A Price That Works In A Market Headed South
It’s Friday desk clearing time for this blogger. “The Obama administration’s program to modify troubled mortgages has started strong but must pick up steam, U.S. Housing and Urban Development Secretary Shaun Donovan said in Seattle. Donovan defended the administration’s foreclosure-prevent efforts from arguments that those efforts are artificially propping up a market that should be allowed to sink further.”
“‘When your neighbors house is on fire you don’t wait to call the fire department to help put out that fire, because the danger is it’s not just going to destroy that home, but it’s going to spread in the neighboorhood and destroy other homes as well,’ he said. ‘The effect of foreclosures has been to accelerate and deepen the declines in value, particularly in communities where it’s been concentrated. Studies have shown that those are not natural declines or declines that would otherwise happen.’”
“The median price of an existing Atlantic County home was almost unchanged at $218,700, down just 0.2 percent from the first quarter, according to a National Association of Realtors survey. This follows quarterly drops of 4.4 percent and 8 percent the previous two quarters and strongly suggests falling home prices have bottomed out in the region. ‘The numbers are fantastic,’ said Richard Shaffer III, president of the Atlantic County & City Board of Realtors.”
“One buyer who apparently timed the real estate market right was Connie Hackney, an Atlantic City police officer who bought a Chelsea Heights property in June as an investment. ‘I did good for a change,’ Hackney said. ‘When prices started coming down again, it seemed reasonable, so I jumped on it. Now I hope it goes back up again.’”
“In the midst of a wobbly economy, Salem has an abundance of luxury condominium units for sale. Gene Krametbauer recently purchased a condo at the 295 Church Condominiums. The Nevada resident bought the condo for his son, a student at Willamette University’s law school. Buying the condo was a better investment that paying rent for an apartment, he said. Krametbauer figures he can sell the condo when his son finishes law school, or keep the property and rent it.”
“None of its 27 residential condos had sold until its developers agreed to sweeten the deal for buyers. During the past month, a 25-percent discount for buyers paying in cash, plus a $14,000 credit, helped sell seven units. ‘How could a guy pass that deal up?’ Krametbauer said.”
“Dallas-Fort Worth home sales prices were basically flat in the second quarter after a long string of declines, according to the National Association of Realtors. ‘Yes, it appears to me that we are at the bottom of the housing market in most Texas cities at this point,’ said Dr. Mark Dotzour, chief economist at the Real Estate Center at Texas A&M. ‘I feel that now is the time to buy a house in most all Texas cities. Housing affordability has never been higher than it is right now.’”
“A second wave of home foreclosures is sweeping across St. George, with banks unloading properties seized from investors onto the market, driving down other homeowners’ values. It’s trouble for young Utah couples like Bradley and Kirsten McArthur who, because of a layoff, found themselves with a mortgage they couldn’t afford and a house they couldn’t sell for enough to cover the balance on their loan.”
“After failing to find any buyers within $100,000 of what they owed, their lender eventually accepted a short sale of $140,000 in satisfaction of their $240,000 mortgage. ‘We went up fast and came down hard,’ said Kirsten McArthur, 25, a stay-at-home mom with a 1-year-old boy.”
“Three out of four of the county’s real-estate sales are foreclosure listings or short sales, said Alan Carter, owner of Southern Utah Title. Expensive new homes around St. George are commanding the biggest discounts. Carter told of one builder forced by his bank to surrender a $2.8 million property that wasn’t selling and had plunged in value to $800,000. ‘I bought it,’ said Carter, who plans to move into the 6,400-square-foot house. ‘It has a $24,000 refrigerator and two Bosch dishwashers. It’s just over the top.’”
“A list of the biggest increases in foreclosure rates across Florida reads like a map of the fallout from the unbridled real estate boom. Foreclosures spiked 788 percent during the last three years in the 20th Judicial Circuit. Speculative buyers were ‘like an infestation,’ and the areas that they targeted are now paying the price, said Lewis M. Goodkin, a real estate analyst. But speculators were essentially only the first, inevitable phase of the defaults. The problem has spread thanks to the recession and the impact of unemployment. The next phase is just beginning, Goodkin said.”
“‘What we’re going to see is discouraged homeowners who either bought at the peak or bought at a good time, but borrowed against their homes, and thus are underwater,’ he said. ‘Those owners in the market are going to be increasingly prone to take a walk.’”
“Kathy Marlowe, an agent who specializes in distressed properties…already is seeing new foreclosures among people who bought in the calmer days of 2000 or 2001, saw their home values skyrocket in the boom and began flocking to second mortgages. ‘That imaginary equity everybody had back then — even people that didn’t buy, many of them decided to take a second mortgage out,’ Marlowe said. ‘Now they are underwater, too.’”
