February 28, 2009

The Ground Is Shifting Constantly In California

The Appeal Democrat reports from California. “It was standing room-only at a Behind on House Payments workshop in Marysville that reviewed ‘cash for keys,’ the hope hotline and ‘all those things going on behind the curtain’ when homeowners face foreclosure. Lincoln resident Lexie Karsch, and her husband, Pete, who have three daughters, worked for builders before the housing boom ended and owe $4,500 after falling three months’ behind on mortgage payments. ‘Everybody sounds so confused,’ she said of people who deal with her about the loan.”

“Karsch said she’ll follow up on workshop advice that includes trying again if the first effort to modify loans and lower housing payments isn’t successful.”

“A homeowner in the Edgewater development in Linda, who asked not to be identified, said after the event that she and her husband face possible foreclosure on the house they bought for $348,000 in 2005. The couple had their house on the market for a year but no buyers came forward. Other comparable sales in the area have brought between $179,000 to $200,000 for houses, the woman said. Their lender wouldn’t work with the couple in Linda until they were in default on mortgage payments, the woman said.”

“A Loma Rica resident who attended the workshop said she was surprised to see neighbors there. She said a March 9 trustee sale looms on the home and five acres she bought in 2006 for $489,000 — and whose loan terms she seeks to modify.”

“Difficulty reaching and dealing with lenders was a common workshop theme — as were changing regulations involving loans, foreclosure and government assistance. ‘The ground is shifting constantly,’ said Lee Pliscou, directing attorney at the Marysville office of the nonprofit California Rural Legal Assistance.”

The San Gabriel Valley News. “California’s housing market has weathered a sobering downturn in recent years, and figures released Thursday show how far things have fallen. In January, the state’s median home price for an existing single-family home topped out at $254,350. That was off 9.5 percent from the previous month but down a whopping 40.5 percent from a year earlier, according to the California Association of Realtors.”

“Locally, Rowland Heights showed the biggest year-over-year decline, with its January median home price falling 42.9 percent to $374,000. Other big declines included Pomona (-41 percent), El Monte (-40 percent), Pasadena (-35.9 percent) and La Puente (-35.4 percent).”

“With favorable home prices and historically low mortgage rates, affordability in the California housing market is now at its highest since the start of the decade. And that is a good thing, according to Tom Adams, owner of Century 21 Adams & Barnes in Monrovia and Glendora. ‘The flipside to everything you hear on the news is that all of these opportunities have opened up,’ he said. ‘I have someone who is buying a home for $450,000, and two years ago that home was $700,000.’”

The San Francisco Chronicle. “President Obama has grabbed what the real estate industry considers the third rail of tax reform: mortgage-interest deductions. Among the many tax increases on the affluent laid out in his budget proposal Thursday was a plan to reduce the itemized deduction rate for families with incomes over $250,000 to 28 percent, down from 33 or 35 percent.”

“The National Association of Realtors quickly responded with a strongly worded letter to the president, arguing the change could ‘trigger yet another crisis in home values…Mary Trupo, the Realtor group’s public issues director, said the impact would be particularly widespread in expensive housing markets like the Bay Area, where a large portion of home buyers are well-to-do.”

“The California Association of Realtors ‘will vigorously fight this provision in the halls of Congress,’ said James Liptak, president of the Los Angeles trade group, in a prepared statement.”

“Christopher Thornberg, principal at Los Angeles research firm Beacon Economics, said the reduced deductions could slightly weigh down home prices, by 2 to 3 percent, but only on higher-priced properties that have been less affected by the housing downturn. ‘It’s like I’m standing in the middle of a forest fire and they say, ‘Don’t light that match,’ he said, noting prices across the state are already down more than 40 percent.”

The Ventura County Star. “If you’re planning to buy a home in the coming months, state lawmakers and residential developers hope you consider a newly constructed home. To sweeten the deal, if you buy one between this Sunday and March 1, 2010, you could get up to a $10,000 tax credit from the state. And if the purchase is before Dec. 1, you may be able to pair it with the $8,000 federal tax credit in President Obama’s stimulus package, provided you’re a first-time buyer and meet other requirements.”

“The state program is capped at $100 million, meaning about 10,000 buyers could secure the $10,000 credits. The program potentially could be over within the first few months. It helps that there is some impetus to take advantage of the credit early. ‘It puts urgency into the system,’ said Layne Marceau, president of the Northern California division of Shea Homes.”

“The sale of 10,000 homes with the tax credit would put a 15 to 20 percent dent in what home builders were planning for this year, Marceau said, citing 66,000 new home starts last year. Clearing inventory from the market could spur more construction and drive the economy, he said.”

“Mark Schniepp, director of the California Economic Forecast in Goleta…said the tax credit would act more as an incentive to get those already interested in buying to consider a new home over an existing home, but he questioned whether it would be enough to push someone who is undecided into the market. That’s because $10,000 still isn’t a lot on a home that costs $300,000 or $400,000. It may drive sales in lower-priced parts of the state more than higher-priced areas like Ventura County, Schniepp said.”

“He believes lower interest rates would provide a bigger boost in sales because it would produce more savings over the long run. ‘This in combination with lower rates would provide a pretty important stimulus,’ Schniepp said. ‘Without the lower rates, which we really need, I don’t know how much of a big lift this is going to provide.’”

The Press Enterprise. “Some analysts said they think the programs could create some excitement and provide a financial boost for some homebuyers. But they contend the help is too little to turn around the housing market or replace the hundreds of thousands of jobs the state has lost in homebuilding and related sectors. ‘The magnitude of the problem is so great that this is not going to solve it,’ said Chapman University economist Esmael Adibi.”

“Chris Thornberg, an economist with Los Angeles-based Beacon Economics, complained that the state tax credit ‘will bail out homebuilders who built homes no one wanted.’ Thornberg and other economists said before the homebuilding industry can regain its health, the first priority is to sweep away the flood of foreclosed properties that are selling at distress prices.”

“Local Building Industry Association officials say there is a limit to how much good the tax credits will do. Frank Williams, chief executive of the association’s Baldy View chapter, which includes San Bernardino County, said the programs are ‘well meaning but not near enough.’”

“He said the federal credit needs to be twice as large and not a credit but cash that a buyer could use as a down payment. Also, he called the state program ‘window dressing’ that probably will run out of money within six months.”

The Union Tribune. “Rising job losses at retail stores, construction companies and movie studios helped push California’s unemployment rate above the 10 percent mark last month for the first time in 26 years, according to data released yesterday. ‘We started the downturn bad. It turned worse. Now it’s gotten ugly. And unfortunately, employment is the last thing that improves in a recession,’ said Esmael Adibi, economist with Chapman University in Orange.”

“Over the past year, construction firms in California shed 130,800 jobs, or 15.5 percent of their work force. Real estate and financial firms lost 48,200 workers, or 5.5 percent of their work force. Adibi blamed the housing sector. ‘We were disproportionately exposed to the construction sector and the mortgage industry,’ Adibi said. ‘When you see that these sectors are losing jobs as much as 15 percent per year, you can see how this could affect us.’”

“In addition to cuts from company payrolls, the jobless included a large spike in nonsalaried workers, such as independent contractors, freelance construction crews and cleaning workers. ‘A lot of the self-employed people were very exposed to the housing troubles, such as independent real estate agents or home-repair workers,’ Adibi said. ‘Some of them may have tried to survive through the new year and then decided that things just weren’t getting better.’”

“Jerry Nickelsburg, economist with the UCLA Anderson Forecast, said that other than the high unemployment rate, there are few parallels between the recession of the 1980s and the current decline…The current downturn, Nickelsburg said, has been driven by the crisis in the financial system. ‘We’re really in uncharted waters here,’ he said. ‘I don’t see anything on the horizon that will lower unemployment this year. It will probably go higher before it goes lower.’”

The LA Daily News. “For the first time since 1993, the unemployment rate hit 10.5 percent in Los Angeles County in January as thousands of workers lost jobs in nearly all occupations in the economic downturn. The increase from 9.2 percent in December represents a record one-month jump in the number of unemployed people in the county. ‘There are huge problems,’ said Stuart Waldman, president of a San Fernando Valley business group. ‘I can’t tell you how many people I know who don’t have a job right now. Business is scared.’”

“Meanwhile, the unemployment rate in California hit 10.1 percent, up from 8.7 percent in December, the largest one-month jump since the California Employment Development Department began tracking the data in its current form in 1976 — and probably the largest ever. ‘It’s the largest jump in history,’ EDD spokesman Patrick Joyce said. ‘Employment peaked in December of 2007. And it’s basically been going down ever since.’”

“Jerry Nickelsburg, a senior economist at the UCLA Anderson Forecast, said he believes the county is still in the middle of a contraction. ‘Although there are signs in the housing market that the adjustments that needed to be made have been made, the fly in the ointment is foreclosures, and that means the housing market is not going to stabilize until the labor markets do,’ Nickelsburg said.”

