A One-Shot Deal
It’s Friday desk clearing time for this blogger. “With foreclosures flooding the housing market and bringing new-home construction to a halt, KB Home has launched a new line of starter homes that are priced to compete with bank-owned properties. Travon Howell, 23, recently bought a 1,287-square-foot, three-bedroom home in KB Home’s Rancho Valencia community. The base price for his home was $129,000, and with extras the price rose to $140,000. Howell, who works at a Caterpillar dealership, said his payments should be about $770 a month. Now, instead of looking for homes, Howell said his fiancée has him looking for furniture.”
“‘There’s a 10-year warranty, and it’s brand new, so you don’t really have to worry about anything,’ he said.”
“With 3,054 trustee sale notices issued in the first three months of the year, Pima County is on pace to easily surpass the 8,956 such notices issued in 2008. Retiree Frank Carlino, 71, is facing foreclosure on his north side home after buying it for $200,000 in 2006. Saddled with a first and second mortgage that total about $1,300 a month in payments, Carlino said he can’t make his second mortgage because he’s seen a drop in his life savings of about 50 percent.”
“He had invested in mutual funds, but after they plunged in value he moved his savings to two annuities that combined pay him about $500 a month. ‘I almost lost half of what I had,’ he said. ‘I said ‘take it out and close my funds out, I can’t afford to lose anymore. I can’t take any risk with what I have left.’”
“Carlino has been trying to modify his second mortgage with Bank of America, but so far he has had little luck. ‘I am in this sort of limbo, in a sense, not knowing what is going to happen,’ he said.”
“Since sales have slowed, some of the high-end homes that were built on speculation and would have sold briskly in a stronger market are being furnished and marketed as rentals, said Susan Breitenbach, an associate broker at Corcoran. Owners are making other concessions — like extending the lease through the end of September, say, or agreeing to absorb landscaping costs. Many owners ‘are spoiled,’ she said. ‘They are not used to having to do stuff like that.’”
“The slowdown in the rental market is mirrored in the sales market, where prices have dropped to 2006 levels. Preliminary first-quarter data from Corcoran shows that median prices have declined by about 20 percent over the same period last year, said Rick Hoffman, the regional senior VP for the Corcoran Group.”
“Still, Gary Wohl, an agent at the East Hampton office of Brown Harris Stevens, said he remained optimistic that the market would pick up. ‘There’s a lot of value here right now,’ he said as he showed off a 5,000-square-foot spec house on a quiet East Hampton street whose price has been reduced to $3.7 million from nearly $4 million. But people with unrealistic expectations are bound to be disappointed, Mr. Wohl added.”
“‘It’s never going to be a fire sale out here,’ he said.”
“Home sales in the Hamptons, the New York oceanside communities favored by financiers and celebrities, plunged 67 percent in the first quarter from a year earlier. ‘We are a luxury item, and people don’t want to spend money,’ said Judi Desiderio, president of Town & Country.”
“In East Hampton Village sales fell 81 percent, also to three houses. The total value of all homes sold there was $4.1 million, a 95 percent decline. ‘Those are your iron-clad, been-there-for-over-a-hundred- years, been-used-by-the-Kennedys areas,’ said Desiderio. ‘It’s the blue-chip, best-of-the-best. I would never expect that.’”
“When the foreclosure crisis hit Las Vegas, many expected apartment-complex owners to be the beneficiaries because those out-on-the-street homeowners needed to live somewhere. But the reality is that the shadow rental market of homes and condominiums continues to put pressure on apartment-complex owners, whose vacancies are increasing. They must offer incentives and cut rents to lure tenants.”
“John Tippins, a broker with Northcap Commercial, said he’s worried about the inventory that’s about to come on line to compete against apartments. Many condominium towers are going to provide some stiff competition, he said. ‘It is not the current inventory I am worried about, but the new inventory,’ Tippins said.”
“Tippins also said competition is stiffer from homeowners as well. ‘For the first time in four to five years, you can get a three-bedroom, two-bath on the beltway market from Summerlin to Green Valley for $1,150 a month. That is pretty scary,’ Tippins said.”
“Many contracted buyers at Vantage Pointe received an e-mail last night from the developer of the largest condo building downtown, which is slated to start selling units in May. I’d spoken to Brian Stoddard, president and chief operating officer at Pointe of View, in October after I’d heard that Vantage Pointe might be rented out. He told me then: ‘That’s not something that we’ve said officially.’”
