A Possibility That You Are Going To Lose Everything
It’s Friday desk clearing time for this blogger. “Greenwich homeowners, saddled with the worst sales climate in 30 years, are turning to the rental market. The number of single-family properties for rent in this suburb an hour outside Manhattan climbed more than six-fold this year as sales fell by almost half. ‘Never in the market history have I ever seen anything like this where you have a whole group of the normal buyers in Greenwich renting luxury homes instead of buying them,’ said Jeanne Howell, a broker for Greenwich Fine Properties.”
“Cheryl MacCluskey broke ground on a five-bedroom luxury home in Greenwich, Connecticut, last year, hoping it would sell by June. After cutting the price 13 percent to $4.4 million failed to lure buyers, she rented it this week for $13,000 a month. The house MacCluskey built costs more than $15,000 each month to carry. ‘I’d never have put it on for rent before,’ MacCluskey, president of M&M Development, said of the 7,800 square-foot house. ‘In this down market, you don’t really have a choice.’”
“Nichol and Bryan Okvath, whose ranch-style home with a leaky roof was leveled and replaced on ABC’s ‘Extreme Makeover: Home Edition’ in early 2005, are selling their Gilbert house for $1.2 million. Nichol Okvath, a stay-at-home mom, is looking for a job, and the family put the house on the market after realizing it was impossible to keep up with expenses, including utility bills. The original home was leveled and replaced with a 7,200-square-foot, six-room Spanish Colonial-style mansion replete in extras like a movie theater, hardwood and travertine flooring, granite countertops in the kitchen and bathrooms and ultraviolet-light air and water filtration systems.”
“Tony Moore, a real estate agen who is handling the transaction, said selling the Okvath home won’t be easy. The luxury market has a two-year inventory in the pipeline because there are fewer people able to purchase homes that are $800,000 and above. Obtaining financing for those who qualify is another obstacle.”
“‘So I’ve been very honest with them and explained that it is a challenging time to sell a luxury home,’ he said.”
“There are two widely accepted villains in the story of the housing market crash: greedy banks making predatory loans and greedy homebuyers buying McMansions. A third group gets less attention: people on society’s margins who had few housing choices except for high-interest mobile home loans. In 2000, Christina Gutierrez purchased a new double-wide manufactured home with her then-boyfriend and his mothe. The home was installed at the mobile home park on Zepol Road, a tidy neighborhood where many mobile homes have handmade ‘for sale’ signs in the windows.”
“According to court documents, the home itself cost $61,600. Green Tree’s finance charge was more than double that amount: $128,700. Such massive finance charges on mobile homes are typical, as several other local cases confirm. Green Tree charged one Santa Fe woman $19,600 in finance charges on an $18,700 mobile home loan; it charged another $87,400 in finance charges on a $41,800 loan.”
“The company has faced allegations of predatory lending since the 1990s. ‘Green Tree did a lot of bad shit,’ Homewise Executive Director Mike Loftin says.”
“Colorado’s housing market suffered an unusual blow this week. On Monday, the Colorado Division of Real Estate deactivated 4,560 mortgage broker licenses for ignoring the state’s new mortgage broker licensing law. The number amounts to more than half the lenders in the state. The new licensing law was intended to improve lending practices by requiring new and existing loan officers to complete 40 hours of licensing education and pass a written test.”
“After a year and a half, a time extension and dozens of reminders, 4,560 mortgage brokers still failed to meet the new requirements, according to Erin Toll, director of the Colorado Division of Real Estate. ‘I don’t want to be Chicken Little, but the market is so volatile, it could be disastrous for Colorado,’ she told the Denver Business Journal. ‘You shrink the loan-originator population and then tell the lenders ‘we’re not going to buy your loans on the secondary market’ … We could have a disaster.’”
“Portland-area foreclosure filings have begun ticking up again this summer, reversing a spring trend that showed mortgage defaults had leveled off. ‘We’re not seeing any relief,’ said Sande Sivani, a consultant who researches property records and records documents for title companies. ‘It’s going up and up and up.’”
“In the three-county Portland area, Sivani said she found 800 loan modifications recorded in the first six months of the year. But, she said, her sampling found about only one in 10 were modifications tied to a delinquent mortgage.Those modifications were dwarfed by the more than 6,300 new mortgage defaults the lenders had recorded in those three counties in the same time period.”
“Despite Obama’s calls for banks to lighten up on troubled borrowers, said Patrick Newport, U.S. economist with economics firm IHS Global Insight. ‘That isn’t going to happen. Usually it’s in the banks’ interest to take the loan into foreclosure.’”
