A Guaranteed Cash Machine
The Summit Daily News reports from Colorado. “The latest round of property valuations by the Summit County assessors office has spurred a wave of appeals that’s running 170 percent ahead of the pace from two years ago. Summit County commissioners have been fielding calls from property owners who are wondering how their property could have appreciated so greatly during a recession. Commissioner French said…the gripes are natural during a tough economy — especially when people get a chance to blame the assessor, county government or the State Legislature.”
“But he also said that nearly everyone who bought real estate in Summit County did so with the expectation that its value would increase. ‘It was guaranteed cash machine … Now that it’s turned a bit, people are bitching. They just don’t want to pay more money. It’s not because they’re mean. It’s so complicated they just don’t understand,’ he said.”
The Coloradoan. “Norlarco Credit Union’s 2007 collapse was caused by management that routinely ignored sound lending practices, a board that failed to properly oversee management, and ineffective state and federal regulatory systems, a new federal report said. The report indicates Norlarco’s problems date to 2001, when it gambled on a Florida residential construction loan program that quickly ballooned to more than $30 million per month and forced further missteps to cover its potential losses.”
“By the time federal regulators stepped in to shut down the loan program, 97 percent of Norlarco’s construction loans were in Florida and only 1 percent in Colorado. And of 350 Florida loans reviewed by examiners, almost all were in the risky subprime category that required no documentation of income.”
“Norlarco’s gamble to concentrate its residential construction loans in Florida, 2,000 miles from its home base, paid off initially, netting up to a million dollars a year. Then the bottom fell out of the overvalued Florida housing market, leaving Norlarco with an insurmountable pile of bad home loans that should never have been approved in the first place, the report said.”
“‘For years and years and years, the housing gains were unprecedented,’ Inspector General William DeSarno said in a phone interview from his Washington, D.C., office. ‘If that had continued, and that’s a big if, they’d still be in business today and showing great returns. I don’t know how many people expected the housing market to get down as much as it did; that’s why it’s dangerous when dealing with a market 1,000 miles away. That was the main cause.’”
“In 2003, Norlarco agreed to fund up to $30 million per month in construction loans through First American to compensate for flat-loan demand for cars and home equity lines of credit and take advantage of the real estate boom, the report said.”
From KSL Newswire in Utah. “Government efforts to breathe life into the housing industry have created some huge helps for certain home buyers. For example, how would you like $14,000 of free money to help you buy a new home? If you fit the right profile, it can be yours.”
“Matthew and Amanda Coons are closing on their new home — a 1,400 square foot condominium with two bedrooms, two baths and a den. ‘It’s great! It’s exciting,’ Amanda laughed. Matt added, ‘[We're] excited to get into something.’”
“For the two and a half years they’ve been married they’ve lived in an apartment, and would still if it weren’t for a pair of government incentives. ‘The $8,000 grant was something that pushed us toward that; the $6,000 really pushed us over the edge to do it now,’ Matt said.”
The East Valley Tribune in Arizona. “A new study by Arizona State University suggests the rate of decline in Valley home values may be slowing. The latest report released Monday shows a record 37 percent fall in the index from February 2008 to February 2009. But that is followed by lesser declines — an estimated 36 percent from March 2008 to March 2009 and an estimated 34 percent drop from April 2008 to April 2009.”
“‘In this market, this would be considered good news,’said Karl Guntermann, a real estate professor at at ASU.”
“The index has declined every month for two straight years, eclipsing the previous record of 17 consecutive months of year-over-year drops in the early 1990s. The median Phoenix-area home price in April was about $117,500, Guntermann calculates, which puts prices back to the level of November 1998.”
The Tucson Citizen from Arizona. “The end of the downturn in Tucson is near, and the local economy will see a turnaround in the third — or even second — quarter, a University of Arizona economist says. Marshall Vest said a collection of figures, facts, trends, hints and a touch of consumer mood led him to the conclusion.”
“He said…the inventory of vacant houses still looms large, especially in a community where the economy was driven in large part by growth and the housing industry. He’s not alone in worrying about empty boxes cooling the recovery here.’
“‘You get an $8,000 credit’ for first-time buyers, Tucson real estate consultant and analyst John Strobeck also stressed. ‘You can buy it (a home) for less than two years ago, and for 4.5 percent interest. Everybody ought to be out there buying houses. The problem is, people aren’t economically set to buy houses.’”
“Vest said he is encouraged that investors are buying homes again, ‘but we actually need people to live in those houses.’”
From KTAR in Arizona. “With lower housing prices in the Valley, home buyers are finding lots of competition, with some properties drawing multiple bids. Persistence paid off for Mary as she helped her daughter look for a home. First, the daughter got pre-approved for a $100,000 loan, then the family went to work. ‘We used the internet a lot and used the multiple listing services. And several of those have little flags that will flash up to let you know that things are new,’ said Mary.”
