The Housing Bubble

It’s Friday desk clearing time for this blogger. “Hundreds of miles inland from the booming real estate markets of Beijing and Shanghai, an unlikely property fever is gripping this middling industrial outpost. Taxi drivers boast of owning multiple flats for investment. Billboards hawk developments with names such as Villa Glorious and Rich Country. Frenzied crowds pack sales events with bags of cash, buying units that exist only on blueprints. Average home values in Hefei soared 50 percent last year. Xi Zhou, a cameraman for a local news channel, paid $50,000 for his 900-square-foot unit in December. He figures it’s now worth $80,000. He’s so anxious to take possession that he visited Binhu’s sales office on a recent weekday to gaze at his property in a plastic diorama of the complex. ‘For people of my generation, property is all we talk about,’ said Xi, 27, who will share the new home with his wife and parents. ‘I felt a lot of pressure to buy because the longer I didn’t, the more likely I wouldn’t be able to afford anything.’”

“As the real-estate market in Canada continues its record-setting recovery, the market for high-end homes is surging. The country’s richest residents – as well as millionaires from countries such as China and the United Kingdom – are turning to property to provide a safe haven for their money. ‘There is no doubt a great deal of the demand is coming from mainland China,’ said Ross McCredie, president of Sotheby’s International Realty Canada. ‘The Chinese are the people shopping at above $5-million.’”

“Phil Soper, CEO of Brookfield Real Estate Services, said there’s also no rush to buy because the homes are no longer looked at for their investment value. ‘Those buying these homes are typically financially sophisticated and there aren’t too many who will believe we’re in for several years of highly appreciating values,’ he said. ‘They see today’s prices as reasonable, and don’t really think prices will fall very much.’”

“The Canadian Real Estate Association lists Victoria house prices as the second most expensive in the country. Taking in a tenant is the only way for many young homebuyers to keep their heads above water. ‘If you don’t mind the loss of privacy, renting a downstairs suite is the easiest way to augment your income,’ says Ted Jones, an accredited mortgage professional. ‘It enables you to buy up — to afford more of a mortgage than one just based on personal income.’”

“In Vancouver, based on RBC’s data, nearly 80 per cent of all median pre-tax household income was needed just to pay the cost of a typical mortgage on a standard two-storey home. That figure almost certainly increased again in the first quarter of 2010, as house prices continued to skyrocket. If that’s not a bubble, I don’t know what is. In fact, it makes one wonder how homeowners have enough money left to buy food and keep the lights on.”

“When U.S. house prices got to their most extreme levels during the U.S. housing bubble, the ratio of average household income levels to average local house prices got to 10 times or more in overheated markets like Los Angeles and Phoenix. In Vancouver, the average detached bungalow now costs roughly 11 times the typical average local household income level, based on the data above. So just who can afford to buy these homes?”

“Everybody lists location among their top priorities when shopping for a home. But Hilary and Gareth Baxendale had a different item on their wish list: FHA approval. ‘We were thinking we were only going to get something where we had to put 10 percent down,’ says Hilary, who works as a nanny. This would have meant a small apartment in the $300,000 range. ‘But [FHA status] made a whole new set of apartments available for us,’ she says.”

“‘Most people haven’t been saving for 10 years,’ says David Burks, who just bought a one-bedroom at the Residences at Dixon Mills in Jersey City, which got FHA approval last month. ‘But they could easily make that monthly [mortgage] payment.’”

“An $8,000 federal homebuyer tax credit ends Friday, after months of helping fuel sales among first-time customers. But despite concerns that the buyer frenzy will diminish as the credit goes away, Realtors and observers say the market will continue strengthening and prices will rise. ‘We didn’t see (prices) getting any lower,’ said Rudy Quinonez, who with his wife recently bought a condo in Claremont. ‘From what I read, the market kind of bottomed out. So, it was kind of the right time. Looking around, the prices were lower than we’d expected. But it kind of bottomed out. So we said, `Do we wait?’ We didn’t think they would lower any more, if any.’”

“Still, even the California Association of Realtor’s own president said last month in a press release that while the loss of the federal credits would remove some urgency from the market, it’s ‘not likely to derail current market trends.’ ‘Maybe it’s wishful thinking,’ Mueller said. ‘But I don’t think demand will stop.’”

“Industry lobbyists have pushed leaders on Capitol Hill to extend the credit once again…but lawmakers instead seemed to be emphasizing ways to create jobs as a way to drive the home market. ‘A significant component of the housing market crisis is a jobs crisis, and that must be the top priority moving forward,’ said Rep. David Dreier, R-San Dimas. ‘I believe our focus must be on creating jobs in order to help get the economy back on track.’”

“After nearly 30 years of business in this city, Chino Hills Ford closed Wednesday. Business had declined precipitously in recent years due to the sluggish housing market, popularity of imports, decrease in discretionary spending and higher fuel costs, said Lenny Woods, manager and owner of the dealership. ‘We flourished until the recession,’ Woods said. ‘We peaked in 2003. Since then, it’s been downhill.’”

“‘I’ve never seen anything hit this hard in all my life,’ said body shop manager Michael Aiken. ‘I’ve been through gas shortages, but nothing like this. People with money are scared to spend it, which I don’t blame them.’”

“Woods said he put much of his money into keeping the family business alive. His family is now in danger of losing their homes, he said. ‘Everything I own is invested in this business, sadly, and I made a commitment to this,’ he said. ‘It’s like a runaway train. I put more and more into it to try and save it, and I don’t know what I’m going to do.’”

“The word on the street is that this is the strangest market most agents have ever worked. Even agents who have been through two or three of these cycles know this one’s a little different. Why? Probably the biggest reason is that the federal government has never been as involved in the market as they are right now. On the financial side, they are regulating banks, they are a direct lender (Fannie, Freddie, FHA), they are imposing moratoriums and delivering incentives and stimuli. You name it – they’re there along with their unintended consequences.”

“In some respects it has served to stabilize the market, but in a broader sense it has prevented the market from achieving its own balance, finding a real bottom and starting a real recovery. The market is being artificially manipulated right now and we just don’t know what’s next.”

“The state Senate is gearing up to debate a bill to protect renters and homeowners amid the rising number of foreclosures statewide. Many housing experts agreed that the Berkshires has been spared some of the worst of the foreclosure crisis that has surfaced in many parts of the state, but there is still concern locally. ‘[The national foreclosure rate] has to impact values and it has to impact everybody — there’s no getting away from it,’ said Jay Anderson, president of the Pittsfield Cooperative Bank. ‘We’re not immune.’”

“Saying that some properties would default on their mortgages no matter how they were restructured, Anderson said, ‘If they want to start changing that process … I’m not sure if it’s a wise thing to do, because it stalls what will eventually happen anyway.’”

“The U.S. housing market won’t recover for three to five years as mounting foreclosures hold down prices, according to mortgage-bond pioneer Lewis Ranieri. At least 3 million new properties will join 5 million already in a ‘cloud’ of distress in the next 18 months, Ranieri said.”

“‘There’s another big leg down and the question is how long does it stay,’ Ranieri said. ‘You can’t have much of a rally when you’ve got this big overhang.’”

“Salt Lake City had the largest percentage increase in foreclosure filings the past year among more than 50 communities hardest hit by the nation’s foreclosure crisis, a new report shows. RealtyTrac said Salt Lake’s growing foreclosure-filings rate demonstrates how the problem has spread in a big way from cities in California, Arizona and Nevada into other once-booming areas. As home sales and prices have fallen over the past two years, more and more homeowners are ‘underwater.’ Many of those in this situation are unable to sell their homes for enough money to cover their mortgages after they encounter financial trouble and can’t keep up with their payments.”

