The Sound We Are Hearing Now
It’s Friday desk clearing time for this blogger. “President Barack Obama took aim at the housing crisis during his first 100 days with a broad plan to stabilize the market by trying to prevent foreclosures, pushing down mortgage rates and offering a handsome tax credit to new buyers. But has the effort helped South Florida, where foreclosures are soaring, many homeowners have little or no equity and price declines show no sign of abating? The merciless slide in home prices has made it tough for many homeowners to benefit.”
“Borrowers aren’t likely to stick with the program if prices keep falling, said attorney Roy Oppenheim, whose firm specializes in foreclosure prevention. Retiree Carmen Carrio, for instance, bought a condo in Dadeland four years ago and got her loan modified in December. After a condo next door sold as a foreclosure for $75,000 this month, she decided to stop making payments on her $171,000 loan.”
”’I will walk away and go rent somewhere,’ Carrio said.”
“The region’s condominium market, once the entry for first-time homebuyers, continued its downward spiral in the first quarter as sales fell by nearly 27 percent. As sales tanked, condo prices in Massachusetts posted the sharpest decline in more than two decades. The median condo price dropped nearly 17 percent from January through March to $220,100, according to The Warren Group.”
“Despite realtor claims of ‘packed’ open houses and ’strong’ buyer interest, single-family sales didn’t fare any better. Sales of single-family dwellings dropped by 10.8 percent to 6,160 compared to a year ago, the slowest sales pace for a first quarter since 1991. Monthly median home prices have been falling by double-digit percentages year-over-year since last September.”
“But at least one housing expert is convinced there’s good news in between the lines. ‘We’re in a big recession and it’s not done yet, prices are still falling and there are lots of foreclosures,’ said Karl Case, an economics professor at Wellesley College. ‘But the rate of decline is slowing and in the western suburbs and some South Shore locations, we’re seeing things turning around.’”
“John Ellsworth, an owner agent with Homes Connection in Ashland, said many of the multifamily homes for sale were owner-occupied, but in those, owners were swept up in the same mortgage mess that struck many owners of single-family homes. In Ashland, for example, at least one-third of the town’s foreclosed properties were multifamily homes, he said.”
“Even with dropping rents - a two-bedroom unit that went for $1,200 could go as low as $1,000 now, he said - the demand for multifamily homes remains. In Marlborough, 15 multifamily houses sold in the first quarter of 2009, 10 more than the same time a year earlier. Median prices also fell from $290,000 to $155,000, said Eric Berman, a Massachusetts Association of Realtors spokesman. ‘It is an investment, even if it’s owner-occupied, because you are deriving revenue’ from tenants, said Berman.”
“David Strainer, president of the Warren County Board of Realtors, said home sales in the Glens Falls and Queensbury area were never depressed, but the market has definitely started to pick up. The biggest jolt of activity, he said, has come in the form of dropping home prices. Strainer has observed many inflated listings that sat on the market all winter and have sold after shedding tens of thousands of dollars from the price.”
“‘What’s really helped is that the prices have come to where they should have been,’ Strainer said.”
“He advises clients who don’t want to let go of their home for less than they think it’s worth that when they sell low, they can buy low. Wait until the market is back at its peak, and homeowners will sell high only to buy high, he said.”
“All across the Memphis area, foreclosed homes have glutted the market and are being sold at prices as low as a half, one-third or even one-tenth their appraised values or the prices they had previously fetched. Others are remaining vacant, creating another set of problems.”
“The bargain-price properties are found in every level of the market. They range from a 6,400-square-foot home in Eads that sold last month for less than half its $900,000 price from 2007 — and is now listed for resale at $380,000 — to three homes on a block in Orange Mound that a Utah investment firm snapped up for a total of $15,000.”
“Local planners and community activists worry that the conversion of large numbers of homes from single-family ownership to rentals could cause neighborhood declines across the Memphis area.”
“‘I think there’s some kind of tipping point — and I don’t know what that is — at which there’s so many rentals that the neighborhood becomes undesirable for homeowners,’ said Emily Trenholm, executive director of the Community Development Council of Greater Memphis. ‘Nothing against renters, but I think people don’t feel the same personal stake in the neighborhood as when they own property.’”
“In California and across the United States it’s become a trend to sell $150 tickets that can win a $2 million house – and ring up leftover money for a group doing good deeds. So what if you win? How do you pay the taxes? Remember the woman who won a free $250,000 house in Lincoln last month with a $96,000 tax bite? Imagine that on a $2 million house.”
“‘HGTV does a sweepstakes every year for a million-dollar house, and I don’t think anyone who’s won it has lived in the house for that reason,’ said Sandra Sims, president of Step By Step Fundraising. ‘If you can’t pay the taxes, you have to sell the house, and in this market it’s hard to sell.’”
“The housing slump has reached even the wrought-iron gates of Silicon Valley’s great estates, where the rich and sometimes not-so-famous are having to adjust their thinking and their asking prices. Exhibit A is Stonebrook Court, a grand 30,000-square-foot Tudor on 7.5 majestic acres that dwarfs its neighbors in this bucolic enclave. It was bought a decade ago for $5 million by Kelly Porter. His listing agent said…Porter may be more flexible now than he was last summer.”
