Those Days Of Easy Money Are Barely A Memory
The Denver Post reports from Colorado. “At first, it looked as if David Fedeli might catch a break. Although his southeast Aurora home was listed among the 237 foreclosure filings in that part of town in the first quarter of 2009, he and his wife weathered the process in order to renegotiate a burdensome interest-only loan. Soon afterward, though, Fedeli joined 1,406 others in his area on the unemployment rolls when his job with a printing company evaporated. But here’s the economic indicator that hits him right where he lives: 80013. The ZIP code’s estimated 70,000 mostly white-collar residents earn a median household income of about $68,000.”
“With more than half its workers in sales, office work or professional jobs, the area has been particularly vulnerable to Colorado’s economic downturn. ‘This recession is a lot different than any of the ones that I can remember because it’s touched everyone,’ said Gary Horvath, research director at the University of Colorado’s Leeds School of Business. ‘It’s hit all sectors. It’s much deeper than we anticipated.’”
“From his front porch in The Conservatory, an enclave of 3- and 4-year-old homes in the $250,000 to 350,000 range, Fedeli pointed to several houses hit by foreclosure. ‘It’s the young people getting killed,’ he said. ‘It’s the new buyers, getting those 110-percent loans. I remember when we were buying, my lender told me, ‘If you can fog a mirror, I can get you a loan.’”
“Those days of easy money are barely a memory amid the economic realities of 80013, where over the past 15 months, there have been more than 1,300 foreclosure filings.”
“As owners of high-end mountain homes try to make their properties stand out in a crowded market, an increasing number are going the auction route.at least 15 Vail Valley homeowners are considering including their homes in Slifer Smith & Frampton’s first scheduled auction in July, said Ric Souto, head of the company’s newly created auction division.”
“‘It used to be thought of as a last resort, but that’s no longer the case,’ Souto said of the auction mentality. ‘It’s an accelerated way to sell real estate. Figuratively speaking, it’s on steroids.’”
“Real estate auctions have been relatively rare in resort communities until now, said Byron Koste, director of the University of Colorado Real Estate Center. ‘We like to believe we’re above the fray,’ Koste said. ‘It just has taken longer to get here because we have been hit less heavily by the downturn.’”
The Arizona Daily Star. “At the Aldea del Rey subdivision in Corona de Tucson, finished town houses with granite countertops and high-end appliances sit empty with their doors wide open to the world. Down the street, unfinished town houses that are now overgrown with weeds are crumbling away. Their cinder-block walls have been pushed over by the wind as rebar juts out in every direction.”
“It’s a suburban ghost town plagued by errant golf balls. ‘For a while, there was only one (other) person in the neighborhood,’ said William Smith, who has rented in Aldea del Rey for the last two years. ‘It’s quiet. That’s the upside.’”
“The state’s Real Estate Department lists 24 projects in the greater Tucson area where the developer is either in ‘financial trouble’ or bankruptcy. These projects range from the sprawling Saguaro Springs development in Marana — where hundreds of acres were bladed and graded, but only three model homes were built — to smaller custom developments like the Enclaves at Gates Pass that never took form. Both of those projects are now going to auction.”
“‘Early buyers in these neighborhoods often have little recourse for shoddy construction, and those who bought at the market’s peak now owe far more than their homes are worth. ‘For the people who bought into these subdivisions, they are probably the ones getting worked over the most,’ said Jay Q. Butler, realty studies director at Arizona State University. ‘And yet they did nothing wrong.’”
“During the peak market, town houses sold there for roughly $300,000. They now go for $130,000. ‘It’s sort of bureaucratically stuck,’ said builder Michael F. Teufel. ‘Technically I am the owner (of any unsold lots and homes), and technically we are in default. And with that, it’s really hard for the owner to do anything when the property is worth so much less than the debt.’”
