The Real Estate Market Led Us Into This
The Hartford Courant reports from Connecticut. “George and Susan Hitchcock thought they were doing the responsible thing. They could no longer afford the mortgage on their ranch house in Farmington so they put it up for sale, knowing they owed more than the house was worth. When they finally got an offer in December, they hoped their lender, Countrywide Financial, would accept it even though it was less than the mortgage. After all, there had been so much publicity about lenders working with homeowners.”
“For three months, the couple tried to get an answer from Countrywide, to no avail. Finally, in early March, the buyer lost patience and walked away. Countrywide auctioned off their house on April 4. As the volume has grown, the average time to just get an answer has doubled in the past year alone, to two months — and in many cases, it is much longer, according to a recent survey of 2,000 real estate agents nationwide.”
“Frustration among real estate agents, sellers and potential buyers is growing. ‘Bad enough we have a slow market, this is pushing down values,” said Art Rose, a real estate agent in East Hartford who represented the Hitchcocks.”
“In Connecticut, 14 percent of all houses and condominiums with mortgages on them were ‘underwater’ as of the end of 2008 according to The Warren Group. That was 95,640 residential properties in all, a number that’s probably still rising. Short sales were rare during the boom years in housing because property values kept rising, sometimes at double-digit rates annually. When the housing bubble burst and prices slid.”
“The Hitchcocks — whose mortgage was standard, not subprime — would seem to have been strong short-sale candidates. In 2007, George Hitchcock was diagnosed with a lung disease and had to give up his job as a maintenance worker. Their home has been in the family since 1961 when George Hitchcock, then 11, and his parents moved in.”
“But their mortgage debt — dating to the Hitchcocks’ buying out George’s siblings after they married in 1993 — had been compounded by a second mortgage to pay off a car loan and some other bills. ‘I feel like they could have cared less,’ said Susan Hitchcock.”
From The Day in Connecticut. “By last October, one of every 20 mortgages in the city was in foreclosure, the third-highest rate in Connecticut behind those of Bridgeport and New Haven, according to the state Department of Economic and Community Development. An estimated 21 percent of the nearly 3,800 mortgage loans in New London were classified as subprime, and payments on nearly 8.5 percent of the mortgages were more than a month overdue, suggesting additional foreclosures would occur.”
“The recent spate of foreclosures in the city is the most anyone can remember, and comes on the heels of a scandal involving Jose Guzman of Waterford, a former loan officer who last September pleaded guilty in federal court to fraud charges. Guzman admitted to falsifying information in obtaining mortgage loans for more than 200 borrowers in New London County between August 2004 and June 2007. Guzman is scheduled to be sentenced July 22, while his co-conspirator, Brian Guimond, of Norwich, is scheduled to be sentenced Thursday.”
“In February, the last month for which data were available, the median sales price of homes in New London was $136,450, down from $179,900 in February 2008 and $275,000 in February 2007, according to The Warren Group. Eight homes sold in February, compared to 13 the previous February and 37 in February 2007.”
“Having won $867,850 in federal stimulus funds set aside for ‘neighborhood stabilization,’ New London’s Office of Development and Planning will train its sights on a downtown district. The city will kick in $250,000, and other sources of funding will up the budget for the effort to about $2 million. That’s enough, wrote Cara Pianka, the city’s community development coordinator, in applying for the stimulus money, to purchase and rehabilitate a dozen units.”
“Among the candidates for improvement are a three-family structure at 77 Garfield Ave. City tax records show the South Ledyard Street house sold for $55,000 in 1995 and for $220,000 in January 2007. Sutton Funding LLC of Raleigh, N.C., foreclosed on it in January of this year. The Garfield Avenue dwelling sold for $87,000 in 2003 and, in a Jose Guzman-brokered transaction, for $295,000 in 2005. In October, U.S. Bank, of San Diego, Calif., took possession of it for $193,445.”
“Nothing less than the fate of the economy rests on such efforts, some say. ‘It’s the real estate market that feeds the economy,’ said John Bolduc, executive VP of the Eastern Connecticut Association of Realtors. ‘The real estate market — the whole subprime mess — led us into this and the real estate market will lead us out.’”
South Coast Today in Massachusetts. “The Massachusetts Association of Realtors has named Congressman Barney Frank, chairman of the House Financial Services Committee, its first ‘Distinguished Champion of Housing Opportunities.’”
“Frank received the proclamation for his tireless work and support for legislation and regulations to ensure a robust and sustainable housing market.’Chairman Frank has long been a leading voice in Congress on the importance of housing opportunities — both homeownership and affordable rental housing — for residents of Massachusetts and the entire country for years,’ said MAR president Gary Rogers, a broker at RE/MAX First Realty in Waltham.”
The Boston Globe in Massachusetts. “Boston’s luxury real estate market is finally feeling the pain of the housing downturn. Until recently, sales of luxury condominiums were holding steady. But now the luxury market is faring worse than the rest of the Boston condo market. The median selling price of luxury condos plunged 19 percent to $560,000, while sales skidded nearly 42 percent in the first quarter of this year when compared with the same period in 2008, according to the Listing Information Network. Sales in the city’s overall condo market fell about 33 percent, and the median sales price, or midpoint price, dropped almost 14 percent to $410,000.”
“‘This has been one of the most dramatic declines that we’ve seen within one quarter,’ said LINK president Debra Taylor Blair. ‘A lot of those buyers tend to be hedge fund managers, people directly tied to Wall Street. People maybe who were expecting a bonus that didn’t happen.’”
