The Housing Bubble

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

The Mercury News reports from California. “Central Valley real estate agent Donny Piwowarski last year sold his four-bedroom, 3,500-square-foot house on a half-acre in Tracy for $387,000 — about half of what he paid for it in 2005. Under California tax law, Piwowarski owes tens of thousands of dollars in state income tax on the nearly $400,000 in mortgage debt that was ‘canceled’ when he sold his house for less than what he owed. ‘I paid a pretty penny, $765,000, for that house,’ he said. ‘Now I have nearly $400,000 in canceled debt sitting out there that ultimately I’m going to be taxed on by California” if the law doesn’t change.”

“Piwowarski was forced to short-sell his house when he could no longer afford the payments because his income had dwindled, and he and his wife were separating. If California law doesn’t change to mirror the federal rules, he said, he’d have to pay his huge tax bill in installments ‘for the rest of my life.’ ‘It would financially wreck me,’ he said.”

The Fresno Bee. “The number of building permits for new houses issued so far this year in the Fresno area is at its lowest level in years. Through February, about 153 permits were issued for new houses in the Fresno market, the California Building Industry Association reports. That’s a far cry from the region’s heyday a few years ago.”

“Home starts this year are off nearly 40% from early 2009, and Michael Prandini, CEO of the Building Industry Association of Fresno and Madera Counties is not sure why. ‘Maybe people are holding off or haven’t decided to jump in for a federal tax credit,’ Prandini said.”

The Pasadena Star News. ” California’s housing market may be headed for a slight recovery - but it’s not going to happen quickly, according to one industy expert. Michael Carney, a professor of finance and real estate at Cal Poly Pomona, said that Southern California home sales and prices may be stabilizing, but ‘I don’t think it’s going to continue. If it does continue, I think it’s going to be very slow.’”

“‘In California, you’ve got to look at the composition of the labor force,’ said John Silvia, considered one of the top 10 forecasters in the country - so named by Bloomberg - (and) the managing director and chief economist at Wells Fargo and Co. ‘It’s heavily weighted in construction. It’s not surprising the unemployment rate is as high as it and that it’s not turning around.’”

“He predicts unemployment in this area will stay above 9 percent through 2010 at least. His presentation indicated that California’s housing recovery is ’subpar compared to prior cycles’ and that improvement is relative. He doesn’t think last quarter’s increase in value and activity refutes that. He says there’s no doubt that those improvements were biased by government incentives and other factors, and we’ll be back at 1 percent increases when those influences end.”

“‘In my opinion, if there is a change, I think it’s going to get worse,’ said Carney. ‘I certainly don’t see any huge recovery. The financing is not coming back. A lot of foreclosures are in the wings. If unemployment stays the same, surely we’ll see more defaults and foreclosures.’”

The Desert Sun. “The Coachella Valley has begun its economic recovery, though job growth isn’t expected until the end of the year, The Desert Sun’s latest economic index report shows. The first quarter of the year should boast an 86.7 — the best rating since the middle of 2008, said economist Esmael Adibi, director of Chapman University’s A. Gary Anderson Center for Economic Research, who compiles the index. ‘It’s a big jump,’ he said, but it’s still 13.3 points from 100 — when job creation begins. ‘It means we’re still going to lose jobs, but at a slower rate.’”

“The streets of El Paseo in Palm Desert were filled with shoppers as Fashion Week was in full force. Downtown Palm Springs is bustling all week long. Realtors say they’re getting calls from investors who live in the valley or afar about what they can do as prospectors of distressed real estate. One Oregon investor who checked into a Courtyard hotel in the Palm Springs area, identifying herself only as Judy, said she spent a few days here while traveling to a short-sale property she bought in Arizona.”

“‘We got it on the first bid,’ she said, mostly because she agreed to let the sellers lease back the home. ‘It’s sad this is happening, but it was nice to get a good deal on the house,’ she said. ‘We let the sellers stay because we know what it feels like: We lost a home in Colorado in the recession of 1988.’”

“Chris Kasivalis, an owner of Yellow Basket, said hamburger platters have been flying out the door in recent weeks. ‘Things have really picked up,’ he said. But so have the legal notices for foreclosure activity. One day last week alone, listings for home and commercial property in some stage of foreclosure totaled $64.9 million.”

“Economists say ongoing foreclosure activity in 2010 is the other shoe that continues to drop. The shadow inventory is described as the artful dodger in the mix, so much so local real estate experts are checking tax records to try to predict how many properties are out there. Economists are also concerned about what will happen when the stimulus programs run out — and whether businesses will make hiring decisions based on emerging government policies.”

“‘There’s so much happening on the national level,’ Adibi said, that another element has been added to the predictability factor.”

“Irene Pilien, manager of Sparky’s Self Storage, has the pulse on tough times. She sees it in the faces of customers who store their valuables at Sparky’s Self Storage in Thousand Palms. Some have lost their homes, scaled back businesses or furnished rental properties purchased when houses could be had for zero interest and, by some accounts, 53 people a day clocked into the Coachella Valley.”

“Pilien and others say longstanding customers are checking out because they’re leaving the area all together, or are roving from spot to spot to capitalize on prices. Others can no longer afford the rent at any price. ‘It’s sad,’ she said. ‘One client told me he had to put all his stuff in the living room.’”

The Carmel Valley News. “As Solana Beach struggles to make up for a $600,000 loss in sales-tax revenue from two fiscal years ago, a more specific look reveals no area has been hit harder in generating business than the Cedros Avenue Design district. According to city financial documents, Cedros Avenue generated $126,947 in sales-tax revenue in the third quarter of 2006. In the same time period of 2009, it generated $75,685. The design-oriented shopping district includes, high-end jewelry and furniture stores, cafes and the Belly-up Tavern, among other establishments.”

“‘There’s a lot of discretionary spending there,’ said City Manager David Ott. ‘That’s what goes down in a recession.’”

The San Diego Reader. “For the past six years, a huge construction hole in the lower Cortez neighborhood has remained a collection of rusty rebar, weeds and dirt, and wooden shoring. Construction began on the project, a 74-unit condo development called the Atmosphere, with excavation for a three-level parking garage. But the project ran into problems. According to Centre City Development Corporation documents, ‘The owner(s) tried for several years to recommence construction but were unsuccessful, and the building permits expired.’”

“The developer’s website described the Atmosphere as ‘a sophisticated, spacious, creative urban living experience, perfectly positioned in the Heart of Downtown.’ As for the hole in the ground, which is 22 feet deep in places, As new construction may not begin ‘for a period of up to three or more years,’ Flores Lund Consultants recommended that the site ‘be backfilled and capped with asphalt.’”

The Press Telegram.”Downtown-based real estate firm DOMA Properties reported about $98 million in sales in 2009, said president Scott Hamilton. Unlike previous years when new home sales accounted for three times more than resales, DOMA in 2009 made half its sales in resales, Hamilton said. DOMA picked up more foreclosure and short sale accounts through Bank of America, Wells Fargo and several management companies.”

“Hamilton said DOMA also reported solid numbers in new home sales in 2009, thanks in large part to an aggressive sales strategy that enabled DOMA to quickly sell more than 300 units on an Orange County development. By putting together sales events, DOMA was able to sell 335 of Stadium Lofts’ 390-unit condominiums developed in Anaheim A ‘Final 40 EVENT’ led to a sold-out project.”

“If a prospective buyer is interested in a two-bedroom, two-bathroom home but can only afford to pay $190,000, DOMA keeps that information and alerts them of homes that come on the market that fit their needs and price point. ‘When prices actually came to a point where people were thinking that this is a really good value and now is the time to jump, they jumped,’ he said.”

“Hamilton said he’s hoping for slow and steady growth in the market by 2012, adding that he’s seeing prices stabilize in Long Beach. ‘As long as interest rates stay low, I think we’ll probably start to see a little bit of upwards pressure on prices,’ he said. ‘We’re already seeing anywhere from 10 to 20 offers on almost every home.’”

