Were The Prices Right To Start With?
The Vail Daily reports from Colorado. “Home loans have been harder to get ever since the nation’s housing bubble burst a couple of years ago. But money’s still out there, for the right borrowers. Jeff Wilson of Wells Fargo Home Mortgage, was asked about the future of interest rates and whether the current wave of foreclosures has crested….(and) whether or not people can get money for home loans. Wilson said reports that home loans have dried up are just ’sensationalistic headlines,’ adding that Wells Fargo is writing mortgages for all kinds of property all over the nation.”
“The problem, though, is who can get loans. Wilson said that current lending standards reflect those that were in place between roughly 1986 and 2002. ‘It was 2003 through 2007 that was the aberration,’ he said.”
The Denver Post in Colorado. “What has become known as the ‘Roaring Aughts’ in Colorado’s resort communities was a time like no other. Retiring baby boomers drove up home prices, spending millions on 30-year-old condos with a view. The construction trade boomed with an appetite for newer, bigger homes. Working-class locals stepped up from apartments to condos to single-family homes in a matter of years, tapping escalating values. ‘We were drinking too much of the Kool-Aid. I had a couple more sips than I should have had, that’s for sure,’ said Aspen-area loan consultant Drew Sakson, who last year lost five of his investment and commercial properties and is fighting to stay in his longtime home. The fight has cost him 30 years of savings.”
“With his income nearly zero, Sakson qualifies for employee housing, but he can’t sell his condo in the depressed market. He’s late on his payments. ‘I had the ability to pay when this thing hit,’ Sakson said. ‘I thought I could ride it out. . . . I never knew it was going to get this bad.’”
“For years, mountain brokers touted endless appreciation that bested the stock market. When properties appreciated at rates of 10 percent or more a year, ‘all you needed for a loan was a pulse,’ Sakson said.”
“John, a former top-producing loan officer for Bank of America who owes $1.2 million on his 5,000-square-foot home in Edwards and is in foreclosure. ‘I’m the first, and there are probably another few hundred behind me,’ said John, who at 41 worked as a VP for two regional banks in the Vail Valley and as recently as two years ago earned $600,000 annually making loans. He asked that his last name not be used for fear of damaging his banking career.”
“‘Everyone was getting greedy, and everyone was living like kings, and everyone was making money thinking it was never going to end. Now everyone is getting scorched. Everyone,’ he said.”
“In 2007, his home was worth $1.8 million, $1 million more than he paid four years earlier. He tapped that equity and bought two investment homes. Those, too, he will lose to foreclosure, he said. Today, John is not making any money. He’s packing his stuff, joining a mass exodus of formerly flush locals fleeing the valley. ‘There’s no more work up here. It’s not about to end, and it’s never going to come back like it was,’ he said.”
The Aspen Times in Colorado. “The number of residential real estate sales and total sales volume have both plummeted since the boom years of 2005 to 2007, reported broker William Small, but the decline has slowed. ‘There are some indications that the market has bottomed out, but it’s still too early to say things are turning around,’ he said. ‘I think it’s safe to say the worst is behind us.’”
“Banker Kurt Adam, president of Community Banks of Colorado, was less optimistic. The lending market remains tight, interest rates will rise, and the national debt will continue to have a crippling effect on the economy, he predicted. ‘The good old days that we saw on many of the charts and graphs — I don’t think will ever happen again,’ he said.”
The Greeley Tribune in Colorado. “Looking back now almost a year after regulators shut down New Frontier Bank…the total cost is expected to reach well beyond the current estimate of $670 million. ‘My guess is the loss will be closer to $1 billion,’ said Carroll Miller, a bank investor and former board member of New Frontier.”
“For all the bad associated with the bank — the fortunes lost, the call for criminal proceedings, the failed businesses — the environment inside the bank left a permanent mark on employees. ‘It was a special place,’ said Joe Tennessen, a former VP at the bank, who lost his retirement but landed at the helm of Greeley’s Habitat for Humanity months after the closure. ‘During the good times, we all said to each other, ‘You better enjoy it, because this is a once-in-a-lifetime experience.’ It was indescribable. It was an absolutely spectacular place to go to work.’”
The Gazette in Colorado. “Classic Cos., which has constructed thousands of homes in the Pikes Peak region over 20 years as Colorado Springs’ largest local builder, is doing something it’s never done before — auctioning some of its inventory of homes. Classic has hired a national auction company, to sell 10 upscale homes that the builder has constructed at its Flying Horse development on Colorado Springs’ far north side.”