“‘He’s not lowering the price but will consider less,’ said Olivia H. Decker of Decker Bullock Sotheby’s International Realty.”
“High-profile suicides like that of the finance chief at embattled Freddie Mac highlight the dangers that an economic crisis poses to the powerful as well as the vulnerable, experts say. Dr. Shelley Reciniello, a psychologist experienced in counseling Wall Street executives said she and her colleagues are hearing of suicides on Wall Street that are not getting much attention. ‘Absolutely, there’s a lot of this agony going on,’ she said. ‘People are very vulnerable.’”
“‘Their worlds are basically crumbling,’ she said. ‘Everything that they had hoped for and really seemed within their grasp over the last 20 years or so is ending.’ At the heart of it, she said, ‘there’s a disparity between who you want to be, who you thought you were and who people are telling you are today, and that hurts like hell.’”
“Until the housing bubble began its slow painful deflation a few years ago, Countrywide Financial Corp. the nation’s biggest home lender, had 40 years as a reputable lender that helped millions acquire homes, a co-founder says. Now that era is a memory. The collapsing company was folded into the Bank of America a year ago laden with high-risk loans, enormous executive salaries and federal investigations.”
“With its name ‘too toxic to resuscitate,’ as an expert says, Bank of America has begun rebranding each branch.”
“It’s been a good 20 years since I first met Angelo Mozilo, the California founder of what became the Countrywide mortgage lending giant. And then, as now, he struck me as the mortgage industry’s incarnation of actor George Hamilton: Tan-obsessed, big on sartorial splendor and sure everyone in power would see things his way.”
“Well, times have changed. And the legal power in Florida wants Mozilo to visit the state. A U.S. District Court judge remanded a lawsuit filed by the state of Florida against Mozilo back to Broward County Civil Court. The action came in a case filed by Florida Attorney General Bill McCollum alleging that Mozilo and Countrywide violated the state’s deceptive trade practices act by placing consumers in loans they could not afford or with rates that were false or misleading.”
Let’s be perfectly clear. Mozilo went overboard pushing risky mortgages. He should be held accountable. But where on earth was McCollum — in fact, any legal and financial regulator — all those years when mortgages were approved and handed out to anyone who could scrawl an X on a signature line and, presumably, did not drool too much.”
“A U.S. House panel approved legislation that would prevent lenders from transferring all mortgage risk as part of a bid to boost consumer protection during the deepest housing slump since the Great Depression. Lawmakers said they were trying to curb lending abuses that contributed to record losses on securities linked to mortgage payments and a 24 percent increase in U.S. foreclosure filings in the first quarter from a year earlier. ”
“‘If this bill passes, there will continue to be a vigorous mortgage market, and it will continue to function better,’ said Committee Chairman Barney Frank, a Massachusetts Democrat.”
“Frank said last month that 100 percent securitization ‘allows bad originations because people make loans and don’t have to worry about being paid back.’ The committee debate included efforts by Republicans to change a measure they said would impose too many limits on lenders.”
“‘It sounds like every mortgage made in the past 10 years has been a toxic asset, and that’s just not the case,’ said Representative Randy Neugebauer, a Texas Republican. ‘And how many of those people’ with bad loans ‘have taken out mortgages they really shouldn’t have.’”
“‘When Secretary Alfonso Jackson in the Bush administration proposed ending Section 8 assistance to lower-income people in need of help to rent decent apartments, I objected that this would leave people with no affordable housing after five years. When I asked him directly what he planned to do for those who would find themselves in this situation if his five-year cap on Section 8 eligibility were to go through, his reply was that we would help these recipients become homeowners.’ —Representative Barney Frank.”
“Is Washington mental? Where can you buy a home with very low income from naught but Social Security or disability benefits? The Ozarks? The Okefenokee? The still-devastated part of New Orleans?”
“This exchange is extremely telling, demonstrating the brainwashing we have all experienced about the ‘everyone-can-have-it’ American Hoax—sorry, Dream.”
“House prices all across Bulgaria’s regional cities have slumped in the three months through March 2009 from the previous quarter. The average housing price in the first quarter was 1190 leva a sq m. Last year it peaked at 1418 leva a sq m between July and September, making an average national decrease of 16 per cent from July to March.”
“Experts say residential prices will slip to their lowest in the third quarter of up to 30 per cent on an annual basis. From January to March, prices plummeted the sharpest in Veliko Tarnovo (-25.1 per cent), Kyustendil (-21.5 per cent), Blagoevgrad (-20.5 per cent), Rousse (-18.8 per cent) and Vidin (-17.8 per cent).”
“The property section of The Irish Times ran its annual review issue this past weekend. ‘If You Can’t Sell, Swap.’ ‘Market on the Floor.’ ‘Prices Down by 40%.’ ‘Estate Agents Bracing Themselves for Further Losses.’ In all I counted a dozen or so headlines that portrayed the incredible crash in property prices that has gripped Ireland.”