“That’s why Mark Knold, chief economist for the Utah Department of Workforce Services, isn’t surprised that Utah’s foreclosure rate is significantly higher than the national average. ‘We were late in to the housing bubble, we’ll be the last to get out,’ he said.”

“Kristen and Chuck Dvorscak of Midland Park, N.J., need to sell their 1929 three-bedroom Colonial now. The couple just had a second child, so the Dvorscaks, 33, want to upgrade to a bigger home nearby. Trouble is, their house’s value has plummeted about 7 percent from the $535,000 they paid four years ago. They’re resigned to taking a loss, but hope to save the traditional 6 percent real estate broker’s commission by having Kristen market the house herself. (Asking price: $499,900.)”

“‘Frankly, I don’t think a Realtor does much that I can’t do myself,’ she says.”

“Housing markets everywhere are fraught with market failures and there is no housing market in the world devoid of government intervention. I am stating the obvious, of course, but it bears repetition, especially in the light of the growing frenzy in the residential property market in Singapore. There are two schools of thought, diametrically opposed, on what should be done.”

“Would-be home buyers, especially first-timers, want the Government to ‘Do Something Drastic’ to control runaway prices. The other camp wants the Government to ‘Do Nothing’ about rising property prices. But if you take a long view, a lot is going right in housing, thanks to the Government’s refusal to treat housing as a free market.”

“Instead of pretending that the housing market is like any other market, the Government has explicitly turned housing into an object of social policy, making home ownership a national objective and tailoring policies accordingly. Market forces are allowed some free play to allow home-owners to realise the value of their assets - but with the Government retaining a watchful eye in case of wide swings.”

“Instead of ‘Doing Nothing’ or ‘Doing Something Drastic’, the best policy in an overheating market is precisely what the Government is doing now: Stay cool, watch the market and be prepared to ‘Do Something Judiciously.’”

“A few common human characteristics were shared by the Wall Street masters of the universe who packaged exotic financial instruments and the Main Street homeowners who purchased more house than they could afford: the insatiable lust for more, the need to impress, the desire for newer, shinier, bigger and ostensibly better. The consequences of allowing those common traits to metastasize across the economic landscape are in evidence in the current economy, edging back from the brink of collapse but still enfeebled by the housing bubble.”

“The homeowners who allowed their oversized dreams to swallow up their common sense are already paying for their mistakes with sullied credit and/or massive debt. From California and Florida, from three-bedroom bungalows to six-bedroom mini-mansions, houses are in foreclosure and neighborhoods are gloomy with abandonment.”

“As President Barack Obama said recently, Wall Street reform would prevent ‘a situation where people are allowed to take wild risks and all the downsides are socialized even as the profits are privatized.’ Just as there will always be homebuyers tempted by the vacation place they can’t really afford, there will always be bankers tempted to earn a sweet million on an obscure deal with an immediate payout. In other words, human frailty will always be a part of the human condition. Government regulations curb the excesses.”

“Between 1997 and 2006, consumers, lenders and builders created a housing bubble, and pretty much the entire establishment missed it. Fannie Mae and Freddie Mac and the people who regulate them missed it. The big commercial banks and the people who regulate them missed it. The Federal Reserve missed it, as did the ratings agencies, the Securities and Exchange Commission and the political class in general.”

“It’s easy to see why this happened. People who make it into the establishment work and play well with others. They are part of the same overlapping social networks, and inevitably begin to perceive the world in similar, conventional ways. They thrive in institutions where people are not rewarded for being cantankerous intellectual bomb-throwers.”

“As is traditional in our culture, the elected leaders of the clueless establishment have summoned the leaders of Goldman Sachs to a hearing so they can have a post-hoc televised conniption fit on the amorality of Wall Street. The second big event in Washington this week is the jostling over a financial reform bill. The premise of the current financial regulatory reform is that the establishment missed the last bubble and, therefore, more power should be vested in the establishment to foresee and prevent the next one.”

“If this were a Hollywood movie, the prescient outsiders would be good-looking, just and true, and we could all root for them as they outfoxed the smug establishment. But this is real life, so things are more complicated.”

“If this were a movie, everybody would learn the obvious lessons. The folks in the big investment banks would learn that it’s valuable to have an ethical culture, in which traders’ behavior is restricted by something other than the desire to find the next sucker. The folks in Washington would learn that centralized decision-making is often unimaginative decision-making, and that decentralized markets are often better at anticipating the future. But, again, this is not a Hollywood movie. Those lessons are not being learned.”

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The Miami Herald reports from Florida. “Continuing a months-long slide, South Florida home prices inched down in February. Some experts say the latest pricing figures indicate a leveling off in the tumultuous real-estate market. ‘Pretty much we’ve reached a plateau where things have bottomed out,’ said Jack Winston, an analyst with Goodkin Consulting. ‘I think it’s a question of how long we stay at that plateau.”’

NBC Miami. “According to a recent study prepared for the Miami Downtown Development Authority, occupancy in Miami’s Brickell area went from a dismal 68% last year to 74% and climbing this year. Jesse Ottley, sales manager at The Viceroy, said the deals are just too good to pass up. ‘The time to buy is now,’ said Ottley.”

“The Viceroy boasts amenities fit for the rich and famous, but with bargain prices slashed in half. Two bedroom units that once averaged $700,000 are now $350,000-$450,000, and single bedrooms now average $250,000-$300,000. Nonetheless, the Miami market remains deeply troubled. Of the 22,000 new condo units built since 2003, 7,000 remain unsold.”

From CBS 4. “A new tactic in dealing with foreclosed condo units is being used by one attorney in South Florida. Ana Martinez is slowly watching her apartment building deteriorate with the housing crisis. Standing on her front porch she told CBS4’s David Sutta, ‘We don’t even feel safe living here anymore.’”

“With just half the building’s unit owners paying their association dues, Ana is left picking up the tab: $417 a month. Martinez said she’s ‘frustrated, I am to the point of giving up.’”

“Banks that own the mortgage on the apartment though take priority, and across South Florida banks are stalling to foreclosure. Attorney Ben Solomon of the Association Law Group explained, ‘The bottom line is the banks don’t want to assume the liability associated with the unit, including the obligation to pay maintenance assessments to the association. The bank has to make a decision as to if they are going to take title to the financially upside down unit, or release their mortgage,’ said Solomon.”

“He demanded Citibank to foreclose on unit 14 in Martinez’s building. Surprisingly, instead of an 18 month legal fight, Citibank wrote off the debt, and handed the title over. Jason Schoenholtz with Regatta Management took CBS4 inside the unit. ‘Yeah it’s completely abandoned. It look like somebody just ran out the door and left everything behind,’ Schoenholtz said, as he walked around the dilapidated apartment. The association now owns this two bedroom apartment. It needs work, but Schoenholtz believes they can sell it.”

From WINK News. “Lee County is spending millions to rehab vacant or foreclosed homes. The $18 million Neighborhood Stabilization Project aims to bring new life to areas blighted by vacant, foreclosed homes. Lee County bought 16 abandoned town homes, which it plans to rehab and sell to low-income families. But some neighbors are upset, saying the county is trying to make their neighborhood ‘the slums of Southwest Florida.’”