“Federal regulators identified significant problems with IndyMac Bancorp but failed to take action to avert its collapse - a collapse that cost the Federal Deposit Insurance Corp. $10.7 billion, according to a report released this week. An audit report, released Thursday by the Treasury Department’s inspector general, says the Office of Thrift Supervision identified a host of problems and risks with the Pasadena-based mortgage lender, including the quantity and poor quality of nontraditional mortgage products.”

“But the OTS ‘did not take aggressive action to stop those practices from continuing to proliferate,’ the report says. As many of the bank’s Alt-A loans began to reset at higher interest rates, the defaults began ramping up and the bank’s stock plummeted.”

“Sven Arndt, a professor of economics at Claremont McKenna College, said the results of the audit report on IndyMac aren’t surprising. ‘Lending had became increasingly casual and there was a huge amount of laxity as far as risk assessment,’ he said. ‘And supervisory agencies were aware of that. They thought all this stuff would work itself out.’”

The Marin Independent Journal. “Mill Valley-based Redwood Trust Friday announced a loss of $116 million, or $3.46 per share, for the fourth quarter of 2008. The fourth-quarter loss was slightly greater than the $110 million loss Redwood officials predicted earlier this year when the company raised $284 million with a public stock offering. Redwood plans to use the public offering cash to buy residential mortgage-backed securities at what it considers to be deeply discounted prices.”

“In a letter to shareholders, George Bull, Redwood’s chief executive, wrote, ‘While we were not surprised by the downturn, we underestimated the extraordinary level and complexity of the financial risks that market participants had taken, the extreme level of leverage employed, and the degree to which the fates of most financial institutions and markets were intertwined.’”

‘Bull added, ‘With the clarity of hindsight, we were too early with some of the investments we made in the first half of 2008, although we believe these investments will ultimately yield acceptable returns.’”

The Monterey County Herald. “A Nevada County peace officer-turned-real estate broker suspected of bilking hundreds of investors out of $20 million was arrested by local authorities Thursday morning. Inspectors from the Santa Cruz County District Attorney’s Office arrested Thomas John Hastert, 53, at his daughter’s Westside home around 10:30 a.m., according to County Jail records. He is being held on a $540,000 arrest warrant.”

‘Hastert is a hard-money real estate broker who ‘brazenly deceived’ 123 investors and borrowers in six counties, embezzled fees and filed false paperwork, the Attorney General’s Office reported.”

“Hastert allegedly brokered more than 270 hard-money loans in Nevada, Sacramento, Sutter, Butte, Placer and Yolo counties between September 2004 and September 2007 for real estate development projects. Hard-money loans typically provide high returns for private investors and are secured through collateral such as real estate, according to the Attorney General’s Office. The scheme collapsed when many of the loans, which were not properly backed with property, failed, the Attorney General’s Office reported.”

“Hastert, who had been a sheriff’s deputy in Los Angeles and Nevada counties before he got a law degree and went into real estate, was arrested without incident.”

“The numbers are grim in the Monterey County housing market. More than 5,200 homes are in or near foreclosure since October, and median home prices have dropped by nearly 50 percent since 2007. Credit scores of 750 or more and down payments up to 30 percent are now required to buy a home, leaving many out of the market. Home building permits are down by more than half, and new residential construction is nearly nonexistent.”

“But there is some hope, according to the 2009 Annual Housing Report presented to the Board of Supervisors. That’s because the report…suggests that newly available federal and state funding can do plenty to help boost homeownership and the rental market, keep people in their homes and improve living conditions.”

“County Housing and Redevelopment Agency director Jim Cook acknowledged the huge challenge facing the county’s housing market, but he expressed some optimism. ‘It would be easy to say the problem is so big that we’re spinning our wheels,’ he said. ‘But I believe we can bring the resources to the table to complement state and federal efforts to help address the problems.’”

The Neighborhood Stabilization Program, which is supposed to receive federal and state stimulus funding…takes aim at buying, fixing up and reselling foreclosed homes to low- and moderate-income homebuyers, and the county is expecting about $2.1 million in funding for the effort. ‘The fact is for the first time in years, home prices are within reach and we can help people bridge the credit gap,’ Cook said. ‘For the first time in years, the stars are lining up.’”

“County housing officials are also backing a so-called “soft landing” initiative aimed at providing temporary housing for people displaced by more aggressive code enforcement efforts, which Cook indicated is partly in response to an increase of illegal housing and overcrowding as a result of a tightening housing market. Also Tuesday, the supervisors reviewed a schedule for budget talks aimed at addressing a shortfall that could reach $100 million by the end of fiscal year 2010-11 without significant cutbacks.”

The Milpitas Post. “City officials last week loosened legal restrictions regarding nearly 70 unsold housing units within KB Home’s Terra Serena community on South Abel Street. Milpitas City Council, convening as the city’s redevelopment agency, unanimously voted Feb. 17 to adopt a resolution authorizing the city manager to execute amendments to affordable housing agreements at Terra Serena’s 683-unit complex, which completed construction in September.”

“‘We’re taking restrictions off (the affordable housing units) due to the bad economy,’ Milpitas Principal Housing Planner Felix Reliford said.”

“Milpitas requires 15 percent of all residential units in the redevelopment project area to be off price: 6 percent for very-low income households and 9 percent for low- and moderate-income households. Reliford said by having the city remove restrictions normally placed on affordable housing units such as those regarding resale of those units, they may be easier to sell. The amendments would also allow the developer to lower the selling prices of many one- and two-bedroom condo units at Terra Serena.”

“‘We’re dropping the prices to attract more buyers,’ he added.”

“The current housing market and stricter lending requirements have created ‘unforeseen challenges in finding qualified buyers for these affordable units,’ according to a city report. Those challenges have left 67 of the 85 affordable condo units on the east side of Terra Serena unsold.”

“According to Relfiord, the reduction of housing prices resulted in market prices being similar to minimum sales prices for affordable units.”

‘This situation provided little or no incentive for buyers to purchase the off-price units, which come with 45-year resale restrictions that limit equity growth. ‘People ask themselves ‘Why get tied up for 45 years when you can get a market rate (unit) with no restrictions?’ Reliford said.”

“He added that over the last two and half years city staffers and KB Home have advertised on five different occasions (June 2006 to November 2008) to attract homebuyers for the purchase of the affordable units. He said approximately 580 applications were reviewed after the first four rounds of advertising. He claimed the scope of advertising these units was increased last November to include the entire Bay Area in regional newspapers.”

“‘For the entire Bay Area, we got only nine applications,’ Reliford said.”

February 27, 2009

Bits Bucket For February 28, 2009

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Giving It Back

It’s Friday desk clearing time for this blogger. “Some Des Moines-area homeowners feel stuck in their homes — they can’t sell and they can’t rent out either. Doug and Marissa Kennedy of Ankeny want to buy a home larger than their 1,100-square-foot townhouse. They tried to sell but couldn’t find a buyer, and new restrictions prevent them from carrying two mortgages to get into the landlord business. ‘We don’t even have a Plan B anymore,’ Doug Kennedy said.”

“C.P. Morgan Homes announced Thursday it will halt all operations today, after 26 years in the business. Some families are concerned that promises made by the company won’t be kept. Patricia Conry said she and her family moved to a C.P. Morgan community in Camby two years ago from California. She said a huge part of their decision to settle in Northfield at Heartland Crossing involved promises of a pool and a park, which were never built.”

“Without the promised amenities, the house isn’t nearly the value they thought it was, she said. ‘We paid all this money for a house, and now we’re not going to get the things (that were promised),’ Conry said.”

“The Lafayette housing market is bucking the national trend of slumping home sales and depreciation in value. ‘Someone who buys a house here, they think they are going to get that gradual appreciation over a period of time,’ said Broker Duke Long.”

“As for Andrew Conner, he has his eye on a home south of town. He said he is closer than ever to fulfilling his dream of home ownership. ‘I just wanted something that was my own. I’ve been paying rent for four years and it hasn’t been going to anything and I can actually call this my own,’ Conner said.”

“In January, Marco Island saw the biggest drop in the median price for single-family resales in the state. The median price fell to $200,000 for homes sold in January, according to the Florida Association of Realtors. That was down 62 percent from a year ago, when the median price was $529,500.”

“Fort Myers-Cape Coral came in second in the state for its single-family home price drop in January. The median price fell to $94,900, down from $234,000 a year ago — a 59 percent decline. ‘Approximately 80 percent of the Lee County market in 2008 was a distressed sale,’ said Brett Ellis, partner with The Ellis Team at RE/MAX Realty Group in Fort Myers. ‘They are good deals. They are well below replacement cost.’”

“In January home buyers in the Albuquerque metro area could choose from among 5,309 homes and 616 townhomes on the market. That translated into nine homes for every buyer out there looking. ‘Most every buyer, unless they realize this house they absolutely have to have, then they’re going to come in and lowball the house,’ said George Lowes, president of the Realtors Association of New Mexico. And right now price is the driving factor, he said.”

