Who Determines When Down Is Down?
The Great Falls Tribune reports from Montana. “The new owner of a real-estate agency in Great Falls says Central Montana is a far better market than her former home state of Arizona. Kathee Kalthoff recently bought an agency established 10 years ago. ‘The Montana market is consistent, there are not many homes in foreclosure and prices don’t fluctuate very much,’ Kalthoff said.”
“In contrast, she recently took her home in Tucson, Ariz., off the market after two years and will wait until conditions firm up in that area, Kalthoff said.”
The Billings Gazette in Montana. “Construction on hundreds of new Bar Nunn homes is scheduled to begin this spring. Casper businessman Rich Fairservis said the project will consist of more than 300 units. Single-family homes will start at about $160,000, while twin homes and cottages will start in the $120,000-to-$130,000 range.”
“Now is an excellent time to build, he said, because the cost of construction materials has declined dramatically. ‘I believe if the homes are correctly valued and correctly priced, that there’s still a market for it,’ Fairservis said.”
The Bozeman Daily Chronicle in Montana. “Gallatin County’s open lands preservation program officially began in 2000, prompted by booming growth — from 1970 to 1997, Gallatin County’s population grew by 88 percent — and county officials’ desire to preserve rapidly diminishing rural lands. Despite the popularity of the open lands program, its appeal may have soured somewhat in the recession. The federal tax incentives that gave landowners significant breaks for donating conservation easements expired last year and renewal is bogged down in Congress. Donations to land trusts have fallen off past levels. Development pressures have all but disappeared as subdivision projects stalled in the face of tightened lending.”
“Throughout the county, dozens of partially finished subdivisions sit vacant, begun in the construction rush preceding the 2008 bust and temporarily abandoned until their developers can secure the credit necessary to continue construction.”
“County Planner Randy Johnson has been busy fielding requests from developers seeking one-year extensions of their preliminary approvals. Johnson said he’s also seeing changes in the way developers choose to continue their projects. Many want to break their subdivisions into phases, to be developed at different times. Others are looking at smaller divisions, typically lot splits of five or fewer parcels.”
“Johnson said Gallatin County is in a prime position to get more acres for fewer dollars by capitalizing on the down market. It’s too early to know what will happen in the next five or 10 years with the real estate market, Johnson said. ‘For those who want to stay on their land, conservation easements will play an important role for them.’”
The Jackson Hole News & Guide from Wyoming. “In 2009, the number of real estate transactions fell to 223, down from a market peak of 1,122 in 2005 – a drop of 80 percent, according to The Hole Report. The dollar volume of property transactions fell from a peak of $1.57 billion in 2007 to $333 million last year, a drop of 79 percent, the report shows.”
“David Viehman, who is now a principal with Jackson Hole Real Estate Associates…noted that some sellers have dropped their prices to be competitive. Such an attitude is key to moving a property in the current climate. ‘If you must sell right now, ask your Realtor what they think your property is worth under a cold, hard light, but be prepared to move down as fast as you have to in order to remain competitive,’ Viehman said.”
The Magic Valley Times News in Idaho. “Count Mike Crapo of Idaho as one member of the U.S. Senate who won’t back embattled Federal Reserve Chairman Ben Bernanke when the chamber decides whether to grant him a second term. ‘He will vote against him,’ said Crapo’s spokes-man, Lindsay Nothern, to the Times-News. ‘Mostly it’s a lack of faith on where we’ve been going on financial policies.’”
The Oregonian. “Sen. Jeff Merkley would not disagree that Federal Reserve chairman Ben Bernanke has done a solid job in the past year steering the American economy away from complete collapse. But there is, the Oregon Democrat insists, a small complication.”
“‘He helped set the house on fire,’ says Merkley about Bernanke. ‘It burned down, and he turned out to be pretty good with a fire hose. There’s nothing to indicate that he’s the key to rebuilding the house now.’”
“As Merkley points out, during seven years when Bernanke was on the Fed board, he had nothing to say about the housing price bubble, the subprime mortgages that drove it, or the derivatives that almost brought everything down around them. Last July, as Bernanke testified before the Senate banking committee, Merkley asked him if he didn’t think there was a conflict between the Fed’s oversight of banks — guarding their profitability — and protecting the people borrowing from banks.”