The Signal. “Just 140 single-family homes in the Santa Clarita Valley changed hands last month, a report stated. That’s 16 percent lower than last year’s 167 sales. There just aren’t a lot of homes available to be sold, said Jim Link, CEO of the Southland Regional Association of Realtors.”

“However, the median price of single-family homes sold in February was up half a percent from a year ago to $410,000. Prices for condominiums also jumped. Still, the low inventory makes an already sluggish month even slower for Realtors, Link said.”

“Link said two things are holding down the inventory: First, foreclosure rates are down. Second, on the other end of the spectrum, not a lot of home owners want to put a ‘For Sale’ sign on their lawn when home prices are still so much lower than they were before the Great Recession hit, Link said. ‘There’s intense competition for any property under $500,000,’ Link said in a statement. ‘Competition has grown more fierce as the inventory dries up.’”

From KPBS. “For the second year in a row, the County Assessor is predicting San Diego will collect less in property taxes because of the housing crash. ‘I hauled all these rocks from the mountain over there when I came home from work every night and every weekend,’ 82-year-old Frank Taylor says as he points to the retaining wall that surrounds his yard and describes how he built it rock by rock. In fact, nearly everything in this yard was built by Frank, a retired Sears repairman. He and his wife Cathy bought this house in 1962 for $13,000. ‘Of course I was only making $75 to $80 a week, so even then you wonder how you’re going to pay for it,’ Taylor says.”

“In the past four decades, the Taylors’ house has increased by more than 30 times in value. ‘I’ve heard that these houses around here go for $400,000. Can you imagine a house selling for $400,000,’ Taylor says.”

The Victor Valley Daily Press. “Realtors expect the number of short sale houses to rise in the Victor Valley over the next year. Meanwhile, they hope for a reduction in the confusion over short sales among buyers and sellers. But for some sellers, it may not be easy, said Don Jensen, a Realtor in Hesperia who routinely deals with short sales. Homeowners who want to make a short sell should first determine whether they have a recourse loan or non-recourse loan. Recourse loans give lenders more leeway in recovering the full loan amount, while the debt can be fully forgiven under non-recourse loan.”

“‘Under a non-recourse format it may give some relief,’ Jensen said. ‘It could be better than just walking away.’”

“Poor training and inexperience in making high-risk construction loans caused High Desert Federal Credit Union to fail, an internal audit by the National Credit Union Administration determined. ‘HDFCU failed primarily due to a high concentration of real estate construction loans coupled with the dramatic decline in nationwide real estate values caused by the credit crisis,’ the report stated, noting that the credit union grew its construction lending exposure to over 60 percent in 2005, 2006 and 2007.”

“High Desert FCU went into NCUA conservatorship in 2008, and was taken the following year by Alaska USA Federal Credit Union. The report noted that underwriting and monitoring of many of the construction loans made by High Desert FCU did not meet NCUA guidelines. Developers often failed to meet income and equity requirements, and sometimes made loans to non-members.”

The Los Angeles Business Journal. “It was a Wednesday afternoon in early December, and FirstFed executives, jet-lagged from cross-country flights, had descended on Washington, D.C., to plead for the survival of one of California’s oldest financial institutions. The holding company for First Federal Bank of California, a savings and loan with branches across Los Angeles, was up against the wall. Saddled with toxic adjustable rate mortgages, the thrift had endured more than a half-billion dollars in losses since the collapse of the housing market.”

“FirstFed’s failure seemed inevitable, but executives requested the emergency meeting with the FDIC and Office of Thrift Supervision to beg for a stay. The FirstFed contingent left that afternoon confident. They had nailed the presentation. Two weeks and two days later, regulators closed FirstFed.”

“The story of FirstFed’s decline and fall is inextricably linked with Babette Heimbuch, the thrift’s brash chief executive. During her tenure, she presided over the most aggressive expansion in the bank’s 80-year history. A year after her arrival, FirstFed began making adjustable rate mortgage loans, and within a few years they constituted 90 percent of its portfolio. The thrift specialized in option adjustable-rate mortgage loans, or option ARMs for short, which give borrowers choice in how much to pay each month.”

“New competitors, such as EMC Mortgage Corp., flooded into the option ARM market, given the willingness of investment banks to buy the loans, then bundle and sell them as mortgage-backed securities. The thrift felt it had little choice but to try to compete to protect its bread-and-butter loan business.”

“In an interview in June, Heimbuch admitted FirstFed began extending loans to borrowers with little or no documentation of income or assets. It even wrote increasingly popular negative amortization loans, in which a borrower’s monthly payments did not even cover the interest and the loan balance would rise. She thought the thrift could make it work. ‘In 2005, we started trying to compete, but we tried to compete smarter,’ she said. ‘We tried to do a better underwriting job. We didn’t do subprime loans.’”

“That year, FirstFed originated roughly $3 billion in option ARMs, nearly increasing by half the size of its mortgage loan portfolio to more than $9 billion. Quickly, though, executives began to get nervous, fearing that easy Wall Street money was creating a bubble in the housing market. In particular, they were dumbfounded by the risky loans EMC was willing to make. Then, executives discovered that EMC was owned by Bear Stearns, the investment banking giant that would suffer a spectacular collapse within a few years.”

“‘Oh, man,’ Chief Operating Officer James Giraldin said to Heimbuch one day in late 2005, ‘this is over.’”

The Associated Press. “The government’s bold new plan to stem the foreclosure crisis aims to succeed where previous efforts have fallen flat. Diana Farrell, a White House economic adviser, acknowledged the plan won’t prevent many of the expected 10 to 12 million foreclosures expected over the next three years. Doing so, she said, ‘wouldn’t be fair, it would be too expensive and we probably wouldn’t succeed in any case, because many people got into homes that they simply cannot afford.’”

“Joe Clarke, a police officer in Oxnard, Calif., welcomed word of the plan. He owes $390,000 on his home, which is only worth about $250,000, and he fears his adjustable-rate loan will reset to a higher rate in August. ‘I’ve made my payments,’ he said. ‘I didn’t walk away from my house. I’m just not being afforded the opportunity to refinance my home, even at the current value, without taking the principal off.’”

The Sun Herald. “Don’t expect any of them to admit it, but it turns out they were wrong — all those politicians who whined for many years that high taxes and lousy business conditions were pushing Californians to leave for other states. The tide of middle-class Californians leaving the state has never had much to do with taxes, the business climate or jobs. Rather, it was mostly about housing prices.”

“As long as residents of coastal California counties from San Diego to Ventura, San Mateo and Marin could sell their homes for enormous profits and then buy much larger properties in other states or inland counties with cash left over, they did it.”

“In 2004-05, for example, more than 47 percent of all moves within the United States were housing related, with the largest share motivated by a desire for bigger, better and cheaper homes, according to a new Brookings Institution study based on information from the U.S. Census Bureau and the Internal Revenue Service. By contrast, less than 18 percent of moves were related to jobs, and the majority of those involved transfers.”

“But last year, housing motivated only 17 percent of all moves, a drop of about two-thirds from five years earlier, while job-related moves accounted for 34 percent of moves. Meanwhile, the actual number of job-related moves was lower than it had been for the last decade. When the housing bubble popped, the game of musical chairs mostly ended.”

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

The Steamboat Pilot reports from Colorado. “The rate at which homes in Routt County are selling suggests that it could be a year or more before the residential construction industry mounts a meaningful comeback. As of Thursday, said Realtor Doug Labor, there were 2,123 properties of all types listed for sale on the MLS, and of those, 1,282 were residential properties. Of the total number of residential properties, 240 were new product. Although the number of contracts for home purchases has jumped a little this month, the absorption rate in February was just three-tenths of 1 percent. Ford has concluded that the time has come for professionals in the building trades to confront the reality that, ‘I’m going to have to change my business model or do something else.’”

The Greeley Tribune in Colorado. “Greeley was tops in the nation for foreclosures, then it wasn’t. It was the first- and second-fastest growing metropolitan statistical area for the first five years of the millennium. Then it topped U.S. small cities in job growth, then salary growth.”

