It’s What Has To Happen
It’s Friday desk clearing time for this blogger. “Fannie Mae, Freddie Mac, many banks and certain states had frozen foreclosures in a run up to details of President Obama’s rescue housing plan. Now companies are flooding the market with eviction notices. Last month Michael Taylor and his family walked away from their two-story brick home in Riverside rather than face the frustration and humiliation that comes with what they call the dreaded ‘f’ word; foreclosure. ‘They told us, hold on help is on the way,’ recalls Mr. Taylor. Owing more than the house was worth the Taylor’s failed to qualify for loan modification. ‘Now we know that was a costly mistake,’ said Ms. Taylor.”
“‘We were reduced to groveling idiots, begging, pleading with lenders, rescue specialists, just about anyone willing to listen,’ she said. In the end the family resorted to sending ‘jingle mail’ (house keys and a note) to their lender.”
“For Olive 8 and Fifteen Twenty-one Second Avenue — a pair of glistening high-rise, high-end downtown Seattle condo towers — 2009 is a year of reckoning. Now the 400-foot-tall buildings are nearly finished. Fifteen Twenty-one started closing deals with buyers in late November, Olive 8 earlier this month. But the real-estate bubble, of course, has burst. And some of those once-eager buyers from 2006 and 2007 are backing out, often at considerable expense to themselves and, perhaps, the projects’ developers’”
“At Fifteen Twenty-one, developer Opus Northwest says more than one-quarter of the original buyers have walked away, some forfeiting deposits of $100,000 or more. Olive 8 developer R.C. Hedreen tried to limit the number of investors — buyers who didn’t intend to live at Olive 8 — but David Thyer, president of R.C. Hedreen says that, in retrospect, that effort wasn’t as successful as planned.”
“‘A lot of the concern [about closing] and some of the fallout now is coming from speculators that were involved in 2006,’ he says.”
“Michael Linkenauger, a short sales specialist for First Coast Realty Associates, said he thinks the first wave of foreclosures in Jacksonville’s Northside near downtown may be close to having run its course. ‘Some have been in proceedings for two years,’ he said. ‘I don’t know where we’re heading here. It’s a really wild time. I can’t tell what’s going to happen next.’”
“Sellers are stymieing themselves by putting their homes on the market at prices suited to yesterday’s market, he said. ‘In order to get your house sold, you’re going to have to give someone a steal of a deal,’ he said. ‘But when you buy, you’re going to get a steal of a deal.’”
“But this crisis is at least better than the dot-com crisis of 2001 because when those stocks tanked, there was no other value to them, she said. Houses have an intrinsic value beyond appraisal or price, said Shari Olefson, a partner of Fowler White Boggs in Fort Lauderdale. ‘You still need a place to live, and it’s better to own than rent,’ she said.”
“Sales of existing single-family homes surged again in South Florida last month…as the triple draw of low interest rates, tumbling prices and a new $8,000 first-time-homeowner tax credit lured in buyers. Davis Pagan and his wife Lesli, of San Diego, are currently in Miami for 10 days of house hunting. The couple, who plan to move to South Florida within the next two months, decided against renting, fearing that if they waited a great opportunity could pass them by.”
”’There is always a chance the market could change in six months, so we are buying now,’ said Pagan, 33, who works for the Coast Guard and is being transferred to Miami in June. ‘Our lender told us they could lock us in at 4.8 percent.”’
“In Miami-Dade, the March median home price slipped to $205,600, a 39 percent drop from March 2008. The median condo price fell 43 percent to $151,000. The median selling price for a single-family home in Broward County fell 30 percent to $219,500. The median condo price fell 40 percent to $82,100. It is unlikely home prices will see a turnaround anytime soon because thousands of homes hat remain on the market. In both counties, roughly 61,000 homes and condos were for sale. In March, a total of 2,546 properties changed hands.”
“An abundance of foreclosures and other distressed property sales also will continue putting downward pressure on pricing, analysts said.”
“The Pagans said they were looking for a house in the $300,000 to $350,000 range, which puts more than half of the homes in Miami-Dade and Broward within their reach. Pagan said that compared to San Diego, also considered a highly desirable market, Miami prices were a great bargain. He echoed the attitudes of foreign buyers and others from outside the area who now find South Florida prices enticing compared to those in other top domestic locales.”
”’Even outside of [San Diego], foreclosures are still selling for $400,000,’ Pagan said.”
