March 13, 2009

The Shakedown Of The Real Estate Market Is Upon Us

It’s Friday desk clearing time for this blogger. “Lizzette Nieves keeps the blinds down during the day, makes sure someone is always at home and never leaves the house after sundown. In her Venetia Groves community in Homestead, vandals have targeted vacant homes — a trend on the uptick as the homeowners’ association no longer can afford to operate guard gates. More than half of the neighborhood’s homes are facing foreclosure. ”I’m actually afraid to go out,’ said Nieves, who works for a Homestead title company. Like many, she is behind on her mortgage payments and the value of her home, bought for $210,000 in 2005, has fallen. (It’s now worth about $50,000).”

”’If I have to let my house go, I’ll let it go,’ she said. ‘I’m not going to live in fear.’”

“More than 234,000 or 58.2 percent of Las Vegas homes with a mortgage are underwater, according to a report. An additional 14,088 mortgages, or 3.5 percent, are near that point, bringing the total to 61.7 percent of all outstanding mortgages.”

“Steve Bottfeld, executive VP of a Las Vegas housing consultant, says anyone who bought a home from 2004 to 2007 is underwater and many aren’t going to get government assistance. People should be educated that homeownership is important to wealth and that the housing market goes in cycles, Bottfeld says. ‘It is important that people stay in their homes and not walk away,’ Bottfeld says. ‘They would be walking away from their investment. If they hang onto it, it will come back.’”

“‘It is amazing, stunning and a catastrophe,’ says Richard Plaster, founder of Signature Homes. ‘At every breakfast or dinner table, there is a discussion going on about ‘what are we going to do.’ It is going to be hard-pressed on why people should stay in their house. People have no choice if they are rational.’”

“Plaster says the government’s plan to help reduce foreclosures doesn’t go far enough because it won’t aid those who are so far underwater and will walk away even though they can afford their mortgage payment. ‘It is simply not going to help those way underwater, which is what most of Las Vegas is,’ Plaster says.”

“Foreclosures are through the roof in New York. More than 1,700 city homes were in some stage of foreclosure last month, a 44% increase from January, according toRealtyTrac. Manhattan saw the biggest surge in foreclosure action, with 331 properties receiving notice, up 549% from January and up 402% from last year.”

“‘The increase in foreclosure activity from January to February is somewhat surprising, given that many of the foreclosure prevention efforts and moratoria in place in January were extended through most of February as well,’ RealtyTrac CEO James Saccacio said.”

“In the next couple of weeks, Howard Mack will peel off the carpet in the living room of a house he just bought in Sunrise and install wood floors. He’ll give the two-bedroom house a coat of fresh paint. Then, he’ll begin looking for a tenant. Mack and his partners paid $59,000 for the 1,000-square-foot home and plan to collect about $1,300 a month in rent, he said.”

“This is the ninth house that Mack has acquired with cash in less than six months. He says the group has enough cash to buy at least 40 more South Florida houses in the $50,000 to $80,000 price range. ‘Prices will continue to go down, but we decided to start buying now because the fundamentals make sense,’ said Mack, who anticipates the rent income will cover expenses and generate a profit.”

“‘It’s like the wild, wild west out here,’ said Laura Graves, a Coldwell Banker broker. ‘Buyers are throwing out crazy offers. Sellers are desperate but don’t want to act as if they are. The shakedown of the South Florida real estate market is upon us. Liken it to a hurricane, and it’s a big one.’”

“Americans battered by the biggest slump in home prices on record are facing higher property taxes as local governments struggle to plug budget deficits. ‘The value you pay your taxes on went up while market value went down on half our properties,’ said Chris Jones, the appraiser for Escambia County in Florida’s northwest tip. ‘Try to explain that to a homeowner.’”

“‘They’re maintaining a housing-tax bubble even though values are falling,’ said Arthur Purves, president of the Fairfax County Taxpayers Alliance…from Vienna, Va.”