“Portland’s housing bureau is recommending that the city shelve an affordable housing project into which it’s already poured nearly $2 million. Margaret Van Vliet, the city’s housing director, told City Commissioner Nick Fish last week that the project ‘as currently structured should not move forward. ‘I have to be able to present a responsible financing plan to my colleagues, and she’s advised me that the current proposal doesn’t fly,’ Fish said. ‘If (downtown developer) Tom Moyer can’t get financing to build a tower in downtown Portland, it tells you that the state of market is bad.’”
“Bank of the Cascades…said the FDIC and the Oregon Division of Finance and Corporate Securities required it to: Raise money. Reduce its level of nonperforming assets. Reduce its loan concentrations in certain portfolios, including commercial real estate. Improve management practices. Maintain liquidity ratios. In consenting to the order, the bank did not concede the findings or admit to any of its assertions. Patricia L. Moss, the bank’s CEO, said declines in the value of real estate used as collateral for loans have hurt the bank.”
“‘As a community bank, our performance is directly tied to our local and regional economies and, as such, we have been significantly impacted by the sharp and prolonged downturn in the economy and the Northwest housing market,’ she said in a statement.”
“Hovnanian Enterprises Inc.’s CEO said Thursday the homebuilder has begun buying land, raising home prices and reopening previously mothballed developments in response to signs that the worst of the housing market slide has passed. Builders loaded up on land during the housing boom, but since the market tanked they’ve had to sell off lots and walk away from deposits on land option contracts - all while booking huge losses.”
“‘In most cases, we are buying the finished lots at a discount to the development cost with the land essentially free,’ Hovnanian said. ‘For the first time in three years, you can make an economic return based on the lousy current prices and the lousy current sales pace.’”
“We learned that Marc Rutenberg Homes, a luxury home builder based in Trinity, got dunned by its bank. The South Carolina lender demanded repayment of $2.66 million that had financed waterfront lots in Palm Harbor. Owner Marc Rutenberg had been diligent about making his monthly payments. He demanded to see the latest bank appraisal of the land. It came in at about $4 million. Things got a lot clearer in Rutenberg’s mind. The land was worth more than the loan.”
“No wonder it was so eager to close out the loan. Sympathetic bankers told Rutenberg they had ‘marching orders’ to get out of Florida real estate.”
“Steve Atchison was named president of Illinois/Michigan for Pulte Homes last month when Pulte bought Centex in a $1.3-billion deal that created the nation’s biggest homebuilder. Mr. Atchison says his goal is for Pulte to take on smaller developments, citing a recent Centex acquisition of a 25-home subdivision in west suburban Glen Ellyn called the Enclave. The firm is looking at both open-land and partially developed sites where either a previous developer — or its lender — is bailing, he says.”
“‘Most of them (acquisition targets) seem to be work-out deals,’ Mr. Atchison says.”
“The end is nearing for the first-time homebuyer tax credit. Qualified Illinois first-time homebuyers have a double advantage utilizing the tax credit with the Illinois Housing Development Authority’s new Illinois Home Start Loan program.
“‘Ideally, we are encouraging buyers to consider contract signings by late September or early October to comfortably meet the IRS tax credit deadline, as the buying process can take time to proceed to closure.’ said said Pat Callan, president of the Illinois Association of REALTORS(R). ‘There are many great buying opportunities for first-time buyers with property prices having been adjusted to meet current conditions.’”
“The DuPage Homestead Program… partnership cobbles together several funding sources to offer low-interest home loans, said Executive Director Dru Bergman. The center is seeing plenty of homeowners nearing the brink of home loss. Before the housing crisis began in 2007, about five families came in each month for the center’s foreclosure counseling services. Bergman said 54 families were counseled in 2006. The number has gone up each year since then, most dramatically in the recent year. In the first eight months of 2009, there have been 374 clients advised.”
“While some of the homeowners fell prey to bad mortgage offers, often it’s a good home loan that has run into bad luck. ‘In some cases we are having to sit down with the families and just have a reality check,’ Bergman said. ‘Sometimes we see homeowners who never should have been in the house in the first place (and) we have seen a fair number of people who got themselves into trouble because they took out equity loans.’”
“The window is starting to close on an $8,000 tax credit for first-time home buyers. ‘The National Association of Realtors estimates around one-third of home sales this year reported nationally are first-time home buyers. In a normal market, it’s between 10 and 15 percent,’ said Jim Gaines, research economist at the Real Estate Center at Texas A&M University.”
“‘Of the 24 buyers I’ve helped close since March, all but two were motivated by the tax credit,’ said Tracey Amaya, a Realtor with Re/Max Trinity. ‘A lot of them have been younger buyers and single women. The majority of the properties have been foreclosures.’”
