Feeling A Bit Of Deja Vu
It’s Friday desk clearing time for this blogger. “Gresham and its working-class neighboring cities have caught more than their share of the housing pain. On the north end of Main, real estate broker Darren O’Halloran’s sign hangs in front of a vacant lot. O’Halloran bought the plot with a partner and hoped to resell it for a profit. He said he put it on the market in January 2007 for $125,000. He has lowered the price to $95,000.”
“The trouble, O’Halloran says, is that builders don’t want the lot because they already have more homes than they can sell. Even if they wanted to buy, builders and buyers have trouble finding banks willing to offer a mortgage on terms they can afford, he said.”
“‘We’re negotiable on it,’ O’Halloran said. ‘We just haven’t had an offer yet.’”
“Simon Ortega worries because he’s facing rising mortgage payments on his Gresham home thanks to an adjustable-rate mortgage. He said his payment has risen to $1,300 a month, nearly double what it used to be.”
“‘I’m scared to lose everything,’ he said. ‘All the money I put in in 10 years will disappear into the wind. It’s not good.’”
“Oregon’s stubborn housing slump has taken one of Oregon’s highest profile home builders as its latest casualty. The housing boom fueled ever rising land prices, and Randy Sebastian, Renaissance Homes CEO and founder put down millions in earnest money to buy prime land for new home lots. He figures the price of land went from $50,000 an acre in 1995 to $600,000 at the boom’s height in 2006.”
“Renaissance’s first quarter of that year turned disastrous when dozens of buyers walked away from deals because their own homes wouldn’t sell. Renaissance suffered 95 failed sales in the year.”
“Rumors have been circulating about the company’s precarious financial position for much of this year, fueled by a mounting number of construction liens filed against Renaissance by unpaid suppliers and subcontractors. Renaissance Homes expects to file Chapter 11 bankruptcy.”
“‘Obviously, this is humbling,’ Sebastian said. ‘It’s tough medicine. You face big risks in this business, and the market caught up with us.’”
“A slowdown in new-home construction that has galloped through the nation is being felt in the Yakima Valley. ‘Buyers can’t get financing. Everything has pulled way back,’ said Matt Willard, an Ellensburg home builder. ‘This is definitely a different time than we have ever seen before.’”
“Skip Semon, broker at QPoint Home Mortgage loans of Yakima, said while it is true that fewer options exist for borrowers, there is mortgage money out there at attractive rates - as long as they qualify.”
“‘If you go outside the brand-new home market to used homes, there are way more of them and that makes it more of a buyer’s market. It’s a good time for people entering the market without something to sell,’ he said.”
“According to the Municiple Property Assessment Corporation, Windsor homeowners will see an average decline of 5.5 per cent in their residential assessments in 2009. What it means for people like Vicki Bondy, is their taxes will likely go up more than the average homeowner.”
“‘It’s just craziness — our housing prices are going down, not up,’ said Bondy, who vows to appeal her assessment. ‘I’m going to write them and say: ‘Are you out of your minds? We’re all trying to just get by.’”
“Homeowner Scott Nelson has had plenty of time to enjoy the view since he first put his house on the market. ‘I thought it would sell within a few months, but I think all the doom and gloom preached in the paper about the Lower 48, which is in fact true, it kind of reflected how bad some of the properties are doing up here,’ he said.”
“In 13 months Nelson has had four offers and reduced the asking price by $90,000. ‘A lot of folks like to buy something like this, but it’s a little bit out of their price range, and I can understand that, because I feel it’s a little bit out of my price range at this point in time,’ he said.”
“‘It’s like one realtor said to me, you’re chasing the market,’ said Realtor Mary Tutterow. ‘You think you’re pricing it at something that will sell right now and actually that was where something sold three months ago, which is where we’ve always based our comps.’”
“There were no foreclosure deeds recorded in Greenwich from 2003 through 2006, only one last year and four so far this year, according to The Warren Group. Forced sales in Greenwich are usually handled discreetly with arrangements made between lender and buyer, real estate experts say.”
