Value Is Not There
It’s Friday desk clearing time for this blogger. “More than 13 percent of American homeowners with a mortgage have fallen behind on their payments or are in foreclosure. The record-high numbers released Thursday by the Mortgage Bankers Association are being driven by borrowers with traditional fixed-rate mortgages. Cindy Kennedy ran a successful cleaning business in Allentown, Pa., for seven years. But she lost most of her customers once the recession hit. Kennedy paid more than $1,700 to a California company that promised to help modify the loan. But the company stopped returning her calls in June, and she suspects she has been scammed.”
“She and her longtime companion stopped paying on their $840-a-month mortgage in February and their house has gone into foreclosure. They attended a mediation conference in county court Wednesday with their lender but are not optimistic about saving their home. Now making $120 a week as a part-time supermarket cashier, Kennedy says she commiserates with her co-workers, some of whom are also facing foreclosure.”
“‘We talk about it and laugh,’ she said. ‘It’s not really a funny situation, but sometimes you have to laugh to keep your sanity, so you don’t make yourself nuts.’”
“The developers of long-struggling Bella Verde have been named in the first of what could be several foreclosure filings. As developments unravel across the Tampa Bay area, the Bella Verde Golf filing echoes last year’s foreclosure by the Riverwood Estates CDD against its developer, Doug Weiland. In both cases, the developments failed to produce any houses to repay the borrowed money.”
“Two sales buildings went up in 2005, only to be demolished years later without opening their doors. At one point, earthmovers cleared much of the land, which reverted back to weeds after work stopped. Several unfinished concrete structures with rusting steel bars sticking out of them now sit on the property.”
“A Florida Supreme Court task force is calling for uniform mandatory mediation for all residential foreclosure cases in the state to deal with the tide of foreclosures that has swamped courthouses. Broward Chief Judge Victor Tobin…disagrees with the task force’s plan to have mandatory mediation in all instances. ‘It’s not a good idea in all cases because a lot of the homes are vacant, and they are going to remain vacant,’ Tobin said. ‘The owners of the property don’t want to negotiate or can’t negotiate’”
“At 11 a.m. most mornings in Chicago…it’s time for the foreclosed property auction. Investors such as these in Chicago, scout foreclosure auctions hoping to pick up undervalued properties. But of the roughly 30 properties that go to auction on this day, only two to three are sold. The foreclosure auction is often the last stop for a property, after the lender has attempted a short sale.”
“‘When it gets to foreclosure, value is not there,’ said Thomas FitzGibbon, executive vice president of MB Financial Bank NA, noting that 34 percent of home sales in the first quarter in Chicago were short sales. ‘Someone has already tried to do something else.’”
“Valley home prices are dropping at a slower clip than they were earlier this year, according to the Arizona State University Center for Real Estate Theory and Practice at the W.P. Carey School of Business. The study found prices declined 33 percent between May 2008 and May 2009. That’s down from a 35 percent year-over-year drop in April and a 37 percent drop in February and March.”
“Translation: The worst is over. One realtor said she has a hard time believing the numbers. ‘I think we’re being duped, quite frankly,’ said Pattie Haugland, a broker who handles properties in the East Valley. Haugland said the banks are holding back on selling thousands of foreclosed homes, which is creating an artificial seller’s market and slowing the decline in prices.”
“She said if banks start dumping properties back on to the market, ‘we’re going to see a big crash again.’”
“Realtors in the San Gabriel Valley and Whittier area report that half of their sales are in foreclosed homes. The stubbornness of foreclosures is no surprise to some housing market observers. For months, some have cautioned that there’s a glut of 60- to 90-day defaults on the market. It hasn’t helped that many ‘underwater’ homeowners aren’t qualifying for loan modification programs. Even when they do, many of them are defaulting several months later, Realtors said.”
“The news about fixed-rate loans wasn’t a big surprise for Marty Rodriguez, a Glendora Realtor. As unemployment rises, and people realize they owe more on their homes than they are worth - even if they bought with a fixed-rate mortgage - ’some people are just walking away,’ she said.”
“Last month, 3,549 homes sold in San Bernardino County, an increase of almost 41 percent from a year earlier and the highest monthly sales since August 2006. Sales have increased year-over-year for 16 consecutive months in Riverside County and 14 consecutive months in San Bernardino County. The median price was almost 29 percent lower in Riverside County than a year earlier and more than 39 percent lower in San Bernardino County.”
“In Riverside County, foreclosures represented about 59 percent of sales, falling from a peak of 71 percent in January. In San Bernardino County, foreclosures accounted for about 61 percent of sales, slipping from a peak of 69 percent in April. The change is due to fewer foreclosed homes available to buyers, said DataQuick analyst Andrew LePage. Mortgages are continuing to default in high numbers and it is unclear why banks have been slowing the foreclosure process, LePage said.”
“Possible reasons for the trend, he said, are foreclosure moratoriums, bank mortgage modification efforts to prevent foreclosure and paperwork backlogs. ‘For whatever reason, there are fewer repos,’ he said.
“James Monks, branch manager for Prudential California Realty in Riverside, said banks also have been slow to list already foreclosed houses for sale. ‘There are homes all over Riverside that have been empty for a year and still are not on the multiple listings,’ he said.”
