Drop The Price Or Bulldoze Them Down
A report from Marketplace. “Stacey Vanek-Smith: The median home price is down about 17 percent from last year. The reason? Foreclosures, of course. Buyers are bargain hunting. And owners of more expensive houses aren’t selling unless they have to. But there’s another problem says economist Lawrence Yun with the National Association of Realtors. He says appraisals are coming in low. Yun: ‘The buyer and the seller agree to a price. Yet when an appraisal is coming in, it’s coming in much lower than the agreed price.’”
“Columbia University housing economist Chris Mayer says appraisals are coming in low because home values are still falling. Mayer: ‘I think that’s a bit like blaming the messenger for the bad news. Prices are falling in housing and down payments are unfortunately going to be high, and it’s going to be very hard to complete transactions. So I think yelling at appraisers is misplaced blame.’”
“If the appraiser values the home at less than what the buyer agreed to pay, the buyer, not the mortgage lender, has to make up the difference. Colorado realtor Marianne Snygg says this is causing deals to fall through. Snygg: ‘I heard about one just last week. The buyer will need to come out of pocket for the difference and a lot of times the buyer can’t.’”
The Denver Post in Colorado. “Cherry Creek Mortgage Co. is among the lenders picking up the pieces in a shattered mortgage industry. A focus on long-term customer relationships, an adherence to more conservative underwriting standards and honoring commitments to its banks when loans did go bad are among the reasons Cherry Creek has survived.”
“‘To grow a firm to such size, and so rapidly, yet untainted by the grotesque ethical behavior recently so common in the mortgage world — that’s a corporate citizenship lesson to all businesses,’ Boulder mortgage lender Lou Barnes said.”
“When Frank Lorenti walks his kids down the street to the park, they share a highway with semi trucks. When Liz Campbell fills a bath at her home, the water runs brown. In exchange for embracing the plan that would quadruple the town’s number of homes, Bobby Ginn promised Minturn a $180 million package. Voters approved the council’s deal with Ginn by an overwhelming 87 percent…Ginn’s plan for Battle Mountain includes 1,700 luxury homes in a private golf and ski community.”
“Without seeing any tangible progress on Ginn’s promises to Min turn, residents can only remember the round of drinks the developer bought at the local saloon after the annexation vote. ‘It’s like Manhattan. The Indians got beads and we got a free beer,’ said Lorenti.’”
The Park Record in Utah. “There’s a lot of grumbling going on about the most recent proposal from David Holland Resort Lodging to pay back condominium owners owed nightly rental income since February. David Zatz, owner of the company, sent a letter to condominium owners Friday morning announcing a partnership with Phoenix Realty who will take equity ownership in the company. As part of the new arrangement, Zatz is requesting owners agree to sign a three-year contract.”
“But while owners willing to speak on the record are hard to find, they do want it said that they don’t like being told the conditions upon which they’ll receive money owed them. Jim Jenkins, an owner in All Seasons who has only done rentals for one year, wants the company to acknowledge that.”
“‘It doesn’t matter to me that he’s promised if I sign up with him for a new contract he will pay me for the old one. He still owes me the money whether I sign up with a new contract or not,’ he said Monday. ‘I think generally speaking, people in the rental program feel the same way. That’s our money and he owes it whether or not we sign.’”
CNN on Arizona. “Financially strapped prospective buyers like Locascio have discovered hope in the Neighborhood Stabilization Program, a year-old federal program designed to help stabilize communities decimated by foreclosures and abandonment. However, not one home in Phoenix has been purchased using the NSP funds despite hundreds of applications.”
“Experts want to caution those who think the Neighborhood Stabilization Program will solve Phoenix’s devastated real estate market. John Smith, president of a nonprofit that helps people find affordable housing, says that won’t happen. ‘We have to identify those goals, those strategies and those resources that are going to make a difference,’ he says. ‘This is not, in and of itself, going to do that.’”
“He compares the program to a Band-Aid, cautioning, ‘It is only one tool … we’re going to have to find some other solutions to stabilize these communities.’ Communities are visibly ailing all across the area, with some of the hardest-hit neighborhoods nearly abandoned by foreclosures. Homes are boarded up and weeds cover the ‘For Sale’ and ‘For Rent’ signs in thousands of yards.”
“‘It’s overwhelming when you look at the numbers,’ Smith said, noting that Phoenix still records roughly 8,000 new foreclosure notices every month.”
The East Valley Tribune in Arizona. “The National Foundation for Credit Counseling survey revealed that nearly half of all American adults no longer believe homeownership is a realistic way to build wealth. Dennis Hoffman, economics professor at Arizona State University, isn’t surprised that many people’s attitudes toward homeownership have soured.”
“‘It’s just kind of a psychological thing,’ he said. ‘When people loved housing back in 2005-2006, they way overloved it, and now they’re way overhating it. I think psychology will slowly improve as we go forward. It may take years to kind of regain the basic confidence that people have in housing.’”
“John Stih, CEO of the Southeast Valley Regional Association of Realtors, said the American dream of homeownership is still out there, but ‘their vision might be blurred a little bit because when they went through this last cycle, they wanted to reap all the benefits.’”
“‘There’s still going to be homeownership, but maybe it won’t (yield) as much equity as it did in the past because it will be slower and it will be controlled because I don’t think the government and the regulators are going to let things get out of hand again,’ Stih said. ‘When you had 50 percent to 100 percent appreciation, that just couldn’t sustain itself. But homeowners will still be there.’”
