Without Greed, There’s More Than Enough To Go Around
It’s Friday desk clearing time for this blogger. “When Harvey Clavon took out an exotic mortgage to refinance his home in Santa Clarita, Calif., three years ago, he thought he knew what he was doing. He planned to sell the home before the mortgage reset. Because Mr. Clavon made only minimum payments on his mortgage, his balance has risen to $680,000 from $618,000, on a house worth closer to $400,000. ‘I don’t know what I’m going to do,’ he said. ‘I got duped into the loan, and I consider myself an educated man.’”
“‘This was a loan meant for sophisticated investors, or people who expected their cash flow to increase over time,’ said Elena Warshawsky, a residential credit analyst with Barclays Capital, which expects 81 percent of the option ARMs originated in 2007 to default, with many ending in foreclosure. ‘But then they were extended to all sorts of buyers. Now it wasn’t people hoping their income would grow. It was people hoping their house price would increase’ so they could refinance or sell, Ms. Warshawsky said.”
“Ron Dzurinko, who lives on a fixed income in Sacramento, took out an option ARM five years ago without understanding it, knowing only that he could afford the initial payments of $900 a month. ‘The mortgage person said, ‘It could adjust, but we don’t foresee any major bumps,’ Mr. Dzurinko said. ‘It sounded good to me.’”
“One Utah neighborhood…is loaded with high-end homes with foreclosures and lawns full of weeds. Homeowners in the area say they’re fed up with the eyesores affecting their property values. Angie Snarr has an ever-growing problem in the front and to the side of her home: weeds that threaten to overtake her yard. She’s tried cutting them, tilling the soil, but she can’t keep up and has now all but given up.”
“‘This was actually our dream home when we built, and at this point we can’t wait to get out of it,’ Snarr said.”
“Trump Hollywood oozes opulence, from the sprawling pool deck to the cigar room to the Italian cabinetry and wine fridges in the 200 condominiums, all with dramatic ocean views. Of course, the lavish digs, unveiled Friday, come at a steep price: The condos range from $1.3 million to $7 million.”
“Donald Trump and Jorge Perez, the high-profile development duo behind the $355 million project, say they have lined up roughly 140 buyers so far. Closings start next week. ‘In the end, the cream rises to the top, and this building is that,’ said Donald Trump Jr., wearing a gray pinstripe suit as he stood in for his famous father during a press tour of the tower.”
“Buyers will back out of deals, and sales will be challenging, Perez said. ‘Some people are very, very afraid, asking for discounts that we will not give,’ he said.”
“Lewis Goodkin, a longtime housing consultant in Miami, said…elling the rest of the units will be difficult because most buyers are searching for bargains, he said. ‘The last thing in the world I’d want to be doing today is opening a condo development,’ Goodkin said. ‘This is not one of those things where people who are bigger than life will make a difference.’”
“In the second quarter, the Standard & Poor’s/Case-Shiller U.S. National Home Price Index posted its first upward turn in quarter-over-quarter home prices - 2.9% - since the collapse of housing prices began in mid-2006. Although average home prices nationwide still are down 30.2% from their peak and off 14.9% from the same quarter last year, the uptick in the widely watched index’s April-June period suggests that the rapid descent of housing prices may be at an end. Karl Case, an economics professor and co-creator of the S&P/Case-Shiller indexes, told Bloomberg News the latest result ‘looks like a turn.’”
“‘It’s not going down anymore and it’s beginning to come up. That’s very good for the future of this financial problem,’ Case said.”
“We’ve highlighted proposals, picked through reports, and listened to testimony from advocates concerned that Illinois has an insufficient number of affordable housing units. But nothing illustrates the need better than the scene in south suburban Park Forest yesterday, where hundreds of people lined up outside of the police station just to get their names on a federal housing voucher wait-list that has been closed for a decade. Yesterday morning, FOX Chicago sent a reporter out to the rain-soaked lawn where entire families are camped out.”
“‘It’s almost like the Grapes of Wrath looking at those people,’ anchor David Navarro gasped.”
“An affordable housing complex in Fraser, Fox Run, is in pending foreclosure. The recession made Fox Run’s sustained vacancy rate downturn worse. ‘In the future there will be a need for more affordable housing. But right now, there’s more inventory out there. Occupancy rates are down right now. Not just with Fox Run, but with the entire rental inventory,’ said Grand County Housing Authority executive director Jim Sheehan.”
“More than $3 million will flow into Yuba and Sutter counties in the coming months to help restore, rent out and sell homes caught in foreclosure limbo. Sutter County, which announced its payout in June, will add 10 to 15 restored houses to its stock of public housing, whose waiting list has grown with the two-year recession, according to Gustavo Becerra, program director for the Consolidated Housing Authority of Sutter County.”
