The Law Of Supply And Demand Is At Work
KARE 11 reports on Minnesota. “A KARE 11 News investigation shows banks are often not very motivated to work with homeowners who are in financial distress. Kevin Paulson’s been trying to work with his mortgage lender for months now, to negotiate the short-sale of his townhome. Paulson’s townhome in Otsego is listed for $160,000. It’s about what he paid for it three years ago. But the town home behind him is in foreclosure and it’s listed at $85,000. His bank has told him as long as he remains current on his payments, there’s nothing they can do to help him. He doesn’t know how much longer that can last. ‘It’s just too hard to compete with the banks,’ he says, when they’re ’selling houses at half-price.’”
“There’s another for sale across the street, and couple more around the corner - a dozen on the market all around him. ‘I’m not anticipating getting full value,’ he says.”
“In downtown St. Paul at United Hospital, Jennifer Raiter tries to focus on her work while worrying about her house payment. First, the ARM activated on her mortgage and then her home in Prescott, WI lost about a third of its value. ‘You try to fix it, and no one wants to help you,’ she says. All she’s trying to do is re-work her interest rate after she was hit with a ‘double-whammy.’ ‘The strategy of the moment is just to survive,’ she says. ‘To get through every increase and do whatever we have to do to keep making our payments.’”
“Experts tell us they lose more if homeowners give up and sell the house for less than they owe, leaving the bank stuck with the difference. Banks lose even more when they go through foreclosures. You might think this is motivation to move properties faster. But it’s not. ‘And the reason they’re not motivated by it,” says Glenn Dorfman, former executive director of the Minnesota Realtors Association, is that ‘they’re not market driven, they’re government driven.’”
“Jennifer and Nick Rosengren say they worked for nearly two years with their bank, first in pursuit of a better interest rate, then to avoid foreclosure. ‘They hung up on (us). They sent (us) to a voice messaging box that was full, and kept (us) on hold for over an hour and a half, for six months!’”
“As they pack up to move out now, in foreclosure, it’s become the ultimate lose-lose-lose scenario. Not good for the banks, not good for the community, not good for them, either. The longer it takes to move distressed properties through the sale process, the longer it will take the economy to turn around and the more likely it will drag the value of other homes down with it.”
The Sun Times from Illinois. “An explosion of failed mortgage loans in moderate-income and middle-class Chicago communities last year helped drive new foreclosure filings to nearly 20,000 here, a report by the nonprofit National Training and Information Center found. The report also revealed that 75 percent of the mortgage loans were adjustable-rate or other high-risk loan products.”
“New foreclosure filings numbered 19,943 in 2008, nearly double the 10,673 filings reported in 2006. Eighty-six percent of the mortgages were made within the last three years. Chicago reported its highest level of home foreclosures due to ‘reckless lending and unregulated financial practices,’ the report said. ‘The bulk of these loans were loans made to fail, and in 2008 they did,” according to the report.’”
“‘When I lost my home, the family renting out the second floor had to leave as well,’ said Edith Adachi, a community leader from the Albany Park Neighborhood Council who lost her two-flat of 35 years to foreclosure. ‘We need immediate action to help struggling homeowners and also renters.’”
The Daily Herald from Illinois. “Today’s conditions are the ‘most phenomenal buyer’s market’ Patty Ancona has seen in her 32 years in the business. ‘I would suggest that anyone who is looking to move up to a larger home go ahead and do it,’ said Ancona, a broker in Barrington.”
“‘You may sell your current house for less, but you will also be able to buy your new house for less, and when you sell that new house in six or seven years, you will see more of an appreciation than you would if you stayed in your current house,’ she said.”
“However, if you are a homeowner who is looking to sell your last house or to downsize, Ancona has less enthusiastic news. ‘Wait a few years if you can,’ she said. ‘The law of supply and demand is at work here, so this is not the market in which you want to just put your house on the market and see what you can get.’”
“‘I am seeing lots of instances where people have gotten in trouble and they now have no place to go but to move in with parents or in-laws. This situation is bringing extended families back together again. People of all ages borrowed against the equity in their homes and now that homes are going down in value, they are stuck. This should be a big lesson for all of us. Don’t borrow against your home,’ said Ancona.”
“Very knowledgeable buyers know that the best deals today are real estate-owned properties (REOs) that have gone back to the mortgage broker after not selling in a foreclosure auction, or corporate-owned properties, Ancona said. ‘I sold a 3,800-square-foot house with no basement, which backs up to the entrance ramp of I-355, for $160,000 recently. It was a REO. And I had a corporate-owned house in Kildeer that was built six years ago for $2.6 million. When the owner got transferred a year and a half ago, they had to sell it for $1.6 million - a million less than it cost to build it,’ she said.’”
“What steps need to be taken to help strengthen the Chicago area real estate market? ‘The excess inventory needs to be cleared out so that people once again feel a sense of urgency to make a decision. Except with REOs, people are just looking, watching and waiting. They aren’t jumping. They feel that time is on their side because it will be another year or so before things really start to move again.’”
From KSBT 2 in Indiana. “Unemployment was worse than expected in January. In Indiana, more than 9% of the workforce is looking for a job. Locally, sectors like manufacturing and retail have been hit hard, but no industry has been hit harder than construction. Across the nation, fewer new residential construction sites are popping up. Local experts don’t expect that to change anytime soon.”
