This Bumpy And Painful Journey To The New Normal
It’s Friday desk clearing time for this blogger. “Miles Brannan and his wife are feeling the crunch just like everybody else. The Brannans are both South Florida realtors, and when their income dipped with the economy they put their $3 million Fort Lauderdale waterfront house on the market, only to watch it sit there idling. This year they’d had to sell the boat they parked at their 100-foot dock, and when the house failed to move, Brannan came up with the idea of offering it by lottery. The Brannans have already sold 75,000 tickets for $10 a piece on the website they set up, and they plan to keep the lottery going until they sell 300,000 — or until December 25th, whichever comes first.”
“‘Actually we just looked on Zillow and the value of the house is going up, I think it was $3.2 million last time we checked,’ Brannan said.”
“When Douglas and Sonia Bendt purchased their $1.6 million condo in a Biltmore Estates luxury development in 2007, they were ecstatic. But as the Bendts received financial updates on the status of the HOA fund from the community’s management company, they began to voice concerns about what appeared to be a shortage of money in the reserve fund.”
“‘(The developers) haven’t been fiscally sound and straightforward,’ said Bendt of the shortage. ‘They don’t deny it; they just don’t think there’s anything wrong with it.’”
“A Hood River-based private equity fund that recently purchased The Shire development in Bend, announced Tuesday its purchase of another bank-owned subdivision, the 45-lot Tuscany Pines project in northwest Bend. The firm paid $2.75 million for the Italian-themed development. Bella Terra purchased the development’s property in April 2007 for $11.4 million, according to The Bulletin’s archives.”
“Scott Wicklund, a commercial real estate broker in Bend, said investors are ‘testing the waters.’ ‘People are starting to sense it’s near the bottom, that these opportunities are pretty good right now,’ Wicklund said. ‘We’re at a point where I don’t know how much lower it can get.’”
“It’s the height of Utah’s construction season, but the only work being done on the former Cottonwood Mall site is removal of massive thistles and weeds along a nearby creek. And that situation is not likely to change anytime soon, General Growth Properties spokesman Kris Longson told the Holladay City Council on Thursday.”
“Plans call for the 57-acre lot to become a bustling village with everything from high-end condominiums to boutique stores and offices. Councilman Barry Topham voiced concern over giving the mall company free rein. ‘I’d like to have a gun to the head of (General Growth Properties) so they do something with it,’ Topham said. ‘I would not like to see the weeds growing for the next 10 years.’”
“Banco BuenaVentura, an Oxnard bank in its first year of operation, has been sued for not paying rent and the two buildings it leases are now up for sale. The bank started with a mission to serve the community, differentiating itself with a bilingual staff and products aimed at Spanish-speaking customers. The bank intended to serve recent immigrants and the ‘unbankable’ — those who traditionally could not open bank accounts — among its clientele. The bank is still not making a good profit and most of its loans are real estate, which is hurt by the housing market.”
“Diana Rios-Sherwood, chief financial officer and acting president of Banco BuenaVentura, said the bank was not for sale, just the buildings in which it operates. ‘We are, you know, trying to be successful in these times of difficult economic conditions,’ she said. ‘I think we’re doing well.’”
“With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800, Jennifer France and her partner would seem like ideal candidates for a mortgage refinance. But when they applied to swap an interest-only loan on their nearly $1 million San Carlos home for a 30-year fixed that locked in today’s low rates, they were summarily denied. The refinancing would have saved them nearly $2,000 in monthly payments and allowed them to begin paying the principal on the mortgage. They were ultimately able to modify their loan through one of the federal stimulus programs, but it lowered their payment by only about $1,500 and the loan remains an interest-only mortgage.”
“‘I was really surprised, I had been preparing to refinance for years,’ said France.”
“Is it time to pull the plug on some of these wonderful sounding, and frankly pathetically ineffective, mortgage rescue efforts? Arecent Fed study, detailed in the Globe, raises some serious questions about whether the Obama effort and the myriad of other programs like it stand much chance of even putting a dent in sky-high foreclosure rates.”
“After tracking hundreds of thousands of loans over a two year period, it found that only 3 percent of ’seriously delinquent’ homeowners were able to lower their montly payments through loan modifications. And nearly half of borrowers who received some sort of help – 45 percent – ended up in trouble again down the line.”
“Did all the economists inside and outside the government get their diplomas off the Internet or from the back of a comic book? Friday’s newspapers were filled with stories about how surprised everyone was about the country’s latest unemployment numbers. And the smart economists didn’t see this coming? Huge jumps in housing prices, no consumer saving, consumer debt constantly rising. But no one thought that was a problem.”
“If we continue to rely on the people who got us here, we better expect to simply get more of what we’ve already gotten: trouble.”
“Not too long ago, life was good for Orlando Mayor Buddy Dyer. A condo building boom was under way downtown, and property taxes were pouring in. But those days seem like a distant memory. Downtown condos are empty. And property taxes are down.”
“Dyer said the national recession is something that couldn’t be predicted. But Doug Head, former chairman of the Orange County Democrats, says he should have foreseen possible trouble, particularly with the complex venues plan. ‘In retrospect, the party-poopers were right,’ Head said.”
