Prisoners In Our Own Homes
The Globe & Mail reports from Canada. “For the throngs wandering through open houses this weekend, it may feel as though they fell through the looking glass while they were peering into closets. The downturn seems like a bad dream. Housing prices have rebounded, formerly gun-shy buyers are back on the market, and bidding wars abound. Has real estate got its boom back? 24-year-old…first-time buyer Chelsey Perrella…has been looking for a townhouse or apartment with her boyfriend for the past three months, and she does the open-house circuit most weekends in Vancouver’s popular Kitsilano and Fairview neighbourhoods.”
“‘We didn’t know how hard it would be,’ she said. Her favourite property to date - a townhouse with a rooftop patio - went for more than asking in a bidding war, but Ms. Perrella says she intends to keep searching, despite the competition. ‘We want to get into the market,’ she said. ‘You don’t want to miss out on anything.’”
The Vancouver Sun in Canada. “I cannot say the Wesbrook is an economics textbook definition of luxury. I can, however, tell you the homes are ready for occupancy. Wesbrook purchasers will buy a finished home. Building and grounds are not artist’s renderings. The homes are neither renderings nor floor plans. Their doors can be opened and closed. Some of them were sold before or during construction and are occupied. Most of them, however, are unsold and unoccupied.”
“‘So, often you go into a project and what is represented is totally day and night. It happens,’ says Lily Korstanje of Magnum Projects, who, with brother George Wong, is a pioneer of the sale and purchase of a home before construction, a business model the international financial crisis shattered last September.”
The Province in Canada. “Canadian real estate remains a bargain compared to the rest of the world, but Vancouver’s red-hot market is still the country’s most expensive, according to a new Coldwell Banker study. Vancouver realtor Marline Kolterhoff, who has been in the business for more than 38 years, said many Canadian markets such as Burnaby with an average price of $655,497 remain affordable even if Terminal City has gone sky-high.”
“‘When I started, bungalows were $17,000 or $18,000,’ Kolterhoff recalled. ‘I remember a manager saying: ‘One day these homes will be worth $100,000,’ and we all laughed and laughed and thought he was hysterical. Now, you can’t get anything for under $900,000.”
The Seattle Times in Washington.”Michael R. Mastro didn’t have to seek out investors. They came to him. The veteran Seattle real-estate developer’s reputation for making people money spread for 40 years by word-of-mouth, from friend to friend and generation to generation. One by one, the folks Mastro called his ‘Friends & Family Investors’ would come to his inconspicuous office on Rainier Avenue South and listen to him talk about his pending projects. Then they’d write big checks and take home promissory notes pledging they’d earn interest of 8, 9, even 12 percent — and could pull their money out any time.”
“But Mastro’s long, successful run came to a crashing end last month when three banks forced him into what may be Western Washington’s biggest, most complicated bankruptcy ever. And his Friends & Family — about 200 investors owed more than $100 million — are the creditors most at risk.”
“‘I’m certainly not holding out much hope,’ said Dave Carlson, co-owner of a Seattle firm that invested much of its cash with Mastro two years ago, when asked if he expects to get any of his money back. ‘Obviously, looking at it now, what we did was kind of a big mistake.’”
The Olympian in Washington. “Downtown’s historic Capitol Theater building, which was put up for sale in April, has a new selling price and a new tenant. The building also has lost one tenant since April but will gain one more starting next week. The building has five ground-floor retail spaces and 10 loft/office suites on the second floor, said Ryan Clintworth, the listing agent for the building.”
“Building owner Gary Holgate of Chehalis, citing health concerns, put the 21,000-square-foot building up for sale this spring for $1.8 million. After the building failed to attract a buyer in the past six months, the price was lowered to $1.45 million, he said Friday. Although the building has yet to find a buyer, it has received interest from prospective buyers including an undisclosed Bellingham resident who at one time had the property under contract, Holgate said.”
“‘We just couldn’t strike a good deal,’ he said. ‘That’s the only one we’ve had that made an offer and put money down.’”
The Billings Gazette in Montana. “Russ Squire didn’t anticipate a gravel and asphalt operation across Highway 78 when he planned The Spires, his upscale sustainable subdivision on the northwest edge of Red Lodge. He knew there would be commercial activity across the two-lane road, he said, but no one imagined heavy industry on the picturesque bench above the town. ‘Our investment is toast if this happens,’ Squire said.”
“Squire said The Spires is plotted for 96 home sites in its first phase, though almost all are empty. He said he doesn’t expect much interest until the nation’s economy improves and until the gravel pit issue is decided. ‘This is not good for people. It’s toxins, noise, dust and increased traffic,’ said Ed Williams, who owns a home in Red Lodge Country Club Estates. ‘Property values will be affected, too. They could decrease 10 to 50 percent, depending on how close you live.’”
