The Risks Just Were Not There
It’s Friday desk clearing time for this blogger. “They won’t be home for Christmas, but a Roslindale family who lost their house to foreclosure, just miles from where Bank of America’s CEO lives, still hopes to have a happy new year. ‘If we can do anything to get our home back, we’re willing to work with (the bank),’ said Joseph Coyne, who attempted to resume living in his former home on Wednesday ahead of Christmas.”
“Coyne and activists from the group City Life entered the vacant home and were working to get the utilities back on when police arrived and asked them to leave. They complied, but hope to convince Bank of America to let Coyne, his wife and seven children return and rent or repurchase the house at current market prices.”
“The Coynes admit they cashed out some $200,000 during the housing boom, but claim a slick mortgage broker pushed them to refinance over and over again. The couple says most of the money went to paying parochial school tuitions for their kids, who range in age from 4 to 19. ‘Even though we signed the papers, we had no idea - no idea - that things would go like this,’ Margaret Coyne said. ‘It took five minutes to sign our lives away and not realize what we had done.’”
“Like many middle-class Americans, Greg Staffa of Farmington quickly spiraled from joblessness into foreclosure. This Christmas, home will be a late-model Ford. One of the last Minnesotans to lose his home in what has been a tough year for foreclosures, Staffa drove away from his Farmington townhouse at daybreak Saturday, joining more than 26,000 others closing the door behind them for the last time.”
“Job loss, a bad economy, foreclosure, impending bankruptcy — all of this year’s headlines seem to have converged on Staffa, a formerly homeless man who thought he was doing everything right in 2005 when he worked a $20-an-hour job and bought a modest townhouse on a cul-de-sac.”
“It cost him $154,000 — well within his means at the time. ‘I didn’t buy more than I could afford,’ he said.”
“The real estate woes of Virginia Beach developer L.M. Sandler & Sons Inc. have strangled any hope – at least for now – that two of its projects near North Carolina’s coast will be built out with the lavish features that were promised. Building at the Sandlers’ San Rio Ocean & River Club in Shallotte, has come to a standstill as bankers and lawyers bicker. At issue are who will be responsible for the project moving forward and whether the owners of more than 60 sold lots have any recourse in recouping their investments.”
“Until 2008, when the housing crisis was reaching its peak, it seemed that any project touched by brothers Art Sandler and Steve Sandler turned to gold. They made millions of dollars developing master-planned communities in Florida, North Carolina, Virginia and elsewhere along the East Coast.”
“In 2007, Wakefield turned its eye toward the coast by opening a division to develop projects there. ‘They promised all these great big, wonderful things and never followed through,’ says Bruce Kertcher of Calabash, who was among the first lot buyers at San Rio. He and his wife, Sandra, paid $199,000 for Lot 3 in the first phase of San Rio in June 2007 after being treated to helicopter rides to view the property, a tour of Holden Beach, where they would have access to a beach clubhouse, and a stack of glossy marketing materials.”
“The Kertchers had retired to Calabash in 2006 and investigated several coastal projects before buying the lot in San Rio. They planned to build a home where family could gather or that they could later sell or rent. ‘We still have a piece of property, but it’s not marketable or ‘buildable’ right now,’ Kertcher says.”
“Kertcher is one of 25 lot owners in San Rio who have filed a lawsuit against the owners of San Rio alleging breach of contract, misrepresentation, fraud and deceptive trade practices.”
“The best thing to say about 2009 is that it’s almost over. And here’s hoping that 2010 brings better days to the Dallas-Fort Worth real estate business. A few years ago, flocks of building cranes roosted on almost every corner of the Dallas skyline. Now the credit crunch and national recession have pushed this noble bird to the brink of extinction. But for a few public sector projects, almost all the cranes have flown the coop.”
“If you build it, they may not come. That’s what developers of Dallas’ Victory Park project learned the hard way. The ambitious project tried to light up the northwest side of downtown with new shops, restaurants, residences and offices. But the stalled economy and credit woes were too much for parts of the development to overcome. In July, Victory Park’s developer, Hillwood, handed over its ownership in the buildings to the German banking groups that financed the deals.”
“A map inside the sales office of KB Home’s Riverbend development in north Stockton is marked by magnets indicating which lots have been sold, which are built on, and which are still available. An indication of how times have changed for home builders, only a quarter of the lot spaces on the map are filled.”