“‘This was our American dream,’ Thomas Wickizer said. They’re talking about 16 vacant townhouses, soon-to-be home for 16 low-income families. ‘That’s gonna ruin our property values,’ Wickizer said.”

From CNBC. “When Betsy Seligman bought a home in a 55-and-over community just outside then-booming Fort Myers, Fla., three years ago, she thought she had found her retirement paradise. Her hopes turned into a bad dream, however, when the development’s builder, Levitt and Sons, filed for Chapter 11 bankruptcy in November 2007 and halted construction. Seligman and the roughly 100 other retirees there spent the next two-and-a-half years living in the sparsely built subdivision with none of the promised amenities like pools and tennis courts.”

“‘We have a few people who just walked out of their houses, but we’ve maintained the community in that time, and we’ve just been hopeful that it would turn around,’ says Seligman. Home values in the development have plummeted nearly 50 percent since the bankruptcy filing, she adds.”

“But Seligman and her neighbors now see a ray of light. A unit of Weston, Fla.-based developer Pinnacle Cascades purchased the retirement community earlier this month and plans to bring the project back to life. ‘We’re delighted of course,’ says Seligman, though she is waiting for more details.”

ABC News Money. “‘Government handouts.’ That’s what Anna Aquino, 31, a homeowner in Kissimmee, Fla., calls her state’s latest plan to help residents pay off their mortgages. Aquino, whose own home has lost $30,000 in value since she bought it during the boom, says Washington’s $418 million mortgage assistance for distressed homeowners in Florida is spoiling Americans into constantly expecting help.”

“‘It’s not up to our government to bail out every hard-hit person,’ she says of Florida’s proposal, which is currently under review by the U.S. Treasury and is expected to take effect later this summer. ‘Whatever happened to the American spirit of trying to pick ourselves up from our boot-straps?’”

“Alex Pollock, former CEO of Federal Home Loan Bank of Chicago and now a research fellow at the conservative American Enterprise Institute, says using TARP money to bail out homeowners isn’t even legal. ‘The TARP statute authorized the Treasury only to make investments to acquire assets, not just to spend money on subsidies for people,’ he says, arguing that TARP was meant for investments that could yield some kind of return for taxpayers. These programs, however, don’t consitute investments. ‘It’s money that’s not ever coming back.’”

From TC Palm. “Karen Lehmann calls the last 18 months of her life a ‘nightmare.’ Since October 2008, Lehmann has tried to modify the mortgage on her Vero Beach home with Texas-based Litton Loan Services through President Barack Obama’s Making Home Affordable Program. During that time, Lehmann claims she’s had to express mail and fax duplicate paperwork to the company numerous times, stand in front of an Indian River County circuit judge and follow through the precise instructions and stringent payment requirements set forth in a trial modification program twice approved by Litton.”

‘Last month, Lehmann got a letter from Litton, a loan modification servicing company, stating her lender plans to foreclose on the home despite her making five modified mortgage payments under Litton’s modification plan. Litton is owned by global investment and securities firm Goldman Sachs Group Inc. Lehmann’s loan is owned by banking giant JPMorgan Chase & Co.”

“‘They’re selling America out from under Americans,’ Lehmann said. ‘But I have a file five inches thick and I just refuse to give in.’”

“‘Unfortunately, this is quite common. We as Realtors hear the same story on a daily basis with many different owners and banks,’ said Maria Wells, president of the Realtors Association of St. Lucie. ‘If an owner was fortunate enough to be provided a trial modification, it’s not uncommon to have the terms rescinded.’”

“Chris Schneider. a spokesman at the Texas Department of Savings and Mortgage Lending in Austin, said his agency has no jurisdiction over Lehmann’s case because it doesn’t regulate loan modifications in Florida. ‘Litton is a huge servicing company … they do have a lot of complaints, but like other servicing companies, there’s no violation of law or any regulatory violation,’ Schneider said. ‘It’s a sign of the times right now. People can’t always get what they want.’”

The Sun Sentinel. “Stan Humphries, Zillow’s chief economist, points out that the national inventory of for-sale homes increased last month, despite the large number of sales related to the expiring tax credits. Humphries said that little-publicized dynamic ‘does make one at least ponder whether the market is currently capable of clearing itself of inventory without paying people to buy homes.’”

The St Petersburg Times. “Among the 50 states, Florida once again is the mother of mortgage fraud. Soaring rates in the state, specifically of appraisal fraud and misrepresentation, guaranteed Florida retained the No. 1 ranking in 2009 for the fourth year in a row. An annual ranking unveiled Monday by the Mortgage Asset Research Institute found that, given the volume of residential mortgages it originates, Florida had close to three times the expected amount of reported loan fraud and misrepresentation.”

“Nationally, reported incidents of mortgage fraud and misrepresentation by professionals increased 7 percent from 2008, a record year, to 2009. Why did that happen if the housing market by 2009 was in tatters and the volume of mortgages and home sales had declined?”

“Several reasons, MARI said. New technology and changes in the mortgage market created new opportunities to take advantage of consumers. Fraudsters were also motivated to maintain ‘lifestyles obtained during the boom period.’ Consumers who were desperate for the American dream of home ownership remained easy targets. And, MARI said, mortgage fraud was fed by the need for new, creative methods of moving illicit funds.”

“The MARI report says the most common types of appraisal fraud and misrepresentation for loans originated in 2009 involve incorrect (or fabricated) comparables, omitted information affecting a home’s value, and value inflation.”

“Appraisers are under pressure, the report acknowledged, because it’s already tough to complete a home sale given the tight market for mortgages and more conservative financial assessments of potential buyers. Appraisers who do not deliver relevant values fear they may lose future opportunities for business. Some agree to ‘predetermined’ valuations. Still others unfamiliar with certain housing markets, may provide appraisals too high or low to be of use in closing a sale.”

The Times Colonist. “Taxi drivers are endless sources of stories, sometimes exaggerated but always entertaining. My cab driver, an East Indian immigrant who moved to Miami 25 years ago and within three years bought his three-bedroom house for $41,000, relayed the story of a Canadian woman who came to Florida this year in search of real estate bargains.”

“What she found was not quite at the level of two-plus decades ago, but U.S. real estate prices are a steal compared to 2006. In the case of the Canadian, after being taxied around by the cabbie for a day she made an offer on a three-bedroom condominium. It was worth $650,000 at the peak of the Florida (and U.S.) housing bubble.”

“The bank offered it to her for $230,000; she refused and counter-offered with $180,000. The bank accepted. The taxi driver swears the condo, on the beach, will be worth a million bucks in five years.”

“Visit the coastal areas of the United States and a surface look might lead one to believe the Great Recession is over, and that the U.S. is in recovery mode. But a second look will reveal plenty of for-sale signs even in affluent areas but with fewer takers than could normally be expected. There are more supply issues to come as foreclosures push more homes onto the market. In the first three months of this year, a record number of U.S. homes were foreclosed upon — 35 per cent more than in the first quarter of 2009.”

“For Canadians, where our economy is still intimately tied to what’s happening down here, the American housing market is sending a message: Look out below, the U.S. recovery is not a sure bet.”

From Ocala.com. “It has been awhile since real estate sales in Ocala/Marion County could be favorably compared with 2006, the high-rolling height of the housing boom now gone bust. But that is exactly what happened this week when home sales figures for March were released. Real estate market analysts credited two main drivers for the surge in local home sales. First, there are the federal government’s tax credits. Second, the prices are unbeatable - literally. Marion County has the lowest median home prices of any market in Florida, bar none. With the average median price for March at $93,000 - the seventh consecutive month the average has been sub-$100,000 and down 11 percent from a year ago.”