“More than 2,600 families are on the county’s waiting list for apartments as collapses in the building and other trades have helped push the local unemployment rate north of 18 percent.”
“The Tuolumne County Board of Supervisors has approved the latest update of the housing element of the county’s General Plan, and, in doing so, addressed concerns by a group of developers who felt their input had not been heeded in prior discussions. The housing market is so bad right now that unnecessary regulation should be scrapped, goes the developers’ philosophy. That has prompted them to ask the county to consider postponing the affordable housing ordinance if the analysis can’t be done in a timely manner. The median home price in the county sits at $232,000; it was $271,000 when the ordinance was adopted in 2008. In 2006, the peak of the housing boom, the median price was $332,000.”
“Several affordable housing watchdogs were at Tuesday’s meeting, and a few of them spoke up during the public comment portion of the meeting. Marge Brown urged supervisors to provide ‘hope for the hopeless.’ ‘Without greed, there is more than enough to go around,’ she said.”
“If consumers are once again to spend the nation out of recession, we need more than Cash for Clunkers. My brother, a self-employed home remodeler, called my attention to an impromptu video made last week by members of the Home Builders Association of Greater Kansas City. ‘We’re drowning here,’ said Travis Graham with Graham Construction, who called for a life raft like that tossed to the auto industry.”
“Housing industry members got a reality check Wednesday at the Builders Association of Northern Nevada’s Mid-Year Construction Analysis, even as increased affordability had some hopeful about an improvement in the market. ‘The big reset button has been pushed and this is the new reality,’ said Brian Bonnenfant, project manager at the Center for Regional Studies at the University of Nevada Reno. ‘We really need to adjust our attitudes.’”
“Of the more than 4,000 actual listings on the market in July, 59 percent were distressed properties, according to Bonnenfant. Adding to real estate’s woes is unemployment. As of July, the size of the area’s workforce has fallen to levels not seen since 2002. Construction, a key sector for housing, saw the biggest drop in employment, Bonnenfant said.”
“Jobs have done a vanishing act in this recession, and Oregon’s official economic forecast released Thursday predicts they won’t start coming back until 2011. The United States has lost 7 million jobs in this recession so far — more than were lost in the past three recessions combined, the state Office of Economic Analysis estimates.”
“‘Those projections seem pretty dire,’ said Mike Gansen, a homebuilder in Eugene and past president of the Oregon Home Builders Association. ‘I would imagine we’ve already hit (a) 16 percent (decline) this year, but a 9 percent loss next year — I don’t know.’”
“Gansen pared his business down to five employees, including himself, from a peak of 11 in 2007. He said he’s not sure when he’ll start hiring again. ‘It does feel better, but I hate to make plans for expansions just to have a false start.’”
“Nearly one in four Alabama homeowners is underwater on a mortgage or close to the brink. One of trend’s key drivers was the proliferation of more aggressive mortgage products during the height of the housing boom in the mid-2000s, said John Kottmeyer, a banking professor at Samford University’s Brock School of Business. Back then, it was common to see mortgages financed with no money down or 10 percent down, instead of the more typical 20 percent down payment, he said. As a result, homeowners didn’t have much up-front equity in their homes. Since then, values have dropped.”
“There’s also the fact that homeowners pay more interest and less principal on their mortgages in the early years, he said. ‘It really is a non-event if you plan to stay in your house for a long time,’ Kottmeyer said. ‘The risk is there if there’s a major change and you need to move. You have negative equity. … that’s what’s leading to foreclosures.’”
“(A) report from Fitch Ratings Ltd., a credit-rating firm, focuses on a plunge in the ‘cure rate’ for mortgages that were packaged into securities. Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For so-called Alt-A loans…the cure rate has fallen to 4.3% from 30.2%. In the subprime category, the rate has declined to 5.3% from 19.4%. ‘The cure rates have really collapsed,’ said Roelof Slump, a managing director at Fitch.”
“Merced County’s median home price dipped slightly in July, though it seems to have stabilized after last year’s free-fall. Merced remains the county with the highest foreclosure rate in California. Krotik said one promising sign is that banks are more willing to do short sales. While some owners are losing their homes because of a lost job or other economic circumstances, real estate agent Andy Krotik said the market is still driven by people making a business decision of whether it’s worth paying off a home bought at the boom’s height.”
“For so many, it’s not.”
“New home sales increased from June to July nationwide, but that gain didn’t extend to California and the Bay Area where the expiration of a state tax credit for new home purchases is being attributed for a drop in sales. When the state tax credit was launched in March, new home sales picked up substantially until funding for the $100 million program ran out, said Tim Coyle, senior vice president of the California Building Industry Association.”