“Northwest Austin homeowners may want to wait before putting their homes up for sale — if economic forecasts are correct, a housing shortage could drive prices up in the next few years. ‘My fear is that national developers may have overreacted, and Austin may be penalized in the form of lower home starts, which eventually can create an artificial shortage,’ said Angelos Angelou, principal executive officer for AngelouEconomics.”

“Realtors and economists agree that now is still not the time to sell, and it probably will not be for another 18 months. ‘You haven’t lost any equity if you haven’t sold your house,’ said Mark Sprague, Austin partner for Residential Strategies. ‘It’s like a stock. You have to wait for that equity to come back.’”

“Helen Edwards, president and chief operating officer for Coldwell Banker United, Realtors-Austin region, said home buyers are looking for higher-quality homes, but not necessarily larger homes. ‘We’re past the point of bigger is better. Buyers are more concerned with quality of construction and energy efficiency,’ Edwards said. ‘People are not looking for McMansions anymore.’”

“While nuts-and-bolts details are unclear about how President Barack Obama’s unprecedented $275 billion foreclosure rescue plan will work, the immediate benefit of the proposal may be a sense that a bottom to the housing crisis has been reached. ‘We need to stop the free fall and right the ship,’ said Patricia Harpin, a veteran broker in Stratham. ‘In the last year, homebuyers I’ve talked to have been paralyzed out there. I think the biggest thing we need to do is to install confidence,’ said Harpin, who works in southern Maine and New Hampshire. ‘Even if it’s something you’re not facing today, you hear about it. We need to continue to reinforce the positive because it’s a great time to buy a home.’”

“What’s not known yet is what lenders will take part, what homeowners need to do or even how the process will work. Obama announced his plan Wednesday in Arizona, a state drowning in record foreclosures.”

“Most struggling Arizona borrowers are too far upside-down on loans to qualify for refinancing at a reduced loan amount under the program, local real-estate professionals said after learning about provisions discussed by Housing Secretary Shaun Donovan before Congress on Thursday.”

“‘In Arizona, Florida, California and Nevada, most borrowers are underwater by more than 50 percent,’ said Mateo Garcia, president of Mateo Mortgage Funding in Tempe. ‘I just think Washington is seriously naive to what is going on in the streets on a daily basis.’”

“Bob Wasieko, of Phoenix-based Security Mortgage Corp., said that the $75 billion allocated toward preventing foreclosures is ‘a drop in the bucket’ given the total value of distressed home loans in the United States. Letha Martin’s concern is that the promise of federal assistance will discourage homeowners in Arizona from taking the steps necessary to improve their financial situation on their own. ‘Too many people are placing too much stock in the degree of impact the stimulus plan is, in fact, going to have,’ said Martin, vice president of Valley loan modification firm the Platinum Group. ‘This pie-in-the-sky attitude may lull people into a false sense of security.’”

“‘A house that was worth $300,000 may now only be worth $150,000 to $180,000 or less,’ said Bob Bemis, CEO of the Arizona Regional MLS. ‘Even if the bank modifies the loan, extending the term to 40 years and dropping the interest rate to under 5 percent, the homeowner will still never be able to sell the house for what is needed to repay the total debt.’”

“No one has a bigger stake in the Obama administration’s housing rescue plan than Las Vegas. Dennis Smith, president of Home Builders Research, said he doesn’t think there is a magic wand to solve the foreclosure crisis because it is so broad and deep.”

“‘I think any kind of action that we can get out of the government to assist in the foreclosure problem is a positive and it is appears like they are trying to take as much as they can and throw it against it the wall and see what sticks,’ Smith said. ‘And that is not bad … But when you have 50 percent of homes in Las Vegas underwater, that is a scary thought. To suggest that a person is not going to walk away from that loan because he can go in and refinance and save 150 to 200 bucks a month — I don’t see that happening. He is going to walk away like everybody up and down the street did.’”

“California is offering a big carrot to people who buy brand-new homes in coming weeks: a $10,000 state tax credit for new-home buyers who close escrow starting Sunday. Jed Kolko, a research fellow at the Public Policy Institute of California in San Francisco, said the tax credit is a mixed blessing.”

“‘It’s designed to boost the construction industry, which it’s likely to do,’ he said. ‘But it ultimately encourages more new-home constructions, which is most likely to happen where there is more available land and less regulation - the areas where we have oversupply already.’ Moreover, the credit could sap demand for existing homes, making it even harder for people who need to sell their homes to do so, he said.”

“‘While the tax credit may marginally help slow the decline in housing prices, it could encourage people who otherwise would not be able to afford a home to buy one,’ he said. ‘As we all know, sometimes that works out and sometimes it doesn’t.’”

“South Bay home prices plunged in January to a level not seen for nearly five years. The median price of an area home was $477,500 last month, according to the California Association of Realtors. The local decline was less severe than the countywide figure, a stunning 35.5 percent drop to $300,000.”

“‘You know something is going on when you start getting two, three, four times the listings than sales,’ said Realtor Adolph James, who specializes in the beach cities. ‘For the last five, six, eight years, the average number of listings available in that area was eight to 12. As we speak, I think we’re pushing 40. Yeah, it’s tough.’”

“Another sign of the housing market’s tough times was evident on the Palos Verdes Peninsula, which was not cited individually in the CAR report because the entire area failed to generate at least 30 home sales in January. It was the first time The Hill was left off the CAR list since February 2006.”

“James said he expects to see a bottom to the housing market within the next two years. ‘It wouldn’t be a surprise if it’s mid to late next year, but it’s not going to be ‘09,’ James said. ‘The bottom line is that real estate moves 3 percent a year, and we had years where it moved up 13, 14, 15 percent. And we’re giving it back now.’”

“The epicenter of this earthquake was in California. But the true epicenter can be located with greater precision at the headquarters of World Savings, the nation’s second-largest savings and loan, founded and led by Herb and Marion Sandler. The type of mortgage sold by the bucketful were known as Option ARMs.”

“A whistleblower, Paul Bishop…had warned the top management at World Savings that loans were being aggressively promoted and made to people with little or no regard for their ability to afford them. The term ‘Enron’ was waved about like a red flag but to no avail.”

“Will levers be pulled to help the Sandlers avoid further scrutiny? Will Attorney General Eric Holder, not immune in the past to allowing political factors influence his decision-making, send a message to the U.S. attorney in San Francisco to focus on other issues than the Sanders? One more question: Why has House Speaker Nancy Pelosi not looked in her own backyard for the people partly responsible for our nation’s problems?”

“On Jan. 29, President Obama called the bonuses paid to Wall Street employees ’shameful.’ The current financial debacle is a result of the housing mortgage collapse. The mortgage collapse is the result of ’shameful’ government policies which promoted loans to unqualified buyers.”

“Most ’shameful’ of all is the ’shamelessness’ of politicians who keep feeding taxpayers their garbage while maintaining a sincere demeanor.”

“Alan Greenspan should emulate Donald Rumsfeld. When you err badly as a policy maker and do enormous harm to the nation, hunker down and keep your mouth shut rather than demean yourself with lame excuses. That is what Greenspan does in the CNBC documentary ‘House of Cards’ that aired recently.”

“The Federal Reserve under Alan Greenspan failed badly in the last half of his nearly two-decade tenure. It failed in the most basic function of any central bank - regulating the money supply so as to maintain a stable price level. And it failed as a financial market regulator. These two failures - to prudently manage the money supply and to regulate the banking sector - are key causes of the global financial crisis and growing recession.”

“That is not to say the Fed is the only culprit. Many other factors played a part, including large persistent federal budget deficits financed by borrowing abroad, decades of ill-reasoned policies to foster homeownership, a somnolent Securities and Exchange Commission, a fragmented financial regulatory system, irresponsible management of financial institutions and a society that turned a blind eye to folly because times seemed good.”

“In CNBC’s documentary, Greenspan once again argues that the Fed had little to do with the bubble or the current recession. These, he implies, are random events of the kind that occur for no reason every century or so. Moreover, he argues, there is nothing the Fed could have done to limit the growth of the bubble, save raise interest rates so violently that the economy would fall into a recession with unemployment of 10 percent.”

“This is malarkey. Yes, by 2006, there was no longer an easy way to climb down from a perilous perch. But with the money-supply growth at twice the rate of output year after year and with the Fed’s interest-rate target holding at one-fourth or less of its long-term averages, quarter after quarter, it insults the public’s intelligence to argue the Fed and its chairman bear no fault.”

“No Fed official was as conscious of his public image as Greenspan, once basking in the fawning title of ‘maestro.’ If he persists in making statements like his recent ones, the image that he’ll be left with will be far less flattering.”

Bits Bucket For February 27, 2009

Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.

February 26, 2009

Still More An Art Than A Science

A report from the Oregonian. “Time ran out for the Bali family Thursday morning when a Clark County sheriff’s deputy arrived in an unmarked car. Krishneel Bali’s parents hadn’t told him they were losing the house to foreclosure, he said later. Now, as a truck backed into the driveway, he had 30 minutes to vacate. County records show the Balis bought the 1,436-square-foot house for $180,900 in 2005 as the housing market boomed. The latest financial company to own the house after foreclosure paid $158,400 in September as prices plunged.”