“What caused the collective madness that saw an acre of land in Ballsbridge, the exclusive Dublin suburb, go for $132 million an acre just a year or so ago? That was apparently the highest price for a plot of land anywhere in the world at the time. A new bestselling book by Irish Times journalists Frank McDonald and Kathy Sheridan, entitled ‘The Builders,’ goes a long way to explain what happened to overheat the market.”
“What they all believed is that the tree would grow all the way to the sky, fiercely bidding against each other for prime properties even as the telltale signs of a housing collapse loomed on the horizon.”
“Politicians of all parties clearly had their votes bought at crucial planning permission sessions of Dublin city and county councils, as well as at council meetings all over the country. The Irish banks were major colluders in creating the bubble, handing out loans like confetti to the developers and mortgage seekers alike. No one wanted the party to stop.”
“The sound we are hearing now is that bubble bursting with consequences for everyone, most notably homeowners caught in a vicious cycle of heavy mortgage repayments. The developers have not escaped. During my recent trip several journalists told me they believed many of the top 10 developers are actually bankrupt and hopelessly over-extended.”
“The property developers face financial ruin, the banks face massive restructuring while the government faces a barrage of questions as to why they did not act sooner to smash the speculative bubble.”
“The answers may never be known, but in an unforgettable chapter in the book the writers describe the annual property developers’ ball at a swanky Dublin hotel. As recently as this year the invited speaker was defiant, swaggering and adamant that prices would continue to soar and the present difficulties were just a blip.”
“The unsinkable Titanic comes to mind.”
“Eighteen months ago when I was last here, the joint was jumping. Today it seems tired. I make my way to the Stratosphere Casino Hotel, where a room costs $US29.95 a night. Las Vegas needs to maintain its hot status, so you won’t see much advertising of the steep discounting that’s occurring (you can go up-market and stay at the Las Vegas Hilton for less than $50 a night).”
“All this goes some way to explaining why Jamie Packer has been looking a little blue of late. The Wall Street Journal recently reported that at the peak of the market (about the time he was buying) the listed market value of the gaming industry worldwide was said to be about $100 billion, yet by February this had fallen to just $11 billion.”
“Many of the legendary Strip owners, like pioneer Steve Wynn, are reeling from taking on too much debt in the belief that the boom times would last forever.”
“One out of every 22 homes is in some form of foreclosure. The Case-Shiller Index shows a decline in prices of 44 per cent from the 2006 peak. Realtor Jennifer Martin runs House-Hunting Safari - taking bargain-hunters through the sub-prime jungle while she’s decked out in a safari suit (this is Vegas after all). According to her website, the tour will show you homes reduced up to 70 per cent from peak values - some even more - priced from $US 25,000.”
“My brief stayover has shown me that the sign we saw earlier was wrong: what happens in Vegas does not stay in Vegas. Rather it’s a mirror for what’s going on in the rest of the country, and the world.”
“Tom Cargill, economist at the University of Nevada, Reno, said Nevada will lag behind the nation when the economy rebounds. ‘We had the biggest bubble and the biggest burst of the bubble,’ he said of the housing collapse. ‘The center of the financial storm is housing.’”
“Cargill also criticized the federal government’s pumping hundreds of billions in taxpayer dollars into economic stimulus, saying similar measures only lengthened Japan’s recovery a decade ago.”
“Faced with bottom-line competition from foreclosures and short sales, homebuilders in Las Vegas have reduced prices to the point that some are selling for less than $100 a square foot. The average price of a new KB home at Manchester Park in the master-planned Providence community is $154,200, or about $80 a square foot, housing analyst Larry Murphy said. That compares to the average foreclosure price of $149,746, or $84 a square foot.”
“It was about 10 years ago that new-home prices in Las Vegas topped $100 a square foot and everybody was squawking about how the market had become more expensive than Phoenix, the most comparable city in the Southwest region. The bursting of the housing ‘bubble’ has brought prices back to those levels.”
“D.R. Horton dropped prices by about 50 percent across the board in January and was the No. 1 homebuilder in Las Vegas for the first quarter with 210 closings, Murphy reported. ‘Apparently, that strategy is working,’ he said.”
“A household with a median income of $52,800 a year needs to devote 25 percent of income to buy a median-priced single-family home at $164,600. In July 2006, that ratio was 44 percent. Jim Widner, president of KB Home’s local operations, said his company is targeting entry-level buyers and renters with a May 9 seminar about the benefits of homeownership. KB has been able to bring the price of a 2,600-square-foot home at Manchester to $179,900, or about $67 a square foot, Widner said. Less demand for materials such as copper and lumber, combined with more available labor, has resulted in substantial savings, he said.”
“‘You’re going to see a return to single-story. You’re seeing people get back to what do I need, instead of what can I have,’ Widner said.”
“‘People make a big deal that the price of (owning) a home is cheaper than rent,’ Widner said. ‘Shouldn’t it be? You save to put money down and you make a few sacrifices. Why shouldn’t it be cheaper than rent?’”