The Camp Verde Bugle in Arizona. “Beth Adams, president of the Verde Valley Association of Realtors…says foreclosures are an important factor in home sales now in the Verde Valley. ‘They are a large percentage of the sales that are happening now,’ she said. She says foreclosure sales are priced at market value and the lenders want them off their inventory.”
“‘The inventory is incredible,’ said Carol Anne Warren of Adobe Group Realty in Old Town Cottonwood. ‘We have so many houses for a buyer to choose from. The sellers are very, very negotiable. It’s totally a buyers’ market.’”
“‘Every realtor in the Verde Valley has a list of 100 buyers,’ Warren said. ‘But those people must sell a house somewhere else. Once that starts to move, then the dam will break.’”
“Warren said the federal stimulus package has down payment assistance included that doesn’t have to be paid back, and it includes an $8,000 legitimate tax credit. ‘It’s not just first-time homebuyers right now, it’s anybody,’ Warren said. ‘I took my youngest son by the ear and told him ‘you’re buying a house.’”
The Las Vegas Business Press. “Whether all the ’stop foreclosure’ ads will lose their appeal after residents get a chance to go to court mediation for as little as $200 remains to be seen, said local attorney Frank Sorrentino. The lawyer, best known for his bankruptcy practice, has seen business soar in the last year. Many clients attempt to save their homes by going into bankruptcy, he said.”
“However, his clients usually have multiple financial issues that go beyond losing their home to foreclosure, he said. ‘Many have lost their jobs. Some have decided to let the house go,’ the lawyer said. He noted that the prices of houses have dropped so dramatically that somebody hopelessly upside down in their current domicile may opt to let the bank take the house back and save money by buying a new one.”
“At a June 16 Nevada Supreme Court hearing to get public comment on proposed rules for the mediation, attorney Benjamin Childs told Chief Justice James Hardesty that all homeowners should be allowed to request mediation on their loans, not just those that are facing foreclosures.”
“Childs, who handles bankruptcies and foreclosure issues, talked about the impact on the neighbors not in foreclosure. ‘My neighbor is 60 days behind and in the mediation program, and now he is paying $500 less than me,’ he gave as a scenario. ‘I’ll get to participate if I stop making (mortgage) payments.’”
“Frustrated homebuyers at the still under construction Cosmopolitan Resort Casino on the Strip have filed three lawsuits against the project. They claim numerous breaches of contract, and now want their money back. More than $200 million in deposits hang in the balance for the troubled development. The lawsuits have since been consolidated into a single case with more than 400 plaintiffs. Las Vegas-based Marquis & Aurbach is leading the legal charge.”
“The $3.9 billion Cosmopolitan, at 3700 Las Vegas Blvd. South, had been scheduled to open in December. Developer Ian Bruce Eichner, however, defaulted on construction loans last January and lost the project. Deutsche Bank AG subsequently bought the twin 600-foot tower, 2,998 condo-hotel unit complex during a foreclosure sale last summer for $1 billion. Next, it hired The Related Cos. to oversee construction on its behalf.”
“Related’s involvement is ironic, considering the developer failed to build two high-rise projects of its own in Las Vegas — Icon and Las Ramblas — due to financing problems and gross miscalculations about the marketplace.”
“‘It’s rumored that they are going to finish the building as a shell and not do any interior work,’ said Marquis & Aurbach President and Managing Partner Terry Coffing. ‘They may convert it into a straight hotel, but the balconies present a building code issue. They still need someone to operate the hotel. They’re in too deep not to do something.’”
“‘This money in deposit is an attractive thing for them to keep their hands on,’ Coffing said. “They are going to do whatever they can to keep that cash. They may look to settle for 70 cents on the dollar. That would give them $60 million for doing nothing. It has to be attractive in some perverse accounting sense.’”
“Homebuyers could…wind up with dramatically different looking units than originally purchased. Calls to the sales office were not returned. The Cosmopolitan project Web site is no longer online. And Deutsche Bank officials refused to comment on pending litigation.”
“‘They haven’t talked to anyone in a year and a half,’ said Neil Senturia, a San Diego-based Cosmopolitan homebuyer who paid $590,000, or $697 per square-foot, for a 610-square-foot unit in the first tower. ‘No one will respond. And there is no Web site. I think they have issues. People don’t like being lied to and stonewalled.’”
The Las Vegas Sun in Nevada. “Skeptics have been suggesting for decades that Las Vegas has built more hotel rooms than can be filled, and still with every economic downturn, the Strip bounces back with remarkable occupancy rates, stoking even more construction. It may be the closest that man has come to creating a perpetual motion machine.”
“But the machine is sputtering now, and will sputter more through 2010, according to two new reports out this week that fret about the number of hotel rooms being added to the market next year. CreditSights noted that lower room rates are helping to fill Las Vegas hotels, but sales of condominium units on and near the Strip have come to a near standstill with 2,200 vacant units on the market.”
“The CreditSights analysts called it ‘remarkable’ that Nevada gaming win dropped in April for the 16th consecutive month, considering the major additions to the market. With the opening of Las Vegas Sands’ Palazzo and Steve Wynn’s Encore, ‘the old rubric that ‘supply creates its own demand’ is clearly not relevant in today’s environment,’ CreditSights said.”