“These lists are big deals in the economic development game, and they look good all stacked up together — especially when they deliver good news. How accurate can these lists really be? Maybe it depends on your source of information. Realty Trac reports Weld had 431 foreclosure filings in February; the Public Trustee’s office reports 240. Who will you believe?”

“Just last week, U.S. News and World Report reported that Greeley’s Metropolitan Statistical Area, which includes all of Weld County, had the fifth most ‘underwater housing market’ in the nation, according to Zillow. Uh, sorry. The Group Inc., a northern Colorado real estate big hitter, has a little something to say about that.”

“In a release issued this week, The Group stated that based on Federal Housing Finance Agency’s House Price Index, Greeley ranks 114th out of 299 metropolitan areas in terms of year-over-year appreciation. But these lists are only reliable so far as the information they’re reporting. What about the information they don’t report? And both agencies are guilty of spinning the information here.”

“The U.S. News report fails to show that Greeley’s MSA indeed is not really the fifth most underwater in the country. It’s just the fifth of all the cities they chose for their list, one from each state. What The Group fails to report is that over the last five years, according to the federal housing price index The Group uses, Greeley home values dropped the most in Colorado at 10.72 percent — and it was the only metropolitan statistical area statewide where homes overall lost value in that time.”

“Sometimes the truth is ugly, but it’s the truth.”

The Arizona Republic. “Between December 2005 and March 2007, Mario Bernadel and seven accomplices purchased nearly 40 properties in the Phoenix area. Bernadel and his cohorts submitted false mortgage-loan applications, used fake ’straw buyers,’ and directed the proceeds of their illegal scheme into bank accounts they controlled. Bernadel used his share of the money to support a lavish lifestyle, buying luxury vehicles and nights on the town at local nightclubs. Last week, the U.S. Attorney’s Office in Phoenix obtained a 17-year prison term for Bernadel, putting him out of business.”

“According to a study conducted at Arizona State University, the Phoenix area set a new record for foreclosures in 2009. In February 2010, Phoenix suffered foreclosures on 3,300 homes, and foreclosure-related activity represented 65 percent of sales last month.”

“The Obama administration disclosed plans Friday to add two key components to its homeowner-assistance program: mortgage help for borrowers who have lost their jobs and principal-balance reduction for those with unaffordable monthly payments. Aside from adding the recently unemployed, the revised program does not appear to widen what was a narrow eligibility window for the original program, according to the limited information federal officials provided Friday.”

“Tanya Wheeless, Arizona Bankers Association president and CEO, said Friday’s news sparked a feeling of deja vu. ‘This is a new program that’s making a big splash, but it’s not going to help a lot of Americans,’ Wheeless said. That’s partly because of the difficulty to qualify, she said, and because lenders are likely to reject the administration’s financial incentive of 10 cents to 21 cents on the dollar to lower principal balances.”

“BofA customer Harry Baker, 67, of Scottsdale, is deeply underwater on his home of 23 years after a poorly timed decision to refinance to an adjustable-rate loan, also called an ARM, and pay off all his other debts in 2006. Baker said it doesn’t matter to him whether the bank or the government initiates it - he just needs someone to help.”

“‘I got stuck with that ARM because I didn’t sell it, and then I couldn’t sell it,’ he said. ‘I had to go back to work. I’m hoping I can retire again at 70.’”

The Phoenix Business Journal in Arizona. “In 1989, Barron’s, a national financial magazine, predicted the end of a boom era in Phoenix, with the collapse of both the commercial and residential real estate markets. It noted that the bubble of speculative land brokerage was about to burst, and that financial institutions were in distress. It also discussed a decline in population growth and a stagnating economic base far too dependent on construction and housing.”

“In fact, Barron’s pessimistic prognostication did not come to pass. For sure, the economy was sluggish for several years, but Phoenix forged ahead. Still, local economists, real estate brokers and economic developers warn that radical change is warranted during this severe recession. ‘Historically, the state and especially the greater Phoenix area have outperformed the nation in both expansion and recession periods,’ said John Lenio, economist for CB Richard Ellis’ economic incentives group in Phoenix. ‘This time is different. Arizona ranks last among all states for job retention at the present time. Unfortunately, this may be the new norm without some serious efforts to diversity our economic base.’”

“Chris Mackay, economic development director for the city of Chandler, agrees that this cycle is different. ‘We can’t live on construction. We can’t live on population growth. We’re at a crossroads and facing competition from other states,’ he said.”

The Reno Gazette Journal in Nevada. “As spring emerges, the region’s once-deafening construction industry remains muted. Come summer, the prospects for work, commercial or residential, could be downright chilly. ‘Compared to the last five or six years, it’s pretty thin out there,’ said Mike Cate, CEO of Pavers Plus. ‘Everyone’s just hunkered down.’”

“Cate has slashed staff by 60 percent and cut wages of those remaining. And he is not along among area contractors. A nationwide industry analysis found Nevada and its biggest cities to be among the worst for jobs lost. ‘Contractors I know say they’ve never seen it this bad in Reno,’ said Edwin Peaslee, a self-described ‘jack of all trades’ who’s been jobless for a year. ‘I’m scraping by,’ he said. ‘I can probably tighten my belt a bit more like everyone else. I’ve gotten rid of just about everything I own. I’m on food stamps, and I’m not proud of it.’”

“Mike Dillon, executive director of the home-construction sector’s Builders Association of Northern Nevada, said he sees early signs of renewed building, at least at the entry-level price range. ‘We still have the inventory issue with more foreclosures coming,’ he said. ‘Until that inventory is soaked up, we won’t be out of this.’”

“Meanwhile, contractors are learning to adapt to get by. Cate has expanded his attention to solar projects, saying, ‘That might help us along.’ ‘It’s very different now,’ he said. ‘We’re in a perfect storm, it seems. It’s just going to take time to get through.’”

“The government’s bold new plan to stem the foreclosure crisis aims to succeed where previous efforts have fallen flat. Locally, housing industry observers questioned the new plan to help foreclosure-threatened and out-of-work homeowners, but for different reasons. Ken Amundson, president of the Reno/Sparks Association of Realtors, said the plan would likely help homeowners who aren’t as severely upside-down with their mortgages as those in the hardest-hit states, notably Nevada.”

“‘It may help us less, seeing as how we rose in price so much and how far we’ve fallen,’ Amundson said of Reno-Sparks median home prices that have plummeted 50 percent since 2006 and are now at 2002 levels. But he added of Obama’s plan, ‘It could certainly help. It can’t hurt.’”

“‘I’m sure it could help some, but it will at best have a marginal effect,’ said Tom Cargill, economist at the University of Nevada, Reno.”

“Cargill questioned the government’s policy of pumping billions into the housing crisis even before Friday’s announced plan. ‘It’s a terrible waste of taxpayers’ money,’ he said. ‘It uses taxpayers’ money to support bad decisions made by people to buy houses they can’t afford.’”

From ABS CBN News. “Nowadays, signs in front of homes that read ‘Owned By Bank—For Sale’ and ‘Bankruptcy’ are a common view in Las Vegas area. Many homeowners are submerged—owing more than their home is worth. One kababayan who did not want to be identified told Balitang America that he came to the US illegally, but still believed that he could own a piece of the American Dream. It came true when he bought a house in North Las Vegas for his wife and two children, but then he lost it, as a result of the mortgage meltdown.”

“While one man was barely making it, a top realtor has had to learn to live without the excess she used to have. Bernadette Sanedrin once owned 14 houses and 3 high-rise condos. Her family took frequent overseas vacations. In a gamble against the economy, she ended up losing them all. Now all she owns is a $1.2 million house which is now worth $400,000.”

“‘I’ve accepted the fact that they’re gone. I’m still thankful that I learned from that and I know it’s coming back,’ Sanedrin said.”

