Waiting For Good Deals To Become Even Sweeter
It’s Friday desk clearing time for this blogger. “Six years ago, Paul Nelson gave up his long career in the defense industry for what he thought would be a peaceful retirement in Tucson. But retirement hasn’t worked out the way he planned. In 2006 his wife of 46 years died unexpectedly. He tried to swap their house for a smaller one and lost a chunk of his retirement savings in the process. Then this year the stock market cratered, wiping out almost everything he had left. Now the 71-year-old is looking for work at local hardware stores and Home Depot and contemplating filing for personal bankruptcy.”
“Nelson is negotiating to sell his Tucson home for $80,000 less than his mortgage. ‘The market waited for Nelson to make a stupid move,’ he says. ‘We didn’t get any offers that year. People were cautious. We would get lookie-loos, and then the market would drop again, and we would lower the price. I have nothing left. I am not alone, I think.’”
“Recent federal action to lower lending rates and to purchase debt is helping to pull down mortgage rates to historic levels. But so far, these low rates aren’t translating into more home sales in Maine.’If you’re worried about your job, it doesn’t matter what the interest rate is,’ said Melinda Boehm, president of the Mortgage Bankers Association of Maine.”
“In the short term, Boehm said, that anticipation could keep some qualified buyers on the sidelines, waiting for good deals to become even sweeter. From August to October, the most recent quarter tallied, median home prices in Maine fell roughly 8 percent from the same period last year.”
“Agents are hearing from clients who want to hold out for better deals. ‘I strongly feel that people are missing the boat,’ said Rita Yarnold, incoming president of the Maine Association of Realtors. ‘All real estate is local. We should only be concerned about what’s happening in Maine. Now is the time for buyers to get pre-qualified and start looking. This market will soon be disappearing, taking buyers’ future profits with it.’”
“Michael and Cynthia Russell wanted to move to New York City, where they both work. Jobs are more plentiful there than in their town of Poughkeepsie, N.Y. But like millions of Americans today, the couple are stuck. They owe about $80,000 more on the home they bought in 2004 than it is now worth.”
“So instead of selling their home, Cynthia is going to school to become a registered nurse and Michael is working from home. ‘We have had to find opportunities closer to home,’ Michael Russell says. ‘We actually began trying to refinance in June 2007, but absolutely no one would take us.’”
“Jim Fawcett of Houston says the 6% decline in his home’s value is just enough of a drop to keep him from retiring and moving inland from the coast.’There’s probably no way I could even sell my house in this market — short of giving it away,’ says Fawcett, 70. ‘Homes in my area, a newer development, sit on the market for six months, don’t sell, then are taken off.’”
‘Mara Stefan’s house is an unwanted reminder of her life before divorce. ‘As part of the settlement, I’m stuck in a house I don’t want to live in,’ says Stefan, whose suburban Boston home is $60,000 underwater. She would love to move with her sons. ‘But it looks like I’ll have to be here awhile.’”
“Developer Homero Meruelo’s plans for a $300 million condo project officially ended Monday with a lender’s $100 bid during a foreclosure auction at the Palm Beach County courthouse. Meruelo had managed to win postponements of several previously scheduled auctions. But Monday, he wasn’t even aware an auction had taken place, he confirmed in a phone interview. ‘No one bid on it?’ he asked after learning the site went back to the lender for $100.”
“Meruelo said the majority of buyers have received ‘part’ of their deposits back and the rest ‘are being settled as we speak.’ West Palm Beach attorney Gregory Coleman, who represents about 17 buyers trying to recover deposits, said Meruelo has not offered to settle with any of his clients. ‘That is an outright fabrication,’ Coleman said. ‘The only money that these folks got back was the first 10 percent from Gunster & Yoakley.’”
“It was Wall Street’s version of an inside joke: Take a motley collection of largely unwanted assets, repackage them into a new set of bonds, and name it after the pristine white-sand beaches of an exclusive New Jersey town where Katharine Hepburn once summered. No one is laughing now.”
“Deals like Mantoloking were ‘the height of lunacy,’ says Joshua Rosner, a bond market expert who issued multiple warnings about lax lending standards during the past seven years. least until defaults started piling up. ‘Wall Street and Washington acted in concert to provide an artificial sense of a safety net,’ said Julian Mann, a Los Angeles-based investment portfolio manager who looked over many CDO offerings.”
“For Dow Kim, 2006 was a very good year. While his salary at Merrill Lynch was $350,000, his total compensation was 100 times that — $35 million. The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill’s mortgage business.”
“Mr. Kim’s colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.”
“Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino — and let them collect their winnings while the roulette wheel was still spinning. ‘Compensation was flawed top to bottom,’ said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. ‘The whole organization was responding to distorted incentives.’”