‘In a letter to Squire, real estate agent Dorthea Lowe wrote, ‘One of the assets of Red Lodge is air quality, and for the sake of a handful of seasonal jobs, this shall be compromised? Red Lodge is a recreational area, which will lose its appeal once poisonous fumes are starting to drift across the city, and it will negatively affect the marketability of any real estate and tourism in Red Lodge, quite possibly making us prisoners in our own homes and reducing all property values in and around Red Lodge by up to 56 percent.’”
The Flathead Beacon in Montana. “The nation’s rural homeless rate is soaring. In Montana, it has really grown wings. Exacerbating matters in Montana are the state’s high foreclosure rates, which are particularly prevalent in the Flathead. Lori Botkin of the Flathead Food Bank said her agency is consistently flooded with families, many from the middle class, which represents a dramatic shift from past years. ‘We’re not seeing the live-under-the-bridge homeless,’ Botkin said. ‘It’s more middle-income families. They come in, they’re well dressed; they drive nice cars.’”
New West on Wyoming. “Few places evoke the Wild West of range wars and land feuds more than Johnson County, Wyoming. Now Johnson County is making another transition: moving from an agricultural county to a mineral and residential county. The place has lovely landscapes and vistas, fertile ground for new housing developments for the energy workers, retirees, and second-home seekers who are moving in.”
“Wayne Graves, a tall, lean cattleman from Barnum who sits on the Johnson County planning and zoning commission, has watched land-use debates in the county for a long time. In 2006, a neighboring rancher, Nicky Taylor, divided 53 acres of her property into ‘Outlaw Acres,’ a 20-lot subdivision within sight of the Graves’s front porch.”
“About a dozen adjacent land owners showed up at the planning and zoning meeting to protest Outlaw Acres, according to Johnson County planner Rob Yingling. They objected…that the project was 17 miles from the nearest town, Kaycee, so that providing basic services would be a financial burden on the county. Graves said the cost of plowing roads and providing ambulance service to subdivisions such as Outlaw Acres ‘would tax us right out of this nation.’”
“‘It was not a good place for rural subdivision,’ said Yingling flatly. Not one lot in Outlaw Acres sold. The entire 53-acre subdivision is up for sale as a single parcel.”
The Idaho Press Tribune. “Key economic indicators such as the unemployment and foreclosure rate have not reversed their negative trends in recent months, but signs are emerging of better days ahead. Many experts see hope in the fact that those statistics are not getting much worse, either — possibly signaling the end is near for the worst economic downturn since the Great Depression.”
“After a record number of default notices totaling 819 in July, the Treasure Valley saw a 10 percent decline in foreclosure starts filed in August, according to IdahoDataProviders. ‘A 10 percent decline is always a good sign, but when we are talking record numbers of 700 to 800 foreclosures month over month like this its still pretty tough to take,’ president Charlie Nate said. ‘Hopefully in the coming months this trend will continue but I am not optimistic that we will see that.’”
“The number of short sales listed on the local market has also shown signs of stability in recent months, although the number continues to rise with August up 2.98 percent with a total of 2,765 short sale listings.”
From KXLY in Idaho. “If you’ve been looking for a truly unique home in North Idaho, the search is over. A barrel shaped drive-in restaurant is the talk of Osburn’s real estate market. The 80-year-old drive-inturned home was originally listed for $249,000, but the price has been slashed on the barrel-shaped domicile to $75,000.”
“Six or seven years ago, someone decided to transform this commercial property into a residential one. Now after being repossessed, this three bedroom, one bath property is for sale. Tomlinson Silver Valley Realty says a dozen or so families have looked but still no takers.”
“‘It has some unique features, lets put it that way,’ said realtor Roger Crigger. ‘Its going to take just the right person to want to buy this house as a home.’”
The Register Guard in Oregon. “Many things drew Ann Marie Mehlum toward a career in banking. She knew the ins-and-outs of the profession from childhood. Her father, Johan Mehlum, began as a teller and eventually became a branch manager and moved into executive positions. He launched Siuslaw Valley Bank — now Siuslaw Bank — in 1964, and remains president and CEO of the 10-branch bank at age 81.”
“Ann Marie Mehlum was at the helm as a group of local investors raised $10 million in capital five years ago and opened Summit Bank. It was Eugene’s first start-up bank in more than 25 years. Q: A common complaint among business people is that banks aren’t willing to loan money right now, or they’re short on capital. Is that true, or are banks just being more cautious or selective?”
“Answer: ‘There are a lot of factors. One is that there’s not near the loan demand that there was. Our pipeline is probably two-thirds of what it was a year ago, and of that pipeline, much less of it would be considered lower-risk, higher credit-quality demand.’”