“An initiative drive launched Friday could give Arizonans a chance to cut their property taxes. Dubbed Prop. 13 Arizona, the measure would roll back the assessed value of homes and businesses to what they were in 2003, before speculators helped spike prices. Phoenix resident Lynne Weaver, who crafted the initiative, acknowledged that…those who bought at the top of the housing market would be paying higher taxes than their neighbors who had been there longer, even if the homes were identical.”

“She said, though, there’s nothing inherently unfair about that. First, she argued, there is nothing fair about the current system, calling the valuations placed on homes by county assessors ‘random and arbitrary.’ Beyond that, she said it makes up for past inequities.”

“‘Is it fair that I’m sitting here in my house and someone down the street decides to sell their house like mine … and some fool, somebody comes along and pays an astronomical amount for the house? Now everybody in the neighborhood is penalized with higher taxes because of that person’s decision,’ she said.”

“As the region slogs through its fourth year of falling home prices, buyers have snatched homes for up to 70 percent below the previous price. But that doesn’t mean their tax bills will be that low. County officials in San Diego and Riverside counties said some foreclosures will probably be taxed at levels higher than the sales price.”

“Randall Smith is prepared to fight his assessment. His company, Smith and Butler Construction in Carlsbad, purchased a foreclosed house in Vista with fire damage for $100,000, in a neighborhood where homes typically sell for about $240,000. He said they will spend about $80,000 fixing up the property. He hasn’t received a property tax bill yet, but chances are it will be for well more than the $100,000 he paid for the house.”

“‘Who cares what the comps are? It should be valued at what it sold for,’ Smith said, adding that he doubts the county valued properties below their sales price during the huge appreciation through 2006. ‘When you buy it at $200,000 and someone else bought it at $500,000 a year later, you know they would tax you at that new rate,’ he said. ‘It’s a one-way door.’”

“Local mortgage defaults hit a new record in February, as the foreclosure crisis spread from lower-priced neighborhoods deep into the well-heeled corners of North County, a report showed Thursday. Kurt Kinsey, a real estate agent in Oceanside, said foreclosures will probably be most prevalent in areas such as eastern Carlsbad, where new developments such as Bressi Ranch and La Costa Greens attracted buyers with little down payment into higher-risk loans called Alt-A and Option-ARMs. Many of those products carried low fixed payments for three or five years and then adjusted upward.”

“‘That will force a lot of them to default,’ Kinsey said.”

“How many homes end up as bank-repossessed foreclosures may depend on the success of President Barack Obama’s $75 billion proposal to lower home payments for struggling borrowers. Ward Hanigan, founder of a San Diego investment firm that buys foreclosures, said the plan will not do much, largely because investors and borrowers who owe more than the value of their homes cannot qualify for any government help.”

“‘We had a huge rainstorm with subprime, and we’ll be pounded with these Alt-As and Option-ARMs, and the ground is just saturated,’ Hanigan said. ‘We can’t absorb it.’”

“The Stimulus Bill has passed- so now what? What exactly does it mean for home buyers? In a nutshell it means if you can afford and qualify to buy a home, do it now. ‘Home affordability in California is at an all time high at 59 percent, according to the California Association of Realtors,’ said Joe Engle, president of LoanSmart Inc.. ‘It is the perfect storm to get the housing market moving in the right direction.’”

“Foreclosure rates in the Vallejo-Fairfield area rank in the top 10 in the U.S., with one in 111 homeowners losing their house. Joining Fairfield and Vallejo were Stockton, at number three, Modesto at four, Merced at five, Riverside-San Bernardino at six and Bakersfield at seven.”

“For Marc Tonnessen, Solano County assessor-recorder, the increased foreclosures mean more homes will experience a temporary reduction in value. Tonnessen said his department has already done reductions on 30,000 homes and likely will make temporary reductions on 30,000 more in the near future.”

