When The Lions Are Eating Zebras
It’s Friday desk clearing time for this blogger. “Kenion Grove had everything for Albert Mealer. The tiny subdivision was close to his new job in Chapel Hill. His wife liked what she’d read about the schools. The builder, KB Home, was offering good prices. And he couldn’t get over the quaintness of the Orange County town that surrounds it. ‘The little town was amazing,’ said Mealer, who paid $246,500 for his home in August. But as the housing market has fallen, so too have sales and prices at Kenion Grove. ‘The deals are even better now,’ he said.”
“So good, that if Mealer wants to sell, he’d compete with new homes that cost less than what he paid — a dilemma that led to a neighborhood protest. The first Kenion Grove home sold in August 2006 for $360,000, or $128 per square foot. In the year that followed, only eight more homes sold. Almost every sale carried a lower price than the one before. By June 2007, M/I was feeling pain from losses in harder-hit parts of the country. It unloaded its 34 remaining Kenion Grove lots to KB for $1.5 million, taking a 30 percent hit on each lot.”
“M/I sold its last home in Kenion Grove in August for $230,000, or $80 per square foot. ‘The balloon was deflating. It hadn’t burst yet, but it was deflating,’ Kenion Grove resident Ronald Thomas said. ‘M/I Homes seems to have panicked.’”
“It was a great ride when home prices were taking off, but with 2009’s assessed home values in a free-fall some people are wishing they never got on. ‘We should have waited a year,’ said Rachelle Christensen, a Meridian mother and homeowner. Christensen and her husband bought a home a few years after her friend Emily Hoge, from Boise.”
“‘We bought it when everyone said, you need to hurry and buy it right now,’ Hoge said. ‘Everyone was flipping their houses and so excited to buy, buy, buy.’”
“‘If we can just hold on to it for the next couple of years, then hopefully it will come back up,’ Christensen said.”
“Once upon a time not so long ago, developers seeking magic money poured $4 million into a ‘Lord of the Rings’ subdivision here complete with hobbit holes and thatch-roof houses. This month Umpqua Bank, which foreclosed on The Shire, unloaded the moribund development for just $750,000.”
“Some Bend homeowners say they’re victims of scams. Dottie Robertson, a human-resources recruiter, says she and her husband, Jack, borrowed about $350,000 to build a house in south Bend. The couple had made money before with local developer Don Loyd of Aspen Tree Homes, building or buying houses to rent out before selling. This time, the Robertsons planned to build a house and move into it.”
“Now the house sits unfinished and empty. ‘Initially it was disbelief, and then it turned to absolute devastation,’ Robertson says. ‘We not only saw our bank accounts going away, but we saw our credit being ruined.’”
“Fredi Cohen expected the hand-carved sinks and tubs in her East Hampton, New York, home to stand out in the real estate market and help sell her three- bedroom house for $1.25 million. Almost two years later she’s still waiting. ‘People have stopped buying real estate,’ said Cohen. ‘Now I would sell it for $999,000.’”
“Vacant land sales have also declined. In the first quarter, 29 residential parcels sold for a total of $19 million, 56 percent fewer properties than a year earlier and 88 percent fewer than the same quarter in 2005, according to Suffolk Research Service Inc. in Hampton Bays. ‘It’s a strong indicator for the fact that there’s no market for houses,’ said George Simpson, president of Suffolk Research, a real estate data service. ‘There are enough of them around you’d be crazy to build one.’”
“Black Rock has cut the prices on its Bellerive project in Riverstone by about 40 percent and it is already paying off with sales, said Marshall Chesrown, CEO of the development company. Prices have been reduced by $200,000 on the least expensive condos. The penthouses have taken an even steeper cut to $895,000 from the original asking price of nearly $1.5 million.”
“It is not an opportunity that is likely to come around again, Chesrown said — they couldn’t be built again for the asking price and until there is a significant turnaround in the market he won’t be building any more on speculation, even though he has the waterfront property available. ‘I don’t anticipate any more building at this point,’ he said. ‘Based on the current market there is plenty of inventory.’”
“Redesigned Greenwich Place, the largest residential development to be built in West Hollywood in decades, has been placed on hold due to the financial crisis and economic crisis, says Turberry, its developers. WeHo News inquired with project manager Matthew Jacobs, who replied, ‘Given the current worldwide financial mess, now is not the time to start construction.’”
“‘Turnberry continues to believe in West Hollywood,’ he said, ‘and we look forward to starting construction just as soon as our banking system stabilizes.’”
