March 2, 2009

A Storm That Almost Nobody Can Fix

The Baltimore Sun reports from Maryland. “It’s not an easy time for sellers with homes aimed at the move-up crowd. Lois Hanson, who’s asking $539,000 for her Monkton rancher, said the house has been on the market since September with no offers. Two couples were very interested - each returned three times after an open house. But both couples have homes, homes that haven’t sold yet. ‘I can’t hang by my thumbs waiting for someone else to sell a property and take mine off the market,’ said Hanson, who wants something smaller than the four-bedroom house on more than 2 acres.”

“Hanson’s updates since her 2005 purchase include hardwood floors, a laundry room overhaul and porch improvements to enhance views of a neighboring horse farm. ‘It’s a matter of waiting it out. I’m not going to start feeling anxious or disappointed unless we get to next fall,’ she said.”

“The problem for a number of potential first-time buyers - and thus for all sellers - is that prices are still high compared with incomes. After doubling between 2000 and 2007, the average metro-area home price dropped to $306,000 last year. To swing that, a first-time buyer with a 10 percent down payment would need a salary of about $70,000. And $306,000 was the average for all homes, from condos to Colonials. Most single-family homes are more expensive.”

“People who can’t sell their starter homes can’t buy a bigger place, and the owners of those bigger places can’t go anywhere, either. That’s why economists say home sales probably won’t increase until prices fall even more, as they have in other parts of the nation. ‘The buyer’s going to win this game of chicken,’ said Anirban Basu, a Baltimore economist.”

The Southern Maryland News. “Foreclosures continue to rise in Southern Maryland and in the state. By the end of 2008, foreclosures were up 26 percent in Calvert, 29 percent in Charles, and 60 percent in St. Mary’s. They were up 71 percent statewide, ranking Maryland as 18 in the country by percentage of total homes sold.”

“‘The prices are coming down and affordability is at a five- or six-year high. I think affordability will climb much more. They can only get so bad,’ said Jonathan Benya, a real-estate agent in La Plata.”

“‘Truthfully, the good news is houses are very cheap, interest rates are great and there’s a huge amount of selection,’ said Steve Meszaros, president-elect of the Maryland Association of Realtors. ‘Real estate is really local. Foreclosures have a lot to do with it. I think the biggest reason our volume is down so drastically is because they think they’re going to pay too much for a house and they think we haven’t hit bottom yet. My personal opinion is we may not be at the bottom. But I would bet we’re pretty close. The problem is the confidence of the buying public. I don’t know what you do to fix that’”

The Washington Post. “Just three years ago, the Washington area’s housing market was so overheated that bidding wars — sometimes more than 20 bids on a single house — and price-escalation clauses were commonplace. Now the area is awash in unsold homes that sit for months amid an ever-growing inventory of foreclosed properties.”

“The economy is a mess, but newlyweds Jessalynn and Diego Gomez are ready to buy their first home — and are hoping it’s worth the risk. The first home the couple looks at in Hidden Creek is an empty, 1,850-square-foot townhouse built in 2005 and priced at $349,000. The Gomezes know from the listing that it’s a short sale. They would have to check the Montgomery County real estate records to learn the unpleasant truth about its history: Some poor soul bought this place for $514,595 and then watched its value plunge more than $150,000 in three years.”

“The Gomezes, of course, are well aware that there’s some risk in buying a home in a suburb where prices may continue to decline. ‘Yes, it is definitely scary,’ Diego concedes. ‘We know we’re going to lose money right off the bat.’”

“But it’s also starting to seem risky not to buy right now, Jessalynn adds. ‘I don’t want to wait any longer, because I’m actually scared that the market is going to take that turn, and then we’ll have missed the rock bottom.’”

“Today they hand over the $10,000 deposit, and Jessalynn gives sales consultant Julie Beahm a big hug. Beahm hands them a red SOLD sticker, which they’ll later happily slap onto the “For Sale” sign posted in front of their home-to-be. ‘This feels kind of neat,’ Diego says, with a smile. ‘For the first time I’ll be able to touch the wall and say, ‘This is mine.’”

“As far as worrying about whether prices in Hidden Creek might continue to fall, Diego says they aren’t necessarily expecting to make money on the house. ‘If we can at least walk out and sell it and not be upside down,’ he says, ‘then we’re fine with that.’”