“Rob Hallberg, an agent with Long Realty who bought a home in Aldea del Rey in 2007 for $240,882, said he would like to see the bank clear the project off its books. He rents his property at a loss — but he sold homes there at the peak of the market and continues to sell homes there now.”
“One of his listings is for $130,000, significantly less than when he bought. Has he ever considered walking away from his own home there? ‘I don’t want to have anything bad on my credit, and I am going to meet the obligation that I originally set up for the property,’ he said. ‘Is it ever going to come back to that price? I think, eventually.’”
The East Valley Tribune in Arizona. “Chandler is forging ahead with a $2.4 million program to ’stabilize’ neighborhoods by purchasing vacant, foreclosed homes even as investors move in to snap up the cheap houses, city officials say. The homes sit in the 85225 ZIP code, where the foreclosure rate approaches 40 percent.”
“Judy Register, Chandler’s neighborhood services director, acknowledged the market could solve the problem of neighborhood decay caused by high home vacancy rates. Having investors buy foreclosed homes to rent to tenants would arrest that decay, she said. But renters often don’t keep up their homes or feel as invested in the neighborhood as homeowners, she said. ‘We’d rather have owner-occupied,’ Register said. ‘The goal is to have successful home ownership.’”
Inside Tucson Business in Arizona. “The next group of mortgage holders likely headed for trouble are those holding five-year adjustable rate mortgages from the housing boom of 2004 and 2005, which are coming due for rate resets. Elliot Eisenberg, senior economist with the National Association of Home Builders, says that after federal officials’ slow reaction to the initial problems of the housing markets, it’s especially important they be prepared to move quickly to address the next problem.”
“One solution is the establishment of a ‘housing czar’ — one in each of the five most-affected states, Arizona, California, Nevada, Florida and Michigan — who would work to minimize the potential amount of foreclosures that could be on their way. The czar idea is being supported by Eisenberg having started in Tucson from Roger Yohem, vice president of the Southern Arizona Home Builders Association.”
“‘We have two immediate problems ahead of us,’ Eisenberg said. ‘First, we don’t have the infrastructure for the millions of loans that need to be reworked and second, loan default numbers will be going up rapidly in the next six to seven months. That’s why we have to act quickly.’”
“Specifically for Arizona, Eisenberg said the focus needs to be on practical and pragmatic loan modifications. ‘We have to get the homeowner an opportunity to feel like they are creating equity in their home so they will want to stay,’ Eisenberg said. ‘In many cases the work-outs haven’t resulted in a lower payment and those kinds of work-outs aren’t working.’”
“‘Most foreclosure sales are for homes that went into default in 2008 and are just now being sold on the market,’ said John Strobeck, whose Bright Future Business Consultants tracks data for the new home building industry in Southern Arizona. ‘The lag time has been a little longer than usual as there was a moratorium on foreclosures while waiting to see if there would be a program from the federal government to stem foreclosures and to assist those headed into foreclosure. So far, no program of any significant volume has been enacted and the foreclosure process is once again in full force.’”
The Spectrum in Utah. “As the recession creates financial distress for many locals, property management firms and owners said a substantial number of area renters have been forced to leave their homes. With many locals facing job losses or reduced income as a result of widespread cutbacks, Leasing Agent Amy Lee said she has never seen such a high volume of tenants leaving their rented homes and apartments.”
“‘People are getting out of St. George because there is nothing to keep people here,’ Lee said.”
“Rental Coordinator Bobbie Jo Allred said the local rental market has been flooded with properties, as a growing number of homeowners attempt to stave off impending foreclosure by placing their homes on the rental market. With an influx of supply and diminished income among many renters, Heidi Miller, Executive Director of the Cedar City Housing Authority, said many property owners in Southern Utah have been forced to provide additional incentives to attract new tenants and sustain their current level of occupancy.”
“Stan Esplin, a local property owner, said he has reduced rent prices by about $100 or more per month as 20 percent of his tenants have submitted ‘move out’ notices. ‘In a stable time I wouldn’t have as many move out notices,’ he said. ‘I don’t know that we’ve seen the worst of it.’”