“Classic built 25 pricey homes as part of its Village of Sonoma, which is one of the neighborhoods at Flying Horse. About two-thirds of the 25 homes were sold in 2005 and 2006, said company Chairman Jeff Smith. But as the real estate market began to tank, he said, buyers who had contracted to purchase the remainder of the 25 Sonoma homes backed out of their deals because they couldn’t sell their existing homes. Classic has been renting eight homes for the past 18 months, Smith said.”
“Classic has been renting eight homes for the past 18 months, Smith said. Classic, both a builder and developer, wants to sell the homes because it needs to pay some bills, he said candidly. ‘We just need to pay off some bank debt,’ Smith said, declining to say how much.”
“One of the properties to be auctioned is a more than 10,000-square-foot custom home that sits on Flying Horse’s Tom Weiskopf-designed golf course. Minimum bids for the home will be $2.6 million — a 41 percent price cut from Classic’s original asking price of $4.4 million. Other homes will carry minimum bids that are substantial discounts from their original asking prices.”
The Arizona Republic. “The Centerpoint condominium towers in downtown Tempe failed to sell at a foreclosure auction Tuesday, forcing the lender, ML Manager LLC, to take over the property. Peoria-based ML Manager, the successor to real-estate lender Mortgages Ltd., asked a minimum bid of $8 million to sell the property at the foreclosure auction. Because there were no bidders, ML Manager now owns the property.”
“‘Our plan is to market the towers to a buyer who will finish them,’ said Mark Winkleman, chief operating officer for ML Manager.”
“He said proceeds from the sale of the project will go toward paying back investors. Mortgages Ltd.’s loan to Tempe Land Co. LLC, the former developer of Centerpoint, was for approximately $135 million. Winkleman said several people attended the foreclosure auction, but no one made a bid. ‘There have been reports of problems with the towers and that they need more work than they actually do,’ he said. ‘The 22-story tower is 90 percent done.’”
“Centerpoint broke ground in Tempe in 2005. The development was to include an estimated 375 condos, an upscale retail plaza, fine dining and a winery. Tempe leaders hailed the coming of hundreds of affluent condo dwellers. Now, weathered plastic tarps and boards drape the vacant property. Downtown Tempe stakeholders have complained the towers, which are secured by a chain-link fence, are an eyesore. There have been reports of transients breaking into the condos, looking for shelter.”
“Shannon Randle is a manager for Churchill’s Fine Cigars, which is across the street from Centerpoint. ‘If I was the city, I would try to have (the owners) put a 10-foot wooden fence around it and put up advertising for all the downtown businesses on the sides (of the fence),’ he said. ‘They should have that for us as complimentary service for what we have to put up with.’”
“The setting was a lobby turned into a meeting room with rows of plastic chairs at the Carnegie Center next to the state Capitol. The occasion was a public meeting hosted Wednesday by the Arizona Housing Department to share and receive feedback on how it plans to spend $125 million in new federal funds to fight the foreclosure crisis. Amid the numbers and bureaucratic terminology, the meeting provided a visceral glimpse of the wrenching downward spiral everyone involved in the foreclosure crisis feels and how this latest financial package is more triage than bailout.”
“Housing Department Director Michael Trailor recapped the grim trajectory. That the new federal aid would only help less than 10 percent of the households sent a new ripple through the crowd. Some seemed surprised. Others nodded in agreement, studying a handout passed out by Trailor’s staff. ‘We are on track for 50,000 foreclosures in the Valley this year,’ he said. ‘We are hoping we can use this $125 million to help 4,000 homeowners.’”
“Standing at the front of the crowd with microphone in hand, Trailor said he wants to use the money to help homeowners who had ‘demonstrated personal responsibility’ in their purchase. Help would not be available for people facing foreclosure due to ’self-inflicted wounds,’ such as taking large sums of cash out through refinancing or home-equity lines of credit or risky loans. Only homeowners living in ‘modest’ primary residences would be eligible, not investors.”
“And anyone who applied for help would have to demonstrate their risk of foreclosure was due to reduced income from unemployment, a medical condition, divorce or death. ‘We can’t be all things to everyone,’ Trailor said. ‘This $125 million might seem like a lot of money. But when facing Arizona’s foreclosure problem, it’s not.’”
“As the questions went on, some sparked heated debates, others set off frustrated murmurs. Near the scheduled end of the meeting, one man seated at the back of the room, wringing his hands, asked, ‘Why is Arizona only getting $125 million of the $1.5 billion?’”