“‘The numbers on the high end came to a screeching stop after the financial crisis hit,’ said Kevin Ahearn, president of a residential brokerage and marketing company that specializes in Boston luxury real estate.”
The Philadelphia Inquirer in Pennsylvania. “Existing-home sales in the eight-county Philadelphia region continued to slide in March, declining 25 percent from the same month in 2008. Median prices fell 7.5 percent year-over-year, according to Prudential Fox & Roach’s HomExpert Market Report. In Philadelphia, prices of single-family homes fell 8.4 percent in the first quarter from the same period in 2008, said Kevin Gillen, an economist with the Wharton School and Econsult.”
“Since the boom ended two years ago, he said, city home prices, excluding condos, have fallen a cumulative 18 percent, moving Philadelphia closer to the average drop of 30 percent in the 10 largest U.S. cities tracked by S&P Case-Shiller.”
“‘Two competing forces are driving existing-home sales,’ said Patrick Newport of IHS Global Insight Inc., of Lexington, Mass. ‘Distressed sales - foreclosures and short sales - in a handful of states, including California, Arizona, and Nevada, are driving sales up. Driving housing sales down is weak demand across most states.’”
The Baltimore Sun in Maryland. “K Bank in Owings Mills has been placed under heightened federal supervision as it becomes the latest regional bank to suffer from bad loans caused by the collapse of the real estate market. The Federal Deposit Insurance Corp. issued a ‘cease and desist’ order against the bank, requiring it to stop issuing construction and development loans and raise more capital, among other guidelines.”
“David H. Wells Jr., CEO of K Bank, said …the bank was caught off guard by the declining real estate market. He added that the bank voluntarily stopped issuing construction and development loans before the order was issued. Wells also said the bank wasn’t in danger of closing.”
“‘A core part of our business for the past 48 years has been lending to local developers, and that hasn’t gone so well lately,’ Wells said.”
“Regulators shut down Suburban Federal Savings Bank of Crofton in late January, Maryland’s first bank failure in 17 years, after it failed to make changes ordered by the federal government. The Office of Thrift Supervision also issued ‘cease and desist’ orders to Eastern Savings Bank of Hunt Valley and Baltimore’s Bradford Bank in late February. At least a half-dozen banks in the area are operating under heightened scrutiny.”
“Wells said the bank began seeing problems with the real estate market in 2007, when it curtailed construction lending significantly. It stopped those loans altogether in 2008. As people stopped buying houses and values plummeted, many developers couldn’t afford to pay their loans. Wells said the bank was hit particularly hard in Prince George’s County, where real estate values dropped significantly.”
“‘We saw it getting worse,’ Wells said. ‘We didn’t see it getting this bad. We’re in a very, very different economy.’”
The Washington Post. “Condo owners share more than roofs and lobbies these days. They also share one another’s financial burdens. New mortgage industry policies are forcing lenders to look more closely at the makeup of entire complexes before extending loans to prospective buyers or to people who want to refinance. The increased scrutiny is making it tougher to buy — and hence sell — condos, which are widely considered the housing market’s shakiest segment because they are popular with speculators and financially vulnerable entry-level buyers. The policies are also exacting higher fees and larger down payments from condo buyers while limiting where they can live.”
“A lot of foreclosure-related losses have come from condo lending, pushing prices lower and wrecking condo association budgets. Some areas have had particularly dramatic drops in sales volume. The number of condos sold in Fairfax, Montgomery, Anne Arundel and Frederick counties last year was half what it was in 2006, according to a Washington Post analysis. In Prince George’s County, it was off by two-thirds.”
“Tom Murphy, a Long & Foster agent in Georgetown, understands the motivation behind the rules. ‘The lenders don’t want to put up money anymore if the building is not going to fly,’ he said.”
“But the rules risk disrupting sales, especially in parts of the District that tend to attract diplomats and others who are often temporarily transferred for their jobs, Murphy said. ‘Here, people are in motion,’ he said. ‘While they’re gone, they count as investors if they’re renting out their places. That throws everything off for people who are trying to buy in those buildings.’”
“Benjamin Chiang nearly lost the chance to refinance his condominium when his lender discovered that many other people in the building were behind on their condo dues. ‘It made me a little peeved that my loan depended on the credentials and behavior of my neighbors,’ said Chiang, who bought his Arlington home eight years ago.”
The News & Observer from North Carolina. “Nuestro Banco, the first bank chartered in the state that focuses on the Hispanic community, is being pressured by regulators to overhaul its operations. A cease-and-desist order issued by state and federal regulators, made public Friday, requires the Garner bank to halt ‘unsafe and unsound banking practices and violations.’ Nuestro Banco…opened its first and only branch in Garner in fall 2007.”
“Among other things, the cease-and-desist order calls upon Nuestro Banco to stop: ‘Operating with management whose policies and practices are detrimental to the bank and jeopardize the safety of its deposits.’ ‘Operating with hazardous loan underwriting and administration practices.’”
“Tony Plath, a professor of finance at UNC-Charlotte…said it is ‘very rare’ for a bank as young as Nuestro Banco to receive a cease-and-desist order because regulators pay extra attention to fledgling banks.”
“In addition, he said, ‘It is hard to screw up the bank when you don’t have the balance sheet underneath you yet.’ Loans, for example, don’t usually go bad right away.”
