The False Market Could Not Hold
It’s Friday desk clearing time for this blogger. “One in eight households with a mortgage ended the first quarter late on loan payments or in the foreclosure process, the U.S. Mortgage Bankers Association said on Thursday. Foreclosures on fixed-rate mortgages, given to solid borrowers with good credit, represented the largest share of new foreclosures for the first time. The jobless rate in Florida is currently hovering at 9.6 percent, double what it was in December 2007. In Lee County, where the median cost of an existing single-family home has plunged more than two-thirds from a peak in December 2005, job losses have been a key driver behind a surge in foreclosure filings.”
“‘I’m getting to the point where I’m ready to break down,’ said Martin Garcia. The medical laboratory equipment engineer has a prime, 30-year fixed rate mortgage with a 9.5 percent annual interest rate. But Garcia was laid off seven months ago. He receives about $900 a month in unemployment benefits. But he is down to just $400 in savings and he won’t be able to keep up much longer with the more than $800 a month in mortgage and maintenance costs he pays on the Miami Beach apartment he bought in 1989.’
“‘Since I’m unemployed the banks don’t want to refinance or do anything,’ Garcia said.”
“Plunging prices, rising unemployment and a new wave of foreclosures are clouding prospects for a quick end to the American real estate debacle. ‘We’re not at the bottom and anybody that’s trying to call the bottom right now is crazy,’ said Jack McCabe, a real estate consultant based in Deerfield Beach, Florida. ‘There’s a huge foreclosure wave still ahead in the next 12-18 months and still a lot of excess inventory.’”
“As the recession deepened in the first three months of this year, foreclosures and seriously delinquent home loans in Connecticut jumped above the rate of one mortgage of every 20 for the first time in at least 30 years. In neighborhoods throughout the state, stories like that of Ruth Jarvis are piling up. A single mother, Jarvis raised her two sons in a four-bedroom, split-level in Bloomfield that she bought in 1990. She got into trouble in 2007 when she refinanced into an adjustable-rate mortgage with a 9.75 percent interest rate.”
“The value of her house has fallen and her mortgage is now higher than the house’s appraised value. ‘I keep wondering why I can’t fit into some program,’ Jarvis said. ‘I’ve been working since I was 16. I’m 59 now. I have a job. I just want [my mortgage]structured so I can afford it. You end up falling through the cracks.’”
“In Connecticut, the economic downturn and layoffs are driving mortgage delinquencies and foreclosures, said Ronald F. Van Winkle, an economist and acting town manager of West Hartford. ‘If you lose your job in Connecticut, you’re hard-pressed to find another one,’ Van Winkle said. ‘Most families need two incomes to pay the mortgage.’”
“The number of Maryland residents who face foreclosure or have missed payments on home loans rose to nearly 121,000 in the first three months of the year, with mortgage woes increasing the fastest among the less risky prime borrowers, the Mortgage Bankers Association said Thursday. ‘Delinquencies are very much tied to employment,’ said Jay Brinkmann, the MBA’s chief economist. ‘When people have jobs and will be buying houses, we’ll see [home] prices stabilize, but until prices increase in some areas we are still going to see a number of homes in foreclosure. If you lose your job, you can’t sell your home for enough to pay off the mortgage.’”
“Andy Lewis, a community development specialist who is tracking Wisconsin foreclosures for the University of Wisconsin Extension, reported that foreclosure cases in the state surged 29% between the first quarter of 2008 and first quarter of 2009. About 23% of the state’s 7,693 foreclosures are in Milwaukee County. Job cuts are taking a bigger toll on homeowners’ ability to keep up with their monthly payments, Lewis said in an interview Thursday.”
“‘The rising unemployment rates are clearly a problem,’ Lewis said. ‘We already know that the top two reasons why people face foreclosure are illness or loss of income. So with unemployment now approaching double digits, certainly that’s everybody’s fear.’”
“A new report shows the Oregon foreclosure rate has jumped to a level seen only once in the last 30 years. The Oregonian newspaper said the foreclosure rate is the highest since it hit 2.23 percent during a recession in early 1985.”
“Steve Blanton with Rogue Valley Association of Realtors says the statewide foreclosure increase could be linked to unemployment. ‘From what I can see at this point, the most recent wave of foreclosures has more to do with the jobless rate that’s out there right now. People are just having more traditional difficulties paying their mortgage payments,’ says Blanton.”
“About one in eight Nevadans is now behind on their residential mortgage, new data from the Mortgage Bankers Association show. ‘What we saw from the MBA wasn’t surprising,’ said Rick Sharga, of RealtyTrac. ‘We saw a spike in delinquency in the third quarter, but we didn’t actually see a corresponding increase in foreclosure activity. Then the moratorium was lifted and it’s pretty much like the dam burst.’”
“President Obama implemented a $350 billion federal program in March to rescue homes headed for foreclosure, which could ease the bump, said consultant Steve Bottfeld. But Rick Byrd of RB Realty in Las Vegas said not to count on it. The first 100 days have provided no traction or relief to homeowners in distress, he said.”