“North Texas homebuyers who are hoping to find a huge supply of houses for sale may be in for a surprise. The supply of pre-owned homes for sale is down almost 17 percent from this time last year and has fallen by a quarter from the summer of 2007. The drop in inventory of newly built homes is even steeper – about 50 percent since mid-2007.”
“‘I’ve seen lately that the demand for homes that are in good condition and in the first-time homebuyer price range is huge and the supply is low,’ said agent Scott Schueler of Keller Williams. ‘If buyers take a weekend to think about it, forget about it. The home is already sold.’”
“In the town of Gunter in Grayson County, they’ve agreed to waive building permit and inspection fees for folks willing to build a house in a new subdivision. In Plano, city officials will no longer charge developers fees to help pay for infrastructure like water and sewer lines. There’s nothing like a home-building recession to get municipalities worried about the lack of construction.”
“This cycle is nothing new. We saw it before and after the great 1980s real estate crash.”
“The decline has been dramatic. Housing starts in the Dallas-Fort Worth area have dropped almost 70 percent during the last two years. And just this week, the last high-end condo tower being built in Uptown was finished.”
“At 83 years old, Alget Campbell isn’t as nimble as he used to be. His joints are a little rusty and he has some trouble getting around. On Monday, though, after he closed on his very first home, Campbell was doing cartwheels inside, his daughter said. ‘Your own is your own,’ said a satisfied Campbell, a native of Jamaica, who with his wife, will move into their Miramar townhome in about a month. ‘I want something for myself. I don’t like to pay other people’s mortgages.”’
“Home prices in Orange and Dutchess counties have fallen back to normal, if there is such a thing. That’s according to the latest…quarterly study by IHS Global Insight. The study found that homes in the region were ‘overvalued’ by just 1.4 percent during the second quarter of the year. A year ago, homes were overvalued by 13 percent. Three years ago, near the height of the housing bubble, homes around here were overvalued by 28.7 percent.”
“The study compares actual home sale prices with expected prices based on historical trends, inflation and other factors. A combination of falling prices and the passage of time seems to have brought the market back into line.”
“‘That should mean we are at the bottom. I think we are,’ said Ann Garti, CEO of the Orange County Association of Realtors. ‘I don’t see prices going lower.’”
“Homebuilders and Realtors are lobbying Congress to keep alive the tax credit for home purchases and to make it available to more buyers. They say the $8,000 credit—which is for people who have not owned a home for three years or more and expires after Nov. 30—has boosted demand for low-priced homes, many of them foreclosed and in need of repair. But, they maintain, it has done nothing for the ‘move-up’ market, let alone the luxury segment.”
“There is evidence that sales fall when credits expire: In California, homebuilding slowed in July after a $10,000 credit for newly built homes expired. And with the rush of summer buying over, the market remains vulnerable to rising unemployment as well as a new wave of foreclosures, which could flood the market and drive down home prices.”
“With prices down and mortgage rates low, housing affordability is the best in years for those who can qualify for a mortgage (admittedly no easy feat). Michelle Meyer, an economist with Barclays Capital in New York, says that while the tax credit did contribute to the lift in sales and prices, ‘A lot of it has to do with greater affordability and a brighter economic outlook. Even if you say some of the gain is artificial, it’s still true that we’re seeing an increase in housing demand, and that shows fundamental strength.’”
“Washington County’s residential housing market has encountered dramatic losses in recent months, but some industry experts are beginning to notice encouraging signs indicating future growth. Lecia Langston, regional economist for the Department of Workforce Services, said the county’s residential housing market has witnessed its worst crash in recent memory, but the industry is expected to recover slowly as time heals the deep wounds inflicted by widespread greed and overconfidence.”
“The trend is likely to continue for the foreseeable future, said Jeremy Larkin, a local realtor. Several years ago, Larkin said bank-owned homes were somewhat rare in Washington County, but distressed properties currently represent 60 to 70 percent of his business as a realtor. ‘Foreclosures were not even a discussion item in the mid 2000s,’ he said, but distressed properties have grown in prevalence, and he expects the trend to continue, stifling housing growth in the county for years to come. ‘I don’t see dramatic growth for a long time because we are going to continue to see foreclosure activity,’ he said. ‘This is going to be a multi-year trend.’”
“‘This will take a while to work through,’ Langston said. ‘It’s not going to be a quick fix.’ Leading to the downturn, home values were artificially inflated amid rampant speculation.”
“‘What people forget is that anytime there is a chance of great gains from speculation, there is also an equal possibility that you are going to lose everything,’ Langston said.”