“Krish Bali said his grandmother’s house was too full to take in the family. So he would probably go one place, his sister another and his parents somewhere else. ‘I didn’t see this coming,’ he said. ‘We’re just kind of stuck.’”

The Sandy Post from Oregon. “Looking around Sandy, it is easy to see the construction industry is at a virtual standstill. The city has issued from zero to three building permits a month for the past four or five months. That’s a historic low. Tracy Brown, planning director for Sandy, says there are about four subdivisions that have gone through some level of development (prior to construction) before coming to a standstill.”

“‘A couple of (the subdivisions) are just waiting,’ Brown said. ‘One of them is essentially done. But (the developer) hasn’t recorded a final plat, and I don’t know why, unless it’s the economy that’s not doing well.’”

“Even though Tom Orth of Orth Construction is putting the final touches on a subdivision near Dodge Park Road and 302nd Avenue, he is virtually unemployed. ‘My Ten Eyck Rim project has been approved by the city,’ Orth said, ‘but I don’t think I am going to move forward on it at this time. I would like to build $200,000 homes there, but I’m just not getting any response from the market now. The economy is too shaky, and I don’t want to put more capital into it.’”

“Real estate agents and mortgage brokers are a little more positive about the market’s condition. There are plenty of safe home-loan options available for buying or refinancing, according to Kurt Nilsen, a mortgage broker who works mainly in Sandy. Nilsen says loans are not difficult to obtain. ‘There seems to be a misconception that home loans are difficult or impossible to get,’ he said. ‘This just isn’t accurate. Yes, home lenders have returned to requiring borrowers to fully document their income – a practice they never should have deviated from.’”

The Bellingham Herald from Washington. “January was a slow month for local home sales, with drops in prices and volume continuing the trend from last year. Setting a price that’s too high can really hurt the home seller, too.”

“Gragg Miller of Coldwell Banker Miller-Arnason wanted to show his agents the importance of pricing a home to reflect current market conditions, so he did some research about what happens when a seller is forced to reduce the original price. He suspected that it would take longer to sell the home, but he was still surprised by how much.”

“Miller did this research because he expects this year to be a very challenging in terms of figuring out the right price for a house, particularly in the high-end market, which has dropped off dramatically in recent months. ‘It is very difficult to figure out the value of anything above $500,000 right now,’ Miller said. ‘We don’t have people moving into the area looking at that price range like we once did. It’s also difficult to tell someone the price of a house might not be what they think it is, but more sellers are being flexible. They read the news and see what’s happening in the market.’”

“In trying to price a home correctly, Miller said the key is looking at the most recent sales and comparing similar homes. Six months - before the financial meltdown - won’t work. It needs to be sales within the past 60 days. ‘Even with comparables, pricing a home is still more an art than a science,’ Miller said.”

The Olympian from Washington. “A group of mostly couples in their 20s took the first steps toward buying a house Saturday by participating in a five-hour class to learn more about the homebuying process. The class, sponsored by the state Housing Finance Commission, is required by the state agency if prospective homeowners plan to use one of its programs, such as borrowing money for a down payment on a new house.”

“Prospective homeowners can prepare themselves for a higher monthly mortgage payment as renters, said Eagle Home Mortgage senior home loan consultant Nona Woodard. If monthly rent is $800 a month and a mortgage is $1,200 a month, renters should pay rent, then set aside an additional $400 to see if they can afford the higher payment, she said. ‘We don’t want you go to into payment shock,’ Woodard said.”

“Matt and Audrie Shellhart of Olympia attended Saturday’s class as longtime renters looking to buy a house for their growing family. Audrie said she and her husband have been careful with their money and think they could afford a monthly mortgage of $1,100, up from the $640 they pay in rent.”

“The good news is that the current South Sound housing market for the Shellharts and others is a buyer’s market, said real estate agent Shelly Field. An agent might show prospective buyers a house that appears to be beyond their budget only because they know ‘you can make a lower offer,’ she said.”

“Brian and Leslie Thompson of Tumwater joined the class because they said they were tired of being renters after six years of renting a condo, paying $950 a month. Leslie…seeks a house in a rural area that will offer more privacy. Brian’s wish list was shorter: ‘I just want a garage,’ he said.”

“In the year-over-year period ending in January, Thurston County median prices for single-family residences and condos fell 8.59 percent to $239,950 from $262,500, according to Northwest MLS data.”

The KOMO News from Washington. “An attorney has filed six lawsuits against the developer of a luxury condominium as well as JP Morgan Chase Bank for allegedly defrauding non-English speaking immigrants through predatory lending. Bellevue Towers boasts luxury living at its finest. The units feature a state-of-the-art kitchen and floor-to-ceiling windows. Attorney Jim Robinson said his clients, Daniel Kasimov and his wife, thought they’d sealed the deal on a $1.5 million unit in the complex.”

“But Kasimov only makes minimum wage, earning $20,000 per year. ‘He was told, ‘Don’t worry about that. The bank would never loan you money that you couldn’t afford to pay back,’ Robinson said.”

“Robinson represents six clients, all immigrants and many who can’t speak English. He claims they’ve all fallen victim to predatory lending. Robinson said his clients lost hundreds of thousands of dollars in earnest money, which is now sitting in escrow. Kasimov borrowed $75,000 to put down as earnest money.”

“Robinson alleges JP Morgan Chase overstated Kasimov’s annual income in order to pre-approve him for the loan. The pre-approval, however, never led to an actual loan and Kasimov lost his earnest money, Robinson said. ‘I can’t understand why they haven’t given him the money back,’ he said. ‘It’s come to this. I mean, this would not have been a lawsuit if they would’ve just given him the money back.’”

The Vancouver Sun from Canada. “The luxurious Ritz-Carlton hotel and condominium project in downtown Vancouver will not be completed as planned, the developer said. Holborn Group president Joo Kim Tiah said buyers of all pre-sold condo units will get their money back, but he refused to say the more than $500-million project is dead.”

“Tiah said Tuesday the project was ‘put on hold’ because they had not achieved the sales that they wanted. Only 62 of the 123 condos in the tower had been sold, not enough for the developer to move ahead and complete the project by 2011, he said.”

“What happened to the Ritz-Carlton could be the beginning of a wave of failures for other condo projects in Metro Vancouver, said Trevor Boddy, an architecture critic and consultant for urban design in Vancouver. ‘The failure of the Ritz-Carlton is the tip of the iceberg. It’s the first very large tree to fall downtown, and there will be a number of others,’ Boddy said.”

“Bob Rennie, a marketer for the project, said the global economic downturn has affected the luxury housing market. Rennie said property development projects will go ahead, but developers will have to refocus on what’s important to homebuyers in future. ‘What’s going to bring us out of this new economy? Is it affordability or is it luxury? I think there is really going to be a focus on affordability,’ he said.”

The Canadian Press. “‘It would be really foolish for us to go ahead with the project,’ said Tiah. The development would have been the second-tallest building in the city and was scheduled to be completed in 2011. Prices ranged from between $2.5 million and $10 million, with the penthouse set at $28 million.”

“The cancellation is the latest in a string of troubled developments in Canada’s most expensive real estate market which experts say is in a serious slump. ‘Vancouver’s market is already crashing, it’s no longer a question,’ said Brian Ripley, CEO of consulting group Oakes Ripley & Associates Inc. ‘Developers knew the top was in last year, it is not a mystery.’”

“Some condo developers are giving away cars and cutting prices by up to 40 per cent to try to unload unsold units. There are also lawsuits flying between developers and buyers attempting to walk away from pre-sale contracts. Another high-end development in Vancouver - the 61-storey, 191-unit Shangri-La that is the city’s tallest building - was completed earlier this year. Many of its units are currently being posted for sale and rent on local websites at prices considered cheap by Vancouver standard.”

“January saw Metro Vancouver builders start work on fewer than half the number of new homes they started in January 2008, a sign of things to come in 2009, according to Canada Mortgage and Housing Corp. ‘We were kind of expecting [a significant drop],’ Robyn Adamache, a Canada Mortgage and Housing analyst said in an interview. ‘I don’t know if we expected it to be this big.’”

“Adamache said inventories of unsold new homes built up over 2008 to double the number unsold at the end of 2007 (and) that with a record number of condominium units under construction — in the order of 18,000 units — she expected the inventory of unsold new homes could increase further over the next couple of years.”

The Edmonton Journal from Canada. “It was last August when real estate author and consultant Don Campbell crowned Edmonton the best place in North America to invest in residential real estate. Since then, the price of oil has plunged, the Alberta government has predicted a billion-dollar deficit and the city’s housing market has seen starts, prices and sales fall.”

“So is Edmonton still the best place to invest in residential real estate? ‘Absolutely, it is,’ he said during a visit to Edmonton from Vancouver. ‘There’s no way the world can continue to afford $30 and $40 oil. … Eventually, within 18 or 24 months, we’re going to see the market come back to something that’s more normal.’”