“‘Certainly it’s become much harder for entry level clients to gain access to funding. And when the move-ups can’t sell their home, then they can’t build a home even if they’re planning on it,’said Signature Homes Vice President Blake Taelman.”
“The numbers show it clearly. According to the Home Builders Association of St. Joseph Valley, just 282 new single family home construction permits were filed in St. Joseph County in 2008, down from 502 the year before. In South Bend, just 55 new single family home permits were filed in 2008 — half of the previous year’s total. Mishawaka recorded only 44 new permits in 2008, 61% lower than the previous year, according to the Home Builders Association of St. Joseph Valley.”
“Part of the reason, Taelman says, is a sharp drop in ‘risk takers.’ ‘Most builders have sort of stopped building spec homes, or at least a lot of them have. So, there’s really not as much competition in new home price as there was even just 12 months ago,’ he said.”
“Custom built homes, like the ones Taelman builds are still selling, he said, though, admittedly, not as fast as he’d like. ‘There’s plenty of people willing to buy. There’s just a limited number of people willing and able to buy,’ he said.”
The Kansas City Business Journal. “When Jim Kostusik appeared at Overland Park City Hall to obtain a building permit for a single-family home recently, the employee on the other side of the counter looked at him with surprise, then peered at the ceiling. ‘I said, ‘What’s going on?’ recalled Kostusik, who owns Redstone Homes Inc. in Overland Park. ‘He said: ‘I’m waiting for the confetti and balloons to start dropping. You’re the first (single-family) permit this month.’”
“What made the event strange was that Kostusik got his permit on Jan. 29. In a more typical year, Overland Park would have issued dozens of single-family permits by that date, and Johnson County would have been on target for another market-leading year of several thousand housing starts. But Johnson County, where the average price of new homes on the market exceeds $400,000, has been hit particularly hard.”
From WEAU in Wisconsin. “Rusk County is a rural county about an hour north of Eau Claire. And plenty of people there are looking for work. In fact, new numbers show Rusk County has the highest unemployment rate in the state, at 12.2%. Jean Stapleton has been at Wisconsin’s Job Center in Ladysmith for 14 years and she says this recession is the worst she’s ever seen, She says the lack of opportunities are a direct result of a lack of variety in the job market. Most jobs in the county are related to the home building industry, and with the housing market in a steep decline, people living in Rusk County are feeling the pinch.”
“‘Everyone’s looking for work and there just aren’t a lot of opportunities here in Rusk County at the moment,’ she said.”
From ABC 12 in Michigan. “If you’re interested in pursuing a home that’s been in foreclosure, you should be aware of a disturbing trend. Real estate agents are reporting that previous owners are leaving behind more than just the washer and dryer. In some instances, they’re trashing the place.”
“Charles Blowers of ERA Realty says one example from west Michigan featured an owner who plugged the upstairs tub and left the water running for three days. The home was foreclosed and the owner locked the doors, flooding the upstairs, first floor and basement. Apparently, this is the second home to be flooded for this particular real estate group — and they’ve had two arsons.”
“‘This should be a warning to all homeowners out there that are losing their house,’ said Blowers. ‘Talk to the bank. Talk to the mortgage company. Give me a call, I’ll talk to them. Usually we can get money for the mortgager to move out.’”
The St Petersburg Times. “I admit it: I went to the Cascades looking for the bleakest possible view of the local housing market. Sure, there are plenty of other unfinished subdivisions around. The weedy vacant lots, the pavement ending abruptly in sand — it’s part of our landscape now, sorry to say. If we were honest, we’d put it on our county seal.”
“But the Cascades, south of downtown Brooksville, has the added distinction of being developed by a now-bankrupt national builder, Levitt & Sons. And with only 56 completed houses out of a planned 999, the project stalled out particularly short of its goal.”
“Ray and Veronica Koziol, for example, said the worth of their home in the Cascades has shrunk to roughly half the $402,000 they paid for it two years ago. Funny, though, they didn’t seem nearly as down on Florida’s future — at least its long-term future — as I expected.”
“For one thing, these two 60-year-olds are on the leading edge of the much anticipated wave of baby boomer retirees. They figure that at least a few million of them will want to move to Florida. This is especially true — and here we come to the big reason for their optimism — if these retirees now live in Michigan.”
“‘Everybody wants to get out of Michigan,’ said Veronica Koziol, who moved with her husband from a town halfway between Detroit and Flint. ‘Michigan is dead. … It’s going to be — the last one out, turn off the lights.”’
“This, then, could be Florida’s ace in the hole: Midwestern states such as Ohio and especially Michigan — where unemployment has climbed to 11.6 percent — seem to be the only ones worse off than we are. Which, in turn, means that Hernando’s economic future could look a lot like its past, fueled by selling houses and services to Midwestern retirees.”
“The median age in Hernando has jumped from 44 earlier in the decade, when the Suncoast Parkway was drawing working-age commuters, to a current age of 50, said David Miles, a county demographics planner. Miles cautioned that this is only an estimate, and may be a suspect one, considering how few newcomers of any age have arrived in the past two years.”
“And there are plenty of other reasons not to get carried away: The huge inventory of unsold homes; an economy that is forcing more people to stay put; the state’s estimate that annual population growth in Hernando will stay below 2 percent for at least another decade.”
“Even if the retirees do roll in, we shouldn’t treat it as a green light to resume what we always have done: promote development with low taxes and lax growth management, skimp on education and sit back and enjoy a one-dimensional economy. No, what this all means is that we just might be granted another chance to do things right.”