“The town is so private is doesn’t allow for sale signs on properties and kept out of towners off its pristine beaches until the Connecticut Supreme Court ordered them opened several years ago.”
“Real estate attorney Tom Ward said more foreclosures are inevitable with loss of jobs and lucrative bonuses from Wall Street. ‘I think everybody expects that to happen, even in Greenwich, Connecticut,’ Ward said.”
“Developers of new condominiums are finding that apartments they thought had sold are unexpectedly coming back into their hands as buyers - not just layoff victims, but some who are wealthy and employed - default on contracts. ‘Inventory that’s considered 100% sold out is now trickling back on the market,’ mortgage broker Andrea Costa, said. ‘Before, you had people lining up for these apartments. This is definitely new, especially for New York.’”
“At 1 Hanson Place in Fort Greene, a family recently gave up its $70,000 down payment after the father became unemployed, according to the firm that represented the buyer. Mortgage broker Thomas Wiggin, said one of his clients gave up a $75,000 down payment on an apartment in Brooklyn after finding that the financing he’d counted on is no longer available.”
“If buyers can’t come up with the cash, they could lose an even larger amount on their deposit. ‘You could be walking away from $300,000 - that’s not chump change,’ Ms. Costa said.”
“With housing sales down, the rental market may be where the action is. Sellers with no buyers often are opting to rent their homes and investors are adding properties. ‘There’s definitely been an increased demand for rental housing. There’s a lot of buyers that can only rent right now. A couple of my neighbors that moved from Florida and lost money on their homes can’t afford to buy right now,’ says Carlos Cooper, a former commercial real estate broker.”
“Sheena Buntyon will lead Village Property Management, which is currently handling 56 properties. ‘With the economy situation and foreclosure situation right now, it’s a great opportunity for us to start this so we can be the pioneers in the downtown urban sector,’ Buntyon says.”
“At 3:45 p.m., six Boston police officers formed a phalanx around the constable as he walked to a set of steps leading to the house. About 40 activists from City Life blocked the way. There was a jostle of shoving as the protesters tried to prevent the eviction. Four were arrested. Then, the constable walked into the house, followed by a locksmith. ‘We’ve been destroyed by the bank,’ Ana Esquivel said, tears streaming down her face. ‘The bank is too big for us.’”
“Paula Taylor lost her home in Roxbury, several weeks ago, despite a blockade action by City Life. Taylor was at Rowe Street yesterday, carrying a sign and chanting slogans. She said she had not been fully aware of what she was getting into when she signed up for her mortgage. ‘When I went into closing, that was the first time I saw the paperwork, when they gave me the keys. It was a blur, but they told me I could refinance after one year.’”
“Oklahomans who lived through the 1980s oil bust find themselves feeling a bit of deja vu as they are bombarded by headlines about the failure of Wall Street financial institutions, plummeting housing values in large urban areas and families losing their homes.”
“‘I think just an imbalance between risk and reward and a failure to adhere to basic and fundamental lending standards contributed to both situations,’ said Lee Symcox, CEO of First Fidelity Bank in Oklahoma City.”
“‘You had this risk-taking, profit-chasing feeding frenzy going on that created this bubble that has now burst. During the oil bust you saw the same type of activity,’ said state Treasurer Scott Meacham, who previously ran First National Bank in Elk City. ‘The thing just kept getting bigger and bigger and bigger. And then the balloon burst. I think you can call it recklessness.’”
“During Tokyo’s roaring early ’90s…cocky businessmen treated themselves to tiramisu sprinkled with gold flakes in the Ginza nightclub district. They bought Rockefeller Center and acquired the Pebble Beach Golf Links, alarming Americans who thought Japan was taking over the world economy. The Imperial Palace grounds were said to be worth more than Florida.”
“Then came the crash. Corporate titans bowed deeply and apologized. Homeowners quietly panicked. Unemployed salarymen dressed in suits each morning to keep up appearances, but idled away the days on park benches.”
“Japan spiraled from dizzying highs. The outcome: a 15-year recession. Depressed housing prices that still have reached only 40 percent of their 1990 high. Stocks that remain at 30 percent of their 1989 peak.”