“Karen Weaver, global head of Deutsche Bank’s securitization research division said last week that 48% of U.S. mortgage owners will end up owing more than their home is worth by 2011. Q: What mortgages are most responsible for this problem?…A: ‘These products — option ARMs, subprime, etc. — were regarded in the industry as ‘affordability products.’…If you look at Los Angeles: At the peak of home prices in LA, only about 9% of people living in Los Angeles made sufficient income to purchase the average house….For a first-time home buyer, it meant that it was highly unlikely that you were able to purchase a home unless you used one of these very aggressive products that stretched your [income].’”
“At what point of being underwater do homeowners start falling into foreclosure rapidly?”
“Once you get to the point where negative equity is significant — for example, 25% or more — there have been studies that suggest you get more strategic defaults. People say, “I bought my house for $500,000, it’s worth $250,000, there are 10 available for sale in my neighborhood. It makes no economic sense to spend the rest of my life trying to pay off a $500,000 debt when there’s no reasonable likelihood to expect this house to go back up to $500,000.”
“This might sound extreme, but we have borrowers who bought a $500,000 home in California at the peak of the market on $50,000 of income. So for them to devote their gross income for the next 10 years solely to paying off [their] mortgage doesn’t make any sense.”
“The Coachella Valley home sales market is on the rebound, a new housing analysis shows. Average home sales prices that hit lows of $87,152 in Desert Hot Springs and $53,180 in the Salton Sea area, and put many homes well under the $300,000 water mark. ‘This market is healing itself from the bottom,’ said Greg Berkemer, executive director of the California Desert Association of Realtors. ‘It collapsed from the bottom, and it’s healing itself that way.’”
“‘We called the bottom three to four months ago,’ said Fred Bell, executive officer of the Building Industry Association Desert Chapter. ‘I think we’re there.’”
“The real estate bust pushed home prices in San Joaquin County off a cliff, but some would-be home buyers are still finding it difficult to buy houses. Investors have an advantage, even when they offer less money, Stockton resident Carol Ridolfi said. ‘I’ve been trying to find a house since November,’ she said. ‘The investors come in and pay cash right beneath me.’”
“A record 990 Hawaii homes were foreclosed upon in July, a 332 percent increase over a year ago, according to RealtyTrac. RealtyTrac’s Daren Blomquist described ‘a sense in many areas that we’re seeing a false bottom.’”
“‘People have been snatching up properties … at what they think are rock-bottom prices, but you may have this whole new wave of foreclosure inventory coming online that people aren’t really taking into account as they make their purchase decisions,’ he said.”
“A recently enacted state law designed to give homeowners more time to fix their troubled mortgages has delayed but not derailed foreclosure actions in Illinois, say two reports. ‘The 90-day window is good but only good if you can help the borrower get into a better loan and theoretically that would be through the [federal loan modification] program,’ said Geoff Smith, Chicago-based think tank Woodstock Institute’s vice president. The grace period ’seems to have achieved its goal of delaying the foreclosure process. What happens next is where the big question mark is.’”
“Some good news is tucked into new Canada Mortgage and Housing Corp. data showing overall housing starts dropping in July on Vancouver Island. Casey Edge, executive officer of the Victoria office of the Canadian Homebuilders’ Association, said the numbers are good for single-family and semi-detached homes. ‘Clearly what is taking the hit right now is the condo market,’ he said. ‘The important thing is that we are coming out of an absolutely devastating crash in the housing market from last year.’”
“Housing market conditions in Las Vegas remain softer than a week-old banana, but real estate observers are seeing more signs of recovery with each passing month. Tim Kelly Kiernan, foreclosure specialist in Las Vegas, said he thinks a tremendous amount of foreclosures are yet to come. Various reports show a few hundred notices of default being filed daily in Clark County. He had five clients recently with great credit scores who tried to sell their homes in a short sale, or for less than the mortgage balance, which requires lender approval.”
“‘If they aren’t successful, they will just stay in the home for as long as they can, not make the mortgage payments, save that money to move forward in their lives,’ he said. ‘Not a good sign for home values, but they feel they will never recoup the lost equity in their homes.’”
“Sales of existing homes in Colorado fell in the second quarter, bucking a trend of rising sales nationally, according to a report Wednesday from the National Association of Realtors. In Colorado, what is hard to figure out is why the state sales numbers dropped so much in the second quarter when Denver sales were up. The discrepancy likely reflects a sharp decline in sales in parts of the state that have previously resisted the housing slump.”
“The Mesa County clerk and recorder’s office reported there were only 717 sales in the second quarter there, compared with 1,381 in the second quarter of 2008. Declining home sales could reflect a state divided between areas ahead and behind the curve on the housing downturn. Markets that have resisted the downturn, such as Grand Junction, may be seeing sales slow as buyers and sellers try to find a price that works in a market headed south.”
“‘Our market is off significantly from last year. We have gone from 130-plus drilling rigs down to the mid- 20s,’ said John Huff, a partner with Coldwell Banker Home Owners Realty in Grand Junction.”