“A second, punishing wave of home foreclosures is poised to strike just as the subprime mortgage mess ebbs. Kelly Edmiston, senior economist for the Federal Reserve Bank of Kansas City, dropped that unwelcome forecast at the Fed’s Money Smart Day program. Lenders laid the groundwork for this second foreclosure wave in 2005 and 2006, Edmiston said. Those years saw a surge in mortgages on which borrowers were required to make relatively small monthly payments for the first five years. It was the height of the housing bubble, and buyers turned to such loans.”
“‘I don’t expect the foreclosure problem to get much better in the next couple of years. In fact, it may well get worse,’ Edmiston said.”
“Nevada set a record in March with more than 10,000 homeowners defaulting on mortgage payments, and the price of existing homes sold last month in Las Vegas plummeted to its lowest level since 2001, raising the question how much further they can fall. Since June 2006 the median price of existing homes sold has fallen 53 percent from $289,500 to March’s $134,900. The price fell $7,600 from February to March, according to research firm SalesTraq.”
“‘Every time I see it go down $3,000 to $5,000, I am surprised,’ said Dennis Smith, president of Home Builders Research. ‘I don’t know how low it can go. I remember when I thought it would be difficult to go below $200,000.’”
” Daren Blomquist, RealtyTrac’s marketing communications manager, said his firm is hearing anecdotal reports from real estate agents that many homeowners who can afford to stay in their homes are choosing to walk away because the values have fallen so far. ‘I think it is already a problem and will continue to be a problem,’ Blomquist said. ‘A lot of owners don’t have motivation to stay in their home. I don’t think we have seen the full extent of the people who have walked away that we will eventually see. There is no incentive for people to continue to make that payment on homes that are vastly underappreciated in value.’”
“With vacant lots equaling the number of completed buildings and ‘for rent’ signs taped inside many of the windows, the Village of Centennial Springs looks much like commercial real estate projects all over the valley. ‘Inspirada brings to the valley … a community unlike any other in Las Vegas,’ Focus Property Group Chairman John Ritter said two years ago, in describing the 1,950-acre Henderson subdivision then touted as the largest new urbanist project in the country.”
“‘I don’t care if it’s new urbanism or old urbanism, nothing is working right now,’ Home Builders Research President Dennis Smith said.”
“A large apartment complex in Anthem is under threat of foreclosure because its owners failed to make recent payments on their $40 million mortgage loan, according to documents filed recently with the Maricopa County Recorder’s Office. Local real estate experts say many Phoenix-area apartment projects have been struggling because of increased competition from foreclosed homes for rent and economic ailments linked to the Valley’s growing unemployment rate.”
“‘The majority of these properties were financed during the boom years, and the owners’ per-unit cost is so high that they have trouble competing with the residential rental market,’ said Zach Bowers of Mesa research firm Ion Data.”
In March, tenants and employees at 13 Valley apartment complexes operated by California-based investment firm the Bethany Group learned their projects had been placed in receivership, in which the borrower’s management team is replaced in preparation for the change to bank ownership.
‘Donald Mudd, senior vice president at Grubb & Ellis/BRE Commercial in Phoenix, said owners of all types of commercial real estate expect declining revenues in the coming year. Commercial building vacancy rates already are approaching their highest levels in decades, he added. ‘We have just begun to see the tip of the iceberg,’ he said.”
“The Salt Lake Board of Realtors says new local and federal housing incentives will make a big difference to Utah’s housing market. ‘People are kind of excited about this, and there is a little bit of a buzz, and I actually think we might see things really pick up here because it’s just a time where if you are thinking about buying at all, you can’t pass up these opportunities its almost crazy to not take advantage of this,’ said Board President Ryan Kirkham.”
“The supply of unsold new homes in North Texas is less than half what it is in hard-hit markets in California and Florida. But that doesn’t mean the housing industry here hasn’t suffered. Single-family home starts have fallen more than 60 percent since the peak in 2006. And several prominent homebuilding firms in the area have gone out of business.”
“‘We’ve seen some fallout and are likely to see some more,’ said Texas builders president Ron Connally of Amarillo. ‘There are a lot of good builders out there who haven’t done anything wrong who have been caught.’”
“The National Association of Home Builders has seen its membership decline by almost 50,000. ‘Our biggest obstacle is getting the financing,’ Connally said. ‘We very well could wake up and see shortages in the market by the time this thing sorts out.’”
“Fresno County’s unemployment rate soared to 17% last month — its highest level in a decade — even as the work force expanded. Figures released by the state Employment Development Department also show California’s unemployment rate climbed to 11.5%, the highest since comparable records were first collected in 1976.”