“‘The financial services industry was in a bubble,’ said Mark Zandi, chief economist at Moody’s Economy.com. ‘The industry got a bigger share of the economic pie.’”
“Sales of existing homes in Central Texas plunged 40 percent last month, the largest decline on record, as the recession and credit crunch arrived full force in Austin. The 990 sales were the lowest number for November since 1997, according to the Austin Board of Realtors. And the median price fell 3 percent, the first drop in four years. Real estate experts don’t expect next year to be any better.”
“‘The consumer is scared to death to buy anything because they are afraid for it to go down in value,’ said Mark Sprague, Austin partner for Residential Strategies Inc., which tracks the housing market. ‘I haven’t seen consumer confidence this low in Austin since 2001, when we had the Internet bust. ‘09 will be slower, the slowest we’ve had since 1997.’”
“‘For a while, it looked like Austin and Texas were immune to what’s going on (nationally), and that’s no longer the case,’ said John Rees, director of research for Angelou Economics in Austin.”
“Home Builders Research reported a dismal 180 new home building permits issued in Las Vegas, Henderson, North Las Vegas and Clark County, the lowest monthly number since the firm started tracking the local housing market in 1988. ‘”There is no way anyone can try and sugarcoat what is going on in the housing industry,’ said Home Builders Research President Dennis Smith. ‘What started as a bubble a couple of years ago has evolved into a horrific, humbling and scary atmosphere that has grown into a national economic crisis.’”
“Larry Murphy of housing research firm SalesTraq found prices of just $75 a square foot for new homes in the master-planned Providence community in northwest Las Vegas. That’s less than the average of $99 a square foot for some 2,000 foreclosures sold in November, he said. ‘Why would anyone pay more money for a repossessed bank home than they would for a brand new home?’ Murphy asked.”
“My children recently enjoyed an unseasonably warm December afternoon by running and playing games in the backyard of our northwest Redmond home. As their screams and laughter grew louder, I stuck my head out the sliding glass door to say, ‘Quiet down. You’ll bother the neighbors.’”
“But then I remembered. The two houses that border our backyard now stand empty.”
“Sure, we can look at all the graphs and statistics to get the depressing facts of Central Oregon’s housing market crash. But the bigger punch in the gut comes from driving around neighborhoods like mine. You can see a yard where a neighbor carefully planted trees and flowers now being overtaken by weeds. The screaming ‘Price Reduced’ signs only add to the feelings of desperation.”
“The houses in my subdivision were built in 2005 – when it seemed like everyone was upgrading to a new home and every construction worker was working overtime to keep up with the frenzy. I remember driving around this and other neighborhoods under construction and asking my husband, ‘Where are all these people coming from? Where are they working to be able to afford these homes?’”
“Here’s where we made our biggest mistake. We found our new home and purchased it before we sold the old house. We figured it would only take a couple months to sell a 16,000-square-foot lot on the Dry Canyon. No one was more surprised than our real estate agent to find that through the spring and summer of 2007, only a handful of people would even look at our old house.”
“By September of 2007, we joined the ranks of accidental landlords and pulled our house off the market to wait for things to improve. Obviously, we’re still waiting. Every month that we make a mortgage payment, I feel like we’re staying alive in some kind of real estate edition of Survivor. Except the only prize is to keep paying a mortgage on a home that is now worth about $65,000 less than what we paid for it less than two years ago.”
“I know that in time things will turn around and I will eventually meet new neighbors. For now, I can’t help but look at the empty houses and say, ‘We paved over pastureland for this?’”
“I wanted and needed to buy a house as much as anyone, but with my credit rating all I would have been eligible for at the time of the housing boom was an adjustable rate mortgage, an ARM.”
“[S]o I did my research … and made my decision. I would hold off on buying. I would rent and work on repairing my credit. I am outraged at all the pity being given to all those who didn’t do their research and took an ARM and are now in foreclosure trouble. … It’s their own fault. Foreclose, start renting, and figure it out on your own for once and stop depending on the government and taxpayers to fix your problems.”
“Call it the gospel of hard times. With all this bad economic news, we’re starting to hear a chorus of voices preaching the cultural benefits of financial crises. Surely it has reached your ears: a recession could force us to spend more time with our families. It could curb the excesses of our consumerist culture, make us learn to live within our means. Heck, it could purify our greedy capitalist souls.”
“A Temple University English professor even has pointed to all the great literature produced during the 1930s: James Agee, Nathanael West, Henry Roth. The list goes on. ‘If it’s true that adversity can bring out creativity,’ the professor said recently, ‘then the Great Depression was one of the great creative periods of our time.’”
“Gee, too bad the housing bubble didn’t burst earlier.”