“Campbell is author of Real Estate Investing in Canada 2.0 and president of a business that offers training to its members on real estate investing. Last summer, a REIN report ranked Edmonton as the best place to invest in residential real estate, followed by Calgary, Red Deer, St. Albert and Grande Prairie. ‘That being said, we were so superhot here that the pendulum moved so quickly and has gone too far the other way. Like all economic pendulums, it comes back towards the norm and we’ll start to see that pendulum start to swing a little bit more for Edmonton’s sake. Right now, if you’re focusing on yields, it’s still the best place,’ he said.”

“In a note of caution, Campbell said condo buyers should be wary of rushing to buy a piece of undeveloped property. ‘We need to be cognizant that there are an awful lot of new condos coming onto the market, not just in Edmonton, but in Calgary and Vancouver. Please don’t line up to buy a piece of property,’ Campbell said.”

Bits Bucket For February 26, 2009

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February 25, 2009

Holding The Bag With Thousands Of Vacant Homes

The Ouray News reports from Colorado. “County Treasurer Jeanne Casolari told county commissioners that the number of homes in foreclosure, as of January, has already matched the number of foreclosures for the entire year of 2008. Commissioner Keith Meinert asked whether the homes were in the ‘high end’ category. Casolari said the trend is broader. ‘They’re all over the place,’ she said. ‘Some are for a couple hundred thousand; all but one are residential.’”

“In the past, Casolari said, three to six foreclosures in a year was a lot. In fact, she conducted just two foreclosure sales in 2008. But come October, the national sickness hit home. ‘What started as a slow year all of a sudden magnified,’ she said. ‘All of a sudden, I was getting three foreclosures in a week.’”

“‘Another sad thing – certain individuals went into foreclosure on more than one property,’ Casolari noted. ‘With some of these loans, it’s just amazing anyone would have signed on the dotted line, with the kind of interest that’s accumulating,’ she said.”

The Arizona Republic. “Just four years ago, jobs were plentiful, credit was easy and housing values were skyrocketing. Back then, when people wondered how much their homes were worth, it was often a precursor to pulling out equity to finance a lavish lifestyle. Now the answer to the same question could indicate how underwater you might be on your mortgage.”

“Steve and Jennifer Maize of Chandler found themselves with between $25,000 and $30,000 in credit-card and student loan debt, a rising interest rate on their mortgage and a cut in pay when Jennifer quit her teaching job to have a baby, then switched to working in child care at a lower income. ‘The biggest factor was the ARM that adjusted on our house,’ said Steve. ‘That brought a big spike in our mortgage bill of $700 a month.’”

“Michael Sullivan, director of education at (a) Phoenix debt-counseling firm, said several factors can frustrate a mortgage modification, from lender policies to borrowers who are too far gone to help. ‘If it takes 70 percent of a borrower’s income to meet even a diminished payment, the lender will probably figure the person won’t make it,’ he said.”

“Joann Hauger, executive director of a non-profit organization that provides one-on-one mortgage default and pre-purchase counseling, said that the homeowner bailout plan will be a challenge in Arizona because of the large number of lost jobs on top of the significant drop in home values - 34 percent in the fourth quarter alone, according to the Case-Shiller Home Price Index. ‘There is a tremendous amount of consumer debt that could leave people unable to make payments even at a lower amount,’ she said. ‘In reality, there are an awful lot of people that no matter what, their homes won’t be saved.’”

“The Obama administration is staking a claim that most homeowners facing foreclosure should be able to pay 31 percent of their gross income for a mortgage. Not 50 percent or not 60 percent, as is the case with many strapped homeowners. But 31 percent of income still is a hefty number.”

“With car payments, credit-card debt and everyday expenses, Phoenix-area mortgage brokers, bankers and others say that 31 percent still is too high for many homeowners. ‘They would wind right back in default,’ said Paul Klimke, president of the Central Arizona chapter of the Arizona Association of Mortgage Brokers.”

“Librada Martinez hopes the mortgage relief promised by the Obama administration will help her. She makes $40,000 per year and has a $200,000 mortgage on a two-bedroom southwest Phoenix home that she bought for $180,000 in 2005. Her $1,400 mortgage payment is 47 percent of her gross income and 60 percent of her take-home pay. She was able to make the payments until an illness created unexpected medical bills.”

“‘I tried to sell the house or get a roommate,’ she said, adding that she finally just stopped making payments. Martinez is hopeful she will be able to restructure her loan under the Obama plan but is concerned that homes in her neighborhood similar to hers now are selling for $70,000.”

“‘I want to stay in my home - it’s perfect for me,’ Martinez said. ‘But I don’t want to make payments on a $200,000 loan when my house is worth $70,000.’”

The Yuma Sun from Arizona. “Homes in the Yuma area continue to decline in value, to the tune of about a 3 percent loss per quarter, totaling a 12 percent loss over the last year, the Yuma County assessor says. Assessor Joe Wehrle said ‘the bubble burst in Yuma County in the third quarter of 2007′ when home values went from $233,067 in the second quarter of 2007 to $205,812 in the third quarter of 2007.”

“Then, he said values rebounded in the fourth quarter of 2007 and in the first quarter of 2008, when home values rose to $217,673. From there, it’s been about a 3 percent loss per quarter, going as low as around $190,000 in the fourth quarter of 2008.”

The Salt Lake Tribune from Utah. “Utah’s home-price appreciation, among the highest in the country less than three years ago, now is 16th worst among all states. Some owners, such as Jeff Chatelain of Salt Lake City, are being cut off by worried lenders from their home equity line of credit. Chatelain said he’s also trying to sell a home he and a friend had built in hopes of selling at a profit. When it was finished early last year the property appraised at $1.2 million; today he thinks he’d probably get about $850,000 — if he found a buyer.”

“So he’s renting out the home, waiting for a recovery. ‘Maybe next year, things will be better.’”

“‘We know at some point home prices will stop falling, we just don’t know when,’ said Ryan Kirkham, president of the Salt Lake Board of Realtors. ‘At this point, we’re just hoping for the best.’”

The Reno Gazette Journal from Nevada. “Stimulus help can’t come soon enough for Washoe County’s housing market, housing experts said, as home values continued their downward slide in January, while the number of foreclosed homes jumped up from the same period last year.”

“Washoe County reported 221 foreclosed homes in January, up 25 percent from the previous year. Sales of foreclosed homes rose by more than 196 percent to 172 units compared to 58 units in January last year. New homes were hit especially hard last month, only managing 11 unit sales compared to 91 units in January 2008.”

“‘There is almost no market for new homes so long as foreclosures continue to flood the market,’ said Brian Kaiser, a housing and real estate analyst with the Center for Regional Studies.”

From Channel 2 News in Nevada. “There are options and avenues you can follow before you lose your home. The credit crisis, high unemployment numbers and the reduction in home values are leaving homeowners feeling helpless. But the Washoe County Senior Law Project is trying to help, by handing out free advice on foreclosure prevention.”

“‘Ease my burden. Like I said, I’m unemployed,’ says Washoe County homeowner, Bill Sickmiller.”

“Ben Alsasua is a housing counselor for the Washoe County Senior Law Project and is offering his knowledge to homeowners. Alsasua says those options vary from lender to lender and when it comes to advice for homeowners, workout options are availble on mortgages.”

“‘That’s probably what I’m going to do is loan modification. I don’t want to move out. But, the value of the house isn’t worth what it used to be. I owe more than the house is worth.’ says 20-year Sparks resident, Stephen Lord.”

The Las Vegas Sun from Nevada. “The steep drop in home prices and newly approved $8,000 tax credit for first-time homebuyers will help pave the way for a recovery of the Las Vegas housing market in 2010, according to the chief economist with the National Association of Realtors. Lawrence Yun said he expects that foreclosures will continue at their elevated levels in 2009, but is optimistic that inventory will be whittled down given the increase in existing home sales in Las Vegas over the past several months.”

“‘You have gone through some very tough times, but any further decline, if any, would be minimal,’ Yun said of median prices that have fallen $138,000 over the past two years to a price of $150,000 in January. ‘Given $150,000 is very affordable for such a dynamic metropolitan region, once the economy recovers, you are in good shape. But it is just getting over the short term.’”

The Review Journal from Nevada. “The long-term prospect for Las Vegas is bright because baby-boomers reaching retirement age are migrating to cities with warm climates and favorable tax structures, the economist said. The homebuyer tax credit accounts for less than $10 billion of new $787 billion stimulus package, a rather small amount, but nonetheless sufficient to help spark a comeback, he said.”

“‘I’m a little disappointed that it didn’t address as much as it could have, given the size of the bill,’ Yun said.”

“Housing is the source of the national recession, Yun said. The boom from 2000 to 2005 was an ‘artificial boost’ to home values and the general economy as well. Now, with declining home prices, consumers are more cautious about spending. The second part of that is the ‘bleeding’ of bank balance sheets, he said. Tightened credit flow is hampering the economy.”

“‘We have to go through recession to take exuberance out of artificial growth,’ Yun said. ‘Now I’m afraid the economic downturn could be snowballing and hard to stop without the stimulus package.’”

