting changes by giant investors Fannie Mae and Freddie Mac, plus severe new restrictions by private mortgage insurers, getting a loan on a condo unit — or even refinancing one you already own — could prove tougher than you imagined.”

“For example, starting May 1, AIG United Guaranty, a major private mortgage insurer, no longer will write coverage on condominiums in hundreds of ZIP codes across the country that it designates as having ‘declining’ market conditions. The ban is irrespective of applicants’ credit scores, assets or equity stakes.”

“Even in the healthiest real estate markets, United Guaranty will require buyers to put at least a 10 percent down payment into the deal, and will reject applications on units in condo projects where more than 30 percent of the owners are investors.”

“‘It’s ridiculous,’ said Phil Sutcliffe, principal of Project Support Services, who helps put together condominium project financings for developers.”

“For instance, said Sutcliffe, the new Fannie guidance requires loan officers to make certain that at least 10 percent of a condominium project’s current operating budget is reserved for ‘capital expenditures and deferred maintenance.’”

“Sutcliffe, who has analyzed condo project budgets for two decades, says there are no wiggle-room provisions in the guidance for ‘compensating factors.’”

“Freddie Mac spokesman Brad German acknowledged that the changes would make condo unit loans ‘more labor and paper intensive for the lender,’ but said weak sales, growing numbers of financially troubled projects, and declining property values made them necessary.”

“‘Even if you had an 800 FICO score and 50 percent equity,’ said Jeff Lipes, president of Family Choice Mortgage Corp., ‘you still might not be able to get a condo loan’ under certain circumstances.”

“Bruce A. Calabrese, president of Equitable Mortgage Corp., said ‘everybody is really backing off condos; because of all the restrictions and changes.’”

“He said he personally owns two condo units — one in Florida, another in Myrtle Beach, S.C. — and even though he is in the mortgage industry, ‘I don’t think I could refinance either of them right now if I tried.’”

The News Herald. “Bay County foreclosure listings jumped again in March, and a spokesman for RealtyTrac said Wednesday that Florida could expect more of the same in the coming months. There were 160 March foreclosure filings in Bay County, a 162-percent increase from the same month in 2007. There were 119 in February.”

“The increase in filings has kept Joe Baranowski busy. He manages a Carillon Beach-based company that assists buyers and sellers in the short sale process and negotiates with banks to avoid foreclosure proceedings.”

“Also a real estate agent with Panama City’s Keller Williams Realty, Baranowski said he was introduced to the short sale pro-cess through personal experience. Baranowski said he ran into financial difficulties with construction projects in the Water-Color and WaterSound developments.”

“‘Those projects were basically unsellable,’ he said.”

“Baranowski said he refers to each foreclosure-related short sale opportunity as a ‘project.’ The company currently has 90 active projects, the most since he started the business. ‘I think that this will continue for the next couple of years at a high rate,’ he said.”




Bits Bucket And Craigslist Finds For April 21, 2008

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