“‘He said no,’ recalls Merkley, ‘and I said that response, to me, is frightening.’”
“‘He was Greenspan in philosophy,’ objects Merkley. ‘He felt the banks could regulate themselves. I thought we’d learned that lesson from the savings and loan crisis. He was in a perfect position to say these tricks and traps are not OK. We didn’t hear anything from him. We need someone to take on these issues when it’s not easy.’”
The Outlook in Oregon. “Launched in November, the Come Home to Gresham program provides zero-interest deferred payment loans of $10,000 to qualified homebuyers. The dollars, part of the federal Housing and Economic Recovery Act of 2008, must be granted by the end of September and used in four years. The program’s goal is to mitigate negative effects that foreclosed homes can have on neighborhoods.”
“‘Just so you know, there’s free money out there,’ said Chuck Grant, a mortgage banker with Directors Mortgage Inc. ‘But we have to find you a house first.’”
The Portland Tribune in Oregon. “Legislative committees are considering a bill for the February session that would release $19 million allocated last year but never spent, Nance says. The money derives from the state unemployment insurance trust fund, so it’s unlikely to be affected by the fate of two tax increases being considered by voters.”
“Walt Nichols has two big worries: his own finances and the state of his Mount Scott/Arleta neighborhood. He’s chairman of the Southeast Portland neighborhood association, and wonders what will happen as residents get more desperate when their unemployment benefits expire. Nichols also is receiving unemployment and is concerned that it might soon end.”
“Mount Scott/ Arleta is one of Portland’s poorer neighborhoods, and Nichols says it’s unwise to leave anything in a car or on a porch, or it could be stolen. He’s accustomed to seeing many neighbors out of work who are alcohol- or drug-dependent. Now he’s noticing a broader swath of people in trouble. ‘What we’re seeing now is more families, more people who have lost their homes,’ he says. One neighbor who lost his condo is living in a car in the neighborhood.”
The Ashland Daily Tidings in Oregon. “The Planning Commission will consider on Tuesday offering a “recession extension” to developers who have secured building permits but have delayed construction due to the economy. The extension would give developers 18 months, on top of the 30 months already offered, to begin construction.”
“The commission was divided over offering the recession extension when the issue first arose last September. Some commissioners called the extension a subsidy for developers, while others said it was an appropriate response to the recession. Commission Vice Chair Michael Dawkins and Commissioner Debbie Miller voiced opposition to the extension, while Commission Chairwoman Pam Marsh and Commissioner Dave Dotterrer spoke in favor of it.”
“Dawkins said he felt that changing the city’s rules now would be catering to large-scale developers, who assumed risk when they began their projects. ‘It’s like, who determines when down is down?’ he said. ‘All development is basically speculative and it’s all just part of the game or what happens.’”
The Gazette Times in Oregon. “Just days before the Witham Oaks property is due to be sold at auction, a group of local residents hoping to preserve the wooded acreage say they’re far short of having enough cash to buy it. But they also say they’re not about to give up their quest.”
“In November, the Friends of Witham Oaks announced plans to buy the 90-acre parcel and donate it to the city as open space. The land had been slated for a 221-unit subdivision, but developer Legend Homes abandoned that project — and the property — when it filed for protection from its creditors in bankruptcy court.”
“Members of the group acknowledge that’s not enough money to make a serious bid on the property. But they’re betting that no one else is waiting in the wings to buy it out from under them. ‘I doubt that anybody’s going to show up with $5 million on the courthouse steps, given the current economic market for that property,’ said Sherri Johnson.”
The Seattle PI in Washington. “The number of single-family homes and condominiums sold in the 19-county Northwest Multiple Listing Service fell 3.7 percent in 2009 and the value of the homes sold was off by 14.6 percent, according to a report from the Northwest MLS. The large drop in dollar value for homes sold can be attributed to lower home prices and more distressed sales, the report said.”
“San Juan County had the highest median home price at $443,500. King County was second at $380,000. For the 19-county system, the median price was $254,000. The median price for condos was $235,000.”
The Bellingham Herald in Washington. “The local commercial lending market has changed with the disappearance of Horizon Bank, and Seattle-based Washington Federal strengthening its presence. ‘In the first two weeks, the transition has been “very smooth,’ said Roy Whitehead, CEO of Washington Federal.”