“‘Wow, that’s huge,’ he said after hearing the stats. ‘I don’t know if we’re at the bottom or not. It’s hard to tell. We’re still seeing values decline. We may be dragging along the bottom. It could occur at any time.’”

“The sounds of nail guns and buzz saws, noise pollution to some, but the sound of money to others. Florida Training Services President Jeff McGinley remembers 2006 when the sound of construction was common around the state. ‘It was a crazy time but it was good for a lot of companies, but now it’s all pretty much down.’”

“Representative Carl Domino has a plan to boost construction by increasing home sales. ‘Last year housing values went down by about 15% in the state. If there were more buyers it wouldn’t go down.’”

“Growers of landscape trees and shrubs in South Florida saw their business plunge with the crash of the housing market. To stay afloat, many have turned to new crops, planted less, plundered their retirement fund or even threw crops away. One tree farm owner, who didn’t want his name used ‘because it will hurt my business even more,” said, ‘We could not be doing worse. We don’t sell anything. Our sales are down 95 percent from what we sold the past few years.’”

“‘The problem is basically most of the nurseries down here were closely tied to development,’ said Eddie Cequerella, who owns the 60-acre Real Trees Farm in South Miami-Dade County. ‘When there are no homes or golf courses being built, there’s no need for our product. I myself have thrown away palms. Others are throwing away oak trees and tabebuias. I’ve seen nurseries throwing away beautiful royal palms. A few years ago, they were worth $450 to $600. Today there is no demand and everyone’s got them.’”

“At the peak of the building boom, Cequerella said, he would sell about 2,000 plants a month, everything from ground covers to 30-foot palms. Very little besides shrubs for hedges are selling now, he said. ‘I do a lot of brokering,’ he said. ‘I’m buying material for 40 to 30 cents on the dollar. People are desperate. People ask me, ‘What can you pay?’ They’re trying to get jobs and underbidding.’”

“Two model homes at the corner of Freeman and Galligan roads are a constant reminder to residents of this small town of growth that never came. The homes, part of a Warrenville-based Neumann Homes development called The Conservancy, were left abandoned in October 2007 when the company filed for Chapter 11 bankruptcy.”

“The plan was for The Conservancy to feature 985 homes, 6 miles of hiking trails, four onsite parks and multiple tot lots with children’s play equipment. Homes would be priced from $320,000 to $340,000.”

“More than the housing market has slumped in the past year. ‘The economy has changed,’ Gilberts Village Administrator Ray Keller said. ‘There’s a large supply of housing on the market that has yet to be absorbed. As we move forward, we’ll have to wait and see who ends up with the property and what their interest may be.’”

“The United States is returning to the ’sane’ underwriting practices of yesteryear, so money has necessarily become tighter. But if you have a good credit score and money saved, the good news is you can get an incredibly low interest rate on a home purchase or refinance right now, according to Mike Sante, Chicago managing editor of an the Internet site dedicated to financial analysis and information.”

“‘We are experiencing truly record low mortgage rates right now,’ Sante said. ‘We tell people that if they can get a 5 percent mortgage they should be doing handsprings down the street. That is a mortgage that you want to keep forever and not refinance,’ he said. ‘Don’t be greedy and sit back and hope for a 4 percent mortgage. We don’t see that happening.’”

“‘Don’t let the possibility that rates will go a little lower put the kibosh on a great mortgage deal right now,’ Sante said.”

“The subprime mortgage crisis is over, Sante said. Now mortgage experts are seeing people in trouble who have lost their jobs. They are driving a second wave of defaults. And yet another wave remains to be felt. Those are the $750 billion worth of option adjustable rate mortgages, Sante said.”

“These (current) requirements were standard for 30 years before the insanity hit. These were the rules that kept us from getting in trouble and for the great majority of buyers, what they are now requiring is pretty sound. People need to realize that houses are expensive. You have to have some cash to get one,’ he said.”




Bits Bucket For March 13, 2009

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