The Midlothian Exchange from Virginia. “Laura Lafayette, senior VP for public affairs for the Richmond Association of Realtors, said that area homes saw double-digit appreciation for two or three years earlier in the decade, so the slight declines in value are to be expected. Markets like Northern Virginia are experiencing ‘drastic depreciation’ because of the ‘irrational exuberance’ of the rise of prices in that area earlier in the decade.”

“Real estate agents and brokers are generally optimistic that the market will bottom out this year, if it has not done so already, and are looking forward to a better 2010 and more responsible homeowners. ‘Time will heal these wounds,’ Lafayette said. ‘But we have got to stop thinking about our homes as banks.’”

From CBS News. “The crash in the housing market was the beginning of the economic downturn. But now some experts believe we’re seeing the first signs of a real estate revival. Home prices in one Virginia suburb of Washington, DC have fallen so far, there seems nowhere to go but up, reports CBS news correspondent Thalia Assuras.”

“Susan Jacobs is a real estate agent in Manassas County, Virginia with more than 20 years experience. Most of the houses she’s showing these days belong to banks - foreclosure properties on the market for bargain basement prices. She shows a large house that she plans to put on the market for somewhere between $60,000 and $70,000.”

“The price of that same house a few years ago? ‘In ‘05 or ‘06 this property could have sold for $300 [thousand],’ Jacobs says.”

“In 2005 there were just two foreclosures in the city of Manassas. in 2007, 313. And in 2008, a whopping 922. Ninety-two percent of real estate sales in Manassas last year were bank sales. That means opportunity for some people, like Brandon Hughes, who snapped up a four bedroom house for $135,000.”

“‘A few years ago his house would have cost ‘$300, $350,000,’ Hughes says. ‘I thought I would never buy a house. It was way out of my price range.’”

“So is Manassas at the forefront of a housing turn-around? Ranny Isenberg, a local home appraiser, thinks so. ‘Real estate’s on sale. And i don’t think it is going to get any cheaper,’ he says. ‘And for someone who is investing it is instant money.’”

The Virginian Pilot. “For many military families, the prospect of moving and selling a home amid the biggest housing decline in decades is daunting, but a little-touted provision in Congress’ economic recovery package could throw some a lifeline. However, many families who qualify for the program are in a holding pattern until the department clarifies whether it will use the value of the home at the time of purchase or the value in today’s market.”

“The program could allow Lorelei Redmond, whose husband is a master gunnery sergeant in the Marines, to sell for a loss without incurring massive debt or dipping into savings. It could help the family avoid a short-sell. The couple bought their home in Salem Village in August 2005 for $215,000. Last month, Mark Redmond received orders to a base in Twentynine Palms, Calif. The couple have until July to sell their home.”

“‘At the end of the day, we can’t afford to be sitting on a house with a mortgage while we’re in California,’ said Lorelei Redmond. ‘The primary reason we bought is because we had a teenager in high school and didn’t want to move around. But we bought within our means, and we didn’t get any of that crazy financing.’”

“The Redmonds listed the home last month for $226,000 — with closing costs and other fees, just enough to break even. Though a few people have stopped by to look at the house, no offers. ‘We wouldn’t want to profit off the government here,’ Redmond said. ‘But we go at the whim of the military. So I think there should be some help just to get us out from underneath this.’”

The Philadelphia Inquirer. “Any effort to change the tax-deduction rules for mortgage interest, as President Obama has proposed in his budget, is guaranteed to bring the housing industry to its feet, shaking its fists. ‘This proposal could have an adverse effect on a market that is already in trouble, and this is not the time to reduce incentives for buying or refinancing a home,’ Mortgage Bankers Association CEO David G. Kittle said.”

“Deducting mortgage interest, the real estate industry has perennially argued, is a major reason to buy one’s first home. ‘It is an important part of the . . . process to remind potential buyers that, unlike paying rent, the interest on a mortgage payment has a tax advantage,’ said Noelle Barbone, Delaware Valley operations manager for Weichert Realtors.”

“Developer Carl Dranoff, while not disputing the value of the mortgage-interest deduction, said that instead, pricing and confidence were driving today’s home purchases. ‘Will a purchase hold its value?’ is the key question buyers ask,’ he said.”

The Charleston Gazette from West Virginia. “Attorney General Darrell McGraw wants the Legislature to fund a satellite office in Martinsburg to address an explosion in consumer complaints in the Eastern Panhandle over the past four years. Joe Clay, fiscal affairs director for the attorney general’s office, said…complaints from Eastern Panhandle residents to the office’s consumer protection division have jumped from 257 in 2005 to 583 last year.”