“Monks said home sales have been spurred in part by the federal government’s $8,000 tax rebate for first-time buyers. But he said sales would be higher if not for a shortage of bank-owned, bargain-priced properties to satisfy demand. In some cases, he said, buyers confronting multiple offers on bank-owned houses have stopped looking.”
“High unemployment is also discouraging some prospective buyers, Monks said. ‘We have had quite a few folks who have lost their jobs during escrow and could no longer purchase a home. That is the heartbreaker,’ he said.”
“Matt Johnson, a broker associate, said there was a boom of home construction in Austin and Owatonna. He described that as being where the bubble can burst. Since the Midwestern housing market was not hit as hard as the national market, the market in Albert Lea didn’t have to recover as much as other areas. Hugh O’Byrne…has been selling real estate for 38 years, and he said this last recession was the worst he’s seen the housing market and people’s confidence in the market. He said it was one of the only times when people feared what could come in the future.”
“‘We needed to recover some, but our biggest recovery was convincing buyers that it was time to buy, and it was a good time to buy,’ O’Byrne said.”
“Local real estate agencies have seen the economy pick up from lows earlier this year. ‘Are we at historical high rates? No, we’re not. But are we selling houses? Yes. Realtors are getting to go to the grocery store now,’ said Bill Leland, broker at Kenneth R. Leland Realty Inc.”
“The Real Estate Council of Austin held its ninth annual mid-year Economic Forecast Tuesday. Economists said many investors have a wait and see attitude when it comes to jumping back into housing investments. They also said the Texas housing market looks good. ‘The nice thing was we never had a housing price bubble in Texas early in the decade, so without a bubble we’re not going to burst and have any kind of market like that,’ Chief Economist for The Real Estate Center, Dr. Mark Dotzour, said.”
“After five years and five days on the job, Mark Sprague will go to work for the last time Friday as the Austin partner for Residential Strategies Inc., a housing industry consulting and forecasting firm. The firm is closing its Austin office. Sprague said he’s a casualty of the economy and tough times in the homebuilding industry.”
“In Dallas, the company has lost about 22 builder clients among the top 60 in that market, Sprague said. In Central Texas, the company has lost six builder clients out of the top 25 home builders in the past 12 months, he said. ‘I hope there won’t be more downsizing of consulting groups, (but) I think we’re going to see more of this, unfortunately,’ Sprague said.”
“Spanish banking giant Banco Bilbao Vizcaya Argentaria SA appears to have won the bidding for the assets of Guaranty Bank, the hobbled Texas lender, according to reports. Guaranty, battered by the housing bust, said last month it was ‘critically undercapitalized’ and probably couldn’t stay in business.”
“Laurie Accetta has her Ford Expedition cleaned out, gassed up and ready to go. Her goal is to shuttle seven bargain-hunting passengers per trip on a ‘foreclosure tour’ of properties in Pike, Monroe and Wayne counties. Pike tallied about 750 foreclosures last year and, this year, is already close to 600. Acetta got the foreclosure tour idea from a real estate broker her sister knows in Texas.”
“Accetta figures she can cover a lot of territory starting at, say, Lake Ariel, then swinging down to Dingmans Ferry, Bushkill and into Monroe County. Dozens of foreclosures per month are hitting the housing market in Pike and Monroe counties.
“‘They’re just sitting there,’ said Accetta.”
“Allison Jensen is among the Alexandria real estate agents who said that the first-time homebuyers’ $8,000 federal tax credit played a major role in helping to revive the housing market this year. ‘I see brisk sales through the deadline,’ she said. With the credit due to expire on December 1, she added, ‘I just hope they will extend it, because it really got things moving.’”
“She may get her wish. Members of Congress on both sides of the aisle have introduced resolutions to extend the credit through next year at least, while expanding it to all homebuyers. The National Association of Realtors plans to lobby Congress actively for the extension when it reconvenes. ‘We have a sizeable government-affairs group that lobbies congressmen on many issues,’ said Public Affairs Director Lucien Salvant. ‘This will certainly be one of them.’”
“‘Cash for Clunkers proved to be very popular and successful,’ he added, ‘But it will hardly have the kind of long-term effect on the economy that the first-time homebuyers’ tax credit did. We want to extend it to all homebuyers.’”
“Home purchases will spread the wealth through the economy, he explained, since they account for $63,000 worth of related acquisitions including furniture, appliances and cars. As he put it, ‘President Obama and Congress have said that the way out of the recession is through housing.’”
“As I’ve said before, the most important measure of an economy is GDP or Gross Domestic Product. Real GDP of goods and services is what truly represents economic activity. So far I have not seen meaningful steps to end these higher risk lending practices that gave rise to the housing bubble.”
“Is the last great bubble of this economic run comprised of cash for clunkers? We are at the end of a tube of toothpaste trying to squeeze out every last bit. Why do the sides always start leaking goo?”
“I digress. The Austrians had it right: save and invest. Instead of sound economic policies that encourage the purchase of goods and services at sustainable levels, we try and crunch out 500 reps from one economic sector and then wonder why it seizes up on the ground only to lay flat for the foreseeable future. Our psychology is funny. One person’s gain in the short term is everyone’s loss in the long term.”