“‘There is no housing relief,’ he said. ‘The reality is that banks and mortgage servicers have multiple layers to obtain compensation when they foreclose on your home, but very few monetary avenues if they modify your loan. So expect foreclosures to escalate through the summer and next fall. Watch prices continue to fall.’”
“At the end of March, roughly 71 percent of owners who bought in Miami-Dade and Broward counties in the past five years were underwater, or owed more than their homes were worth, according to Zillow. Analysts have said so-called negative equity is one of the biggest reasons why borrowers fall into foreclosure — if they need to sell, they can’t, at least not for enough to cover the debt, or, they choose to throw in the towel, thinking it’s better to take their losses and rent.”
“A recent study by Fitch Ratings projected that as many as 75 percent of subprime loan modifications would fall behind by 60 days or more within a year. Jay Brinkmann, chief economist for the MBA, said that so-called redefaults could show up in the new foreclosure statistics: ‘There may be repeat visitors coming back into the numbers.”’
“Brinkmann predicted foreclosures would continue to rise through the rest of the year. A large oversupply of new property makes stabilizing home prices in the state likely a distant prospect. ”It’s going to take getting demand even with supply just to put a floor under prices. Even then, it may not get it up to a point where it gets buyers back above water,’ Brinkmann said.”
“Lois Capps visited the Ventura County Realtors Association in Oxnard on Thursday with the intention of providing an update on what is happening in Washington, D.C. What she got instead was feedback on the difficulties facing the economy and housing market in the county.”
“Legislators were told that the stimulus bill was the only way to stop the free fall and that government had to put ‘a ton of money in the system.’ Capps acknowledged that there was a lot of hesitation over what it could do to the budget and to the children who will inherit this debt. ‘We were told we were in danger of going under, that there was global instability and that if we delayed it would be too late.’”
“Some Realtors pointed out that it was proving almost impossible for people to qualify for a mortgage workout. When asked why the stimulus money went to banks instead of consumers, Capps said: ‘We can’t even compare our current situation to the Great Depression. Economists have explained to leadership that nothing will become whole until the banks regain the confidence to lend. We realize now how deaf the banks had become to being in the real world.’”
“Dallas real estate agent Lydia Player hopes her bright-red convertible will turn a few heads. The new car is a snazzy perk for whoever buys a North Dallas home that Player has on the market. ‘If they don’t like red, we’ll give them another color,’ said Player, who’s offering a string of incentives to lure buyers to houses she’s trying to sell.”
“Dallas real-estate agent Charles Gregory is offering a $40,000 car-purchase credit for anyone who buys a new University Park home he’s selling. Does that mean he thinks the buyer of a $1.995 million house will make the decision based on a free car? ‘Of course not — I’m just trying to get attention,’ said Gregory.”
“Built in 2007, the five-bedroom, 6,600-square-foot house has never been lived in. ‘It’s a wonderful house, and there’s no reason it hasn’t sold,’ Gregory said.”
“Builders who spoke to the Tribune-Herald said they are cautiously optimistic about the home-building climate. Jim Bland said he’s hearing about speculative homes being bought that languished on the market for months. ‘Now it could be they were sold at reduced prices,’ Bland said, ‘but there has been a lessening of inventory.’”
“Through April of last year, Waco issued 199 permits to build single-family homes. This year, it issued 77 through April. ‘I can tell you that most of those 199 permits last year were for speculative houses, and a lot of those are still sitting there,’ builder Pat Hambrick said.”
“For his part, home builder Woody Butler is offering a vacation package valued at $3,000 to anyone buying one of his new homes. ‘Sure, I’m doing that to increase sales,’ Butler said. ‘I don’t want people to have to choose between the two.’”
“In an unusual tactic to sell his waterfront cottage, David Goyette is offering to pay the first three months of a buyer’s property taxes and will throw in a big-screen TV to boot. ‘Buy our house,’ his ad in yesterday’s Peterborough Examiner reads. ‘If you do, we’ll pay you the first three months of your property taxes and buy you a 48- inch flat screen TV of your choice.”
“Sitting in the kitchen of his White Lake property, about 20 minutes northeast of Lakefield, the 58-year-old writer smiles confidently. ‘I agree, it’s an unusual offer,’ he said. ‘I don’t think this has ever been done before.’”
“Goyette put the nearly 3,000 square-foot, four-bedroom cottage on the market last year to no avail. This year, he wanted to sweeten the deal. ‘These are tough economic times. I thought, what can be done that’s innovative?What is it that will cause the final little push?’ he said. ‘So I just made it up. The bottom line is, it’s a very small price to pay for a property that’s selling for $429,900.’”
“The federal agency predicted in its spring forecast Tuesday there will be only 3,950 single and multi-family housing starts this year in Manitoba. That would be a 28.7 per cent decline from 2008’s total of 5,537 starts, and twice the percentage decline the agency was expecting in its February market report.”