“But in this e-mail, Stoddard dropped this news: ‘Most of the new condominium projects in the downtown San Diego area have an inventory of available homes that are being leased. Although our primary objective is to continue to sell all of the homes at Vantage Pointe, the Developer also plans to implement a leasing program during the sales process. The leasing program will bring vibrancy to Vantage Pointe during the sales process.’”
“Even though a foreclosure pandemic has forced thousands of local families from their houses, apartment managers said they are struggling to keep their units rented, even in desirable communities on the coast. At the same time, pressure on landlords is delivering relief for renters. Tradition, an apartment complex in Carlsbad, has cut its asking rent for a three-bedroom apartment from $2,015 to $1,799 per month, said Kris Nelson, business manager for the complex.”
“‘Who knows where the people are going, but if people can’t pay the rent, they can’t pay the rent,’ said Nathan Cadieux, a multi-family housing analyst with a San Diego real estate firm. ‘If you’re looking for a job, why would you stay in San Diego and pay $1,200 while looking for work when you could be in Arizona looking for a job and paying just $600 per month?’”
“Realtor Kevin Moran has a second line of work where he goes out and assesses the condition of homes for lenders who may want to rework the loans. ‘I appraise and inspect over 200 homes a month, and, anecdotally, 30 to 40 percent are vacant and the lender doesn’t know it,’ he says. That means there could be a second wave of foreclosed properties hitting the market in the next five or six months.”
“But why would someone abandon a home before they’ve even been foreclosed on? Moran pointed to the house we were looking at. The debt owed was $403,000. A year ago, the bank agreed to a short sale, and the home went on the market for $230,000. The price was eventually lowered to $165,000, but the thing never sold. A couple of offers fell through. In February of this year, it was taken off the market, and the family just left.”
“‘There’s too many bad memories to walk in the front door,’ Moran says. ‘A lot of people, when you stop making the payment, there’s no joy in returning home.’ So they leave, and it takes the banks months to figure this out, and months more to put the home into foreclosure.’”
“‘Making money went out the window two years ago,’ says Joe Anfuso, CEO of private builder Florsheim Homes. ‘We’re just contributing to cash flow.’ The point is to stay alive until ‘this market turns.’”
“And he’s also dipped his toe back into buying land, participating in a joint venture to buy land once worth $120,000 a lot for $18,000.”
“According to RealtyTrac, in January, Gresham saw a high of 115 foreclosures. That’s 27 percent higher than Portland’s 84 and 64 percent more than Troutdale’s 41. A map of local foreclosures shows no community is immune. Homes are foreclosing in East County’s more affluent communities, such as Persimmon, Fairview Village and Blue Lake.”
“Fairview resident Kari Hastings is all for improving areas affected by foreclosure. The house across the street from her Fairview Village home is in foreclosure and the yard is a far cry from its former immaculate glory. When the wind blows over flowerpots on the porch, Hastings rights them. She picks up free publications piling up at the front door and retrieves mailers and trash from the yard.”
“‘It’s just unsightly,’ Hastings said. ‘You don’t want to look out your front window and see newspapers piling up.’”
“After more than a year of working with the Southwest Police Precinct and reporting to Seattle’s Department of Planning and Development, Mike Dady has grown tired of complaining about the vacant homes in his north Delridge neighborhood. Dady said the issue became a major problem after the housing boom from 2005 to 2007. During these years, he said many properties were purchased for the development of town homes or other multifamily units. Now, many of those projects are on hold and the vacant houses resting on the properties are stagnant.”
“He’s not alone in his frustration. A number of neighbors see the abandoned, run-down homes in their neighborhood as a drain on the local community. ‘It takes energy out of our neighborhood,’ said Dady. ‘It takes away the quality of life.’”
“Alaska’s foreclosure rate rose 36 percent in 2008 over the year before, the highest rate in 15 years, according to a report from state economists. The state reported a total of 1,131 foreclosures. The regions most susceptible are the areas with the highest populations - the Anchorage and Palmer recording districts.”
“The reasons for the increase in foreclosures are job losses and falling wages, a ripple effect of the Lower 48 economic downturn. Despite the large increase, however, Alaska has the third-lowest rate nationwide. ‘We are very fortunate to be here in Alaska, we have a good story to tell about our situation here compared to Ohio or Michigan,’ said Paul Kapansky, director of mortgage operations at Alaska Housing and Finance Corp. ‘The only real difference is that instead of a house being on the market for an average 30 days, houses are now selling more like 70 days.’”
“New housing construction is slowing as starts were down 63 per cent, year-over-year, in the Regina census metropolitan area in March 2009, say industry analysts. ‘The thing we have to remember here, is that we’re comparing this year’s numbers with an extremely strong 2008 — actually 2007 was pretty strong also,’ said Paul Caton, CMHC’s senior market analyst for Saskatchewan. ‘When you do that … you get some pretty sharp declines.’”