“Part of the reason for such affordable costs, we must point out, is the high number of foreclosures and short sales that have flooded, and distorted, the local real estate markets.”

“It is uplifting news that housing sales are once again comparable to 2006, in total numbers if not in total value. But it also is a reminder of the lessons our community has learned in the aftermath of the housing bubble, not the least of which is that we can never let ourselves become so reliant on a single industry again.”

“No doubt housing will continue to be an important economic driver for decades to come in Ocala/Marion County, but we hope it never regains the stranglehold on our local economy that led, in the words of former Federal Reserve chief Alan Greenspan, to the ‘irrational exuberance’ that caused the housing bubble in 2006. Housing sales might be the only thing that is back to 2006 levels. But we’ll take it.”

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The Times Tribune reports from Pennsylvania. “While data may show the recession has ended, the overwhelming consensus among participants in this year’s Economic Forum is that it still feels like a recession in Northeast Pennsylvania. Misericordia University economics professor John Sumansky, Ph.D: For me, when I look at this recession, what’s clear to me, anyway, is that not all recessions are the same, and we’re not immune from what goes on in the world around us…This size unemployment rate, and we’re talking about nine, ten percent, a lot of our young people have never seen those kinds of unemployment rates before. What’s different about this one I think is that this particular recession was centered around those kinds of factors that affected people’s wealth, how wealthy did you think you were.”

“And by wealth I mean people’s homes and their 401(k)s…And when people’s homes start losing value, when their 401(k)s start losing value, they felt poorer even if they had jobs. And this cut across the heart of all of America because the home was the symbol that I have arrived, I’m wealthy, that’s my asset. Its price has continued to go for up as long as we can remember until just a couple of years ago. And that all turned around.”

“So if we’re looking for recovery, we’ve got to get people feeling wealthy again. So those home prices have to come back.”

The Philladelphia Inquirer in Pennsylvania. “At 1 p.m. May 15, the nine unsold units at what is known today as Cu257 will be auctioned. The minimum bid for the two penthouses, once listed at $1.2 million each, will be $200,000. The minimum bid for the seven remaining units, with list prices ranging from $698,400 to $871,255, will be $95,000. The seller is a subsidiary of the lender, Wilmington Saving Fund Society, designated to complete and sell the building after it was returned to the bank rather than go through foreclosure and sheriff’s sale.”

“Realtor Mark Wade of Prudential Fox & Roach, who handles Center City condos, said the auction offered the chance for a good deal. ‘At the price point where some of these units may eventually sell, it is hard to highlight any negatives . . . in terms of locale, views, or the fact that the property had problems selling when first offered to the general public,’ Wade said. ‘It is not too amazing what a drastic reduction in sale price can overcome.’”

From WBAL in Maryland. “According to new reports, home foreclosures in Maryland have gone up 80 percent compared to this time last April. To help those in trouble, financial experts, mortgage lenders and housing counselors met with folks in danger of losing their homes at Overlea High School. The volunteers didn’t just help people with foreclosure issues, but they also discussed how to deal with a decrease in value of a home.”

“‘We purchased our house at a real high price and it went down really quick,’ workshop attendee Veronica said. ‘So we want to modify the loan and try and sell it see what our options are.’”

The Capital in Maryland. “Every month, our multiple list system summarizes home sale data for each county that is served by the organization. Since we’re now through the first quarter of 2010, it’s a good time to check in on the numbers and see if we’re coming out of the tunnel yet with respect to our local housing market.”

“Anne Arundel County experienced a housing bubble, just like everywhere. However, the bubble locally was a little different than what we saw nationally. Like politics, all real estate is local, and the nature of the market in our county is evidence of that. This is a very desirable place to live, and our adjacency to Washington, D.C., with our ever-expanding government, has mitigated our exposure to overall weakness in the housing market.”

“Like everywhere, home prices have gone down in the county, but they haven’t gone down as much as the national averages. Plus, the last decade in the county was a period of tremendous growth for home prices, far out-pacing the rest of the country. For example, in 2000, the median home price in our county was 13% higher than home prices nationally. By 2005, local housing prices were 47% above the rest of the U.S., and at the end of 2009, a house here was 71% more expensive than the U.S. average.”

“Some might say this means the bubble here has yet to fully deflate. We don’t think that’s the case. In Anne Arundel County, we have continued strong demand for housing because our unemployment rates are far lower than the nation as a whole and we have very high average salaries.”

Hometown GlenBurnie in Maryland. “Steve Hurst knows what it takes to grade a construction site and to remove trees and brush so that a piece of land is ready to support the infrastructure of a new building. But in November 2008, he was laid off from the local company he had served for many years, along with a mechanic and an equipment operator. Today, he’s one of thousands of unemployed county workers in the construction trades he’s still hunting for work.”

“Lending has virtually evaporated for developers and the residential and commercial real estate have been stagnant for months. At 45 years old, with a wife and two teenage boys at home, Hurst has practically given up on landing another job in the field he knows best. After losing track of the number of jobs he’s applied for, he’s now taking Web technology courses at Anne Arundel Community College. He’s applying for retail positions at Best Buy and Kohl’s - anything to earn him a paycheck at this point, he said.”

“‘It’s not for not trying. I’ve applied for construction jobs, I’ve applied for jobs everywhere,’ Hurt said. ‘I wasn’t comfortable with the construction industry in 2006, when prices were dropping. It has really gotten dog-eat-dog, and so many people (are) going after jobs, trying to get work.’”

The Baltimore Sun in Maryland. “What happens in D.C. matters here. Washington workers were part of the rise and fall of the Baltimore-area housing market, in addition to the lax lending and speculation that gripped the nation. D.C. prices skyrocketed before Baltimore’s. As the cost difference between the District and our metro area jumped from $90,000 on average in 2000 to nearly $240,000 in 2005, more priced-out Washingtonians bought in Baltimore and its suburbs, pushing up prices here.”

“Then the bust hit D.C. and rippled north. Home sales in the Baltimore metro area these days are half as numerous as they were at the peak. Price reductions in Washington that put homes in reach of more people aren’t helping the Baltimore market.”

“From the National Security Agency at Fort Meade to the Social Security Administration in Woodlawn, the federal government has an outsized effect on the Baltimore area. Uncle Sam paid $12 billion here to contractors and employees in 2008, which works out to twice as much per capita as the national average. Johns Hopkins University, a major local employer, gets more federal research-and-development dollars than any other university or college in the country. And the D.C. powers-that-be are relocating thousands of jobs from out-of-state military bases to Harford and Anne Arundel counties this year and next. ‘Baltimore, whether we like it or not, has become an adjunct of the federal government,’ said Richard P. Clinch, director of economic research at the University of Baltimore’s Jacob France Institute. ‘When the government sneezes, we catch the flu.’”

“Clinch sees impending contagion. The federal government has spent more than it collected in taxes for the last 18 months in a row — a record-long stretch of budget deficits. The national debt can’t keep growing at that rate, he said, and any change in spending will affect communities across Maryland.”