“As for future lending, some of the standards might be different; Horizon’s aggressive lending practices were considered a factor in getting into trouble. He acknowledged that this is an environment where it is more difficult to get credit, but in some ways it should be because lending got way out of control.”
“‘Like consumers, we all need to work on paying down debt,’ Whitehead said. ‘Being leveraged is wonderful, but it is also a double-edged sword.’”
“With Bellingham-based Horizon Bank being shut down by Washington state government regulators on Friday, Jan. 8 and taken over by Washington Federal Inc., there was a clear signal sent to community banks that the Federal Deposit Insurance Corp. is paying attention to Washington banks struggling with non-performing commercial and residential loans.”
“‘There is so much uncertainty out there; banks don’t know what the rules are and if they will change,’ said Brian Finnegan, a commercial real estate agent. ‘Right now it is much easier to say no (to a commercial loan application) because they are deathly afraid of the FDIC.’”
“‘There are two worlds developing in commercial lending; one is business borrowing, which is still being done. The other is investor and real estate loans, which is seeing continued regulatory pressure,’ said Bruce Clawson, division manager at Banner Bank.”
The Seattle Times in Washington. “The parent company of First Savings Bank Northwest went deeper into the red last quarter. Much of the loss stemmed from the record $51.3 million set aside to cover anticipated loan losses. In 2008, by contrast, the company set aside just $9.4 million. Nonperforming assets — mainly delinquent loans and foreclosed real estate — totaled $132.5 million at year’s end, or 10.1 percent of total assets. Renton-based First Financial Northwest lost $40.7 million in 2009, which CEO Victor Karpiak called ‘a year which has proven to be the most challenging in the history of our company.’”
The Alaskan Daily News. “Alaska Pacific Bancshares has revealed new losses in a filing with the U.S. Securities and Exchange Commission. Craig Dahl, CEO of the Juneau-based bank, said the losses stemmed from a failed high-end real estate development in Telluride, Colo.”
‘Alaska Pacific has been struggling with several problem loans, made in participation with other small banks to finance large developments in Western states. ‘From an accounting and a regulatory point of view, the best thing to do was to charge it off and get it behind us,’ Dahl said.”
The Fairbanks Daily News Miner in Alaska. “Mortgage figures for Alaska confirm what many have said: The mix of low-risk mortgages here has helped protect housing markets from the troubles seen in many states. As of last fall, there were half as many homeowners in Alaska with subprime, adjustable-rate mortgages (2 percent of all homeowners) than in the country as a whole when measured as a percentage of the population, the state Department of Labor reported.”
“The numbers mirror previous comments from many real estate agents in Fairbanks. Federal housing specialists work closely with the state Housing Finance Corp. and local housing agencies, said Eileen Cummings, president of the Greater Fairbanks Board of Realtors. ‘These groups do a great job of screening the potential buyers and limiting the risk,’ she said.”
The Columbian. “Beneath the screaming headlines of bankruptcies, layoffs and foreclosures, fundamental economic shifts are occurring that will affect the growth of the regional economy over the next decade. Unlike past forecasts, I am sharing observations gleaned from the Clark County business community about the economic road ahead.”
“Banking (access to credit), especially for our regional community banks, will not return to normal in the near future. As our financial institutions repair tattered balance sheets, their focus will shift from loan origination/securitization to deposit acquisition, net interest income and fee generation. Credit standards will tighten significantly, loan-to-value ratios will decrease, and the personal guarantee will be the rule, not the exception.”
“I take no pleasure in pointing out the obvious: Residential, commercial and speculative industrial development will not recover within the next five years. The ramifications of this trend will be far-reaching, from the collapse of fee and sales tax revenue for local governments to a significant reduction in construction employment and personal income.”
“We were fully aware that the regional economy was heavily leveraged to residential growth and development. But we did not know how deeply we were dependent (addicted?) on growth-related tax revenues to fund basic services. Growth was to pay for growth, and then some. There is a massive reset under way as local governments ‘right-size.’”
“After reading the above. You may ask if there any positive trends? The trends we’ve mentioned are neither positive nor negative — just trends. Money is made in up and down markets. Profits, job growth and economic expansion can happen under these conditions, but not with traditional economic development or business strategies. Our job is to develop those strategies to ensure the recovery and continued livability of our community in Southwest Washington.”