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

The St Petersburg Times reports from Florida. “Developed in 2004 and sold largely to investors, Carriage Pointe offers an extreme example of the dilemma faced by area suburbs ravaged by foreclosures: Which is worse, an empty house or an unsuitable renter? Homeowner Kourtney Ingrati said she became aware of the issue in December 2007 when two Carriage Pointe teenagers — who lived in a Section 8 house — were charged with shooting two other teens after school. Ingrati poured her outrage into a letter to the authority. ‘I purchased a home at the peak of the housing market at $220,000, and my home is worth $100,000, along with anyone else who purchased homes during that time,’ she wrote. ‘How do you expect our community to bounce back if the residents you are placing here barely make minimum wage?’”

The Palm Beach Post. “The Obama administration announced more assistance Friday for underwater and unemployed homeowners, saying the foreclosure crisis has shifted from volatile subprime loans to ‘hardworking” people.’ ‘This will focus on affordability and foreclosure prevention for responsible homeowners, who, through no fault of their own find themselves in a situation of negative equity,’ said FHA Commissioner David Stevens.”

“Joel Bienvenu, a laid-off marketing specialist with a home west of Boca Raton, is hoping the new plan will help him and his wife, an architect who lost her job when her company closed. The couple tried unsuccessfully last year to get a modification to lower their interest rate. Bienvenu, who is current on his mortgage payments, said the best offer the bank gave him allowed him to go two months without paying, but then required three full payments in the third month.”

“The couple rejected the offer, and were dismissed from the program. Bienvenu says they’ll start again from scratch. ‘They said if we weren’t working, they wouldn’t even consider us for a modification,’ Bienvenu said. ‘This program sounds like it’s designed more to help the unemployed.’”

The Herald Tribune. “The latest plan is weak on several fronts, said Dean Baker, the co-director of the nonpartisan Center for Economic and Policy Research. ‘I don’t think it will make much of a difference,’ Baker said. ‘You have a lot of homes so badly underwater the principal write-down won’t go far enough to help.’”

“Another problem is the FHA loan concept. By not addressing that in certain markets home values are still tumbling, the government agency that insures home loans against default will get into the same type of trouble it did during the housing crash: Homeowners will be underwater once again and as likely to walk away as they are now, only this time leaving the FHA even more on the hook than it already is.”

“And if a decent principal write-down should occur, second mortgage holders would have little reason to modify their loans even if the government is going to double what they pay for the work, Baker said. That is because after the write-down, the homeowner can afford to make both the first and second mortgage payments and the second mortgage holder will ultimately receive all of the money due rather than a few thousand dollars.”

“‘I’d give it a C-minus,’ he said of the plan. ‘It will provide some help to some homeowners, but the main beneficiaries will be lenders and servicers.’”

“The administration cautioned that the plan is not intended to stop all foreclosures or assist all troubled homeowners. ‘There’s no intention here of tackling what may be 10 to 12 million foreclosures over the course of the next three years,’ said Diana Farrell, a White House economic adviser.”

The News Press. “Administration officials cautioned that the plan isn’t an instant cure, won’t stop all foreclosures or help all troubled homeowners. Instead, officials said their goal is to meet their original target, announced last year, of helping 3 million to 4 million borrowers avoid foreclosure.”

“‘In general, I am supporting of any action against people losing their homes,’ said David Hall, president of First Community Bank of Southwest Florida in Fort Myers. ‘Banks don’t want to take back homes. On the other hand, customers have to be making their payments. If the government helps them make their payment, it would be wonderful.’”

“Fort Myers attorney Charles Phoenix, who has handled numerous foreclosures, called Friday’s action ‘window dressing.’ He said those on unemployment get a ‘meager amount,’ and even if their mortgage were reduced by 31 percent, they’re still in trouble. In Florida, the benefits are up to $300 a week. ‘How much it helps …. for me, it’s just more money down the tubes,’ Phoenix said.”

“On the other hand, Phoenix said, ‘It’s a step in the right direction. A couple of years too late, but still it’s a step in the right direction. This creates a lot of hope, which is a good thing.’”

The Miami Herald. “Cut-rate foreclosures, rock-bottom interest rates and lucrative tax breaks helped South Florida home sales edge higher in February. At the current rate of sales, there were enough homes on the market in Miami-Dade and Broward to last 14 months and 10 months, respectively, according to data provided by EWM Realtors. For condominiums, there is enough inventory to last about 21 months in Miami-Dade and 11 months for Broward. A year ago, homes and condos could expect to sit on the market about twice that long.”

“Still, what is characterizing the South Florida real estate market now are the foreclosures and short sales sloshing through the system, said David Dabby, a real estate analyst. When the foreclosure rate hit 16 to 17 percent of homes on the market in the 1980s and early 1990s, market watchers thought it couldn’t get worse. Now, about six out of every 10 homes for sale are in foreclosure, he said.”

“‘Anybody who wants to take advantage of foreclosures, this is the ultimate market to do it,’ Dabby said. ‘There will never be one like this in our lifetime.”’

“But with price likely to be stuck in the doldrums for months to come, real estate is not the road to quick profits. ‘In my opinion you don’t want to buy a home today unless one of two things are true: Either you need a home to live in or the price is a steal,’ Dabby said.”

“Lawrence Yun, the National Association of Realtors chief economist said…the market is stronger now than it was last year. However, Yun acknowledged that ‘the housing recovery is fragile at the moment’ and the real estate market is facing a crucial test. The industry has set its sights on this spring’s buying season, when more people could take advantage of a recently renewed tax credit for first-time home buyers and others that is due to expire in April.”

“‘The key test for a durable recovery comes in the next few months as the tax credit deadline approaches,’ he said.”

The Sunshine State News. “Economist David Denslow offered a snapshot into Florida’s future — and it’s not as dire as many predict. ‘It’s not a great, rapid recovery, but it is there and we won’t have to wait until 2013 or 2014 to see it,’ he said.”

“Denslow, a professor and research economist at the University of Florida, addressed the Economic Club of Florida in Tallahassee Friday on ‘The Economic Influence of Florida’s Changing Demography.’ ‘What’s clearly going to happen is the rate of growth in Florida will slow down,’ Denslow said. ‘There will not be as many construction and real estate jobs as before.’”

“He said that Florida’s economy and its unemployment remained tied to the housing market. Noting that the number of two parent families with children were declining, Denslow insists this did not mean that there would be a housing crisis. ‘The demand for housing,’ he said, ‘has nothing to do with kids.’ Denslow said that families with children spend on their kids and not their houses.”

“Denslow reviewed the changes in the housing market that Florida has seen over the last 30 years. He said that the housing market kept pace with the rate of inflation from 1980 until 2000, before housing prices started increasingly drastically. Denslow said too many people insisted there was no housing bubble. He specifically targeted David Lereah, who formerly served the chief economist for the National Association of Realtors. Lereah wrote the book Why the Real Estate Boom Will Not Burst and was very bullish on the future of the market.”

The Sun Coast News. “Richard Gehring is a chief architect of a growth management plan for Pasco during the next five years. Even though the Great Recession has zapped the area’s economy the past few years, Gehring foresees a rebound. During the past 10 years, property values saw outlandish gains. Property values were going up $50 a day in the statewide average, Gehring said. Many Naples homes were appreciating by $300 a day in some of the state’s real estate hot spots.”

“‘It created this balloon of value … which then burst,’ Gehring commented.”

“Diversifying will provide the key to progress in Pasco, Gehring emphasized. ‘We’ve been too dependent on construction,’ Gehring observed.”

From TC Palm. “Another South Florida developer has defaulted on its bank loans meant to build a massive residential development that promised to bring some workforce housing to Indian River County, according to a civil lawsuit filed in Indian River Circuit Court. Court records show National City Bank, now PNC Bank, won a $2.28 million foreclosure judgment against CJM Development Inc., of Boca Raton for nonpayment of loans.”