“ZIP code 89109, home to luxury high-rise Turnberry Place and its new sister property, Turnberry Towers, lost $185,000 on median prices. Another big loser was the inner-city 89101, where median prices dropped 57 percent, or $105,000. ‘My, my, how times have changed,’ said SalesTraq President Larry Murphy, who reported 40 percent and 50 percent ZIP code appreciation rates in 2004. That fell to 20 percent in 2005 and 4 percent in 2006, then turned negative in 2007, down 4 percent.”

“Just as homes in Las Vegas were overvalued a few years ago, Murphy thinks they’re equally undervalued now. ‘First of all, we recognize there’s no such thing as absolute value,’ he said. ‘However, regardless of what these homes are selling for, what is the replacement cost? I would say it’s undervalued when you can’t re-create it for that price. There are homes selling at less than it costs to build.’”

“Realtor Robin Camacho posts an online list of top 10 real estate values in Las Vegas and came up with a three-bedroom, 1,400-square-foot home near Boulder Highway and Sahara Avenue for $32,900. It last sold for $225,000 in 2005. She just added her No. 3 pick, a four-bedroom, 4,500-square-foot home in the southwest valley for $349,000. It has granite countertops, upgraded tile, cherry cabinets, a spacious loft and master suite with a Roman tub and custom shower, all on a huge lot, Camacho said. It sold new in 2007 for $1.2 million.”

“‘I showed a home that backed up to Desert Rose Golf Course … $59,900,’ she said. ‘It will go for about $75,000 and needs at least $30,000 in repairs to be a decent home, on a golf course on the east side, for $105,000.’”

In Business Las Vegas from Nevada. “Foreclosure filings in Nevada dipped in January, but no one should take that as a sign the housing market is closing in on a recovery. Nevada continues to hold the top spot in foreclosure filings. One in 76 Nevada homes faced a foreclosure filing in January. California was a distant second with one in every 173 homes; Arizona was third with one in every 182 homes.”

“‘At the current levels, I am convinced that there is little more that we can go to from a pricing standpoint (of lower-priced homes),’ says Bob Hamrick, chairman of Coldwell Bank Premiere Realty. ‘Some of those properties are priced lower than when I got into the business in 1980. Some of it to me is quite surprising. There is a debate whether some of the lenders are dumping properties below what they need to get them sold.’”

“Sales are up substantially (his firm’s sales rose 58 percent in 2008), dropping inventory from 28,000 to 20,000, Hamrick says. The reason is the affordability that prospective buyers are finding in the marketplace, Hamrick says. Someone buying a 1,535-square-foot home in 2006 - the median size of those bought - had a monthly payment of $1,606 if they put 10 percent down. Today, the monthly payment on a similar sized home, given price drops and better interest rates, is $852 a month.”

“‘If anything, 2008 showed us that housing markets are working with prices moving toward their long-term trends,’ Hamrick says.”

“A new report from Forbes found that for sheer volume of abandoned apartments and homes, Las Vegas beats all national comers. Detroit ranked second. Las Vegas also enjoyed some of the nation’s strongest housing demand and price increases in 2004 and 2005, said Brian Gordon, a principal in the economic-research firm Applied Analysis. The higher market peak meant a steeper tumble when the bubble finally burst, Gordon said.”

“‘If you look at the amount of housing demand that took place, we were constructing more homes than net population growth required,’ he said. ‘We were artificially inflating end-user demand, and today, that has us holding the bag with thousands of vacant homes.’”

Bits Bucket For February 25, 2009

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February 24, 2009

It Did Get Crazy In Florida

The News Press reports from Florida. “Missing garage doors. Boarded up windows. Dug up landscaping. Holes in roofs. Projects started, then abandoned. For lack of a better term, call it the ‘new blight.’ Homes, throughout the county, in gated communities, well-to-do subdivisions and starter-home neighborhoods are being trashed or stripped bare when banks foreclose on the owners. Fort Myers Realtor Marc Joseph said he’s seen it all - ’stripped appliances, stripped kitchens, carpet gone …’ But, he said, there are many foreclosures that are brand new that can be purchased for 30 to 40 cents on the dollar.”

“Maura Granger-Bohl has witnessed the problem from the front yard of her home in the gated community Gladiolus Preserve in south Fort Myers. ‘Down the street there’s a house in foreclosure. The bank owns it,’ Granger-Bohl said. ‘One day, this van pulls up and the people go inside. They start taking stuff out of the house … cabinets and shelves and anything they could carry out. They even took the garage door off.’”

“Police were called, but they couldn’t figure out who owned the home, so nothing was done.”

From CNN. “When you are called before this court, it’s the end of the line. You are about to lose your home. This is foreclosure court in Fort Myers, Florida. At this point in the legal process, all that’s needed is a judge’s signature. CNN was in court Friday to witness the process, which takes seconds. It’s called the ‘rocket docket.’ On some days the court hears up to 1,000 cases.”

“Dave Cabiness lost his home of 15 years. He stopped making his house payment in October 2007. He has a mortgage of $235,000, while his home is worth only $160,000. ‘My business decision is to take my lumps and start over,’ he told CNN. ‘We have five years of inventory of foreclosed homes here. The values are still going to continue to go down.’”

The Miami Herald. “Ferdinand Bristol, owner of a small home-repair business, lost most of his livelihood in the housing crash and feared his small home on Dewey Street in Hollywood would be next. After seeing a television ad, he turned to Outreach Housing, which enrolled him in a plan that reduced his mortgage payment by almost $500 a month.”

“Bristol said he thought his loan had been modified successfully, which prompted him to spread the word to about 20 friends, all of whom, he claims, were told to make their mortgage payments to Outreach. ”I don’t sleep at night,’ Bristol said. ‘I feel responsible. I feel miserable.”’

“Eva Etienne, a Broward County taxi driver, said she paid Outreach more than $9,300 over six months for help in saving the Miramar home she had bought three years ago for $322,000. The money is gone, Etienne said. ”I know I have to move, but I don’t know when,’ said Etienne.”

“The hope that drove thousands to sleep outside overnight in Fort Lauderdale to apply for subsidized housing turned to outrage Saturday morning as throngs were sent home empty-handed. More than 5,000 arrived hours earlier than expected and began pushing against metal guardrails and police when an announcement came that there were not enough documents to go around.”

”’There are no more applications,’ a Fort Lauderdale police officer called out over a megaphone at 8:15 a.m. ‘Your presence here is a waste of your time.”’

From NBC 6. “A South Florida organization that helps families move back into their foreclosed homes has done it again, and the family said they will not leave without a fight. The home at Northwest 8th Avenue and 135th Street in unincorporated Miami-Dade County was foreclosed as a result of a fraudulent refinance scheme by a lender, the organization said.”

“The homeowner, Carolyn Connolly, said she is reclaiming the home. ‘Down with the bank,’ she chanted.”

The Daily Business Review. “Gulben Degirmenci thought she would take advantage of the booming housing market in 2006 and upgrade to Sapphire, a condominium complex planned within walking distance of Fort Lauderdale beach. Degirmenci put down a $96,000 deposit and hoped to sell her existing condo for $400,000 to make the deal work. Then the bubble burst. These days, Degirmenci thinks she’d be lucky to get $300,000.”

“‘Basically I knew I no longer could afford to buy this place, so I was hoping I could get part of my money back,’ she said. ‘I knew I couldn’t afford to sell.’”

“Miami attorney Robert Cooper…who has filed various suits on behalf of buyers seeking to get out of purchase contracts…prefers state court where he finds judges more friendly to depositors. What about the fact that many buyers are simply bailing for financial reasons? Cooper says so what.”

“‘According to the law, it was an illegal sales practice to sell these condos and tout them as investments,’ he said. ‘The developers’ sales staffs were actively doing that. They were telling everybody they were going to be making money, ‘We are going to flip this for you,’ and people were believing that.’”

The Palm Beach Post. “The wave of foreclosures in Florida continues to batter condo and homeowner associations, which have been forced to cut expenses and raise fees…according to a survey of 1,589 property owners released Monday by Hollywood law firm Becker & Poliakoff.”

“Lenders, for their part, say such criticisms oversimplify the complexity of foreclosure. Alex Sanchez, head of the Florida Bankers Association, said members of his trade group pay assessments as they’re required to. As for complaints about lenders dragging their feet, he said a backlog of foreclosure cases means it can take 18 months to take title to a property. ‘We like to rehabilitate the property and get it off our books,’ Sanchez said. ‘We don’t want to hold property - why would we?’”

“It ain’t exactly an affordable housing activist’s dream, but the slowdown in Palm Beach means entry-level homes now are available for less than $1 million. During Palm Beach’s boom, an entry-level teardown cost $2 million, says Palm Beach Realtor John Pinson. Now, there are half a dozen single-family homes on the island for less than $1 million.”

“‘That’s something, to have properties priced under $1 million,’ Pinson says. ‘It’s been a long time since that was the case.’”

