February 4, 2010

Catastrophic Negative Equity In The House

The Journal Gazette reports from Indiana. “When General Motors Co. closed factories nationwide last year, 700 laid-off employees were told a shift existed for them at the Allen County truck assembly plant. But hourly worker Charlie Cook says that while retaining a job these days is good news, his story doesn’t have a happy ending yet. The father of four is stuck living alone weekdays at the Extended Stay America hotel while his family remains in Michigan.”

“An apartment isn’t practical, and rental houses are at a premium, he says. ‘I have a house (near Pontiac, Mich.), and we’re just going to try to rent it out. But in the meantime, I can’t find a house here to rent,’ said Cook.”

“Real estate agent – and fellow GM worker – Andrew Z. Menchaca called the transferred workers refugees. ‘That’s the only way to put it, really,’ he said. ‘Imagine being told to move to another part of the country, to sell your existing house – if you can in this market – and find your kids a school. I mean, that’s a lot to deal with. That’s why there’s so much frustration and anxiety out there right now.’”

“About two weeks ago, the Allen County Council debated offering incentives to entice transferred GM workers to buy homes, but the council did not make a decision. Menchaca said offering such incentives would be premature because most people aren’t likely to buy a home in an area they know nothing about. ‘A lot of them want to try to get a feel for Fort Wayne before making any decisions,’ he said. ‘What they need is help and not someone pressuring them to buy a house.’”

“Beth Wyatt, executive director of the Apartment Association of Fort Wayne, said she doesn’t believe there is a shortage of rental homes. ‘We just need to get the information out there to them, so that they know what’s available,’ she said.”

“Even so, Cook said the situation remains tough for larger families. ‘I’m still looking for a home to rent,’ he said, ‘and I have to find someone for my house back home because I just can’t rent it out to anybody.’”

Crain’s Detroit Business in Michigan. “National economist David Crowe was clear about the best news he could offer to a room full of local home builders. ‘It’s over — 2009 is over, that’s the best news,’ said Crowe, chief economist for the National Association of Home Builders. ‘It was the worst year we’ve seen since there was a world war going on, and it is now behind us.’”

“Crowe, the keynote speaker for the Building Industry Association of Southeast Michigan’s award luncheon in Sterling Heights, said there is good news in the sense that things aren’t continuing to get worse. Looking toward 2010 home sales, Crowe showed an analysis of house prices relative to household income. The national average has shown a home costing 3.2 times a person’s income. After 2001, that rose to 4.7, and is back down to 3.3.”

“In the Metro Detroit area, the average home sells for 2.11 times a person’s income. ‘That doesn’t necessarily mean it’s time to buy, but it does mean someone can afford a home,’ Crowe said.”

The Detroit News in Michigan. “With housing values down more than 34 percent in the last two years, Metro Detroit homeowners are pretty much out of options for getting any cash out of their homes. For the large and growing number of homeowners who owe more than their houses are now worth, refinancing is out and so is a sale. But there is one small sliver of hope: lowering your property taxes.”

“One client has a tax value that is more than three times the real value of her home, says Lee Morof, a Southfield attorney who handles tax appeals. ‘It’s costing her an extra $2,000 to $3,000 a year. She’s having trouble making her house payment, and she needs that money.’”

“It seems like a lot of time and hassle, but the process can pay off, especially for homeowners who bought near the peak of the market in late 2005 and early 2006. ‘About 90 percent of the people I see, if they bought five years ago and they’re not doing this, then they’re leaving money on the table,’ says Morof, the attorney. ‘And I don’t know anybody in this economy who couldn’t use the money.’”

“So many condos have sprouted along Lake Michigan that developers can’t fill them. The influx has raised tensions, especially between the blue-collar locals and well-heeled Chicagoans buying the condos. Some locals celebrated the collapse of the housing market because it’s the only thing that has slowed the deluge.”

“But it also left the overdeveloped town with dozens of homes that have never been lived in and whose high prices prevent the middle-class from moving in. Nora Duffy, a real estate agent who is chairwoman of the Zoning Board of Appeals, defended the city against criticism that it failed to control development.”

“‘Could we have gone slower? Yes,’ she said. ‘But no one saw the (housing market) bubble coming.’”

The Morning Sun in Michigan. “Final figures for 2009 for homes sold by members of the Central Michigan Association of Realtors showed a year-to-year increase in price for 2009 compared to revised figures for 2008. The average sale price of a home sold by a Realtor operating in Gratiot and Isabella counties rose 1.82 percent, from $83,019 in 2008 to $84,530.”