“Tara Rollins, executive director of the Utah Housing Coalition said financial pressures have forced a growing number of Utah families to share small rental units designed to accommodate single families with one another. ‘They are doubled up in bedrooms or on couches,’ she said. ‘That is an indication that people cannot afford to live in a community.’”
“Rollins said there is a surplus of rental inventory in the Washington County area, but most properties are out of reach to the average worker. ‘People are falling down the ladder,’ she said, as many face diminished earnings as a result of job losses. ‘They (builders) really need to look at the inventory and the people who are living within the communities, and build for them (the people), not for greed.’”
“Facing a collapsed housing market and scarce demand for his products and services, Brian Jones, the owner of Cabnicon in Hurricane, has reinvented the company’s business model, adapting to a radically changing market. He founded Cabnicon in 1985, crafting custom cabinets and furniture while serving as a general contractor for construction projects.”
“Business was booming several years ago at the height of the housing boom in Washington County, Jones said, but the company is now struggling amid pervasive economic instability. ‘In January and February I had nothing,’ Jones said. ‘Three years ago, we were so busy that we couldn’t keep up.’”
The Nevada Appeal. “Ray Smith watched businesses fail for months when he got a call Wednesday morning. The 63-year-old Lyon County man said he knew he would lose his job, he just didn’t know when. Businesses can’t afford a lot of things in a recession, he said. His 13 years of experience as a janitor couldn’t change the economy. ‘People who think their jobs can’t be eliminated are pure stupid idiots,’ he said.”
“March statistics show Lyon County had a 15.2 percent unemployment rate, compared to Nevada’s overall 10.4 percent rate and the nation’s 8.5 percent. Lyon County’s population growth that fueled construction and the jobs it brought earlier in the decade stopped suddenly last year. Nevada had been one of the fastest-growing states in the country for 20 years until recently. Lyon was one of the fastest growing counties in the state. It tripled in size in the last 20 years.”
“But Lyon County’s growth fell sharply from that peak until population actually declined in 2008. Jered McDonald, a state research economist, said the county fell hard and fast for several reasons. Stagnation in population growth stopped the need for construction jobs to build new houses on cheap available land, he said. After that, the county didn’t have an industrial base to fall back on.”
“Doris Richardson of Dayton drives 45 miles to Sparks for an on-call casino job that keeps her in her 28-foot trailer. She lost her full-time job as a card dealer in February. Richardson said she had to search for five weeks before she found her new, unsteady work. ‘I don’t know how people can make it,’ she said. ‘I want to say, ‘God help us all’ because our government is not helping. I’m worried about us.’”
The Reno Gazette Journal. “There were 366 sales of existing single-family homes in Washoe County in March, up 24 percent from the previous month and 58 percent from March 2008, according to the Reno/Sparks Association of Realtors. The numbers only include existing stick-built single-family dwellings and do not include condos, townhomes, new properties and manufactured or modular homes.”
“Median prices continue to post steep declines in the area year-over-year, falling to $200,000 in March. It represents a 27-percent drop from March 2008. The steep price declines that followed the collapse of the housing bubble in Northern Nevada have led to an undervalued housing market in the Reno metro area, according to a recent report by IHS Global Insight and PNC Financial Services Group.”
“Studies on market valuation, however, should be taken with a grain of salt, said Ken Wiseman, broker-owner of Reno Rancho Realty. ‘”Yeah, it’s a great study and all, but value is in the eye of the beholder,’ Wiseman said. ‘Isn’t the value of something what the buyer is willing to pay for it? That’s where the real value is.’”
