A Product For Which There Is No Market
It’s Friday desk clearing time for this blogger. “Spanish Trail, one of Las Vegas’ most affluent gated communities, is starting to feel the pinch of the recession. Some residents are outraged that Spanish Trail association directors have started a $4.1 million remake of the landscaping and plan to collect a $3,350 special assessment from each homeowner over the next two years to pay for it. Alex Forgette, a retired California lawyer, said he would like to buy a new Mercedes but is driving a 4-year-old Lexus because of the hard times. ‘The economic downturn has hit Spanish Trail just like it would anybody else,’ Forgette said.”
“Roughly 60 percent of existing home sales in Polk last year were distressed properties, and the county’s current median price of $107,600 is off 16 percent from the year before. Twila Jarvis purchased her home after moving here from the Seattle area in 2005. Earlier this month, Jarvis found herself packing the contents of her mobile home at Lakeland Harbor. She had fallen short on payments after two years without steady work. ‘It’s emotionally draining,’ she said. ‘This kind of lifestyle makes you want to take a long walk off a short pier.’”
“Foreclosed homes can still be found all across Merced. RealtyTrac reports nearly 8400 properties here received a foreclosure filing in 2009. ‘It doesn’t surprise me, just what I’ve seen since I’ve been here with UC Merced and the investors coming from outside, buying then losing, it doesn’t surprise me,’ said Spence Boelter, Merced Homeowner.”
“Boelter bought his home in 2007 and has watched its value plummet in the past few years. ‘It’s not, maybe I don’t know, might be worth half what it was when we bought it, so we don’t feel real good about that,’ Boelter said.”
“But there are some signs that the market is improving. Realtor Andky Krotik said more people are having success selling their homes now than a year ago. ‘It’s typical that new homes on the market are shown within 2 hours of being listed and are usually in contract within 2-4 days after they’re listed. It’s not uncommon. In addition to that for houses to sell for anywhere from 13-15 percent over the list price, said Krotik.”
“But Krotik says that’s largely because banks have artificially caused a lack of inventory as they face more government pressure to delay foreclosures. “In the past it would take 4 months, and now some are letting them sit there before they confiscate them for up to a year,” Krotik said.”
“He says more than a thousand homes are sitting empty in Merced County, but most are not available to sell.”
“Last year, there were foreclosure filings on 8,174 metro Birmingham properties, according to RealtyTrac. And along with new foreclosures hitting the market, there’s also the problem of shadow inventory — houses that have been foreclosed on but have not been listed yet. ‘There’s a lot of this foreclosure inventory out there, and it has the potential to erode home values further,’ said David Higginbotham, VP of Alabama Title Co. Inc. and the author of a monthly report on local foreclosures.”
“Linda Rheinberger, president of the Nevada Association of Realtors, said it appears short sales are the future as banks and asset managers catch on ways to avoid letting homes go into foreclosure. ‘There is a lot of political and social pressure on banks, especially those that received stimulus money, and they have been highly encouraged to do this,’ Rheinberger said.”
“President Barack Obama’s efforts to bolster the U.S. housing market, the trigger of the worst recession since the 1930s, may be undone by record unemployment and repossessions by lenders. ‘We’re working to lift the value of a family’s single largest investment — their home,’ Obama said in his Jan. 27 State of the Union speech to Congress.”
“The Federal Reserve said Jan. 27 it will keep the target rate for overnight bank lending near zero to help nurture the recovery. ‘Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,’ the Federal Open Market Committee said this week in a statement.”
“The statement dropped the previous reference to real estate that said housing ‘has shown some signs of improvement.’”
“U.S. Federal Reserve Chairman Ben Bernanke Thursday won confirmation from the Senate for a second term at the helm of the central bank. But he faced more opposition in the chamber than any previous Fed chief. President Barack Obama congratulated Bernanke on his confirmation and said he looked forward to working with him.”
“‘As the nation continues to face the consequences of the worst recession in a generation, Ben Bernanke has provided wisdom and steady leadership in the midst of the financial and economic crisis,’ Obama said in a statement.”
“Sen. Bernie Sanders, the Independent from Vermont who has led the opposition against Bernanke, said the Senate sent a clear signal to the Federal Reserve with a historic number of ‘no’ votes. ‘Start representing the needs of the middle-class and working families, not just Wall Street CEOs,’ Sanders said. ‘Break up big banks, and stop the secrecy surrounding trillions of dollars in blind loans,’ he added.”
“Critics say he helped fuel the housing bubble at the root of the financial crisis by endorsing low interest rates in the early 2000s, when he was Fed governor and Alan Greenspan headed the central bank. ‘I’m troubled that Bernanke refuses to take responsibility for the housing bubble,’ said Jon Kyl from Arizona, the No. 2 Republican in the Senate.”
“Despite the criticism, Kyl voted in favor of Bernanke, fearing President Obama might pick somebody worse in his place.”
“‘He allowed the Fed to become the lender of the nation. Nobody had ever done that,’ said Sen. Judd Gregg (R) of New Hampshire on Thursday.”
“Sen. Shelby voted against Bernanke, adding that the Fed chief’s actions in helping feed the housing bubble led to the economic melt-down in the first place. ‘I believe it is far more important to consider the facts surrounding Chairman Bernanke’s record than it is to speculate about the impact of his departure,’ said Shelby.”
“Housing markets appear to have stabilized for the moment, with Case-Shiller price indexes rising for six consecutive months and sales stimulated by federal tax credits and fixed interest rates below 5 percent. The Case-Shiller index for November was up 0.2 percent.”
