October 7, 2008

The Challenge Is Prices Got Stupid

The Daily Astorian reports from Oregon. “An increasing number of homeowners in Clatsop County are falling behind on their mortgage payments and opting to sell their homes to avoid foreclosure. On the North Coast…Barbara Maltman, a Gearhart real estate agent said she has sold several local homes that were in foreclosure or in danger of being foreclosed. ‘We are seeing a lot of people coming through who need to sell their home because they can’t make payments and they only have so much time before it goes into foreclosure,’ she said.”

“Joe Schulte, VP of Compass Community Bank in Seaside, said subprime loan programs were available in communities all over the country, including the North Coast, though for the most part local banks were not the ones offering them. ‘They were absolutely active in this area. No doubt about it,’ he said. ‘They weren’t discriminating based on geography. They were national programs.’”

“Drew Wilkens, senior VP of residential lending for the Bank of the Pacific of Aberdeen, Wash., said the so-called predatory lenders have closed up shop since the housing bubble burst. But while they were in business, they made life difficult for home buyers and responsible lenders by tricking people into thinking they could offer a better deal than the market could realistically provide, he said. ‘We’re all glad those people have gone away,’ he said.”

“Wilkens saidhis department is facing new challenges as the loan criteria change each day. ‘Loan officers have to be ahead of the curve,’ he said. ‘There’s so many changes, you really have to be on top of it. A good loan officer is doing a heck of a lot more research than they were a year ago.’”

The Oregonian. “Marty Ray Folwick, the Portland man who put together more than 70 fraudulent mortgage deals during the housing boom, pleaded guilty Thursday to four counts of bank fraud, wire fraud and money laundering. Folwick worked as a real estate loan officer. He admits to setting up bogus transactions with a series of straw buyers. He submitted falsified loan applications to lenders and took kickbacks out of the loan proceeds once the deals were done.”

“‘My guy is a fall guy for the whole subprime mess,’ said Ernest Warren Jr., the Portland attorney representing Folwick. ‘But he takes responsibility for the false documents he submitted.’”

The Idaho Press Tribune. “When it comes to buying a new refrigerator, car, home or securing a student loan, Idahoans have begun to feel the credit crunch. ‘Our market here in the valley is comparatively not so bad,’ Randy Neary, president of the Snake River Home Builders Association, said. ‘Average home appraisals in the area are still only feeling the effects of the first to second round of foreclosures or stress sales, whereas some parts of the country are in about the fourth round now.”’

“What’s happening is so many people are short selling homes and losing homes in foreclosures,’ said Robert Pilote, a local homebuilder and past president of the Idaho Building Contractors Association, ‘and that’s affecting the price of houses on the same street that aren’t in foreclosures.’”

“‘There’s a lot of people out there that need to sell everything from guns to coins to full estates and real estate. And lately we’ve been flooded with a lot of homes and have seen a big increase in folks trying in need of selling their homes,’ said Kevin Seward, auctioneer in Nampa.”

The Seattle PI from Washington. “Around the region, families are starting to tote up the bill of just how much the Washington Mutual meltdown is going to cost them. The sums will, for many families dependent upon WaMu paychecks or WaMu investments, or both, be daunting and depressing. The region can’t easily go find itself another employer with 4,300 local jobs.”

“Notes an employee by e-mail, ‘Most floors are half empty as it is after all the layoffs; after the next purge, it will seem even more like a ghost town.’”

“A year ago, WaMu stock was selling for just under $36 a share. Now? It’s about 14 cents. Some people bought the stock in recent weeks on a wildly speculative gamble, on which they lost. But others bought and held WaMu stock for years (a sample quote from a reader: ‘I lost about 35K, and this portfolio was for my kids to go to college in 10 years’).”

“Not only will many lose their jobs, as one employee noted, ‘The people I feel really bad for are the ones that drank the company Kool-Aid and loaded up their 401(k)s in WaMu stock. I think those are the ones that will have a very hard time recovering from this.’”

“Just how much of the JPMorgan Chase acquisition was done on the fly was apparent during a conference call Thursday that Charlie Scharf, JPMorgan Chase’s head of retail operations, had with employees. One WaMu employee, noting the amount of information-technology work ahead to merge the two banks’ computer systems, raised the issue of Project Restart (the name of the outsourcing effort), and asked, ‘Is that about dead?’”

“While other employees in the meeting room laughed at the phrasing, Scharf was a bit perplexed. ‘What is Project Restart?’ he asked. ‘I’m the only one who’s not laughing.’”

“Responded the employee, ‘We’re not laughing either.’”

The Seattle Times from Washington. “Prices continued their yearlong decline in King County, the Northwest MLS said Monday. Sellers are dropping their prices, said Melanie Smith, a John L. Scott associate broker who lives and works in Magnolia. Queen Anne and Magnolia experienced one of the steepest year-over-year declines in the county last month, MLS figures show.”

“‘Our prices are $40,000 or $50,000 or $100,000 lower than they were a year ago,’ Smith said. ‘I have a neighbor who dropped his price $150,000 over 80 days.’”

The News Tribune from Washington. “Home prices in Pierce County continued to fall in September, dropping to $241,950, a 10.4 percent decline from September 2007. Home sales in Pierce County and around the country have been falling for the last year. For the four-county Puget Sound region (King, Snohomish, Pierce and Kitsap counties) the median price for last month’s sales dropped from $349,950 to $324,000, a decline of 7.4 percent.”

“Buyers waiting longer for the market to bottom out could be making a mistake, said Virgil Wells, president of the Tacoma-Pierce County Association of Realtors.. ‘I think we just need to get the media to paint a positive picture,’ said Wells. ‘The fact is, this is the best time for buyers to buy since 1996. Inventory is high, prices have decreased and interest rates are low.’”