“‘There’s a lot of builders who built homes in the last couple of years for customers who were actually speculators, so they’re not actually moving into those houses,’ said Ted Reilly, sales manager for Gilroy Homes. ‘Now those houses are on the market.’”
“Caton expects housing starts in urban Saskatchewan to remain lower this year than in 2007 and 2008, settling around pre-2007 levels, which were still historically high. However, he forecasts 2010 starts to increase over 2009, just not to the same levels seen in 2007 and 2008. ‘That was a one-shot deal. They were the highest starts that we had seen, in some centres, in 30 years,’ he said. ‘We don’t expect that we’re going to see that again in the near future.’”
“John Steinfath is not giving up on his $20,000. That is how much the Englewood contractor paid to install custom mirrors and shower doors in a luxury Nokomis condo building. Steinfath spent two years seeking payment as the Harbor Villas condo project sat vacant, eventually sliding into foreclosure last month.”
“Harbor Villas will be up for auction soon, and Steinfath hopes the next owner will honor the last one’s debts. ‘I have too much invested in this to stop now,’ said Steinfath.”
“In better times, developer, Trendy & Trendy LLC owners handed out $100 bills to real estate agents to boost sales. After the real estate decline, Harbor Villas became one of the most conspicuous empty buildings on Tamiami Trail. But it is certainly not the only one.”
“Next door, another building is less than half built. The developer stopped construction with the steel support beams still exposed. The property is for sale. Up the street in Osprey, the new two-story Bay Street Village shopping center sits largely vacant.”
“To the south, at Warm Mineral Springs in North Port, another developer’s dreams for a resort and ‘Fountain of Youth Institute for Natural Healing’ ended in foreclosure earlier this year, with another owner taking over.”
“There is little money available for real estate deals these days, but Steinfath is undeterred. ‘I did the work,’ he said. ‘Somebody should pay for it.’”
“With hundreds of new luxury high-rise units on the market in Dallas, two of the newest buildings – the House and 1900 McKinney – are luring residents with deluxe features and eye-catching design. That’s important when there are fewer customers in the market. And it’s even more critical at the top levels of the Uptown housing market.”
“‘The consumer is very sophisticated on what tricks will work,’ said Dallas housing analyst Mike Puls. ‘At a half-million bucks, that’s very important.’”
“Puls estimates that while there are more than 1,000 new high-rise units on the market in Dallas, only about half are spoken for. ‘The high-rise market is probably the most overdeveloped market,’ he said.”
“Austin-based Guaranty Financial Group Inc.’s shares fell about 11 percent Thursday, after federal regulators gave its banking subsidiary six weeks to improve its financial health or potentially face a forced merger, sale or liquidation. Guaranty has more than 160 branches in Texas and California, and a portfolio of mortgages, commercial loans and other assets. The company has seen its bad loans mount amid the housing bust.”
“Guaranty, which has significant operations in Dallas and about $15 billion in assets, also said Wednesday that it would file its 2008 Form 10-K annual report late. The company is reviewing with its accountants the appropriate valuation of the mortgage-backed securities portfolio on its balance sheet. ‘It’s a good bank, but their clock is definitely ticking,’ said Dan Bass, managing director in an investment banking firm. ‘I hope they do find the capital to get through this.’”
“From Maine to Hawaii, millions of new McMansions, post-World War II bungalows, modern downtown lofts, exurban town homes and inner-city row houses sit empty. This unprecedented glut of vacant homes — one in nine homes across the USA, according to the Census Bureau — will change the real estate landscape for years.”
“‘We overproduced by 1 million new units,’ says Edward Glaeser, economist at Harvard University.”
“The nation’s housing stock increased by 8.65 million units from 2002 to 2007 — a time when the number of households in the USA increased by only 6.7 million. Even after taking into account the need to replace homes torn down or lost to fire and other disasters, there is an excess of 1.3 million units, not including vacation homes. What happens to the 14 million empty houses, condominiums and apartments and the 9.4 million that are for sale? How long will it take to absorb this massive and unprecedented oversupply of housing?”
“Susan Wynalek hasn’t witnessed the consequences of the real estate collapse firsthand — only on the news. She doesn’t see foreclosure signs or many ‘For Sale’ signs in Freehold, N.J., the affluent town in the far reaches of the New York suburbs, where she lives. ‘We bought our house 3½ years ago, and I imagine on paper we’re losing money,’ she says. ‘But we’re staying put.’”