“The company’s Web site lists one subdivision in Vero Beach currently in development called Bella Vista Isles. The company’s last update on the project in July 2007 describes the development as a ‘luxurious, private-gated community,’ featuring lake views and a pool. According to previous Press Journal reports, the project’s controversial rezoning request for more density was approved by the Indian River County Commission and CJM was granted final approval in 2006 to build the 136-unit townhouse community.”

“At the time, approval was contingent upon the developer pricing 10 of the units at $166,500, 10 more at $199,500 and another 10 at $219,000. CJM could then sell each of the 106 remaining town houses for $300,000. Local residents living in the surrounding area were strongly opposed to the project during the county’s approval process, stating that the development would cause more traffic on the roads.”

From Ocala.com. “If Jeff Hartwell had tried to rent space for his new hair salon even three years ago, the deal would have been significantly different from the favorable one he negotiated last year. ‘[Landlords] would have laughed at you and said, ‘Get in line. There’s 30 more like you,’ said the 46-year-old hairstylist and businessman.”

“But in three years, the demand for shopping plaza space had fallen as severely as the economy. When Hartwell approached the plaza’s owners to lease space, he already had a backup location in case his first choice didn’t pan out. By the time Hartwell left the negotiating table, his cost per square foot was ’significantly’ less than what the plaza owners had asked, he said. In addition, the plaza had paid about half of the $80,000 needed to convert the nearly 1,500-square-foot space into a salon. ‘These are terms you would have gotten back in 1994,’ he said. ‘They [plaza owners] are just trying to get their [loan] interest paid.’”

“John Breder knows all about this trend. He owns and manages 25 shopping plazas throughout Florida. ‘Three years ago you couldn’t do anything wrong. You just had to hang a sign out on the property. We were having a ball,’ he said.”

‘Most area plaza owners and managers agree. One joked that ‘even a monkey could have made money.’ They also agree that by 2008, the party was ending. ‘As the economy took its downturn … we had three, four, five vacancies at each location,’ Breder said. By the time the recession was in full swing, ‘you couldn’t lease a store to save your life,’ he recalled.”

‘For the most part, that’s still the case. But it isn’t just the vacancies that are the problem. It’s also the bank mortgages, typically in five-year renewal increments, that are the next looming storm. Banks made those loans based on the value of the plazas back when the loans were made. But now that both land values and revenues have fallen, banks aren’t likely to renew loans at the same terms. They’re likely to seek more of a down payment — money the plaza owners won’t likely have during this recession.”

“Banks need the extra money because they are under pressure from federal regulators to clean up their books and show more cash reserves to back outstanding loans. Many of those loans are based on properties that have taken financial dives in value. ‘The amount of distressed properties is going to continue to grow rapidly. The people that purchased properties during the boom have a cost basis that can’t be supported during the recovery,’ said Bartow McDonald, managing director for Spery Van Ness/ Skye Commercial Real Estate.”

“While plaza owners and banks might be some of the losers, there are going to be some winners, McDonald predicts. Some will be new investors buying the mortgage notes at 30 cents to 40 cents on the dollar. In some cases those new mortgage holders will offer plaza owners the chance pay off their mortgages at reduced rates, too. Other winners will include tenants that are able to renegotiate new lease contracts, he said, because new owners won’t have as much money invested in the plazas as the previous ones did.”

“‘Capitalism is wonderful in that regard,’he said.”

“Shopping plazas aren’t the only businesses struggling to keep tenants. Just a few years ago, renters skipping out of their apartment leases in Ocala were rarities. Maybe one a month would break their lease at Tuscany Place Apartments, said Andrea Zullo, regional manager for Gray Co. Properties, which owns the 288-unit apartment complex.”

“Now she sees six or seven a month. Filling those vacancies is getting tougher. ‘You definitely have to work for it. It’s not coming to you,’ Zullo said”.

“To keep their occupancy numbers up, apartment complexes are turning to incentives that they wouldn’t have bothered with just a few years ago. All told, Tuscany’s rent cuts and other incentives total about two months worth of free rent for an average new tenant, according to Zullo. Tuscany is doing what many complexes are trying: cutting rents, doing away with application fees, and reducing the cost of optional features like garage fees or floor-level requests.”

“The apartment complex’s residents are mostly middle class, including working families, some singles, professionals and some retirees. ‘It’s not that we’re losing [our renters] to competitors. We’re losing them to unemployment,’ Zullo said.”

“Lee County’s rental market is a work in progress, but there is a silver lining - higher occupancy rates. Lee County’s apartment occupancy increased 7.2 percent in the fourth quarter of 2009 from the previous year to 91.1 percent, according to statistics. The increase was the highest in the state.”

“Of the renters Sue Lutter, a broker for Fort Myers-based Gulf Waters Rentals and Management, has recently seen, many of them are people who have lost their homes to foreclosure. And today’s low rental rates make renting an attractive option for people looking for a place to live. Lee County’s apartment rental rates dropped 12.2 percent to an average $776 a month in the fourth quarter of 2009, according to RealFacts - and three months into this year, not much has changed.”

“The median price for a single-family home in Lee County is also down - in February, it was $88,000, down from $97,500 a year earlier. But that doesn’t seem to deter Southwest Floridians from renting. Bill Powers, a Montego Bay resident and former Wells Fargo banker, said he chose renting over buying to save money.”

“Although homes are being sold at such low rates, there are additional costs that come with buying a home. ‘If you buy a used home, you better be prepared to spend some money on fixing it,’ said Powers, who had to wait for an available unit at Montego Bay. ‘I like renting because I can’t fix a thing.’”

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

It’s Friday desk clearing time for this blogger. “Construction hasn’t begun, but buyers are already signing the dotted line and claiming their spots in Ottawa’s largest condo project ever. A spot in the Tribeca high-rise isn’t exactly cheap: $650,000 is what it will cost for the largest unit – a 1,145-square-foot penthouse. The smallest unit, a 551-square-foot studio, is the most affordable of the Tribeca units at almost a third the cost of the penthouse at $241,000. But at least one real estate seller – and a future Tribeca condo owner – says she thinks that those prices are a steal given the good location. Anna Kiefl purchased a unit in the Tribeca condo as an investment purchase, she says. When construction is complete in 2013 she plans to rent out her unit.”

“‘Where else in the world can you buy a condo for $300,000, six blocks from the Parliament Buildings? You couldn’t do it in Rome, you couldn’t do it in London from Downing Street, you couldn’t do it anywhere else,’ says Kiefl, sales representative for Royal Lepage Performance Reality.”

“The city’s building boom resulted in 170,000 new housing units between 2000 and 2008, according to a new report from NYU’s Furman Center for Real Estate. ‘There was pent-up demand for housing resulting from the low rates of building in the 1990s, and from the city’s increasing popularity, so this high level of building was necessary and important for the city,’ said Vicki Been, faculty director at the Furman Center. However, she added, ‘much of the building was targeted at the higher end of the market, and is unlikely to sell at the prices originally expected.’”

“FHA loans have been particularly popular among Florida’s condo buyers. The agency has backed more of these mortgages in the Sunshine State than anywhere else in the country, insuring more than 11,000 loans valued at nearly $1.7 billion over the past five years. After losing his trucking job in October 2008, Darryl Gary struggled to keep up with the $1,400 monthly payment on his Sarasota home. Though he soon landed a post as a termite technician, it paid him $5.50 less an hour and only lasted for a year.”

“Though his wife continues to work, the couple ran through their savings and then fell behind on their mortgage in the middle of 2009. He’s trying to negotiate a loan modification with his servicer to help him get back on his financial feet, but he’s finding that the job market is pretty weak right now. ‘If I hadn’t lost my job, none of this would be happening,’ Gary said.”

“More homeowners are walking away from their mortgages, even if they can keep up the payments. Shelby and Scott Robinson, from Manteca, Calif., married in 2006 and purchased a starter home about a year later for $310,000. It plummeted in value. They realized they would have to stay in the home for far longer than expected to gain any value back. The area also did not hold much job flexibility for Scott, a restaurant chef. The couple spoke with financial advisers and considered a strategic default.”