“‘We are seeing sort of a last-gasp kind of loan demand, that’s really tough to do. It’s interesting, because the last thing that I want to do is make a loan to someone who wants to keep borrowing money to stay in business when deep in my heart of hearts I’m expecting that’s going to be the straw that breaks the camel’s back. You can’t be that kind of lender, but that’s tough in these times, because there are people who think if they just had more cash …’”
“‘I think that there is less willingness to take risk on projects that three years ago wouldn’t have seemed so risky. Anything speculative in construction, those are things that just don’t make sense to do right now. Those kinds of projects aren’t being funded. But where are they really being requested? That’s the thing. People think that we’re saying no. We’re not saying no, we’re not being asked.’”
“Q: How long do you expect the fallout from the highly publicized bank failures to last? Answer: ‘The administration is proposing sort of a super regulatory agency to manage the risk (and) figure out how to supervise them. And personally, my view is that will not be effective. I’m really hard-pressed to believe that (with) a $1.7 trillion organization (such as Bank of America), not only can it not be managed very effectively, I don’t think it can regulated very effectively. I just think it’s too big and too complicated.’”
“‘When I know how difficult it is just to really know where our risks are in this organization, the idea that even with an incredible organization and incredible team, that I could understand where the next shoe’s going to drop in a $1.7 trillion bank, to me we’re kidding ourselves.’”
“‘In 1999, that’s when Gramm-Leach-Bliley (the Financial Services Modernization Act of 1999) passed, and the essence of that regulation was that it allowed banks to be in the securities business and insurance and all kinds of stuff. I went back and looked at it a couple weeks ago. When it got passed, there was a lot of lip service and a lot of support for it, because they said they were going to make sure that they would not allow companies to get too complicated or too big, to present undue risk.’”
“‘Not to worry — they were going to take care of it, because the argument against that passing was, ‘How are we going to really make sure that these organizations function correctly and don’t take on too much risk and endanger the economy?’ That was all discussed.’”
“‘I went back on the Web site, the FDIC Web site, and … at the time (1999), there were 12,978 banks, with less than $500 million (each in total assets), which comprised 24.5 percent of the total assets of commercial banks (in the United States). There were three that had greater than $100 billion in total assets. And this is where we are today: basically 7,000 of the 8,000 banks (have less than $500 million in total assets). But we’re down to 7.3 percent of the (country’s) total banking assets.’”
“‘Why are we doing this? What is the reason to make the giant companies? They’re not more profitable, either. I don’t know why we’re doing it.’”
“‘I think we have a little opportunity right now in our history to rein this in, but I don’t know if that’s the direction they seem to be taking in Washington. They’re trying to devise some new regulator that’s somehow going to be smarter and better than past regulators. So I’m concerned about the future of it.’”
“Q: How do you break up the behemoths, or make them smaller? Answer: Maybe what you do is give them time, over a certain time frame. One of the things they are saying they’re going to do, but I haven’t heard any number yet, is that if you want to be that big, you’ve got to have a lot more capital, and you’ve got to have a lot more liquidity. The thing is, those giant organizations are so complex and have so many different subsidiaries and everything else, I really don’t think anybody could really (assess) them.’”
“‘When regulators come into our bank, the FDIC usually comes in with like 10 people for two weeks. They can turn over every rock here, and they do. You cannot turn over every rock in a (behemoth bank). What is $1.7 trillion? Can you get your mind around $1.7 trillion? I just don’t see it.’”
“Q: Is the public’s distrust of some of these bigger banks affecting smaller ones such as Summit? Answer: ‘Well, I was somewhere getting my hair cut a few months ago, and the gal asked me what do I do, and I didn’t want to tell her I was a banker. Whereas a few years ago, I was always proud of it.’”
“‘To me, banking has always been a noble thing…It’s something that I’ve always been so proud of. Well, I’m not proud of my big banking brothers, at all…I think that large banks are very, very short-term oriented, and there’s no reason not to be for them when you look at it, the way they’re set up. So I think if we’re going to leave them set up that way, we’re asking for trouble.’”
“‘I think it’s a very important challenge. Capitalism does not work if you can’t be allowed to fail.’”
“‘If you’re looking at quarterly growth and quarterly earnings all the time, then it just sort of goes unbridled. It’s just capitalism gone awry. As a citizen I’m frustrated and angry, and as a banker I’m sad about it.’”
The Williamette Week in Oregon. “When Sharon and Neil Anderson moved from the Bay Area to Portland’s South Waterfront in December 2007, they paid $1.4 million for a 12th-floor condominium with breathtaking views of the Willamette River. Now that same 2,200-square-foot condo elsewhere in the Atwater Place condo building could go this weekend at auction for as little as $699,000—or about half what the Andersons paid less than two years ago.”
“‘You could say that’s disappointing,’ admits Neil Anderson. ‘But there’s no blame to be handed out. That’s just the way it is.’”
“Lloyd Kendrick also lives in the Atwater. He has no regrets about buying his one-bedroom condo in January at $350,000. Those condos were originally priced at more than $500,000, and will now be auctioned off starting at $219,000. ‘If you spent $20,000 on a Mercedes and someone else later got it for $5,000, you might be upset,’ he says. ‘But in the end, you do still get what you wanted.’”