“Most of the cases involving predatory mortgage complaints are from the Eastern Panhandle, which was one of the few areas of the state to experience a housing boom, he said. ‘It was a hot real estate market for a time,’ Clay said. ‘Most of West Virginia was sheltered from that.’”

The Journal from West Virginia. “Fran Hughes, chief deputy attorney general, said predatory lending is on the rise locally, and that is the main reason why a satellite office is needed for the tri-county area. ‘In the Eastern Panhandle, (predatory lending) has almost doubled. There is more in the Eastern Panhandle than elsewhere in the state,’ Hughes said.”

“Senate Finance Committee Chairman Walt Helmick, D-Pocahontas, said in a telephone interview that McGraw’s request was taken very seriously. ‘When it comes to the Eastern Panhandle, we handle it a little differently because we know it’s been growing,’ said Helmick. He agreed that with the phenomenal population growth and housing development experienced by the tri-county over the past decade, there comes certain problems and when the housing bubble burst, other problems followed.”

“There were 824 complaints from the Eastern Panhandle in 2007 and 2008 combined - just on issues of excessive fees and financing, which include mortgages, payday loans, credit cards and other financial matters. That is because the rest of West Virginia ’saw no appreciable asset inflation,’ meaning the housing bubble that burst here in 2008, she said. People were told their houses were worth more than they really were, Hughes said. As appraisals went up, people got into ‘exotic’ loans and home equity loans for more than they could afford, she said.”

“Between 1991 and 2002, West Virginians were less likely than the average American to be more than one month late on their mortgage payments. ‘People would fall behind a month for one reason or another, then catch up,’ said Doug Duncan, former chief economist of the Mortgage Bankers Association. ‘West Virginia was one of a handful of states where you’d see that.’”

“But now, West Virginia, like most states, is facing rising number of delinquencies at foreclosure stage. The Mortgage Bankers’ third-quarter statistics show that, among mortgages held by national lenders:
West Virginia’s three-month delinquencies were the 14th highest in the nation. The state had the nation’s seventh highest prime mortgage delinquency rate and the seventh highest subprime delinquency rate.

“In the third quarter of 2008 alone, MBA figures show, there were 4,868 seriously delinquent West Virginia mortgages, compared with 3,529 the year before, a 38 percent increase. In 2006, there were 2,852.”

“Prime mortgage delinquencies are rising nationwide, said Mortgage Bankers chief economist Jay Brinkman. His staff expected delinquencies to level off in 2009, he said. ‘But we can pretty much throw that out the window now, because now we have to factor in the effects of job loss due to recession.’”

“In 2003, four top Bush administration mortgage regulators posed in Washington in front of a pile of banking regulations wrapped in red tape, holding a chain saw and shears, to show their determination to cut through ‘red tape’ they said was hampering mortgage lenders. That same year, West Virginia’s three-month delinquencies rose above the national average.”

“‘You started seeing those tricky mortgage ads on national TV and the Internet, saying ‘Come refinance, we’ll give you a good rate,’ said Joe Hatfield, Housing Development Fund director.”

“In the Eastern Panhandle, ‘a horde of mortgage brokers arrived from out of state,’ said Charles Town bankruptcy attorney Aaron Amore. They targeted affluent people, he said, and ‘prices of homes doubled in many cases.’”

“In the coalfields, subprime mortgage brokers went door to door, targeting low-income people who needed money, said Dan Hedges, Mountain State Justice attorney. ‘Wall Street had let it be known that they’d buy all the mortgages those brokers could send them,’ he said.”

“In 2005, West Virginia homeownership hit an all-time high of 81 percent. And the state’s three-month delinquencies rose well above the national average, MBA statistics show. By 2008, national lenders owned almost twice as many West Virginia mortgages as they had owned in 2000, according to MBA statistics. At that point, they held the great majority of state mortgages.”

“The rising cost of food, utilities and other necessities squeezes people’s budgets and affects their ability to make mortgage payments, said Hatfield. ‘People’s disposable income has dropped to the point where they struggle with a payment they could easily afford three years ago. So when the transmission goes out or the water heater quits working, what do they not pay?’”

“‘Our concern is that we made [prime] loans that were very affordable to folks a few years ago, but now they do not have the disposable income to keep everything current,’ he said. ‘All we need is one more problem with unemployment or the auto breakdown or the health issue, and we’ve got a storm that almost nobody can fix.’”




Bits Bucket For March 2, 2009

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