“The Valley’s turbulent economy and increased competition for work are forcing some to turn to jobs on society’s fringes to make ends meet. In an average week, for example, between 25 and 30 women call to answer a help-wanted ad for exotic dancers — about twice as many as a year ago, said Spice 1 Entertainment owner Albert Ellis.”
“‘I’m seeing a lot of professional women who were doing other work — teachers, nurses, real estate agents, all walks of life — turning to dancing now,’ Ellis said.”
“In a witch hunt, the witches have feelings, too. As populist rage has erupted around the country, stoked by canny politicians, an opposite rage has built on Wall Street and other arenas where the wealthy hold sway. Its expression is more furtive and it’s often mixed with a kind of sublimated shame, but it can be every bit as vitriolic. ‘AIG pissed some people off, and now you’re gonna screw everyone on Wall Street?’ rails a laid-off JPMorgan vice-president.”
“Of course, it is precisely the flawed risk management that has brought Wall Street salaries under scrutiny. ‘There’s this perception that the people on the Street were making money for nothing,’ says a mortgage-investment banker. ‘You have a political and media class who make the mortgage originators and bankers out to be the villains. But are they? They were doing what Congress wanted them to do. Is the guy who lied on his mortgage application the victim here? This whole narrative that the downtrodden were the victims and the money guys were the perpetrators really doesn’t stand up to rational challenge.’”
“But the issue of pay is hardly ever discussed rationally. ‘Compensation gets so emotional,’ says the Bear Stearns managing director. ‘Everyone has a point of view. The truth is, the market determines what people are worth. Did I think I was overpaid? You betcha. But a lot of people are overpaid.’”
“Are real estate reality shows on cable these days more reflective of the challenging housing market? The TV genre has been lambasted in some circles for pumping extra air into the real estate bubble by encouraging novices to ‘flip’ houses like the pros.”
“Two new shows, ‘Real Estate Intervention’ and ‘The Unsellables,’ focus on fixing down-on-their-luck properties to bring them to market. New to the cable lineup this year is ‘Deals on the Bus’ on TLC, which chronicles the latest in real estate: the ‘repo’ or foreclosure bus tour. The concept is simple: Pile a bunch of people onto a bus and take them on a three- or four-hour tour of six to eight foreclosed homes. If you’re lucky, a couple of deals will be made and excess inventory will come off the market.”
“You don’t get that same sense of wanting to educate buyers from ‘Deals on the Bus.’ There, it’s about grabbing ‘once-in-a-lifetime’ opportunities. ‘Ride along as we search the country for the American dream,’ says the show’s announcer. By the end of the 30-minute show, a woman was signing an offer for it and her future sister-in-law, who had come along for the ride, was putting in an offer for a $300,000 home that she just couldn’t resist.”
“One complaint about the show (aside from not showing a — voila! — kitchen makeover) is that the word ‘foreclosure’ isn’t uttered once. Rather than convey the magnitude of the country’s foreclosure mess, it seems to offer a tag sale of half-price homes. So much for reality.”
“A report released Thursday by the Florida Association of Realtors told a familiar story for the local housing market - home prices are down, but sales are up, way up. Foreclosures are again the main culprit for decreased home prices, but they are also the reason home sales are increasing. The continuing slide of home prices is another step toward the elusive bottom of the market, as the effects of the recent housing boom and bust reverberate throughout the economy.”
“‘This is the healthiest thing that can happen in this market,’ commercial Realtor Gary Tasman said. ‘It’s what has to happen.’”
“As a country barber in business for more than 50 years, he summoned the help of his friends - and he has plenty of those. One brought a portable saw mill, one electrical tools, yet another a planer, and many more their friendship, muscles and good advice. In what could only be called an East Tennessee version of an Amish barn-raising, this band of brothers gradually built my dad’s little red house.”
“While subdivisions of cheaply-constructed $200,000 McMansions sprang up all around, most erected lickety-split on emerald pasture fields that were once a sacred part of our East Tennessee heritage, my dad’s country bungalow was built on his own land for less than $8,000.”
“Now caught in the grasp of a financial crisis that threatens to destroy us, what lessons can we glean from my dad’s little red house? A good many. After 20 years of buying (now devalued or worthless) stocks and spending our hard-earned money on retail therapy at the mall, America is suffering a mind-numbing consumption hangover.”
“At my dad’s little red house, everything is prime, not subprime; there is no housing bubble, no credit card debt, no mortgage. It is all long paid for by hard-earned and hard-saved cash, and the freezer is well stocked with venison and Kentucky bass. Meanwhile, in the garden, this year’s litter of young cottontails frolic happily in the fragrant dirt, their little bellies full of sweet Tennessee grass. Less really is more.”