The Washington Post. “Since the collapse of the housing market, home buyers trying to a secure mortgage of more than $729,750 have faced higher interest rates and tough new standards to even qualify for a loan. Now the market for these ‘jumbo’ loans is starting to thaw. The home-sales market remains depressed by historic standards, but it has shown signs of improvement, said Lawrence Yun, economist for the National Association of Realtors. Sales of homes worth $750,000 to $1 million increased 39.6 percent in February compared with the same period last year, according to NAR data. Sales of homes worth $1 million or more rose 35.5 percent. But jumbo mortgages still made up just 2 percent of the lending market.”

“‘The upper end of the market is starting to move. It was completely frozen last year,’ Yun said.”

“It has also started to improve in the Washington region, real estate agents said. During the first three months of the year, 146 homes sold for $800,000 or more in Montgomery County, up about 22 percent compared with the same period last year, according to data from the Metropolitan Regional Information Systems. In close-in Northern Virginia, sales above $800,000 were up more than 50 percent from January through March. They were up 20 percent in the District.”

“For some local buyers, a shortage of homes on the market is a more significant problem than obtaining a loan, said Jeff Brier, a principal with the Martin & Jeff Group of Coldwell Banker in the District. A few weeks ago, Brier said, a client offered more than the $2.5 million asking price for a home in the District’s Kalorama neighborhood but still lost out to another buyer. Two bidders also emerged for another Kalorama home listed at $1.55 million last year, Brier said. His client was outbid after the home had been on the market for just eight days. The client offered the seller an additional $100,000 to reconsider — to no avail, he said.”

“‘If it’s a nice house, and it’s priced well, it goes,’ Brier said. ‘Well priced doesn’t mean give your house away. It just means a fair market price.’”

“Citigroup is among the lenders pushing more deeply into the jumbo market. In March, it cut the average interest rate for a jumbo loan from about 7 percent to less than 6 percent for customers who apply through one of its bank branches. The company expects to double its business in the jumbo market this year. ‘We see that that part of the market has been underserved. We believe that it is something we need to get back into in a big way,’ said Sanjiv Das, chief executive of CitiMortgage.”

“Demand for jumbo loans has already picked up in California and New York, two traditionally high-priced markets, he said. ‘It looks like, at the higher end, prices have dropped as much as they needed to, and there is some sense of stabilization in a much broader swath of the country as opposed to six months ago,’ Das said. ‘I am much more confident than I was six months ago that there is a stabilization and that it will stay stable.’”

The News Journal in Delaware. “Home resales got a solid boost from warmer weather and a scramble to take advantage of tax breaks in March, even as foreclosures and sheriff’s sales helped push prices even lower. The falling prices continue to be driven partly by abnormal buyer-seller dynamics, said Cynthia Witt, co-owner of Woodburn Realty in Dover — about a third of the quarterly sales in Kent were sheriff’s sales or bank-owned sales. But demand is clearly strengthening, partly because of tax breaks, partly because of melting snow, and partly because of impatience, Realtors said.”

“‘You can’t discount the emotional part of the marketplace,’ said Bob Weir, executive VP of the New Castle County Board of Realtors.”

“Foreclosures may also dictate the direction of the housing market after the tax incentive is over. Filings rose 16 percent in the first quarter from a year earlier and bank seizures reached a record, according to RealtyTrac.”

From ABC News Money. “When the Obamas arrive in Asheville, N.C., for a vacation, the first couple will find a festive tourist destination and a bustling business hub that, though hurt by the recession, has managed to keep its unemployment level below the national average. If only the rest of the state were so lucky.”

“Some 30 miles away from Asheville, in Waynesville, N.C., furniture store owner Tom Massie, 70, is recovering from his business’s toughest year in decades. For most of 2009, he said, 108-year-old Massie Furniture didn’t turn a profit and Massie had to dip into savings to make ends meet. Massie was able to keep all 12 of his full-time employees, but he watched as businesses around him shed workers and contributed to his home county’s 12.3 percent unemployment rate.”

“‘It’s by far the worst we’ve seen since the Depression that my father and grandfather went through,’ Massie said.”

“The economy in the western part of state, including Waynesville, has also been hurt by a decrease in the number of retirees who — thanks to the ills of the national housing market — are unable to sell their homes in other parts of the country and move to western North Carolina. When the ‘in-migration’ to the region was higher, those retirees helped stimulate both home building and commerce, as they shopped for everything from groceries to furniture to sustain their new lives, said Tony Plath, an associate professor of finance at the University of North Carolina-Charlotte.”

“The downturn of the nation’s banking sector, meanwhile, took a heavy toll on the economy and employment in Charlotte, which lost one of its biggest banks, Wachovia, after it was purchased by Wells Fargo. Charlotte, the home of Bank of America, is still considered the banking hub of the Southeast, but the city and its neighboring towns have lost some 10,000 jobs in the finance sector since 2007, according to data from the U.S. Bureau of Labor Statistics.”

“A portion of the jobs lost, experts say, were those of high-paid investment bankers — think multi-million dollar bonuses — whose incomes helped support other businesses. ‘When those people show up with all this disposable income and start buying houses and cars and go out for dinner, that has a multiplier effect,’ Plath said. Today, he said, ‘that’s gone.’”

The Citizen Times in North Carolina. “Here’s the TV show you probably won’t see anytime soon: “Wall Street Trauma.” It was high drama back in the fall of 2008. Here was the setup: The American economy comes staggering into the ER. Dr. Hank Paulson steps up for his close-up. His diagnosis: patient’s suffering from a complete seizure of the financial system. His prescription: ‘Give me history’s hugest injection of public money into the private market just to stabilize the patient, stat. We can ward off a Great Depression, if not a credit coma.’”

“It’s all a fantasy, of course. There were no doctors with a miracle cure for the economy, and hardly any cops on the beat, looking for the fingerprints at the financial crime scene. It’s not even clear that any laws were broken, an indication of how unregulated Wall Street had become. Congress has seen a line of top CEOs testifying that no one was really to blame. Even the former Federal Reserve Chairman, Allan Greenspan, at whose every word markets once trembled, said he was blindsided by the economic calamity coming.”

“But it wasn’t just nameless investors who got sideswiped. When the housing bubble finally burst, it left millions of homeowners at risk of foreclosure. In Western North Carolina, OnTrack Financial Education and Consulting is seeing more people who lost their jobs in the resulting Great Recession, and the means to pay regular mortgages, not just the credit-risky borrowers trapped in exploding subprime mortgages. OnTrack is likely to see even more foreclosure cases this year.”

The News Record in North Carolina. “News that economists think it may be time to declare an end to the recession comes as a reminder that economists don’t know squat. Outside the ivory tower, unemployment remains painfully high, the housing market is still broken, and a lot of the good news comes courtesy of unsustainable government intervention. If this is not a recession, I don’t want to see one. Welcome to my column about optimism.”

“So why start with the negatives? Because the negatives are real and persistent and need to be understood if optimism is going to have much meaning. In our short-attention-span, instant-gratification culture, we expect problems to vanish with the next news cycle, and we get frustrated when that doesn’t happen. But it’s not going to happen. As it turns out, ‘worst financial crisis since the ’30s’ and the ‘Great Recession’ were more than glib phrases, and the consequences cannot be wished away.”

“People are going to be hurting for a while. The consumer spending that powered our economy is not going to come roaring back — nor should it, to the extent that the money was borrowed, and often borrowed against inflated assets. I just read a report estimating that some of the renewed spending we are seeing comes courtesy of people who have quit making mortgage payments and so have extra cash to burn. This is not the path to sustainable growth.”