“‘It’s not about not having money,’ says Shelby. ‘It’s about not throwing money away.’”

“Gone are the days when households relied on their homes’ ever-rising values as family piggy banks that would pay for everything from new cars to college tuition. Tage Woehl, of Eastlake, Calif., is about $80,000 underwater on a home he and his wife, Imelda, bought for $430,000 in 2003. He’s locked into a 5.99% fixed-rate mortgage that no bank will refinance.”

“To hold down other expenses, the Woehls go without cable TV, and he’s holding onto his 1999 Dodge Intrepid, which has 188,000 miles on the odometer. The Woehls’ daughter, Nika, is only 4, but Woehl, an accountant, already is worrying about how he’ll afford college tuition in 13 years. He says it sometimes feels unfair that other homeowners who don’t pay their mortgages on time get federal bailout assistance in the form of mortgage modifications and lower monthly payments.”

“‘I’m the one who’s paying every month, and when all is said and done, I’m scraping by,’ he says. ‘We can’t refinance. We’re upside-down now.’”

“Vicky Dicristo bought her home in Soquel, Calif., in 2006 for $535,000 with plans to fix it up, live in it awhile, then sell and buy a nice retirement home in Arizona. She bought the home with a five-year, interest-only, adjustable-rate mortgage at a 5.9% interest rate. Her home is now worth $350,000, according to the local assessor’s office. And Dicristo, who was laid off nearly two years ago from her job as a mortgage loan underwriter, has lost the $135,000 she put down on the house as well as the more than $15,000 she put into renovating the home with new floors.”

“‘I lost $150,000,’ Dicristo says. ‘I haven’t been able to make payments, either. I thought I was going to be able to sell it and move to a less expensive area. That had been my plan when I bought it, to move to someplace like Arizona and pay all cash. But that whole plan fell apart.’”

“For Dicristo, losing equity in her home has meant losing the cash she sank into it and losing much of her retirement dream. ‘Emotionally, this has had a very big impact on me,’ she says. ‘It’s changed how I view housing.’”

“Scores of blighted and foreclosed houses in Lucas County could be transformed into community assets under a new land banking program authorized this week by the state legislature, County Treasurer Wade Kapszukiewicz announced. The California owner of the modest one-story house where the county treasurer spoke yesterday said in a phone interview that he welcomes Lucas County’s land bank because it could help him wash his hands of the property.”

“Peter Biata, of San Mateo County, said his bank foreclosed on the property last year after he stopped making mortgage payments in March, 2009. He’s no longer on the hook for the payments, but the bank won’t take possession of it, Mr. Biata said. He said he put $20,000 in the house to fix it up, yet it didn’t work out long term as a rental property and the value dropped more than he expected. Mr. Biata said he bought the house more than four years ago from a wholesaler’s Web site and was immediately displeased - ‘She totally lied about the condition of the property.’”

“‘We just decided with the way the economy was going and everything that it was prudent to stop paying on it, and we thought we would just let it go to foreclosure,’ he said.”

“The uncertain line between hope and despair divides this exurb of Phoenix, Arizona, where the trim stucco houses used to sell so briskly. Ms. Carter said that she felt guilty about leaving. With her short sale, the price of the home went down, for the benefit of the new homeowner. But it dragged down prices in the neighborhood, she said. Ms. Carter, a mother of two and a real estate agent who poses as an angel with wings on her Web site, has been through hard times before. Years ago, she considered filing for bankruptcy but she then changed her mind. She said she was accountable for her actions and was making what amounted to a business decision to leave her home.”

“‘I had to take emotion out of it,’ Ms. Carter said. ‘If I had a business, and every single month I was losing money, would I keep on paying? No, I wouldn’t.’”

“Mr. Setbacken said that he had warned his neighbors not to get in over their heads but that they had not listened. He and his wife might have stepped up to a bigger house if they, like so many of their neighbors, had gambled recklessly on the housing market, he said. ‘Everybody that I know that got themselves in trouble was because of one word: greed,’ said Mr. Setbacken. ‘I have no sympathy for any of them, on the financial end. When I hear about dropping the amount you actually owe, I could stick my finger down my throat.’”

“More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months. The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report today. The figure, which measures payments at least 30 days late, climbed to 57.9 percent for changes made in the prior 12 months.”

“Modifications are ‘clearly not working well and it’s not a surprise,’ said Sam Khater, a senior economist at First American CoreLogic. It’s pointless to rewrite these loans because they’re underwater.’”

“President Barack Obama’s administration is pressuring lenders to alter loans to reduce the number of properties lost to foreclosure. ‘The program will not be a long-term success if large amounts of borrowers simply re-default and end up facing foreclosure anyway,’ said the report by the Special Inspector General for the Troubled Asset Relief Program, prepared for a Congressional hearing.”

“‘The program risks helping few, and for the rest, merely spreading out the foreclosure crisis over the course of several years’ at significant expense for taxpayers and borrowers, the Inspector General’s Office wrote. If too many participants redefault, the modification plan ‘will have done little to achieve the goal of assisting homeowners who would still find themselves losing their homes.’”

“Treasury’s focus on trial modifications ‘raises issues for how the program was justified and how Treasury is not measuring progress,’ the report reads.”

“Massachusetts foreclosure petitions dropped 6.1 percent over the first two months of the year, compared to the same period in 2009, according to new numbers released by The Warren Group Thursday. A petition represents the first step in the foreclosure process. Foreclosure deeds — the last steps, which indicate completed foreclosures — rose 13.8 percent during the same time.”

“The group’s CEO, Timothy Warren, added that the number of petitions is a better leading indicator of the housing market’s direction, but again there are mixed results. ‘People are still having trouble paying the mortgages,’ Warren said.”

“He noted that foreclosed properties can also push housing prices down, putting even more homeowners underwater. But that cycle of decline could be broken by public perception that home prices — especially those in neighborhoods with many foreclosures and a sense of stagnation — are trending upwards. ‘A rising tide lifts all ships,’ Warren said. ‘If the sense of the consumer is that real estate prices are rising, prices will eventually rise in all neighborhoods.’”

“Lawrence Yun, chief economist for the National Association of Realtors, will be in Memphis next week to discuss all things housing. Yun, who will deliver the keynote address, spoke with The Daily News about the real estate market’s woes and future.”

“Q: What were the main reasons for the housing slump? A: Without a doubt very lax underwriting standards; just trying to give out mortgages for anyone who had a heartbeat. That brought on too many people who were not financially capable. We can clearly see that in hindsight.”

“Q: Did the real estate industry, and specifically NAR, respond properly to the downturn and is there anything that could have been done differently? A: From the real estate association and position as a chief economist, I think we need to be assured that we are promoting a successful homeownership policy, and not any homeownership where people buy and be foreclosed upon. That’s embarrassment for the association, it’s not good for the families involved, it hurts the community. Anything the association was either promoting or acquiescing in bringing about this frenzy, that needs to be re-examined.”

“Q: Is it difficult getting people to understand how their local market might differ from the national climate? A: All real estate is local. … In Middle America … there was no bubble. Maybe just a modest-level mini-bubble that was occurring, but no major bubbles like the California, Florida markets. Hence, there was very little to pop.”

“One of the Twin Cities’ largest home lenders faces a deadline of June 30 to sell itself unless it can raise more capital. Otherwise it risks a series of escalating enforcement actions. InterBank, a large and struggling Minnesota mortgage lender that grew rapidly during the housing boom, has been put on the auction block by federal regulators.”

“InterBank made nontraditional mortgage loans, including interest-only mortgages and so-called hybrid ‘ARMs,’ which offer an initial period at a fixed interest rate followed by a floating rate. InterBank kept many loans on its books rather than sell them. As foreclosures rose, losses on the mortgages wiped away much of InterBank’s capital.”

“Moody’s and the other bond rating agencies have featured prominently in the build-up to the financial crisis. These agencies gave investment grade ratings to complex financial instruments filled with subprime mortgages and other bad assets. These ratings allowed Goldman Sachs and other investment banks to sell this trash around the country and the world, ensuring that the effects of the collapse of the housing bubble would reverberate throughout the financial system.”