“In August 2004, Moody’s Corp. unveiled a new credit-rating model that Wall Street banks used to sow the seeds of their own demise. The formula allowed securities firms to sell more top-rated, subprime mortgage-backed bonds than ever before.”
“A week later, Standard & Poor’s moved to revise its own methods. An S&P executive urged colleagues to adjust rating requirements for securities backed by commercial properties because of the ‘threat of losing deals.’”
“Gugliada says that when the subject came up of tightening S&P’s criteria, the co-director of CDO ratings, David Tesher, said: ‘Don’t kill the golden goose.’”
“‘Let’s hope we are all wealthy and retired by the time this house of cards falters,’ one unidentified analyst told a colleague in a December 2006 e-mail, according to the SEC report. The e-mail was signed with a computerized wink and smile: “;o). ”
“Local Raymond James financial advisor Bill Matthews remembers when the sub-prime phenomenon hit home for him.”
“‘I remember a mortgage banker in this town a year and a half, two years ago, telling me that this person could make a loan to someone who didn’t have any income or any net worth and had a poor credit record and sell that loan to Lehman Brothers,’ Matthews explained. ‘It made you think poorly of the system as a whole.’”
“‘The system was built to make it look like value was there, but it wasn’t,’ said Ashley Burt, president of Gunnison Bank. ‘And now things are repricing to real values. When you do that, boy, you yank a lot of value out of a system and you can’t do that without there being huge repercussions.’”
“Treasury Secretary Henry Paulson’s $700 billion plan to buy devalued assets from financial companies is ‘a joke’ because it doesn’t go far enough to calm markets, said Kenichi Ohmae, president of Business Breakthrough Inc.”
“Ohmae, nicknamed ‘Mr. Strategy’ during his 23 years as a McKinsey & Co. partner, called for a $5 trillion ‘international facility’ to be made available to financial institutions. ‘This is a liquidity crisis,’ Ohmae said. ‘The liquidity has to be so big that people won’t get panicky.’”
“Ohmae compared the current financial crisis with Japan’s 15- year economic decline that began in 1989. Both started with a property bubble, which wiped out companies’ equity when it burst, and like in Japan, the current one could lead to escalating bankruptcies as banks worried about their own survival rein in lending, he said.”
“The financial-market upheaval may lead to slower growth in China and the reversal of the commodity boom as ship orders are canceled and steel supply dumped, said Ohmae. What Ohmae called Japan’s ‘Viagra’ economy and Australia’s ‘dig and deliver’ boom may also fizzle as China weakens, he said.”
“Local economist Rick Harper told nearly 500 local business executives that ‘Wall Street is no more’ Monday at the 12th annual Gulf Power Economic Symposium. He also shared his assessment of the local housing market.”
“On the flip side, there’s the continuing saga of Washington stepping in to prevent complete failure on Wall Street. ‘The bailout scares me,’ said Shane Moody, president of the Destin Area Chamber of Commerce. ‘Who’s going to bail out the government when the time comes? And the time will come.’”
“Isn’t it ironic that the Fed - the central planning institution that got us into this fine mess in the first place - is now expected to get us out?”
“The housing bubble and the ensuing mortgage meltdown were themselves caused by the Federal Reserve. By keeping interest rates artificially low and driving inflation, it distorted the market and created the impression that houses and sub-prime mortgages were must-have investments. The mortgage and credit crisis that we’re now witnessing is simply that government-created illusion coming crashing down.”
“By the turn of the 20th century, young Americans just like us proved to be the leaders of the Industrial Revolution, and by the end of World War II, the United States had transformed itself from a rag-tag immigrant nation to the world’s economic powerhouse. In between, businesses failed, and no Federal Reserve came by to scoop them up.”
“Now, I ask only that my generation has the opportunity to continue to do the same. We’re not looking for a government to coddle us and we’re not looking for Ben Bernanke to plan our economy; we can run business and we’ll look after our own individual economic futures. And if the economy comes crashing down again, we ourselves will pick it up, just as long as the bureaucrats in Washington get out of the way.”