The Olympian from Washington. “South Sound apartment vacancies remain tight and rents continue to rise, according to a fall survey of the Puget Sound apartment market. Because the housing market is slower, more higher-end houses that can’t be sold are becoming rentals and pushing average rents higher, said Tim Seth, president of the Washington Landlord Association.”

“Rich Marlatt of Olympia, who is selling his condo, plans to move into Polo Club once it sells, he said. After that, he plans to rent for a period before getting back into the housing market.”

“Denise Bach moved to the area two years ago and chose an apartment because she is so busy. In time, though, she would like to own a home again, preferably on East Bay Drive in Olympia. Bach was a former homeowner in Northern California and said she will continue to watch home prices fall further before she jumps into the market again.”

“‘Let’s get the house I want and be patient,’ she said.”

The Peninsula Daily News from Washington. “Mortgage woes continue to afflict Northern Olympic Peninsula homeowners as Clallam and Jefferson counties see double-digit increases in foreclosed homes over the last year. Kathy Miller, recorder for the Clallam County Auditor’s Office, said she began to notice a sharp increase in foreclosure filings last summer.”

“‘This isn’t the good ol’ days,’ she said.”

“Terry Roth, a private auctioneer in Clallam County, said everyone on the economic scale is being affected. In June, he said he posted a piece of property for foreclosure with a $4,300 per month monthly mortgage payment. This year he has also posted a piece of property for foreclosure in Sequim assessed at $880,000. A home in Port Townsend went back to the loan beneficiary for $607,500 in July.”

“Michael Castle of Port Angeles lost his home to foreclosure last month. Castle said he and his wife, Rebecca were able to meet the mortgage payments until February. The home went to auction on Aug. 22. It did not sell, and therefore went back to Ocwen financial corporation as the beneficiary.”

“Castle, Rebecca and 20-year-old son Michael were told to vacate their $210,000 home by Sept. 12. Castle said his wife works as a home health nurse in Olympia and will likely have a place to stay at Providence Hospital. He is unable to work due to a back injury, he said.”

“‘If I have to sleep in my van by the side of the road, I will,’ Castle said with a laugh. ‘I can laugh at it now, because what else can you do?’”

The Nanaimo Daily News from Canada. “Property values are dropping all over Vancouver Island, with the median house prices down anywhere from $3,000 in Nanaimo to $32,000 in the Cowichan Valley in September, compared to a year ago, based on the most recent statistics from the Vancouver Island Real Estate Board.”

“Falling real estate values are what In August University of B.C. economist Tsur Somerville predicted falling values, but they are now exceeding his expectations. ‘What I know about Nanaimo can be fit in one paragraph, but Nanaimo shouldn’t be exempt from all the fundamental underlying trends,’ Somerville said.”

“Sellers should lower their expectations, said Jim Stewart, a VIREB director. ‘The challenge is prices got stupid over the last couple of years,’ said Stewart. ‘If the market goes back more, even if it drops 10%, are we hard done by? Nope.’”

The Calgary Herald from Canada. “‘Calgary’s housing market has yet to rebound from the correction that began in the latter half of 2007,’ said the Re/Max Upper-End Report. ‘The overall supply of homes listed for sale is still several thousand units ahead of levels reported in 2004 and 2005. Fortunately, speculators have vanished from the landscape.’”

“Other highlights of the Re/Max report include: The priciest condominium listed for sale on MLS is priced at $14.8 million in Greater Vancouver — reduced from $18 million earlier this year.”

The Vancouver Sun from Canada. “The market for luxury homes ‘is a separate market with its own factors,’ Re/Max’s regional executive VP Elton Ash said in an interview. What’s been pushing the positive numbers in part is pent-up demand. In 2006 and 2007, there was very little inventory as people snapped up all homes, even the higher-end ones, Ash said.”

“However, the Re/Max report said that in south Surrey, many high-end properties are overpriced and have been on the market for more than a year.”

“Elsewhere in the country, sales of high-end homes in Edmonton — valued at more than $850,000 — dropped 64 per cent. But in Regina, the number of luxury home sales, with prices of more than $500,000, jumped from 17 to 69, or 306 per cent.”

“On Thursday, we asked you whether it’s only a matter of time before Canada’s housing market bubble bursts. Two-thirds of respondents — 66.27 per cent — said the bubble will burst.”

The Leader Post from Canada. “The housing market in Regina was at a frenzied pace earlier this year, but during the third quarter, prices have cooled down and flattened out, says a report by Royal LaPage Realty. ‘The listings are dramatically up and the buyers, for the most part, are sitting on the sidelines, waiting to see what’s going to happen,’ said Mike Duggleby, broker-manager for Royal LePage Regina Realty.”

“Regina still posted high year-over-year price appreciations. The Queen City (34.1 per cent) was only second to Saint John, N.B. (54.4 per cent) with regards to the increased price of detached bungalows from the third quarter in 2007. Detached bungalows are now selling for an average of nearly $279,000, compared to $208,000 last year in Regina.”

“‘Condominiums have become the entry level (housing purchase) of choice. Go back to early 2007, you could buy a three-bedroom townhouse condo for $150,000. That’s almost doubled in some cases (now),’ Duggleby said.”

“Since March, the housing market has been relatively static, as bidding up and multiple offers on a property are rare occurrences. Buyers are holding out in hopes of a significant price reduction on the market, but Duggleby doesn’t see a price reduction happening.”

“‘It won’t be as dramatic as 2007, but I do expect somewhere between five and 10-per-cent price appreciation through 2009,’ he said. ‘The people who decide to sit on their hands and not buy now, are going to be sorry six months from now.’”




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