“Her realtor checked out 30 homes — 20 already had been sold, she and her daughter looked at the other 10. They put bids in on two of the homes, but someone else put in a better offer. Then… the third time was a charm. ‘It was a new listing,’ said Mary. ‘We hurried to get there and put our bid in right away, and they were willing to work with us.’”
“Mary’s daughter paid $65,000 for a three-bedroom, two-bath home in north Phoenix which was in foreclosure. The same home sold for $220,000 two years ago. During the house search, Mary said they rejected some properties. ‘Some of them were pretty bad. Some of them you just kind of got scared and said, ‘Oh, this is a huge commitment.’”
The ee. “Phoenix’s housing bust has turned into a quasi-boom, a sign that its market may have hit bottom and a sneak preview of what a national housing recovery could look like. More homes are selling than at any time since 2006. Prices are slowly stabilizing. Buyers are once again finding themselves in frantic bidding wars — only this time over foreclosed houses selling at deep discounts rather than ranch homes listing for vast sums.”
“Phoenix experienced one of the most dramatic real estate crashes in the nation. Median home prices for resold homes peaked at $268,000 in June 2006. Now the median price is $120,000. It is the biggest decline in the top 20 metropolitan areas tracked by the Standard & Poor’s/Case-Shiller home price index.”
“The collapse was devastating in a city that has long depended on housing to power its economy. In the last year, Phoenix lost 41,000 construction jobs and 136,000 overall, accounting for 7% of its workforce. Home building came to a halt. Many illegal immigrants, discouraged by the sudden lack of jobs, returned to Mexico. Realtors cut staff. Home prices dropped faster and faster each month for two years.”
“Mike Orr, a Phoenix real estate analyst, thinks the market already has hit bottom. Among the signs: As recently as January, a year’s worth of homes sat on the market; in March, that dropped to seven months’ worth of inventory. ‘It’s a dramatic change in just three months,’ he said. ‘I never imagined it’d get this crazy this quickly.’”
“Orr thinks mid- and high-priced properties still will lose value in the coming months. ‘I wouldn’t be investing in luxury right now,’ he said. ‘But if you’re looking for inexpensive homes, you’re going to have a fight on your hands.’”
“After four years of renting because they were priced out of the real estate market, Jamia Jenkins and Scott Renshaw concluded the time had arrived for them to buy. They saw that home prices had dropped so fast here — faster than in any other big city in the nation — that mortgage payments would be less than the $900 they paid in rent. The city is littered with foreclosed houses, so the couple figured they could easily snatch up something in the low $100,000s.”
“Three months later, they’re still looking. They have submitted 13 offers and been overbid each time. ‘It’s just pathetic,’ said Jenkins. ‘Investors are going out there and outbidding everyone.’”
“Jenkins, who has looked at more than 80 houses, said she was being cautious not to get caught up in the frenzy. ‘It’s going to create the same damn situation we had before,’ she said. ‘You’re going to buy a house and it’s not going to be worth what you paid for it.’”
“Skeptics of the turnaround note that the competition for foreclosed homes may be artificial. They argue that the number of bank-owned properties has shrunk because some lenders held off on foreclosures early in the year as they waited for President Obama to unveil his plan to aid distressed homeowners.”
“Some warn that a potential flood of new bank-owned properties could drive down prices further.”
The Review Journal in Nevada. “News headlines scream almost daily about soaring foreclosures, that more than 1 million homes were lost to foreclosure in 2008 and the number is expected to top 1.2 million this year.”
“But the good news in Las Vegas is that bargain-hunting buyers are chomping through the foreclosure inventory at a faster pace than other parts of the nation. Clark County had 4,863 foreclosures for April, down 37.2 percent from 7,747 in March but up 154 percent from 1,911 in the same month a year ago, Foreclosures.com reported.”
“Banks have become more sophisticated and savvy with REO pricing, said housing analyst Larry Murphy of Las Vegas-based SalesTraq. They’ll list a foreclosure at below-market value to create competitive bidding between interested parties, bringing in multiple offers and getting a better price in the final analysis, Murphy said.”
“Banks need cash and their bulging portfolios of ‘hidden’ foreclosure inventory are one way to help them get it, said Alexis McGee, president of Foreclosures.com investment service. The ‘phantom’ inventory is lender-repossessed properties that are not shown for sale on the Multiple Listing Service. Only about 30 percent of REOs are listed on the MLS, McGee said.”
“‘This is a staggering low number,’ she said. ‘That leaves 70 percent of lender-owned REOs that no one knows about potentially available for sale.’”