“It was not just incompetence that caused Moody’s to misunderstand the quality of the issues it was rating. Moody’s and the other bond-rating agencies were getting paid by the banks whose assets that they were rating. The bond-rating agencies knew that these companies wanted investment grade ratings for their issues.”

“As one examiner for Standard and Poor’s said in an email, they would give investment grade ratings to products ’structured by cows.’”

“Justin Kawa is the new face of the depressed real estate market. The young marketing executive’s two-bedroom condo in the upscale neighborhood of Lincoln Park, which he put on the market for $359,000 last month, is now offered at $349,000, and he may have to lower the price even more.”

“Kawa, 29, and a friend, purchased the condo in July 2005 for $333,0000. The two-bedroom, two-bathroom walk-up is in a vintage building and has a roof deck. They had thought they would be able to sell it for about $380,000 in 2008. Many people who looked at his condo put bids on nearby condos, many of which were priced less. ‘We’ve had tons of showings but no offers,’ said Kawa.”

“The number of foreclosures in swanky neighborhoods throughout Cook County last month drove the county’s foreclosures to highest level since the recession began. Quentin Green, real estate expert and owner of Lincoln Park Homes Ltd., said he recently saw a Lincoln Park home that would have sold for at least $1.5 million in a normal market, sell for $1.2 million in this economic downturn.”

“‘I would be terrified if I had to sell my house right now. I’m thankful that I don’t have to sell,’ said Green. ‘It’s an act of god to get some of these products sold.’”

“Christian Chase of Chase Real Estate, specializing in foreclosure investments, said he’s seen this scenario play out across the city, including the suburbs. He saw it up close with a foreclosed property in Naperville that he purchased from the bank that held the mortgage. ‘It was a property that might have sold at the height of the mark in 2007 for $563,000 that now the bank is letting it go at $371,000,’ said Chase. ‘That’s a substantial discount on a property that’s in good shape.’”

“The problem, experts say, is that sellers who are underwater on their homes—even in tony neighborhoods—are not spending the money on updating their homes to keep them in tip-top shape. ‘It’s like pouring perfume on a pig,’ said Chase.”

“Kawa and his friend have refinanced their Lincoln Park mortgage twice and are now paying only $1,720 in mortgage payments each month, compared with $1,940 previously. That’s given Kawa enough breathing room that if the condo doesn’t sell by April, he has decided to keep it and take on a new roommate to help cover costs. But he has learned a lesson about purchasing real estate.”

“‘Now after going through the experience, I wouldn’t buy a place as an investment. I’d buy because you want to stay,’ said Kawa.”

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

The Toronto Sun reports from Canada. “Last year’s comeback for Canada’s housing market will carry through early 2010 but subdued activity is on the horizon as higher prices and interest rates make property less affordable, Scotia Economics says. The first half of 2010 will cap off a real estate decade fit for the record books, Scotiabank said. The last 10 years has seen the largest real price appreciation in at least 50 years and new home construction was at its strongest since the 1970s during the period. Canada leads the pack of developed countries in terms of real estate coming out of the recession with inflation-adjusted home prices in the fourth quarter up 19% year-over-year compared with a 12% rise in the third quarter. Australia maintained the second place position reporting a 12% annual increase in real price gains during the fourth quarter.”

“‘We’ve come to the end of the real estate boom globally,’ said Benjamin Tal, a senior economist and real estate watcher at CIBC World Markets.”

The Vancouver Sun in Canada. “A pair of surveys on housing prices released Wednesday show that many Canadians are worried about rising prices and interest rates, but that is not stopping many from entering the housing market sooner, or taking on more debt than they want to. ‘Housing prices have risen 89 per cent since 2002 — vastly outpacing family income gains,’ Sal Guatieri, senior economist at BMO Capital Markets said.”

“According to a new BMO survey, 71 per cent of current and future homeowners think house prices are too high and 33 per cent complained they have lost sleep due to the stress of trying to buy a new home. However, it was exactly this feeling that housing prices might spiral out of reach that has led first-time homebuyers to feel pressure to buy homes sooner. ‘There’s definitely a sense of urgency among home buyers,’ Lynne Kilpatrick, senior VPof Personal Banking at BMO said.”

From USA Today. “In this former Chinese fishing village where skyscrapers are springing up almost as quickly as the population of 9 million is growing, it’s not hard to find people who think real estate prices will keep rising, as well. Zhao Jin is a believer. In late 2008…he bought a modest three-bedroom apartment on the outskirts of Shenzhen. The property’s value has soared 63%, prompting an avalanche of calls from property agents asking whether he wants to sell (the answer is no).”

“‘Property prices will definitely go up more,’ says Zhao. ‘I’m an example of why the demand for real estate is there. People hear their country boy did good and come to seek their own fortunes.’”

“In Shanghai’s older Puxi area, at the Baccarat , most of the buyers are wealthy people from Hong Kong and Taiwan. The apartments, which range from about 900 to 1,600 square feet, cost $1.2 million to $3.5 million. ‘People made a lot of money from stocks in 2006 and 2007, and came and invested’ in the building, says Xie Jun Ling, a Shanghai real estate agent, noting that these investors typically already have three to four homes. ‘The rental market is not that great, so they buy and hold it.’”

The Strait Times on Thailand. “An executive condominium (EC) site in Sengkang has drawn a whopping 11 bids, with the winning offer trumping analysts’ expectations by a fair margin. Frasers Centrepoint’s Opal Star and Lum Chang Building Contractors valuation of the asset came to $193.28 million, or $315 per sq ft (psf) of gross floor area. The units are not expected to be cheap, given that the top bid is the highest received for an EC site since land was made available for sale from this source in 1997, property experts said.”

“‘This site is well located, and in view of the tight supply and great demand, we are confident that it will be an attractive development especially to home buyers who have been recently priced out of the market,’ a spokesman said.”

From Phuket Wan in Thailand. “A dismal picture of the property development scene on Phuket and Samui emerges from the latest figures provided by the Government House Bank, which specialises in loans for housing. Given low demand, there appears to be an oversupply of both villas and condominiums. Phuket and Samui are experiencing an oversupply that could take years to whittle down. Three villas were sold on Samui in Q3 of 2009, the report says, while results have been equally stagnant on Phuket.”

“On Phuket, the report says, 13 villa projects were offering discounts of between 10 and 20 percent. Given the outlook, it’s little wonder that upmarket villa and condo estates have converted to resorts to retain cash flow and a positive future.”

From Scoop in New Zealand. “New Zealand home loan affordability was steady in February from January as house prices and interest rates were broadly unchanged, interest.co.nz’s Home Loan Affordability report shows. ‘There is a Mexican Standoff in the housing market where some buyers are holding off until after the May 20 Budget and sellers are reluctant to accept price reductions after the rebound in late 2009,’ said Editor Bernard Hickey. ‘However, the pressure is mounting for price falls as swathes of new listings have hit the market in February and March and many buyers are preparing for higher variable mortgage rates later in 2010,’ Hickey said.”

“The median house price as measured by REINZ was steady in February at NZ$350,000, just off a record high NZ$360,000 hit in December and 7.7% above its January 2009 trough of NZ$325,000.”

The Press in New Zealand. “I was wandering around Christchurch’s four avenues looking at all the leaky apartments and townhouses. Once you know the telltale signs of what to watch out for, they leap out at you everywhere. It seems no-one wants to talk much about New Zealand’s leaky buildings scandal - not the owners, architects and builders, council or government.”

“But walk around the streets, and it is staring you in the face. A few are also realising it could be New Zealand’s greatest single financial disaster. Auckland pilot Paul Lyons is telling me about an investment unit he owns in a four-storey block in Bealey Ave. He says many of the block’s residents are elderly or still struggling to get their heads around what might be the worst case for their own building. Then there are those with investment properties who fear that if they go public and potential tenants take fright, the empty units could quickly bankrupt them.”