“There has been a 180-degree spin for the housing construction industry, which blew into a massive bubble at the beginning of the decade but eventually popped, creating financial turmoil that may take years to clean up. The beginning of the housing boom in San Joaquin County was a result of supply and demand, University of the Pacific Business Forecasting Center Director Jeffrey Michael said.”
“‘You have to go back to the late 1990s and the (tech industry) boom in the Silicon Valley spilling over across the (Altamont) pass,’ Michael said. ‘Population growth really picked up in this area after what was a pretty weak decade for new housing in the ’90s.’”
‘Thousands of building permits were issued each year in the early 2000s in the county’s largest growing cities - Lathrop, Manteca, Stockton and Tracy. Pockets of new home developments sprouted in each location, luring buyers by offering more and more luxurious amenities. By 2005, San Joaquin County’s median home prices hit an all-time high of $400,000, despite only 11 percent of county residents able to afford such a mortgage, according to the California Association of Realtors.”
“It was not uncommon to see new homes advertised at $500,000 or more. Some neighborhoods would sell at triple the county’s current $170,000 median sales price. As housing prices increased, so did consumer confidence. The early 2000s was a period of low unemployment, fast and easy credit, and a strong stock market that helped fatten many portfolios.”
“‘And people have a lot of confidence in buying real estate in a growing region,’ Michael said. ‘Banks were confident, buyers were confident, and when you could get a loan with little or no money down, the risks just were not there.’”
“One indication of the state of the economy was revealed when Wells Fargo held its annual Economic Outlook not in an expensive resort convention center, but instead via teleconference. Four economists with Wells Fargo Securities generally shared one point of view — the economy will rebound, but will take years to return to levels seen a few years ago.”
“Foreign investments helped drive the economic boom in the early half of the decade, but have declined significantly. ‘The U.S. is not alone with the credit bubble,’ said Jay Bryson, global economist. There is little worry that China will see a credit crisis similar to the one in this country, however. ‘It’s not something that keeps me up at night.’”
“Real estate foreclosures, which have been prevalent among mortgages secured with no documentation or other marginal means, are now rising in the traditional lending market, said Mark Vitner, senior economist. Often even modified loans do not work out. More than 75 percent of modified loans are delinquent again after 90 days, he said.”
“‘It doesn’t matter if they are restructured if the homeowner doesn’t have the available income,’ he said.”
“There is a fine balance between what is good for consumers and what is good for banks, said John Silvia, chief economist and moderator of the discussion, with 75 percent of the economy based on consumer spending. ‘They want everything but can’t afford anything,’ he said. ‘If credit is extended and they can’t sustain the payments, the fundamental challenge is in (servicing the debt). How many do we expect to own houses. How many do we expect to own fancy automobiles. How many do we expect to own big-screen TVs.’”
“Since the phrase ‘A Diamond is Forever’ first appeared in advertisements in the late 1940s, the retail diamond industry has maintained a long, happy partnership with fairy-tale romance. The bridal business continues to be the lifeline for many Southwest Florida jewelers, even if other sales decline. For example, buying jewelry as fashionable gifts declined during the recent recession.”
“It may seem that diamonds have always been one of America’s most popular symbols of love. But it was not always so. De Beers and its subsidiary, the world’s largest diamond mining and selling operation, leveraged the timeless human emotion after sales fell off during The Great Depression. The company hired an ad agency to combine romantic images with the nowubiquitous catchphrase, and the twinkly gem captivated a starry-eyed public.”
“For many hopeful husbands, spending two or three months’ income on a diamond engagement ring became par for the course.”
“In Southwest Florida, the recession created a glut of diamonds that drove down prices on the street, even though diamonds have held their long-term value well. The market was flooded with people trying to get rid of their old diamonds. ‘People are selling diamonds to try to pay their mortgage or medical bills,’ said Mark Loren (of) Mark Loren Designs in Fort Myers,. ‘The supply is much greater than demand at the moment. It’s kind of like the housing market. You’re starting to see the best deals disappear quickly.’”
“‘What we are (also) seeing is people who took money out of real estate or other markets and put it into a big diamond, because it’s going to hold its value. We’ve had some clients that purchased big stones from us when things were really busy in the construction industry. And we’ve now helped them resell those big stones.’”