“Neither is the route taken by the big banks, which are reporting fat profits again. Those profits are built not on good loans but on trading operations, which are benefiting from what is essentially free money from the Fed. Sooner or later, interest rates have to rise or we’ll get another bubble.”

“Meanwhile, we’re stuck with a huge amount of real estate, both residential and commercial, that won’t be worth what people paid for it again anytime soon, if ever.”

“But however slowly, the pig will move through the python. The uncertain aftermath of the Great Recession will give way to something else. Something better, I believe. That doesn’t mean the real pain of today can go unaddressed. In many places, including this part of North Carolina and neighboring areas of Virginia, things were not going very well before the bubble, so we can’t just settle for the old status quo.”

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Post off-topic ideas, links and Craigslist finds here. The DC meetup link at the forum is here.

Post off-topic ideas, links and Craigslist finds here. The DC meetup link at the forum is here.

Post off-topic ideas, links and Craigslist finds here. The DC meetup link at the forum is here.

The Denver Post reports from Colorado. “The pitch was made to a group of San Francisco immigrants packed into a windowless Holiday Inn room over plates of cold chicken and glossy photos of Colorado vistas. Three years ago, Edwin Resplandor was tantalized by the deal: Put down merely $2,500 and he’d wind up owning an investment home — its construction and mortgage neatly packaged into one loan handled by American Dream Seminars of Denver. Months later, however, ADS withdrew more than a half-million from his loan account and abandoned the project without driving a nail, he claims in a lawsuit joined by seven other investors, leaving him holding a half-million-dollar debt and only empty land.”

“‘Now we’re in limbo — we’re just trying to survive,’ said Resplandor, a Filipino transit driver in San Francisco now working two other jobs to support his wife and 2-year-old daughter.”

“Once regulators shut down New Frontier in April, the investors’ collective bank debt and property titles shifted to the Federal Deposit Insurance Corp. And in at least a half dozen counties across Colorado, the over-valued properties with names like Sunflower and Fountain Village either sit empty or are only partially completed. A former ADS attorney said he’s not sure where his former clients are located. ‘They hosed us too,’ Denver attorney Mike Bohn said without elaborating.”

“Real estate brokers and economic development officials are scratching their heads over a Forbes report that ranked the Denver area among the worst-selling housing markets in the country. Citing data from Zillow, the story last week said there were 42,000 homes on the market in January, a 27 percent increase over the previous year. But local data indicates there are fewer than half that number of homes for sale.”

“Forbes reporter Francesca Levy could not be reached, and other magazine officials did not respond to requests for comment. Levy culled the 42,000 figure from the number of listings on the Zillow website in January, said Katie Curnutte, a Zillow spokeswoman. The number includes foreclosures and homes for sale by owners as well as data from multiple-listing services. ‘Inventory can be a tough thing to pin down,’ Curnutte said. ‘This includes any home for sale from any source.’”

The Telluride Watch in Colorado. “‘According to Telluride Building Official David Samuelson, ‘If you have the cash or ability to get it, things are going to get done quicker and cheaper. People are hustling to find jobs.’”

“Things have certainly changed since the last building boom. ‘Five to eight years ago everybody was just crazy [busy],’ said Montrose County Building Official Greg Pink. ‘They didn’t have enough help; getting work was not an issue, all they had to do to start a job was finish the last one.’”

“But it’s a different story now, with more workers bidding on the same jobs and many carpenters scrambling to find the most basic work. ‘All in all I see our region being down,’ said Jay Kyne, owner of K&K Concrete in Ridgway. ‘People that want to do projects are unable to get funding. Our glory days are certainly well behind us for a while and I don’t see it changing in the next year.’”

From Vail Daily in Colorado. “First quarter construction activity in Vail is showing some signs of growth compared to the first three months of 2009. Building valuation totaled $6.44 million as of March 31 this year, compared to $4.7 million during the same period in 2009, a 37 percent increase. Vail’s record year for valuation was $496 million in 2007.”

The Yuma Sun in Arizona. “Yuman Ruben Garcia stood in line Wednesday morning long before the doors to the job fair at the Main Library opened. He said he got there at 7:30 a.m. The job fair didn’t start until 9 a.m. And it wasn’t long until he was joined by hundreds of others. Out of work since January, Garcia said he’ll take ‘any job’ right now - he just wants to work.”

“The unemployment rate in Yuma was just shy of 30 percent in February.”

The Kingman Daily Miner in Arizona. “Like a number of other proposed large housing developments in Mohave County, Pravada may be a thing of the past. The Las Vegas Review-Journal reported that 1,300 acres of the Rhodes Homes Pravada master-planned community will be sold. Rhodes Homes filed for Chapter 11 bankruptcy last April. A bankruptcy judge approved an agreement between Rhodes Homes and its creditors in January. That agreement declares that Rhodes Homes will sell all of its Las Vegas holdings and the 1,300 acres from Pravada. The exact date and the terms of the land sale have not yet been set. Rhodes Homes may hold onto the remaining 4,000-plus acres of the property.”

“During the housing boom, Rhodes Homes used Rhodes Ranch and Tuscany as collateral for a $500 million loan. The company used the funds to expand during the boom, but because of the downturn in the market, the company was not able to make a March 2009 payment and was forced to file for bankruptcy.”

“Jim Rhodes was allegedly involved in several real estate scandals in the Las Vegas area. Former Clark County Nevada Commissioner Erin Kenny testified in a federal case that Rhodes paid her $16,800 a month or about $200,000 a year for consulting services.”

The Phoenix Business Journal in Arizona. “Gov. Jan Brewer’s appointed head of the Arizona Department of Housing is one of the principals of a company that defaulted on a $97 million loan used to construct Safari Drive in Scottsdale. The mixed-use project near Camelback and Scottsdale roads has been mired in foreclosure proceedings, complicated by the demise of both Lehman Brothers and Corus Bank. Mike Trailor is a principal of Vanguard City Home, which received the loan from Corus through an entity called Riverwalk Square Development LLC.”

“Trailor said he never met with Brewer, but he passed muster with two staff members who interviewed him, including Brian McNeil, the governor’s deputy chief of staff in charge of operations. ‘If people are disqualified because of real estate issues, there won’t be enough people for these jobs,’ he said.”

The Spectrum in Utah. “Bolstered by an influx of affordable bank owned-properties coupled with attractively low interest rates, Washington County recorded 993 sales in the first quarter, representing an increase of 287 sales from last year’s quarterly figure, according to data collected by Southern Utah Title Company. St. George real estate agent Jeremy Larkin described the region’s housing situation as ‘the tale of two markets,’ with prospective buyers flocking to distressed properties and other residential units boasting impressive savings opportunities, but little activity occurring in the overpriced and high-end segments of the market.”

“‘It’s as though they don’t exist,’ Larkin said of the overpriced homes in competition with an influx of foreclosures and other distressed properties.”

“Foreclosures and short sales remain prevalent in Iron County, with distressed properties representing approximately 85 percent of the county’s sales in the fourth quarter of 2009. The county’s market is rife with distressed properties, said Chris Dahlin, president of the Iron County Board of Realtors, and he expects the trend to continue at its current inflated rate for another three to six months.”

“‘We still have a crop of foreclosures still coming on the market,’ he said. ‘Which means prices won’t be going up.’”