The St Petersburg Times. “In 2006, at the height of the most recent building boom, the median sale price for a home in Hernando County was $178,500. This month, it’s $95,000. ‘I’ve never seen anything like this,’” said Stuart Glover, president of Palmwood Builders, whose father started the company when Stuart was a boy. ‘It’s been three full years now,’ he said. ‘In January of ‘06, the spigot shut off. Sales just went off a cliff.’”

From Consumer Affairs. “A class action lawsuit has been filed on behalf of homeowners experiencing problems with drywall manufactured in China, just as the Consumer Product Safety Commission ramps up an investigation. The drywall, installed in homes in Florida, may be emitting sulfuric odors, potentially exposing homeowners to respiratory health problems. The emissions can also corrode air conditioning coils and wiring, posing a potential risk of electrical fire.”

“Most of the complaints have come from homeowners in Southwest Florida, although the scope of affected homes remains to be seen. Miami-based Lennar Homes, the nation’s second-largest homebuilder by volume, has confirmed that KPT drywall was installed in some of its homes, and says it is taking steps to address the issue.”

“In a preemptive strike, Lennar Homes has already filed suit against KPT, Banner Supply, and Taishan Gypsum, another China-based drywall manufacturer. In its complaint, the builder insists that, ‘Lennar stands alongside its homeowners as a victim.’”

The News Journal. “Residential construction permit activity last year fell 29 percent across Volusia and Flagler counties, including a 14 percent drop in the fourth quarter. The sliding numbers are not surprising to local home building officials.”

“‘Realtors say things are happening and foreclosures are moving, but until we get ride of the existing inventory, our industry will not come back. We need the inventory to go away,’ said Sue Darden, executive officer for the Volusia Home Builders Association.”

The Orlando Sentinel. “NewBroad Street Realty’s spacious office, on the main drag through Baldwin Park Village Center, has the latest touch-screen video monitors to show off the neo-traditional homes for sale in Baldwin Park, the mixed-use development in northeast Orlando. But right behind the glitzy office is a weedy lot that was once destined for upscale, high-rise condominiums and town homes overlooking Lake Baldwin. Another parcel nearby was planned for mid-rise condos. Both projects are on hold for now as the local real-estate market struggles to find stable ground.”

“Part of the explanation, said Scott Hillman, president of Fannie Hillman & Associates, is that higher-income buyers are having as much trouble getting a mortgage as everyone else — maybe more so. ‘Lenders were burned, so they’ve really cracked down, and you can’t blame them. For a time, they were loosey-goosey, and now they’ve gone way over to the other extreme,’ Hillman said.”

“David Welch, an Orlando real-estate agent who bought a home in Baldwin Park four years ago, said he figures his own home there has lost about $250,000 of its value since the market’s peak. ‘We contracted [to build] at $650,000, before the real blow-up in prices, and I think it peaked at about $1.1 million. It did get crazy,’ Welch said.”

From CBS 4. “Once a boom town for development as the city fathers of Las Vegas developed it into a family friendly town. Now Forbes magazine reports the sagging economy has earned Sin City a new title – the Most Abandoned City in America. Four Florida areas; Miami/Miami Beach/Ft. Lauderdale, Orlando, Jacksonville and Tampa also made the top 15.”

The Daily Advance. “With all the money being doled out of Washington these days, some folks are angry. I received a call from a reader last week upset about the housing segment of Obama’s stimulus package. She said that she had acted financially responsible over the years and now ’selfishly’ feels that others are being rewarded for their lack of fiscal discipline.”

“She went on to say that when she purchases stock and loses money, it’s her loss and she alone must bear it. She sold her condominium in Florida last year when she chose to relocate to North Carolina. ‘I took a terrific loss,’ she said. ‘But it was my decision. I don’t expect anyone else to pay for my mistakes or lack of good judgment. I probably shouldn’t have bought in Florida in the first place.’”

Bits Bucket For February 24, 2009

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February 23, 2009

The Old Box Isn’t Working In California

The North County Times reports from California. “Analysts said last week that North County homeowners can expect little relief from President Obama’s $275 billion housing bailout, based on details the White House made public last week. For openers, few local homeowners will qualify for a new refinancing program in the bailout because it targets homeowners with mortgages backed by Fannie Mae or Freddie Mac. As for the refinancing piece of Obama’s package, homeowners must have a Fannie or Freddie mortgage and carry a ‘loan-to-value’ of 105 percent or less, meaning the amount owed on the mortgage is no more than 5 percent greater than the value of the home.”

“That’s a problem in San Diego County, where prices have tumbled 38 percent since 2005 and many mortgages carried small down payments, meaning thousands of homeowners owe far more than 5 percent over the home’s market value. Economics professor James Hamilton agreed…that the housing problem is too big for Obama’s solution. Further, the UC San Diego professor said if the bailouts go too far, it might make the problem worse by encouraging foreclosure.”

“‘Does everyone presume once they have negative equity, it’s time to ditch their obligation and once they’re there, they’re entitled to assistance from taxpayers?’ Hamilton said. ‘If we get to the point where everyone is thinking that way, it’s way too big a problem for the government to solve.’”

“Cecilia Rocha, a Bonsall resident…fell behind on the payments and is now hoping a short sale will go through, meaning she will sell the property for less than its loan amount. ‘When I was looking for help,’ Rocha said, ‘nobody gave me any solutions.’”

The San Francisco Chronicle. ” More than 90 percent of Bay Area mortgage holders cannot qualify for the low-cost refinances included in President Obama’s housing rescue package, according to an analysis of loan data from Zillow. That is the smallest percentage of people eligible for the refinances anywhere in the country, Zillow said.”

“‘Around here, most of the market just doesn’t qualify; it’s going to bypass us,’ said James Wilcox, a professor of finance at the Haas School of Business at UC Berkeley.”

Bay Area Newsgroup. “If somebody owns a home that’s now worth $300,000 — January’s median home price for the Bay Area — they would be disqualified if they had to borrow more than $315,000. Numerous Bay Area homeowners whose mortgages are in trouble have loan balances well above those levels. Some observers criticized Obama’s proposal to allow bankruptcy judges to restructure mortgages to a lower principal balance based on existing values.”

“‘That provision could slow lending even further,’” said Brian Wesbury, chief economist with First Trust Advisors. ‘Why would I want to provide someone with a loan if a bankruptcy judge can unilaterally change the terms of the mortgage?’”

“The possibility that the president has the wrong prescription for the housing market isn’t the only ominous development for the reeling industry. Regulatory and market forces could spur a new epidemic of foreclosures this year and banish a current pause in defaults. In some cases, big lenders have suspended the launch of new foreclosure proceedings, voluntarily or under government pressure. Plus, numerous adjustable-rate mortgages that gave borrowers multiple options for their monthly loan payments are about to reset to market interest rates.”

“‘The lull is artificial,’ said Christopher George, president of San Ramon-based CMG Financial Services, a mortgage and finance firm. ‘There will be a series of further waves of foreclosures.’”

“About 25 percent of California homeowners suffer from negative equity, which means the loan balance exceeds the current home value, O’Toole of Foreclosure Radar said. The Bay Area could be in worse shape. ‘Investment houses, empty houses, homes owned by people who were never going to be able to make the payments anyway, they will contribute to the new foreclosures,’ O’Toole said.”

The Press Enterprise. “‘Whenever it comes to government programs, the devil is in the details. The guidelines and restrictions they adopt are sometimes very prohibitive which doesn’t make them very usable,’ said Nancy Herrera, an agent with the Riverside branch of Pacific Sunrise Mortgage.”

“Wells Fargo said Thursday it had seen a surge in calls about the plan and Bank of America reported an increase in calls about refinancing although none of the callers mentioned the plan. A Bank of America spokeswoman said the company had no plans to hire more staff in the face of the new program.”

“Bunker Rayner, owner of Corona Mortgage Financial Corp., said he was surprised he didn’t receive inquiries Thursday. He said that may be because previous foreclosure prevention programs touted by the federal government have worked for only a fraction of homeowners in distress. ‘We got more calls when other programs were announced. I think they are tired of being disappointed,’ Rayner said.”

“For homeowners, there is bright side to falling home prices: Lower property taxes. Thousands of Bay Area homeowners had their property taxes cut last year under a state law that requires a reassessment when a home’s market value falls below its assessed value. The number of homeowners who could see lower property taxes is likely be even more this year.”

“Livermore resident Wanda Del Conte saw a yearly savings of about $851 off her 2008-09 property taxes. The assessment on her five-bedroom home she purchased in June 2006 was reduced by $125,000 to reflect its Jan. 1, 2008, market value of $900,000.”

“‘When I got my tax bill in October I saw that it was coming down and I was like, ‘yeah,’ and I’m celebrating and I’m happy,’ she said.”

The Sacramento Bee. “County assessors all over the Sacramento region are warning homeowners about a company trying to bill homeowners for something they already get for nothing. And in some cases, the company is telling property owners they will be hit by a $30 fee if they are late to respond.”