“There is a wave of adjustable rate mortgages on which rates will reset in 2010 and 2011, said economist Kevin Gillen, vice president of Econsult in Philadelphia. ‘It was the reset of subprime ARMs in 2007 that was the specific trigger for the market’s downturn,’ Gillen said. ‘Will this coming wave cause us to double-dip?’”
“It appeared to the housing industry that the tax credit was a panacea, but Gillen suggested that ‘the true effect of the home-buyer tax credit is still unknown.’ ‘Did it truly halt the market’s decline, or just give us a temporary reprieve? We won’t know until after its expiration in April,’ he said.”
“What the tax credit might have done is pushed people who had been planning to buy in the first half of 2010 into the market in the last quarter of 2009 - meaning that sales will actually decline in 2010 as ‘payback.’”
“Another major factor is high unemployment. ‘People need to feel comfortable about buying a home again,’ Gillen said. ‘They not only need to know that they’ll be able to support their home’s value, but that their neighbors will be able to also.’”
“Although Honolulu finished 2009 with fewer foreclosures per household than the national average, the city’s foreclosure activity increased at more than six times the national pace over the last 12 months and is expected to worsen this year. On Oahu, Ewa Beach was the hardest-hit market followed by Waikiki, Kapolei, Waianae, Waipahu, Mililani, Kaneohe, Hawaii Kai, Kailua and Pearl City.”
“‘We had so many military buyers that gravitated to Ewa Beach in 2005 and 2006 that were on three- to five-year tours of duty,’ said David Kucic, a Realtor-associate with RE/MAX Honolulu. ‘Now that they’ve been transferred, they can’t afford to keep those houses and the rents aren’t covering the payments.’”
“As a result, certain neighborhoods such as Gentry’s Tuscany/Montecito have many listings that are in short sale or foreclosure, Kucic said. Ewa Beach homes that sold for $430,000 to $500,000 during the previous boom are now selling for around $390,000, he said.”
“Baby boomer buyers fueled a big run-up in U.S. home construction and sales in the 1970s and 1980s. Now beleaguered homebuilders say they’re hoping aging boomers, who are just entering retirement age, will once again give them robust housing sales. ‘The number of people in that age group is increasing, and there is a lot of promise out there,’ builders’ association economist David Crowe said. ‘The good news is they usually have a lot of home equity and can get a mortgage. The bad news is they have to sell a house.’”
“Most older homebuyers surveyed are holding down their cost expectations, industry research shows. ‘When we asked the consumer, ‘What are you willing to pay?’ they said $190,000,’ Crowe said. ‘And when we asked the builders, ‘What are you building [for this market]?’ they said $287,000. Obviously, there’s a real big problem there.’”
“The City Council voted Tuesday night to allow a developer to drop an age-restriction clause from a planned condominium project in a rural part of the city. The 9-1 vote gave Home Associates of Virginia Inc. permission to build 54 traditional townhouses, amending an earlier plan to build 60 condominium units restricted to people older than 55.”
“The market for upscale age-restricted housing is saturated, Eddie Bourdon, the company’s lawyer, told City Council members. ‘In our view, it doesn’t make sense to build a product for which there is no market,’ he said.”
“BankAtlantic Bancorp., set aside a $76.8 million provision for loan losses for the fourth quarter, which amounted to double the loan-loss provision it booked for the year-ago quarter. The banking company has posted 10 consecutive quarterly losses, putting its last profitable quarter at June 30, 2007.”
“‘We are still not seeing improvements in the local Florida economy,’ said Alan B. Levan, CEO of the parent company. ‘BankAtlantic’s losses are coming exclusively from continued writedowns on real estate, and we anticipate these losses will continue until the Florida economy turns to improvement.”’
“Much of troubled loan portfolio is on land parcels around the state ‘that were spoke for by national homebuilders, who walked away from options or obligations to buy the real estate’ amid the collapse in the housing market, Levan said. ‘Most of the losses come from reappraisals of real estate [the bank has loaned money on] for the second or third time, with continued reductions in valuation,’ he said.”
“During a meeting yesterday, Neil Chrystal, CEO of Polygon Homes Ltd. gave his take on the local real estate market, noting he was surprised by some of the incongruencies between this city and Vancouver. While both hit a wall in terms of real estate sales by November of 2008, consumer demand has long since returned in Vancouver, spiking prices and sales volume above the highs of 2008.”
“In Kelowna, however, that’s far from the case. ‘Vancouver bounded back and Kelowna got nothing,’ said Chrystal, adding he’s wondered what the difference could be and landed on the lack of appeal to the Asian consumer. ‘You are a resort market — a secondary home market a bit like Whistler— and that market continues to be dead. (The Albertans) left town and they aren’t coming back for awhile.”
“Condominiums are contending with weak pricing because there’s still an over-supply in the valley, and the more than 400 complete, empty and as of yet purchased units sitting on the market will act as an economic hangover.’”
“The House of Representatives has approved a bill to stimulate economic development by cutting taxes and creating new incentives for businesses, despite complaints from critics that the measure was rushed through before it could be understood completely. Democrats who opposed the bill said legislative budget staff hasn’t even had a chance to analyze what impact the tax cuts would have on the state’s general fund. They said the bill was a ‘corporate bailout’ because large companies will benefit most from the incentives and tax cuts.”
“It also will hurt homeowners by shifting more of the property tax burden to them because of the business property tax cuts, said Rep. Tom Chabin, a Flagstaff Democrat. ‘It is very clear that homeowners today cannot sustain this kind of burden,’ Chabin said.”
“Arizona has based its economy on the housing industry for decades, said House Speaker Kirk Adams. That makes the state particularly vulnerable to economic swings. ‘It’s well past time that we get serious in this state about attracting jobs,’ he said.”
