Bringing The Market Closer To An Eventual Equilibrium
It’s Friday desk clearing time for this blogger. “Ari and William Morel are homeowners and grandparents who hope to save their home from foreclosure after becoming victims of what they consider to be a predatory loan. The Morels, whose troubles began in 2006 when Will lost his job as a bank adjuster, were told that they could not force the bank to modify the loan under the Making Home Affordable Refinance and Modification program. The program gives struggling homeowners facing foreclosure and who have a loan owned or guaranteed by Freddie Mac or Fannie Mae the opportunity to modify their mortgage payments or refinance to a lower mortgage rate. The Morels did not qualify because they had waited too long to apply. The bank had failed to tell them they qualified for the plan when they first went to them in February, according to the Morels.”
“‘We’re not looking to get a new house. We can pay a mortgage,’ said Ari Morel, who said she has lived in her current home for over 15 years. ‘We were cheated.’”
“Orlando’s housing starts, once a bellwether of success, have been cut by more than half during the past year, according to a real-estate analysis. The large number of foreclosures and short sales in the resale market has driven down prices of new homes as well, allowing buyers to employ ‘aggressive’ negotiation tactics, said longtime homebuilder Steve O’Dowd, VP of the Home Builders Association of Metro Orlando.”
“‘Market price is way down, and the ability to rebuild and reproduce that house at that price doesn’t exist — you can’t do it,’ O’Dowd said. ‘There may be a desire for new construction, but the replacement cost is higher than the market is willing to pay.’”
“New federal rules that went into effect May 1 prevent mortgage bankers from ordering appraisals on homes under contract to sell. It’s called the Home Valuation Code of Conduct, and it was created to address some of the problems that led to the nationwide run-up in housing prices and accompanying downturn. ‘It makes all the sense in the world. It truly protects the consumer. In the old days, you could talk to the appraiser and say, ‘I need this value,’ said Robert Runnells, production manager of Old Point Mortgage in Hampton.”
“It’s true the appraisals are coming in low, he said. ‘That’s more a product of the market,’ he said. ‘We’ve had more appraisals come in low this year than my previous 10 years combined. It’s hard to tell someone their house is worth less than they think it’s worth. Some people get mad at you; they point the finger at us, when it’s not us.’”
“The number of properties facing foreclosure in Hampton Roads has more than doubled from this time last year, according to a new study.And it’s not over yet. ‘We should expect more foreclosures in the future rather than fewer,’ said James V. Koch, an Old Dominion University economics professor.”
“Though foreclosures force people out of their homes, it puts others into them, Koch said. ‘Foreclosures aren’t completely bad. When they go on the market, they’re oftentimes snatched up by individuals who are looking for bargains and probably have an ability to actually meet the terms of the mortgage,’ Koch said. ‘I think, actually, some of the foreclosures are healthy in the sense that we’re really bringing the housing market closer to an eventual equilibrium. That sounds harsh, but we need to have some additional decline in the housing prices and some improvements in overall economic conditions before I think we’re going to see the housing market turn around.’”
“By midyear, 1,616 Honolulu homeowners had received a foreclosure notice, a 276 percent increase from the same period a year ago and a 31 percent increase from the prior six months. But while Honolulu foreclosures are growing, overall the city has a limited foreclosure footprint as compared to the nation…The same could not be said for the neighbor islands, which have been harder hit by economic recession and had experienced higher price swings during the last real estate boom, said Howard Dinits, a Realtor in Wailea, who specializes in Big Island and Maui sales.”
“Declining real estate values and increased joblessness, combined with a tighter lending market and a depressed economy, have created the perfect neighbor island storm, said Dinits, who has had to switch real estate firms twice this year due to office closures. ‘Get ready, it’s just going to get worse,’ Dinits said. ‘California was littered with foreclosures last year and we tend to lag that market by six to nine months or more.’”
“San Diego County home prices were down 18.52 percent from a year earlier, according to the most recent Standard & Poor’s/Case-Shiller index for May, released Tuesday. In the three-and-a-half years since the market’s price peak in November 2005, prices have fallen 42.05 percent to a level last seen in summer 2002. Still, prices remain 45 percent higher than they were at the start of the decade.”