“However, Lyons is fuming at what the inspections have been uncovering. The 42 apartments were completed in 2000. Lyons says he bought his rental unit in 2006 after careful checks. ‘We had an engineering report done. The property had a proper Code of Compliance certificate. All the boxes had been ticked,’ he says.”

The Sydney Morning Herald in Australia. “Interest rates may be rising, but that’s not stopping people from dishing out more than $1 million for prestige property, a leading mortgage broker says. Loan Market says its brokers have seen a 30 per cent increase from people seeking loans in excess of $800,000 in the past year. While first home buyers are finding it harder to get into the market, partly because of tougher bank lending criteria, those already on the property ladder are not as affected.”

‘This is because upgraders have large amounts of equity in their homes and have a track record paying off a mortgage. As a result, Loan Market chief operating officer Dean Rushton said they were viewed more favourably by lenders. Some experts predict median house prices in most capital cities will double by the end of the decade due to population growth.”

“‘Those making a move now on a prestige property could certainly realise significant gains if those sorts of predictions eventuate,’ Mr Rushton said.”

“It’s official: 60 per cent of investors believe Australia has a property bubble. A confluence of housing shortages, low interest rates, speculative fervour and last year’s move by the Rudd Government to relax foreign ownership rules on real estate have turbo-charged house prices.”

“When asked if it was a good time to buy an investment property, 67 per cent agreed that it was because the supply shortage would support rental and price yields. Another 21 per cent thought prices would stagnate and only 12 per cent believed that prices would fall.”

“On the future of the boom, 32 per cent could see it running another year, 44 per cent for two or more years, and 7 per cent forever.”

Money Morning Australia. “If you’re one of the many Money Morning readers suffering from property and housing withdrawal symptoms then don’t worry, because this morning we’re back on the bandwagon. And if you’re one of the many Money Morning readers who’s glad we’ve stopped banging the housing drum then all I’ve got to say is, ‘Sorry, we’ll have a non property article for you tomorrow.’”

“Since we last stuck the boot into property a couple of weeks ago there have been more ridiculous headlines from the property spruikers than we could eat. We had intended on keeping a record of them, but we figured it was a waste of time as it’s basically the same story being recycled every day: ‘Sydney property prices set to double’ – News.com.au.”

“There is no doubt at all, that the concept of risk in the Australian property market is completely and utterly absent. Market signals that should indicate to borrowers the level of risk have been manipulated to such an extent that what is high risk now has the appearance of low risk. And that’s the core of the problem. Strip away all the opinions, statistics and indices and you’re left with the simple and unarguable fact that the perceived risk of housing has been eliminated from the market.”

“Just at the time when it’s at its highest risk – it’s all upside and no downside apparently.”

“To our way of thinking it’s not a chronic housing shortage that’s pushing prices up, it’s the availability of easy credit and no comprehension of risk by buyers of taking out a recourse loan – although perhaps the golden years of easy credit could be coming to an end, we’ll see. So, as I say, imagine that all the things the property spruikers claim to be true aren’t true. What will happen then? Well, is it possible we’ll experience what the Yanks are going through with their housing bubble and crash?”

Fin 24 on South Africa. “After being banished to the financial product wilderness, the 100% homeloan is making a guarded comeback. Absa this week announced that people earning less than R15 142 a month can now apply for loans of up to 110% of the value of the property.”

“The return of these loans has been met with a huge demand, with statistics from the mortgage originator ooba showing that by December last year, 44% of homeloan applications were for 100% mortgages. However, banks are not scrambling to grant these loans and approval rates have been fairly limited - and with half of the approved applications, the banks still required some kind of deposit.”

“Local banks - like many banks worldwide - got burnt by 100% loans during the credit crunch. While the easy availability of these loans to people who could not afford deposits helped inflate property booms, many home owners were left devastated after the crash. The value of their properties was worth less than their 100% home loans, which will run up huge interest charges during the course of the loans. Many defaulted on their loans.”

“While Adrian Goslett, CEO of RE/MAX of Southern Africa, isn’t in favour of a return ‘to the crazy years when we had to fight off the banks as opposed to fighting with banks,’ he does think 100% home loans have a role to play.”

“Many South Africans simply do not have 10% or more to deposit just to initiate the investment. And if you want to buy a property of more than R2m, some banks will require a 20% deposit while for vacant land, most banks ask 40%. The advice to prospective home owners may be to wait, build up some capital first and only then to enter the market, said Goslett. ‘The problem is the opportunity exists now. Property prices and interest rates are at a low and won’t remain there indefinitely,’ he said.”

From Finfacts Ireland. “The Irish Independent reports that Bundesbank boss Axel Weber said last night that the German authorities could not let Hypo Real Estate Bank fail when it ran into difficulties with its Dublin-based subsidiary Depfa. Speaking at the Institute of European Affairs, Mr Weber said we future banking regulations must be changed to allow some banks to fail.”

“‘We need a regime where banks can fail in an orderly fashion and this is where the idea of a ‘living will’ comes in.’ He added that there was a risk that the banking problems and the shortage of credit would put a break on recovery.”

“The Bundesbank president held up the stable German property market as an example, noting that home buyers typically have to have 30pc to 40pc of the cost of the house in cash. ‘Both the idea of 100pc mortgages or even 100pc mortgages is inconceivable,’ he said.”

“Earlier, in a speech in Trinity College, Mr Weber said new bank regulations need to address the issue of moral hazard or another crisis will happen. Mr Weber, who is widely tipped to become the next head of the European Central Bank and is now busy helping to draft a new regulatory framework for world banks, said the basic answer must be to increase the amount of money lenders have to keep in reserve for emergencies, known as the Tier 1 capital ratio. The Tier 1 capital ratio should be highest for banks which have a systemic importance and are too big to fail, Mr Weber said.”

From TIME. “Donald Trump has never been accused of subtlety. So there is nothing retiring about the celebrity real-estate magnate’s venture into Panama. His 70-floor sail-shaped Trump Ocean Club, under construction in Panama City’s exclusive Punta Pacifica district, will be the largest and most expensive building ever built south of the Rio Grande. ‘Nothing like this has ever been attempted in Latin America,’says head developer Roger Khafif. ‘When you think of Sydney you think of the Opera House, when think of Paris you think of the Eiffel Tower, and when you think of Panama, you are going to think of this building.’”

“The 1,080-unit building’s construction has now reached the 62nd floor and is scheduled to be inaugurated by the end of the year, complete with luxury condos, a five-star hotel, six restaurants, a Las Vegas-style casino and a private yacht club on the nearby Isla Saboga. The project is 10-to-20 times more expensive than that of any other skyscraper in Panama City. It will be 20% bigger than the AOL-Time Warner building in New York City, Khafif says.”

“More expensive than Miami real estate and priced three-to-eight times higher than property in the rest of the Panamanian market, the Trump Ocean Club is partially financed by a $230 million bond offering from Bear Sterns. That bond is now being handled by JP Morgan following the collapse of Bear Sterns in the 2008 global financial crisis. ‘Without Trump, we would have lost our shirt,’Khafif admits.”

“Since then, more than 2,000 construction workers add a new floor each week, silencing many of the earlier skeptics who claimed the project would never get off the ground.”

“But some doubts remain. Eric Jackson, owner of the English-language Panama News thinks that many of buyers in the Trump Ocean Club, which claims it is 90% sold, could be speculators rather than future tenants. ‘You go around Panama City and look at these new ’sold out’ luxury towers at about 8 p.m. and there are hardly any lights on in them,’ Jackson says. Samuel Taliaferro of the PrimaPanama investment blog agrees. ‘I have received emails from a number of speculators who never intended on taking possession.’”

“Khafif says Trump’s name will help the country’s image makeover. ‘Before it was Panama and Noriega,’ he explains. ‘But now it will be Panama and Trump.’ Or at least he hopes so. ‘We bet $400 million on it,’ Khafif says.”

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.