The Deseret News in Utah. “If hearing is believing, Utah’s housing market is in the midst of recovery. Check out all those rebound sounds emanating from a new subdivision near you. The incentivized truth, though, is that those are really only the sounds of the federal and state governments working mightily to keep the sickly homebuilding industry on respirator. It turns out nearly all new construction taking place in the first quarter of 2010 was spec in nature as builders have been bolstering inventory to cash in on the last-minute rush by people taking advantage of expiring federal and state tax incentives.”

“One homebuilder who won’t miss federal and state incentives when they go away is Bill Perry Sr., CEO of Perry Homes. He sees the stimulus doing as much harm as good, artificially propping up the market. With or without government subsidies, homebuilders are of the mind that they’re not going to be able to sell houses for much less than they already are.”

“‘We’re not going to lower prices. There’s no more room to go. We’re at our bottom. The only way for us to lower our prices is if we could find cheaper lots, but that’s becoming difficult,’ said Perry, who has snapped up a few land bargains over the past year that he’ll be repurposing for market.”

“After 37 years working in the business, Perry also believes ‘fundamental changes’ are coming. He sees Utah’s housing market morphing into a different animal out of necessity. He said Utah’s penchant for big homes on big lots is no longer practical or affordable. ‘Both the family size and size of house will need to be reduced in Utah to something that’s more efficient,’ the homebuilder predicts.”

“Oh for those boom times of early in 2007 when Utah was the toast of American residential real estate, boasting the strongest housing market in the nation. Real estate know-it-alls were everywhere capturing appreciation and tapping equity that was being inflated to the moon by seemingly insatiable demand. The rather quaint notion that someone’s home could serve as a family piggy bank for special occasions, such as paying for a child’s wedding or college, mutated into this idea that houses were no-limit ATM machines.”

“But just when it looked like the lunacy would last forever, the repurposed Ponzi scheme went Madoff, leaving Utahns scrambling, as when the music stops in a game of musical chairs. Except that in musical chairs, only one player is left seatless. This time, all the chairs seemed to have disappeared. And the music doesn’t appear anywhere close to starting back up.”

Casino Gaming Stock. “Last week MGM Mirage reported a preliminary first quarter 2010 loss of $96.7 million, explaining that the loss is the result of decreasing property value in Las Vegas causing problems with condo sales at the CityCenter. The gaming company has said that they plan on taking a $171 million non-cash impairment charge on condos at the mega casino resort complex on the strip.”

“MGM has reduced prices of the condos by about 30% to bring them in-line with the general fall in Nevada property prices. Net revenue for the quarter is expected to be $1.46 billion which is a 4% drop on last year. ‘Las Vegas was still very weak … there were some pockets of strength, like international business, but for the most part it was very challenging,’ MGM Mirage CEO Jim Murren said.”

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It’s Friday desk clearing time for this blogger. “It’s the eternal question for real estate obsessed New Yorkers: should you rent or buy? Now, we might finally have an answer. The New York Times created this awesome, interactive graph that calculates common expenses of buying and renting, spitting out precisely at what year you would be better off buying your apartment. Economist David Leonhardt says that in these troubled times, most New Yorkers are actually better off buying. Home prices are still low enough that it’s still a bargain in places like New York and L.A., which Leonhardt calls ‘microcosms of today’s more nuanced real estate market.’ So, will you ever be buying your place, or are you a die-hard (bitter) renter?”

“Homeownership is in most cases a highly leveraged, undiversified, relatively illiquid bet, with a return that is highly correlated to local labour market conditions. But Mr Leonhardt sets most of that aside and suggests that, hey, maybe you should play around with the New York Times’ mortgage calculator, and think about buying. Problem one is that said calculator asks you to fill in the about by which ‘you expect home prices to go up each year.’”

“The correct assumption should be zero. Strikingly, the calculator gives you the option to estimate annual appreciation as high as 30%. It doesn’t let you enter an annual decline of value of greater than 10%, despite the fact that over the past year, several markets have seen price declines of at least that much.”

“What is the value of having the option to pick up and leave these metropolitan areas at no cost? Should we be encouraging people to chain themselves to labour markets like this for at least five to seven years? I would hope that most Americans would have more sense than to look at the enormous declines in home prices over the past few years and see a buying opportunity, rather than a cautionary tale.”

“The party’s over at the A Building, an East Village condominium built by mini-mogul Ben Shaoul and his partner, Rob Kaliner. Beneath the two-year-old building’s reputation for hosting raucous rooftop pool parties lies a reality worse than the most killer hangover — flooding, crumbling balconies, alleged mismanagement of the condo board’s funds and two unresponsive developers who have left owners banging their heads against mold-ridden walls, claim several residents who forwarded dozens of documents detailing these issues to The Real Deal.”

“‘This is dangerous for my daughter to be in, and we now have no running water in the kitchen as the island has been disconnected … I feel like I am squatting in my own home,’ resident Kim D’Amato wrote in an e-mail on March 25 to the building’s management company. Her $1.9 million garden-level apartment flooded after the heavy rainstorms in early March.”

“In 2006, Harry Penny thought he was living the dream. He and his wife bought a house in Coventry, Chenango County, and settled in to enjoy retirement. The $2,600 total tax bill seemed reasonable for three bedrooms and seven acres of land. Four years and two reassessments later, Penny has put the house up for sale. Taxes have virtually tripled, making it difficult for the couple to afford. ‘It’s been on the market three weeks, but we haven’t seen a soul,’ said Penny, who turns 72 this year. ‘I think I’m going to be here until I die, because I can’t sell it. Maybe I should just let the outside go to hell and hope my assessment goes down.’”

“New York’s taxpayers pay property-tax bills that are 79 percent above the national average, a 2008 state report found. Property-tax levies grew 60 percent between 1995 and 2005, more than twice the inflation rate, the state Comptroller’s Office said. The situation has become so unbearable for Todd Feuerstein, a 45-year-old sales manager from New City, that he has thought about moving to Arizona.”

“‘What are they telling me — that if I can’t afford these taxes I have to leave my home?’ Feuerstein said. ‘But who’s going to buy it? No one’s going to be able to afford moving to Clarkstown.’”

“Housing starts stayed strong through March in the Tucson area as builders pushed to take advantage of the first-time home-buyers tax credit before it expires. Once that tax credit goes away, local business consultant John L. Strobeck said, he anticipates housing starts will again drop off. Meantime, the median price of a home is the lowest it’s been since January 2004, Strobeck’s report says. ‘Builders are trying to meet the competition of resale and foreclosure homes so they’re pushing their prices way down,’ Strobeck said.”

“Homeowners who bought in 2005 who had ‘interest only’ mortgages will see their rates reset in 2010. Those loans were viable only if property values continued to rise, which they didn’t, so homeowners will see their monthly payments increasing, leading to more financially distressed properties, Strobeck said. ‘This verifies my concern that we are just at the height of the foreclosure problem and will not be out of the situation until 2013,’ Strobeck said.”

“Jim Watters, his wife and children were living the dream in their Gilbert house but with the current economy they found themselves needing to modify their loan and that is when they woke up to a nightmare. With their modified loan, the Watters started making their new mortgage payments. Jim explains, ‘Here are all my cancelled checks from September, October, November, December, February, March…right up until last week when we were told our home was being auctioned off.’”

“The director of the Arizona Department of Housing, Michael Trailor, says loan modifications are not going well in our state. ‘Most of the modification efforts today are ending in foreclosure,’ Trailor explains.”