“Though a tightened supply and an increased demand might typically indicate underlying strength, this market has too many issues to say for sure, said Mark Goldman, mortgage broker and real estate professor at San Diego State University. ‘I don’t like to be Dr. Doom in the housing market,’ he said. ‘We’ve taken most of our licks, but what’s going to cause the market to improve?’”
“Goldman said…with the potential for inflation on the horizon, a homebuyer could do well to buy a discounted home and lock in a mortgage at the interest rates in today’s 5 percent range. ‘I just see a bunch of stuff going on that can become a concern, but is now a good time to buy a home? Hell, yeah,’ he said. ‘Will prices slide some more? Yeah, they will. Are they going to slide a lot? No.’”
“Fueling optimism of a real estate turnaround in San Joaquin County, Tracy has been listed the eighth-hottest investment market by a statistics-based company that measures an area’s real estate affordability, crime, school rankings, lifestyle rankings and employment potential. Investment possibilities in a county where the median home price has dropped to $155,000, and the slight decrease in foreclosures brings hope to community leaders.”
“‘Foreclosures and unemployment rates are still way too high in the Central Valley, but I’m hopeful that we could start to see the market stabilize,’ said Rep. Dennis Cardoza D-Atwater. ‘This is a great place to live, and I think the housing prices in the Central Valley are underpriced.’”
“Rental prices across California fell 4.5 percent this spring compared with the same period last year, according to research. Fewer than 90 percent of Modesto apartments had tenants this spring, compared with about 94 percent a year ago and nearly 96 percent two years ago. ‘It’s definitely not going in a good direction,’ said Georgina Bockel, a West Coast consultant.”
“The purchase of Pacific Union Real Estate, a struggling but well-known Bay Area name, by a smaller rival in Marin might be a sign of things to come in these down economic times. The deal is the latest in an industry that has experienced seismic shifts locally over the past year. Marin has about 1,450 Realtors practicing, based on membership figures from the Marin Association of Realtors. Through the first six months of this year, there were 881 residential home sales in the county, according to MAR. At last year’s midpoint, there were 965 home sales. By the halfway mark of 2004, 1,987 home sales had already taken place.”
“‘We’re going to see more of these types of mergers and acquisitions to reflect the difficult market,’ said Katie Beacock, president of the Marin Association of Realtors.”
“During the buying orgy of the housing boom, many consumers overleveraged themselves by signing on for low-introductory-rate ARMs, apparently presuming that tomorrow would never come, or at least that the option to refinance always would be there. Toll Brothers raised a few financial eyebrows recently when it announced it would offer an adjustable-rate mortgage to its buyers at an eye-popping 3.75 percent rate.”
“When a high-profile company such as Toll Brothers rolls out an ARM, and with some fanfare, one has to wonder: Could these loans be making a comeback already? ‘ARMs are not evil; really they’re not,’ said Keith Gumbinger, a loan analyst at a mortgage-industry publisher.”
“Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon. The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. ‘They’re probably going to default at a rate that makes subprime look like a walk in the park,’ warned Rick Sharga, senior VP for RealtyTrac.”
“They pose risks for the broader U.S. economy because they threaten to add inventory to a depressed housing market and could hasten the blistering pace of foreclosure filings — more than 1 million from March to May alone. ‘We can’t rebuild housing values when there’s a serious risk that another set of mortgages is collapsing,’ said Elizabeth Warren, a Harvard University law professor.”
“Foreclosure rates in the Baltimore-Towson metropolitan area are less than half the national average, according to a new report, but industry professionals have warned that the lull in filings is temporary and artificial and said they are girding for a new wave of problems in the third and fourth quarters of this year. ‘Foreclosures have probably been artificially low because of moratorium programs that have been in place,’ said Rick Simon, a spokesman for Bank of America Home Loans. ‘The expectation is that we’re going to see an increase, not just because we’re getting through that backlog but also because the projections are showing that people are not going to qualify for loan modifications because of unemployment.’”
“David McIlvaine, president of the Greater Baltimore Board of Realtors, also sounded a warning. ‘I work with numerous banks, and I’m hearing from banks …’get ready,’ because there’s significant inventory [of foreclosures] expected to hit the market in the third and fourth quarters,’ he said. ‘I would say it was an anomaly if just one bank was telling me this. But three different banks have told me that we’re in a lull, that loan modifications have slowed things down … we’re going to see a significant rise from what we saw last year.’”