“All local markets continue to be in solid ‘buyers’ market’ territory, said CalNeva Realty owner Mitch Argon, who keeps track of local foreclosures. Lower-priced housing also is being bought at a ‘fairly rapid rate,’ leading to falling inventory in all markets except Tahoe and Carson City, Argon said. ‘(This) indicates a trend towards a balanced market where prices will be declining less and eventually stabilize,’ Argon said. ‘All of this said, distressed properties continue to dominate the buying activity, and I have not personally witnessed any slowdown in activity as a result of recently announced federal programs.’”
“Pending sales of existing homes rose significantly in the greater Reno-Sparks metro area in April, with distressed houses making up the lion’s share of the properties yet again. Distressed properties continue to drive pending sales in the area, accounting for 78 percent of pending inventory in March. Among new listings, the percentage of distressed homes rose from 59 percent to 63 percent in the same period.”
“Homes priced at $250,000 and lower were at a 5.6 month supply in March. In comparison, inventory for homes priced from $351,000 to $450,000 were at 19.9 months while homes priced between $451,000 to $1 million was at 28.6 months.”
The Las Vegas Sun in Nevada. “After engineering last week’s rescue of CityCenter from the brink of bankruptcy, the urban planning major who created the concept for the resort complex — and has shouldered the blame for the way it has imperiled MGM Mirage — defended the company’s investment in the $8.5 billion project. MGM Mirage CEO Jim Murren said in an interview that CityCenter’s critics, including competitors, ‘just don’t get it’ and will be proven wrong when it attracts new visitors to Las Vegas.”
“Murren doesn’t believe Las Vegas’ ‘build it and they will come’ business model is dead. At least not as it applies to CityCenter, which will fight for business alongside resorts offering half-price rooms when it opens this year.”
“‘You have to differentiate between capacity that’s going to bring people to our community and capacity that’s going to absorb existing tourists,’ Murren said. ‘The consumer here is extraordinarily spoiled and we love that.’”
The Las Vegas Business Press. “The ownership of Turnberry Towers may be decided by a court. Turnberry financial partner Prudential is suing the developer for millions of dollars and seeking total ownership of the project, claiming Turnberry failed to make its loan payments, misappropriated funds and breached its contract. One observer is also saying the Turnberry default allegations, if true, might have played a role in lenders’ decision to pull the plug on $800 million in prearranged financing for the developer’s other local project — the $3.1 billion Fontainebleau Las Vegas.”
“The 640-unit, two-tower Turnberry Towers development was completed last year but has fallen on hard economic times as property values have plummeted. In an interview last month, local Turnberry officials said the newer 320-unit west tower had about 150 unsold units at that time. Fifty other units remained vacant in the 320-unit east tower.”
“Bruce Weiner, president of Turnberry, Ltd. blamed the economic downturn for the troubles at Turnberry and the litigation. ‘Unfortunately, the downturn in the economy and its severe impact on the Las Vegas real estate market in general, required Prudential in its role as financial partner to fulfill certain onerous contractual obligations,’ Weiner’s statement said.”
The Review Journal in Nevada. “It may not be the best of times to show off luxury mansions in Las Vegas, considering the down housing market and an economic recession that has forced the wealthiest of the wealthy to reconsider where they’re throwing their money. During the 18 months of preparation for the 2009 Parade of Homes, the ‘perfect storm’ swept through Las Vegas, destroying home values at every price segment and siphoning available credit, said Lisa Hester, executive producer of the tour.”
“After holding up well into early 2008, the high-end market hit the skids like the rest of the real estate market, said Kenneth Lowman, broker and owner of Luxury Homes of Las Vegas. Prices have declined 25 percent to 45 percent, depending on the neighborhood, quality of construction, age and amenities, he said. He knows of a 13,000-square-foot home inside three gates that was originally listed for $14 million and can now be bought for $6.5 million.”
“It’s not uncommon to see $1 million price reductions in many luxury communities, he said.”
“‘Who moved my cheese?’ Hester said. ‘It’s a different setting in Vegas. When you’re in an economy like this, adjustments happen that have to happen.’”