“Bank economists and home builders have been forced to repeatedly update their expectations this year as more and more dismal economic numbers come in, and CMHC is no exception. ‘It’s a pretty big revision,’ said Bob Dugan, chief economist at CMHC. ‘We were a little too optimistic for housing starts in the first quarter.’”
“‘Certainly sales had been quiet through the fall and early winter,’ Kensington Homes manager Tony Balaz said. ‘But I can also tell you that sales for April were great… and in May the sales have been good.’”
“He said its also important to remember the last few years have been unusually strong years for new home sales in Manitoba.”
“Vallejo officials said Thursday they’re tired of waiting for the main downtown redevelopment project and are ready to fight, if need be, to find someone else who will deliver. The project’s first phase — 182 condominiums (including eight live/work units) and about 11,000 square feet of retail space on the Virginia Street parking lot site — has yet to break ground.”
“Although city officials say they understand the recession has discouraged Triad from moving forward, Vallejo needs to do just that. ‘I personally think we need to terminate that agreement and believe it should have been done a long time ago,’ said Mayor Osby Davis. ‘There is no point waiting on a watered-down project that isn’t going anywhere, anyway.’”
“Yet another stalled residential development in northern Manatee County is facing foreclosure. This time it’s Curiosity Creek, which was approved for nearly 1,600 homes on the north side of Buckeye Road midway between U.S. 41 and Interstate 75 but has not broken ground.”
“John Green, a Centrum official, said Thursday that the project got caught in the credit crunch and real-estate market crash. ‘We can’t sell it, there’s no financing to develop it and the banks don’t want to lend money,’ he said, adding the developers still hope to reach a compromise with the banks.”
“Residents across Broward County should brace for less service or higher tax rates. The taxable value of homes and businesses fell 11 percent last year, according to preliminary estimates released Thursday by Property Appraiser Lori Parrish. The tax base is smaller than it was in 2006, Parrish estimated.”
“She included foreclosures and pre-foreclosure sales in setting values for the first time. She also focused on sales data from the latter half of 2008 because she said home prices were sharply lower compared with earlier in the year.”
“‘It’s the economy,’ Parrish said. ‘The false market we had could not hold.’”
“The sunny side is not facing up for local real estate agents, who can do nothing but stand back and watch while the real estate market slows down and local housing sales slump. Former independent senator and economist Mary King said yesterday that medium housing prices had fallen ‘between December 2007 and December 2008 by 47 per cent.’”
“Despite what King said, however, Association of Real Estate Agents’ president Richard Saunders said while there is a problem and the more pricey homes are being left on the market for longer than usual, it was not as bad as King has indicated. Following the seminar, which was held at Queen’s Hall, St Ann’s, he told the Express, ‘There is no doubt that there is some retraction in the market, because real estate follows the wider economy. If there is a decline, we will experience a similar decline. This is the situation as it exists today.’”
“He added, ‘I think 47 per cent may be a bit high, and it may reflect a future direction. I would say currently, in the high end (market), we have experienced about a 20 per cent (decrease in sales) already. And in East Trinidad and other areas, outside of that ‘wild, wild west’ it (the decline) is in the ten to 12 per cent (bracket); it’s not in the 20s certainly.’”
“Plenty of swanky summer digs are yours for the taking. From Carmel, Calif., to Newport, R.I., second homes with yachting docks, tennis courts, golf courses and infinity pools — to say nothing of the obligatory spectacular view — are languishing on the market. Prices are down an average of 20%, and as much as 30%, from their 2007 peak. Among the latest price choppers: Kenneth D. Lewis, embattled chief executive of Bank of America, who just cut the price on his 5,700-square-foot Spring Island, S.C., vacation home by 13% to $3.3 million.”
“Perhaps not surprisingly, more and more foreclosed mansions are for sale. In the first quarter, there were 1,214 foreclosures of homes worth $3 million and up, compared with just 279 in all of 2008. Last week in Telluride, Colo., a 6,150-square-foot stone and timber home hit the foreclosure list. During more than a year on the market, its price was cut from $4.995 million to $4.250 million, and the final price is likely to be significantly lower, says Corie Chandler of Peaks Real Estate in Telluride.”
“Buyers in the Northeast who decided last year to wait for further price cuts may like what they see. Sharon Smith Purdy, president of Sandpiper Realty in Martha’s Vineyard, points to a 3,000-square-foot contemporary home that sits on a bluff on Chappaquiddick Island and has 360-degree views of the island and ocean. It went on the market last year for $6.85 million. Last week its price was reduced more than 30%, to $4.48 million.”
“For an impeccably restored 1891 oceanfront mansion in Newport, ‘we will consider any offers,’ says owner Candy Keefe. ‘Anything, anything.’”
“Keefe listed the 22-room house at $14.5 million four years ago. Now, despite extensive renovation in the meantime, the offering price is $12.8 million. ‘We are a family that wants to move on,’ she says.”