“Democratic Rep. Dina Titus did not set out to create a housing counseling center in her Las Vegas office. Five staffers in Titus’ district office in Las Vegas now handle housing problems, in addition to the jobs they were hired to do. Critics may scoff, and some have, at Titus helping homeowners who had no business buying homes they couldn’t afford in the first place. Indeed, one family acknowledged they could afford no more than $800 a month when they bought their home in a gated community in Las Vegas with a loan that would cost them $1,200 monthly. The homeowners believed they could eventually refinance to a better rate.”

“With so many homeowners facing foreclosure in Southern Nevada, the economic damage that would come to entire swaths of the community if such a high volume of homes are vacated would be worse than the cost of helping keep families in houses they could ill afford, said Julia Gordon, a senior policy counsel at the Center for Responsible Lending in Washington. ‘Everyone’s in trouble: The borrower’s in trouble; the lender’s in trouble. How do we go through this with the least amount of damage?’ she said. ‘Yes, that does mean that some families that should have never been in that house are going to stay in that house.’”

“Titus will likely face a difficult re-election this fall, as she seeks to keep her seat in a district she won in 2008 with less than 50 percent of the vote.”

“Starting this month, the Treasury Department is paying companies that collect mortgage payments and examine pleas for assistance a $1,500 stipend for approving the sale of homes for less than the loan balance, known as a short sale. The servicers also get $1,000 for each completion under the government’s year- old mortgage modification program, and additional stipends over three years if borrowers stay current on their payments.”

“‘The incentives being offered by the government are small compared to the counter-incentive of foreclosure,’ said Diane Swonk, chief economist of Chicago-based Mesirow Financial. ‘The service industry has its own set of incentives, and you can’t tell people to do what’s not in their financial best interest, especially in an economy that is still struggling.’”

“About 7 million homes may end up in foreclosure in the next three to four years even with the government programs, according to Laurie Goodman, senior managing director at Amherst Securities Group LP in New York. Some of those properties will be homes owned by borrowers who re-defaulted after getting modifications, she said. ‘Clearly the program hasn’t been effective enough so far,’ Goodman said. ‘What it’s succeeded in doing is kicking the can down the road.’”

“A growing number of North Texas home foreclosure filings have nothing to do with the usual late mortgage payments. About 350 Dallas-Fort Worth area homes are facing a forced sale because the owners owe money to homeowners associations or home equity loan holders, local foreclosure filings show. The same factors that have contributed to record home foreclosures and late payments have also caused a jump in foreclosure postings for home equity loans.”

“‘We knew when those loans first came into vogue that it was just a matter of time before this happened,’ said George Roddy, president of Addison-based Foreclosure Listing Service. ‘People were borrowing to pay for a boat or a trip and putting the debt on their house.’”

“Hedge-fund king John Paulson didn’t have any direct involvement in the mortgages contained in the Goldman deal under scrutiny by the Securities and Exchange Commission. And the bets that Mr. Paulson placed on Abacus didn’t affect whether or not homeowners defaulted. Rather, he used Wall Street to help structure hugely lucrative side bets that homeowners couldn’t make their monthly mortgage payments.”

“Some of the people whose mortgages underpinned Mr. Paulson’s wager were themselves taking a gamble—that U.S. housing prices would continue to march upward. One mortgage in the Abacus pool was held by Ms. Onyeukwu, a 43-year-old nursing-home assistant in Pittsburg, Calif. Ms. Onyeukwu already was under financial strain in 2006, when she applied to Fremont Investment & Loan for a new mortgage on her two-story, six-bedroom house. With pre-tax income of about $9,000 a month from a child-care business, she says she was having a hard time making the $5,000 monthly payments on her existing $688,000 mortgage, which carried an initial interest rate of 9.05%.”

“Nonetheless, she took out an even bigger loan from Fremont, which lent her $786,250 at an initial interest rate of 7.55%—but that would begin to float as high as 13.55% two years later. She says the monthly payment on the new loan came to a bit more than $5,000. She defaulted in early 2008 and was evicted from the house in early 2009.”

“In May of 2006, a broker had approached Gheorghe Bledea, a Romanian immigrant, to pitch him a deal on a loan to refinance the existing mortgage on his Folsom, Calif., home. His broker told him the only one available was an adjustable-rate mortgage carrying an 8% interest rate, according his court filing. Mr. Bledea, who says he has limited English-speaking skills, was told that he’d be able to exit the risky loan in six months and refinance into yet another one carrying a lower 1% rate. Mr. Bledea agreed to take out the $531,000 loan on July 21, 2006.”

“The new loan never materialized. Within months, Mr. Bledea and his family were struggling under the weight of a $5,800 monthly note, says his son, Joe Bledea. ‘We were putting ourselves in a lot of debt,’ Joe Bledea says. By spring of 2009, the loan was in default.”

“Throughout my childhood, my grandmother Big Mama extolled the virtues of owning a home. When I dared to move out of her house and get a one-bedroom apartment a year after graduating from college, Big Mama harassed me about renting. When my lease was coming to an end, she declared that I had two choices: Move back in with her or buy my own home. I bought my first home - a two-bedroom, one-bath condominium.”

“Even though I was in my early 20s, I was ready for ownership. I had no debt. The monthly mortgage payment was well below 36 percent of my net monthly pay. My grandmother pushed homeownership, but not as an almighty way to increase my net worth. She taught me to view my home as a place to live and a way to stabilize my monthly housing expense. If your home appreciated in value, that was a bonus. When I sold my condo, it hadn’t appreciated in value. But I was OK with this. I lived in a great place for more than 10 years.”

“Homeownership in this country climbed for decades, peaking in 2004 at 69.2 percent, according to data pulled together by the Hoover Institution at Stanford University. Homeownership rates jumped significantly, according to census data, increasing from 43.6 percent in 1940 to 61.9 percent by 1960.”

“But as the number of homeowners increased, so did the belief - fueled by lenders and others working in the mortgage industry - that a home was a savings account. We were enticed by lenders to tap into our equity, secure in the belief that a house would always increase in value. We embraced the idea that draining the equity was a risk-free deal. We even took the Holy Grail of homeownership to a disastrous place by chastising people who didn’t have a mortgage. People were counseled to get a home loan for the mortgage-interest deduction.”

“However, that deduction was never intended to promote homeownership, wrote Dennis J. Ventry Jr., a University of California-Davis law professor, in the journal Law & Contemporary Problems. Ventry concluded that the mortgage deduction promoted overinvestment in residential real estate. We made renting seem so financially reckless that it surely encouraged people to jump into buying a home before they were ready.”

“The Fannie Mae National Housing Survey, conducted between December 2009 and January 2010, polled people with home loans and renters to gauge their feelings about the current state of homeownership, including whether they view a home as a safe investment. Turns out many still see owning a home as key to increasing their wealth. The Fannie Mae poll found that seven out of 10 respondents said buying a home is still one of the safest ways to invest.”

“However, the survey also uncovered a new trend regarding homeownership. Survey participants ranked a safe neighborhood and living near good schools ahead of making money on their home as a leading reason to become a homeowner. Twenty-three percent of renters said they have changed their plans and are putting off purchasing a new home. ‘Consumers are still committed to owning a home, but are showing increased cautiousness, regardless of whether they rent, own their homes outright or have a mortgage,’ said Doug Duncan, Fannie Mae’s chief economist.”

“It’s what Duncan said next that I think is a sign that maybe, just maybe, people now understand a home is not an ATM or a risk-free investment. It’s great that people are viewing homeownership with much more caution now. You are not a financial failure if you rent. It may be the smartest financial move you make until you are ready to handle a mortgage.”