“He declined to say whether the project’s funders, the ugly real estate market or both contributed to the decision to delay groundbreaking, saying only ‘We are holding off until conditions stabilize on a broader level.’”
“New-home starts in Wichita linger at about a third of historical norms and will likely remain down until at least late this year, according to industry officials. Starts are running on a pace between 1,000 and 1,500 for the year, a third to half of historic norms, officials say.”
“‘It’s just way down,” said Star Lumber president Chris Goebel. ‘To be honest, right now is probably the best time in your and my lifetime to buy a new home for a multitude of reasons — price, quality and interest rates. But folks aren’t buying because of confidence. They’re listening to the news and not liking what they’re hearing about their jobs.’”
“John Stumpf may not have realized that he was taking on one of the toughest jobs in corporate America when he agreed to become Wells Fargo’s new CEO in June 2007. On a trip to Minneapolis this week, Stumpf, a 27-year veteran of Wells Fargo and a native of Pierz, Minn, sat down with reporter Chris Serres to share his views on challenges facing Wells Fargo and the banking industry.”
“Q: So is it your view that we won’t come out of the recession until we reach a bottom in housing? A: I don’t think it’s that simple. I do think we need to find a bottom. But I also believe you can’t restructure enough loans to fix this economy on the housing side. This is still about jobs. It’s all about jobs. I think you need to find the bottom in housing, but you also need to find the bottom on job loss, and I think those two are actually related to one another…You’ve gotta reach the bottom of housing, get a sense that your job is secure, and then we’ll start to see ourselves pull out of this.’”
“Q: I have to ask about your March meeting with President Obama. You were with some other bank executives. Tell me about that meeting and your impression of Obama. A: ‘He clearly wants us to help the economy going again. He told us he’s there to help us. He also said, ‘I’m the only thing between you and the pitchforks.’”
“Q: What did Obama mean by that ‘pitchforks’ comment? A: ‘I don’t know exactly. I didn’t have the guts to ask him.’”
“When the lions are eating too many zebras, you don’t ask the lions to stop — you build a fence. That is how Rep. Mike Foley, a Democrat from Cleveland, summed up why Ohio needs a six-month moratorium on foreclosures, which would apply as long as borrowers continue to make at least half of their monthly payment.”
“Foley said the moratorium would give borrowers more time to remedy their financial situations and perhaps to work out new loan terms. It also gives more time, he said, to potentially take advantage of new federal foreclosure support. ‘We are trying to put some hurdles up to make this crazy system saner,’ he said.”
“During a two-hour debate, Republicans argued that the new $750 fee was unconstitutional and the moratorium encroached on a lender’s ability to enforce its contract. ‘I don’t know what we’re thinking here,’ said Rep. Bill Coley, R-West Chester. ‘What is going to happen during that six-month period? Do you really believe people are suddenly going to find themselves in a better financial situation? Of course not.’”
“A typical home is worth a little over four times the average household’s annual after-tax income, down from almost six times five years ago, Reserve Bank figures show. Strong growth in incomes and a period of more sluggish median house price growth are working in the interests of would-be home buyers. ‘This is a dramatically better picture on Australia’s housing affordability,’ the chief economist at UBS, Scott Haslem, said.”
“But housing still remains expensive by historic standards. In the 1980s, it took just three times the average annual disposable income to afford a median priced home. Australia remains one of the least affordable countries in the world.”
“The governor of the Reserve Bank, Glenn Stevens, said yesterday that the gradual improvement in affordability suggested Australian house prices were not heading for the same large price falls witnessed in other countries. “In Australia’s case, the ratio of the median dwelling price to average household income has declined quite noticeably since 2003, without a very large absolute decline in housing prices.”
“‘This is evidence for at least the possibility that these adjustments can take place over reasonably lengthy periods and without being terribly disruptive to the economy,’ Stevens said.”
“Although there are some promising signs in the housing market for San Diego and Southwest Riverside Counties, more pain is coming. Foreclosures and general economic malaise will continue to take their toll. Consequently, potential homebuyers don’t need to be in a hurry to find that first home or move up into a larger one: Once the market hits bottom, it won’t be bouncing back anytime soon.”
“And though none of us likes watching our home values drop, lower prices will actually be a boon for the economy. During the bubble, California was effectively priced out of the national labor market, and businesses struggled to stay competitive as housing affordability for employees disappeared. The return of affordability will make the state attractive to employers and employees once again. Patience is the name of the game, and in the long run, the outlook for the local housing market is bright.”