“Earlier this month, Vic De Stefani of Folsom received one such letter in the mail, saying that because of the recent housing slump, his home’s value was now overassessed by about $150,000. Getting a reassessment on his home would save him about $2,000 in property taxes annually, the letter said. All he’d need to do was mail $179 to a post office box in Los Angeles, the letter said. But if he didn’t send the letter in by Feb. 27, the service would cost another $30, it said.”

“‘It’s the second one I’ve got,’ said De Stefani, who bought his home in November. ‘The original one said that for $95 they could lower my taxes by $750 (annually).’”

“De Stefani said he was immediately skeptical, but decided to check out the company with county officials. ‘I showed them the letter and they just laughed,’ he said.”

“Kathleen Kelleher, Sacramento County’s assistant assessor, said her office won’t begin considering new property values until June. ‘We’re in a period of time where it’s too late for last year and too early for next year,’ she said. ‘We kind of question why there’s any urgency to file.’”

The Manteca Bulletin. “There have been 131 resale homes that have closed escrow in the first seven weeks of 2009 in Manteca with a median selling price of $179,900. The vast majority of those homes are selling for less than it would cost to construct and pay required fees on a new home. A 1,094-square-foot home with three bedrooms and a bathroom closed escrow for $70,000 on Feb. 10. A classified ad in the Manteca Bulletin last Sunday for a kissing cousin of that home on the same street with three bedrooms and one bathroom has a rent of $1,080.”

“That’s more than double or $600 more to rent than to buy each month. Buying also comes with tax advantages that renting doesn’t. It is a trend throughout California that Wells Fargo Bank CEO John Stumpf noted Friday has created the opportunity of a lifetime in the Golden State with homes selling for less than it would cost to build them new.”

The Ventura County Star. “The rental market is softening, spurred by a feeble economy that has more people searching for roommates or moving home with their parents. Rents fell by as much as $200 or $400 per month at a handful of apartment complexes last year, while most other property owners froze or slightly reduced rents, said Dawn Dyer, president of Dyer Sheehan Group in Ventura.”

“It just isn’t worth taking the chance of losing tenants to make an extra $25 a month, said Linda Gilden, a Fillmore resident who owns an apartment building in Santa Paula. She noted that once a tenant is lost, an apartment stays vacant for a while. ‘I would love to have an automatic turnover like I used to, but now it takes several weeks or a month,’ she said. ‘Our philosophy is to take a little less than market value in order to keep the tenants.’”

“It’s not as if renters will be rejoicing every time they write the rent check, said Caroline S. Latham, president of RealFacts. Tim Kephart certainly isn’t. A handyman from Santa Paula, Kephart said rents need to fall much more in order to be affordable. ‘The rental market in this county is outrageous,’ he said. ‘You’re paying $500 for a 10-by-10 room with a closet, and you’re sharing a bathroom with somebody. You may have laundry privileges; you may not. You may have room in the fridge; you may not.’”

“Property owners like Gilden, (have) had a difficult time retaining tenants during the past two years. She’s considered lowering rents because of worsening economic conditions, but she hasn’t acted upon it. Right now, she’s in wait and see mode. ‘It’s kind of like waiting for an earthquake to happen,’ she said. ‘You know it’s going to happen eventually. You just don’t know how bad and how much it’s going to affect you.’”

From Reuters. “Experts agree California home prices will ultimately rebound but caution that real estate investing in this economy — the worst contraction since 1982 — should not be undertaken by amateurs or the faint of heart. ‘You have to have a pretty strong feeling about where this is all going,’ Stuart Gabriel, director of the Ziman Centre for Real Estate at the University of California, Los Angeles, told Reuters. ‘This cycle is so different from prior cycles that it’s very difficult to extrapolate.’”

“‘Most would argue that California is not going into the sea,’ he said. ‘On the other hand it’s not totally out of the question that this particular period of weakness could extend for a while, and that means multiple years.’”

“Chris Twoomey and his wife Jennifer illustrate the risk underlying the perceived opportunities. They moved to California from the Midwest in 2004 to pursue acting careers and had just begun to think the dream of home ownership was out of reach when the crash came and they saw their chance. The couple pounced in January, right after Jennifer learned she was pregnant with their first child, making an offer on a small, bank-owned home in suburban Los Angeles.”

“But the day after the Twoomeys’ offer was accepted, Chris was called into the cafeteria at his job in a cosmetics company warehouse and laid off. ‘Sometimes in our dark moments we sit around and say to ourselves, ‘Look, forget the acting, forget everything, this is the time to bail’ (from California). We can be doing this someplace else that’s still warm but doesn’t cost as much,’ Chris told Reuters in an interview.”

“‘But we’re sticking it out,’ he said. ‘It’s perverse, but something inside of us does want to stay here. It’s sort of a belief that because it is Southern California and because it is the kind of place where everybody wants to be, it will come back eventually.’”

The LA Times. “John Burns, an Irvine consultant to home builders, said he expected the market to continue to drop despite the increase in affordability. ‘They’re still not as affordable as they were in 1995 and 1996, and I think there’s an almost certainty prices will keep falling,’ Burns said.”

“Even after the economy exits the recession, people will continue to lack the confidence to buy a home, Burns said. ‘It’s bubble psychology. People believe when something happens for three, four or five years in a row, it’s likely to keep happening. It happens in boom times as well.’”

“Aarchan Joshi…who lives in north Redondo Beach, is putting off a move to Manhattan Beach. He could afford to move now but thinks ‘there’s a big disconnect. The more affluent areas are really just beginning’ their price declines, he said.”

“A bit of an armchair economist, Joshi said he figured Manhattan Beach’s median home price is 13 times its median household income. ‘It’s completely unsustainable,’ he said. ‘My range would be when it gets to seven times or eight times income, that would trigger me to seriously look at buying a home,’he said. His guess is that will occur around 2012.”

The LA Daily News. “These aren’t the best of times to own a home - especially when a school district wants to bulldoze it and build a campus on the property. Los Angeles Unified School District officials are trying to seize three Sylmar homes for a new K-8 school at the intersection of Bledsoe Street and Dronfield Avenue. But the homeowners are holding out for more money - or are simply trying to block the move - saying the district wants to buy them out cheaply in the depressed real estate market.”

“‘They’re trying to cherry-pick at the bottom of the market,’ said Paul Croswhite, who says the district has offered him $749,000 for his home, which he said was valued at about $1.5 million three years ago. The offer, he said, would leave him with less than $100,000 after paying off his mortgage.”

The Orange County Register. “TWR Framing had 3,500 carpenters two to three years ago, building 6,000 houses a year all over Southern California. Now, it employs just 175, and last year it built just 1,000 homes. ‘The challenge that you have is just operating at 10 percent of your peak volume,’ said Tom Rhodes of Newport Coast, owner of the Corona-based framing business. ‘Nobody’s making money. You can’t make money at these levels.’”

“Companies have cut their staffs by 80 percent to 90 percent, hours and benefits have been slashed, and profit margins are slim – or non-existent. And forecasters project that construction levels will fall even more in 2009. ‘The problem is: how do you stay in business? I mean, these are pretty tough times,’ said Bill Watt, president of a small homebuilder in Newport Beach that’s gone from building 100 homes a year to two or three last year.”

“I do believe you’ve got to think outside the box because the old box isn’t working. They’re not lending is the biggest problem. Well, that’s not the biggest problem. The biggest problem is no demand,’ he said.”

“Lennar Corp. gambled that if it waits, it’ll get top dollar for three massive Orange County housing developments: Great Park Neighborhoods, A-Town in Anaheim’s Platinum Triangle and Central Park West along the I-405 in Irvine. The projects have been on hold for a year, even though development was under way on Central Park West and in A-Town.”

“‘When the music seemed to have stopped back in ‘06, we in the industry were left with an inventory problem,’ said Emile Haddad, Lennar’s chief investment officer, referring to the vacant, completed homes homebuilders couldn’t sell. ‘We don’t want to add to the problem of more inventory.’”

“Haddad noted that most of the sales are for homes priced at $500,000 and below.”

The Appeal Democrat. “The seller’s loss is the buyer’s gain in the Mid-Valley. While median home prices have plummeted in the last year, home sales have almost doubled as homeseekers take advantage of great bargains, low interest rates and foreclosures. ‘Now is definitely a good time to buy,’ said Connie Coughlin, a real estate agent in Yuba City.”

“In Yuba County, the median sales price saw a 32 percent drop from January 2008-2009, as the price fell from $233,250 to $158,000, DataQuick reports. Sutter County fared slightly better, with a 26.9 percent drop in the same time period. The median home price went from $227,000 to $166,000. The Mid-Valley’s drop is less than the California average of 41.5 percent. The statewide median price of $224,000 is the lowest figure posted since May 2001.”

“Coughlin encourages anyone looking for a home to find one real estate agent to work for them. ‘That’s what Realtors are for, to help you reach your goal,’ she said.”

“Bank-owned properties and foreclosures make up the majority of homes on the market right now, Coughlin said. It may be a buyer’s market but residents are still quick to fight for a greater bargain. ‘There is plenty to choose from but everybody still seems to want to steal them,’ she said.”

Bits Bucket For February 23, 2009

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