“The Central Michigan association was the only one of the 41 local Realtors boards represented by the Michigan Association of Realtors to show a year-to-year increase. The average sale price of a Michigan home fell by 16.27 percent during 2009, to $99,121. That’s the first time since 1994 that the average sale price of a Michigan home sold through a Realtor was less than $100,000.”

“Michigan’s most expensive homes continued to be in northwestern Michigan’s Emmet County, with an average sale price of 209,682. That’s down 22.75 percent from 2008, and down nearly 35 percent from the peak year of 2006. That year, the average sale price of an Emmet County home was $321,106.”

The La Cross Tribune in Wisconsin. “More people are falling further behind on their taxes, figures from area counties show. Taxes delinquent by at least a year rose by about 25 percent on average throughout the region from 2008 to 2009. ‘There are people that have been laid off, lost their jobs. We hear it every day now,’ said La Crosse County Treasurer Donna Hanson.”

“Monroe County’s delinquent taxes saw the biggest one-year increase in this area, jumping 56 percent. But treasurer Annette Erickson said taxes on one property - the moribund Three Bears Resort in Warrens - accounts for about half of those unpaid taxes.”

The Post Crescent in Wisconsin. “When faced with mounting bills and limited job options in a down economy, a growing number of northeastern Wisconsin residents have resorted to filing for bankruptcy to eliminate their debt. The road to bankruptcy varies among individuals, said Alan Prahl, education manager for a Menasha-based financial counseling organization.”

“‘It’s tough to generalize, because there are so many causes behind it,’ he said. ‘Job loss, accidents, illness or sometimes it’s simple overspending.’”

“Prahl said business owners sometimes fall into debt quickly, especially in a down economy. ‘If your company say was a vendor that depended on the housing industry … well, the recession has hit that industry very hard,’ he said. ‘You become accustomed to a certain amount of income and it becomes difficult to adjust to less.’”

The Journal Sentinel in Wisconsin. “Marshall & Ilsley Corp. probably won’t start paying back the U.S. Treasury’s $1.7 billion TARP investment until next year, the company’s chief financial officer said at an investors’ conference Wednesday. ‘In all likelihood, it’s more of a 2011-type discussion,” Greg Smith said.”

“Milwaukee’s M&I, the biggest banking firm based in Wisconsin, has reported losses for five consecutive quarters. The bank’s loan portfolio has been hit by losses related to the recession and the housing slump, especially in Arizona and Florida. ‘I think the first hurdle is getting back to profitability before we can start having that discussion,’ Smith said.”

The Chillicothe Gazette in Ohio. “A Ross County woman trying to save her home from foreclosure testified in front of the Ohio Senate Committee on Finance and Financial Institutions Tuesday, advocating inclusion of funding in Senate Bill 197 for housing counselors.”

“‘The process of modifying my mortgage to allow me to stay in my home has been complicated, frustrating, and confusing,’ Beth Ann Allen shared with the Senate in her written testimony. ‘My bank seems like they’re putting every obstacle in my way that they can. In December, I was so tired and frustrated that I was ready to walk away from my house and take my three children to a homeless shelter…Without housing counseling, we would be homeless right now.’”

From WKYC.com. “Northeast Ohio part of a growing national trend in which homeowners in danger of being foreclosed upon simply walk away from their houses. As attractive as ‘walking away’ may appear, Cleveland organizations who work to prevent foreclosures say it is not the right choice. ‘Don’t do it,’ says Mark Seifert, Executive Director of ESOP, which has been assisting distressed homeowners for more than 15 years. ‘If you walk away, we can’t help you. We can only help owner-occupied properties, so no matter what the bank tells you, or no matter what the stress is at night, do not walk away.’”

“People considering walking away are those who have seen the value of their home fall to less than they owe on their mortgage. Many are in bust-and-boom housing states, like Florida and California. Jeff Horton is a Florida homeowner whose house is now worth about half of the $255,000 he paid for it three years ago. ‘Why would I continue to pay all this money every month, and cut back on the things that I enjoy doing,’ Horton told NBC, ‘just to make the payment when there’s catastrophic negative equity in the house?’”