“The U.S. traditionally hasn’t had to deal with long-term joblessness. During the last 30 years, Americans who were thrown out of work took an average 15.8 weeks to find new positions. In June, the average duration of unemployment was 24.5 weeks, the longest since records began in 1948. ‘The United States right now is in transition,said Mohamed El-Erian, CEO at Pacific Investment Management Co., manager of the world’s largest bond fund. ‘It’s on this bumpy and painful journey to what we’ve called here the new normal.’”
“Long-term joblessness is also a ‘profound problem’ for housing, said Paul Willen, senior economist at the Boston Fed. ‘If a person becomes unemployed, they’re going to start missing mortgage payments,’ he said.”
“Mark Zandi, chief economist at Moody’s Economy.com…said the U.S. hasn’t thought through how to attack the problem of long-term joblessness. ‘We as a nation have not intellectually addressed this,’ said Zandi. ‘We don’t have a policy answer for it. And I’m pessimistic we’ll get one.’”
“It’s pouring rain outside, but in a green room at the ‘Today’ show’s Rockefeller Center studios, the sun is shining in the form of Barbara Corcoran. Almost every Friday, the pixieish real estate queen with the short blonde hair comes here in her shiny, fluorescent suits and delivers her ebullient shtick about what a great time it is to buy a home, recession be damned.”
“When the market was ascendant, Corcoran used booming housing prices as evidence that there was no better purchase than a home. Now the market has tanked and she’s still advising people to buy. The current argument: Don’t miss out on the deal of a lifetime. Like a Jim Cramer of real estate, it’s go, go, go all the time.”
“In 2007, after the bubble began to burst, Matt Lauer said to Corcoran on ‘Today,’ ‘We’re talking about the worst housing market in generations, or a generation. What happened?’ She replied, ‘I think the worst is behind us. You should know that, right now, prices are at their lowest point, in my belief.’”
“What sort of evidence was Corcoran relying on when she went on the air two years ago and made these prognostications? ‘Wishful thinking,’ she says now. ‘Obviously, I was dead wrong. Do I regret it? No. Fortunately not everyone is as diligent as you to go and look it up.’”
“It was one thing to hype the New York real estate market in an effort to get a little more money out of hedge fund managers and Russian oligarchs. It’s another when she’s showing houses on the most watched morning show in America, a program where the average viewer is middle class and likely assumes that because Corcoran no longer has a financial stake in her company, she (and ‘Today’) have their best interests at heart. ‘I still believe buying a home is the best investment you can make,’ Corcoran says.”
“Not all homes going into foreclosure in the Valley belong to people who can’t afford their mortgage payments. In fact, many of them involve people who can make their payments but whose home loan is now far more than their property’s value. ‘They might owe $250,000 and the current value of the home is $150,000,’ said Valley realtor Russell Shaw.”
“Shaw said he gets between 10 and 25 calls a day from people who want to know when housing values are coming back and when their homes will be worth what they paid for them. The answer, Shaw said, is ‘maybe not in their lifetime.’”
“Prices have fallen dramatically from where they were at the market’s peak a couple of years ago. Steve Lyons, of Century 21 Harris & Taylor, points out that there are newer homes off Hanby Lane in Cave Junction that were once offered at around $240,000. The banks are now selling some of those for as little as $137,000, he said.”
“At Oregon Mountain Real Estate in Cave Junction, Bill Reid said that the start of summer has brought some tourists to the area, along with graduates of area schools back in town for reunions. ‘I have seen an increase in activity,’ Reid said. ‘That doesn’t translate to sold houses, but I’m working on it.’”
“Southwestern Oregon’s real estate market also depends largely on what happens in California, Reid said. Reid said that he remains cautiously optimistic about the real estate industry’s immediate and long-term prospects. ‘Buyers are venturing back in to the market,’ Reid said. ‘Hopefully, the worst of the foreclosures are behind us, but who knows?’”
“But regardless of what happens, real estate agents will continue showing up to work and hoping for the best. ‘My phone does ring,’ said Reid. My fax machine does work, and there are people walking through the door. My lights are on, my rent is paid, I had lunch today, and I will have dinner tonight.”
“There, on the well-worn cards that Westmoreland County assessors use every day, are the inconsistencies. The cards…tell the story of 193,000 parcels of land and buildings in the county, where there has been no full-scale reassessment since 1972. More than half of the properties sold last year in the county were assessed at values 20 percent higher or lower than their sale prices.”
“‘Frankly, I’m surprised no one has filed a lawsuit,’ said Commissioner Tom Balya. ‘We know our assessments aren’t going to adequately reflect market value.’”
“Charles Pityk purchased a two-bedroom home on Orr Avenue in Allegheny Township last June. He paid $60,000, but the county set its worth at $81,200. After an appraisal, the county assessment and appeals board lowered the assessment by 20 percent. ‘I think these real estate assessments should be based on the purchase price of your house,’ Pityk said. ‘If you get a deal, maybe it’s for a reason.’”