“In the first half of 2009, Las Vegas posted the nation’s highest rate of foreclosure. More than six times the national average. But number crunchers at RealtyTrac say Las Vegas could see more houses on the market. If foreclosure filings from June actually become available, it would more than double homes for buyers all at once.”
“Realtor Nick Nolf believes banks and lenders have homes ready for sale but they won’t release them from foreclosure. ‘There’s a long period and that’s an ambiguous period because some of the banks will release properties at certain times. Sometimes they hold off,’ he said.”
“Bill Uffelman is the President and CEO of the Nevada Bankers Association. He says it isn’t collusion or shady plans by FDIC insured banks. Foreclosures take time to work through the courts. ‘It doesn’t happen overnight, but it isn’t something they sit on. There’s no advantage to them to sit on these properties,’ he said.”
“Southern California investors have returned to the Las Vegas market in force to look for bargains on single-family homes and helped drive Las Vegas to a record number of sales in June, housing industry experts said. ‘Real estate has always been a good investment, and right now it has never been better from a residential standpoint,’ said Steve Bottfeld, executive vice president of Marketing Solutions.”
“Glenn Plantone, a Realtor and president of the Real Estate Insiders Club in Las Vegas, said investors are taking advantage of a steep drop in prices since they peaked in 2006. In some cases, prices of homes in the northwest fell 70 percent. Homes that sold for about $300,000 are going for about $110,000 he said.”
“‘They are buying them for cash flow,’ Plantone said. ‘We are not even talking about appreciation potential.’”
“In once-inflated markets like Phoenix, Las Vegas and inland swaths of California and Florida, where prices have tumbled more than 40 percent, sales are rising because first-time homebuyers are snapping up bargain-priced homes. They are getting help from a federal tax credit. For Aaron Carter, a musician who was struggling to fit a drum set, a piano and three guitars into his 600-square-foot apartment in Phoenix, the math on owning a home finally began to work in his favor.”
“Rent for the apartment he shared with his wife: $615. Mortgage payment for a home with twice the space: $760. And the interest on a mortgage is tax-deductible. So they jumped at the chance to buy some elbow room. ‘We figured that everything together, getting more space, getting out of the apartment life and also just the prices right now, it just was the perfect time for us as a couple’ to buy, said Carter, 20.”
“Neighborhood profiles by Jason Sheftell and real estate advice from Barbara Corcoran. Q: Most military families stay in their homes for four years or less, and often four years is rare! What advice do you have for military families — buy a home or rent? A: Stick to renting, as there’s just too much risk in buying a home for such a short period of time. If you buy, there’s no guarantee you’ll be able to get your money back or even be able to sell in the first place.”
“Q: My husband and I purchased a piece of land last year in Lehigh Acres, Fla., for a very good price, but it’s not in a very good area (lots of crime, foreclosures, etc.). My husband thinks the area will only get worse, with the economy the way it is, and wants to sell. I feel that the area will eventually pick up and that this is a good investment. What do you think?”
“A: The fact is you’ll have a tough time selling it now. There’s not much of a market for land because of the credit crunch. Very little new development is taking place and there are too many newly built homes and not enough buyers. You should hold on to the property and wait this rough spot out, as long as you can afford to carry it. You’ll do much better later, once the market recovers, than you can now.”
“House Democrats have declined to subpoena available records that might reveal whether other members of Congress got discounted VIP mortgages from subprime lender Countrywide Financial Corp. similar to the sweetheart deals given Democratic Sens. Chris Dodd and Kent Conrad. Countrywide was taken over by Bank of America a year ago.”
“Robert Feinberg, who worked in Countrywide’s VIP section, told…investigators and the Senate Ethics Committee that Dodd and Conrad were made aware that they were getting special deals on their mortgages. Elana Goldstein, one of Feinberg’s lawyers, said Justice Department prosecutors interviewed Feinberg last October but have not contacted her or her client since then.”
“The senior Republican on Towns’ committee, California Rep. Darrell Issa, has been trying for months to get Towns to subpoena Bank of America for Countrywide’s records. Daniel Frahm, a Bank of America spokesman, said the bank is ready to turn over the Countrywide VIP documents if it receives a subpoena. ‘They have it packed and ready to go,’ Issa said in the interview.”