The Buckeye Lake Beacon in Ohio. “A challenging real estate market throughout most of 2009 has given way to renewed optimism as Ohio’s housing sector was buoyed by strong fourth quarter sales and a clear uptick in the average sales price, according to statistics provided by the state’s MLS. ‘Despite the dire economic conditions that gripped the nation, more than 104,000 homes were sold…a clear indication that the desire to make the American Dream of homeownership a reality remains strong throughout Ohio,’ said Doug McCloud, president of the Ohio Association of REALTORS ®. ‘We remain bullish on the marketplace – as interest rates remain at historic lows, prices have stabilized and begun to trend upward, sellers are realistic in their expectations and consumers understand that long-term, owning a home is a tremendous investment.’”

From News Net 5 in Ohio. “Cleveland police and fire officials have only offered limited information about the cause of the West 83rd Street fire and explosion. Investigators announced Tuesday that the cause was intentional, but did not want to tip their hand to potential suspects or witnesses. Meanwhile, the chief investigator has been looking into the company that owns the home that exploded.”

“EZ Access Funding, LLC and its owner, Newport Beach, Cal. Attorney, Marc Tow, have been buying up foreclosed homes across Cleveland. The California group now owns 85 houses here. There are tons of active cases in Cleveland’s housing court against the firm that also owned the home on West 83rd Street that exploded. Files in housing court show big violations and big money owed.”

“Councilman Matt Zone said it’s time to crack down on EZ Access Funding and other out of state firms like it. ‘How can we strengthen local ordinances to prevent speculators, like this individual and EZ Access from preying upon innocent people?’ Zone said.”

The Chicago Tribune in Illinois. “Chicago Spire developer Garrett Kelleher’s effort to build the nation’s tallest building in Chicago is threatening the viability of one of his Ireland-based firms. Clarinabbey Ltd., a subsidiary of Kelleher’s Shelbourne Property Group, lost $197.2 million for the year ended March 31, with much of the loss tied to an intracompany transfer of funds for the Spire.”

“The company said it made a provision of $187.8 million against money due it from sister companies because it was unsure that those funds would be recovered. That sum includes advances and loans made in 2008 totaling $153.4 million to Shelbourne entities associated with the Spire. The annual financial accounting of the company…said most of the covenants tied to the company’s bank loans are ‘technically in breach’ and that Kelleher and other directors are seeking a ’standstill agreement’ with its banks.”

“If such an agreement cannot be reached, the directors’ report submitted with the financial statements said ‘there exists a fundamental uncertainty over the company’s ability to meet its obligations as and when they fall due.’”

The Daily Herald in Illinois. “Officials at the Northern Illinois Food Bank say the increase in the number of people in the region needing food assistance is ‘exploding,’ and the recession is to blame. Lake Villa Township Supervisor Dan Venturi said he can sometimes spot the first-timers by their cars.”

“‘Someone may drive in with a Lexus. These are people who have lost good jobs and their circumstances have changed,’ Venturi said. ‘They were otherwise affluent before the economy turned.’”

The Citizen in Minnesota. “Three years ago, Mayor Mary Capra envisioned ‘the biggest change to the community in the past 150 years’ as the city adopted its Master Plan and Development Guidelines for the city’s Downtown Redevelopment Plan. The largely residential area was rezoned to Mixed Use. State grants began flowing in. Architectural standards were developed and adopted. A partnership was formed between the city and Beard Group, the developer selected for the project.”

“And then the economy went belly up. Most of the grant money has had to be returned, unspent. Bond payments for the Main Street improvements will be paid out of the tax levy for the foreseeable future instead of from TIF District proceeds. For the owners of the 40 or so nonconforming residences in that area, the plans they may have had to expand their homes to meet the needs of their growing families are now prohibited under zoning rules.”

“January 11, 2007 was a red-letter day for 26-year-old Ryan Lewellen. That was the day he became the new owner of his very first home, a 12-year-old house on Heritage Street. ‘The housing bubble was already bursting,’ Lewellen said. ‘I thought I was getting in at a fairly good time.’”

“When Margaret Gainsley bought her 1-1/2-story 1946-vintage home in 2005, she was a single mother with two children. ‘I like older homes,’ the engineering document specialist said. ‘I could have purchased a split-entry house for $320,000 or I could buy this older home with a lot of land for $220,000.’”

“She met and married Olaf Lee two years later. Together, the Lees’ blended family numbered seven. The couple needed more elbow room, and they considered selling. In consulting a realtor, the news wasn’t good: the recommended sale price wouldn’t begin to pay off the mortgage, Margaret said.”

“‘How am I supposed to sell my property, when [the city] is telling the community that this area is blighted?’ she asked.”




Bits Bucket For February 4, 2010

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