“‘Activity has dropped off dramatically,’ said Coyle, adding there are reports of consumers canceling sales contracts to buy new homes after the state tax credit was no longer available. ‘We call it the ‘can’ rate (short for cancellation). Those went way up in July. If you want to keep the momentum going, that means that the state tax credit has got to be renewed,’ he said.”
“DataQuick analyst Andrew LePage noted that foreclosures are also competing with new home sales in California and the Bay Area. ‘Foreclosures are a larger factor in California, especially in the inland areas, including in parts of the Bay Area such as east Contra Costa and Solano (counties),’ he wrote. ‘Those are the areas where it’s extremely difficult for builders to compete with plentiful and heavily discounted foreclosures.’”
“If you’re in the new home sales business, prepare yourself: The supply of finished lots ready for home construction - which has been suffering a huge oversupply hangover in the area - might run out by mid-2010. That’s the view Randall Lewis, executive vice president of Upland-based developer Lewis Operating Corp., expressed at Thursday’s quarterly Real Estate Research Council of Southern California meeting at Cal Poly Pomona.”
“One could easily perceive a rush by developers to sell unfinished lots to builders, but construction costs would need to drop - or new home prices rise - for this to make fiscal sense for home builders, Lewis said.”
“Foreclosure sales dropped 35 percent in Southern California between second quarter 2008 and second quarter 2009. Banks probably aren’t letting piles of foreclosures flood the market even more than they already have for a reason, said Michael Carney, director of the real estate research council.”
“‘My suspicion is that regulators are putting pressure on lenders not to do this,’ Carney said.”
“California’s domestic out-migration…may have a simpler cause than dysfunctional government or high taxes. Houses became much more expensive in California than in the rest of the country during this decade’s housing boom, with the gap growing until early 2007, when most of those emigrating today would have begun to make their plans. Many Californians who already owned homes took their profits and are looking for larger houses in other states, while people in other states were priced out of California.”
“Housing ‘unaffordability,’ says Steve Levy, the boss of the Centre for the Continuing Study of the California Economy, was and is California’s ‘principal competitive disadvantage.’”
“Steve Shea, an acting member of the State Board of Equalization, reported this week that the total value of state-assessed and county-assessed property declined to $4.448 trillion for 2009-10, a drop of $107.2 billion - 2.4 percent - from the previous year. This is the first year-to-year decline in the statewide total since the board began keeping records in 1933.”
“Year-to-year percentage increases ranged from a high of a 7.1 percent gain in San Francisco County, to a low of a 13.4 percent decline in Merced County. Thirty-eight counties posted year-to-year declines, with 14 of them declining by 5 percent or more. Only two counties (San Francisco and Trinity) saw a positive growth rate exceeding five percent.”
“Mike Himes, director of NeighborWorks Homeownership Center in Sacramento, which counsels struggling and first-time homeowners, said his office is seeing more clients facing growing debt and making choices between house payments and other expenses. His clientele includes a growing number of state workers whose paychecks have been pared by unpaid furloughs.”
“‘There’s a lot of money borrowed to stay in the house and keep up with living expenses,’Himes said. ‘This is becoming more and more of a problem.’”
“Half-a-billion dollars in cash was spent on down payments and home purchases in metropolitan Phoenix last month. That tally doesn’t include mortgages on homes. It’s the pure cash figure buyers spent on existing Valley homes in July, according to Arizona housing analyst RL Brown. In his recent ‘Phoenix Housing Market Letter,’ Brown uses the figure to prove the housing market is showing signs of life after last year’s crash.”
“‘The recovery in metro Phoenix housing is becoming undeniable,’ Brown said.”
“Phoenix is not leading the nation in home-prices declines, according to the latest S&P/Case-Shiller home-price index. Las Vegas is No. 1 with a 32.4 percent drop from June 2008 to June 2009. The Valley came in at No. 2 with a 31.6 percent decline. Detroit was No. 3 with a 25 percent drop.”
“A University of California anthropologist says her study of 19th-century silver prospectors sheds light on the recent bubble in the U.S. housing market. Susan Glover, in a report published in the journal Human Ecology, looked at the relationship between what was reported in contemporary local newspapers and the strategy used by prospectors in Gothic, Colo.”
“She compared the 19th-century silver rush in Colorado to the dot-com boom of the late 1990s and the housing bubble that brought on the current global financial meltdown. She said overoptimistic information in the news media and from informal networks over-exaggerated payoffs while underplaying the risks.”