The East Valley Tribune in Arizona. “While homes sold briskly in March compared to previous months, it’s not necessarily good news, according to a new study. In March, the existing-home market saw more activity and foreclosures than it has since last July, according to a Realty Studies report from the W.P. Carey School of Business at Arizona State University.”
“Activity in March was driven more by increased foreclosure activity, bargain hunters, short sales and the federal income tax credit for new home buyers, said professor Jay Butler, who authored the report. Almost 6,500 single-family homes were resold in the Valley in March, up from more than 4,600 in February and about 5,900 in March of last year.”
“‘Foreclosures remained a major force in the market,’ the study said. ‘Foreclosures and the resales of foreclosed-on homes accounted for 64 percent of the existing-home market activity. Almost 4,400 new foreclosures happened in March. That’s way up from just over 3,300 in February and about 2,700 in March of last year.’”
From ABC 15 in Arizona. “Canadian investors are buying Arizona real estate, helping the housing market in the west Valley. ‘It is the buying opportunity of a lifetime,’ said Bill Chipman, an investor from British Columbia whose business group is buying real estate in Arizona, Texas and Nevada. ‘Our business plan is to buy 500 homes but I hope we can do 1,000,’ he said.”
“Real estate sales to Canadians are reportedly up 80 percent over last year. Real estate values have plunged in areas like Avondale, sometimes by more than half what they were a few years back. But there is hope according to realtor Greg Swann. ‘Phoenix has great opportunities. It’s like California without the beaches or California,’ he said.”
The Winnipeg Free Press. “These days, however, it’s not just the favourable climate that makes Arizona an attractive locale. It’s the ridiculously low real estate prices that have really caught Gerry’s attention. ‘There are houses along golf courses that were $500,000 three years ago and now they’re $120,000,’ he says.”
“Although real estate prices in desirable U.S. hot spots like Arizona, California and Florida will likely never be more affordable than they are today, certified financial planner Wynn Sweatman says it’s equally important to consider the other costs involved in owning and living in a home south of the border. Owning and maintaining two homes will increase their costs, putting pressure on their ability to maintain their current lifestyle in retirement, so their investments may have to provide even better returns, he says. ‘They could end up wishing they had more in cash reserves and less in real estate.’”
“Still, buying a home in Phoenix likely has a substantial upside as an investment. Assuming they purchase a home today for $120,000, and that it will increase in value by five per cent annually, the asset would be worth about $171,000 in 10 years and $278,500 after 20 years. Sweatman says the figures are conservative estimates, considering current real estate values are extremely depressed.”
“What does $1 million buy in an Ahwatukee Foothills neighborhood these days? A lot more than it did five years ago. Longtime Foothills real-estate saleswoman Pam Eagan, for instance, has clients who are scrutinizing three $1 million cash offers for a custom five-bedroom, 4,700-square-foot home. The house, priced at $1.2 million, has a remodeled kitchen, a lap and diving pool with a spa, and balcony views of lights from Phoenix and Tempe.”
“Five years ago, the house would have listed for $1.8 million - and perhaps sold for even more if buyers got into one of the notorious bidding wars of 2005, Eagan said. ‘The prices have just come tumbling down,’ longtime Ahwatukee real-estate broker Mike Mendoza.said. ‘It makes you ask the question ‘were the prices right to start with?’ I just saw one listing that I know the people bought for $1.65 million, and it is listed for $950,000. Another one sold a few years ago for $1.65 million and now is for sale a $1.35 (million).’”
“No matter where a potential million-dollar homeowner wants to live, the biggest stumbling block is financing, those who make a living in real estate say. ‘You used to be able to buy anything with fog in a mirror,’ said Tempe mortgage broker Scott Harward, who works with many Ahwatukee sales representatives to arrange financing for buyers. ‘But not anymore.’”
The Las Vegas Business Press in Nevada. “The country’s largest private development, MGM Mirage’s CityCenter, was sued by its general contractor for $490 million in unpaid construction bills. On March 25, Perini Building Co., a unit of Tutor Perini Corp., Sylmar, Calif., sued several entities controlled by property owners MGM Mirage Inc. and Infinity World Development Corp., a unit of Dubai World, the investment arm of the Persian Gulf state.”
“‘We are doing whatever we have to do to protect ourselves and our subcontractors,’ Tutor Perini Chairman and CEO Ronald Tutor said. ‘They simply stopped making payments and started offering excuses. Their position is absurd.’”
“On March 23, MGM/Infinity demanded ‘that Perini cease all construction activities at the Harmon,’ and directed security to escort the contractor off site and change the locks, the lawsuit alleges. The oval-shaped glass tower was scheduled to open later this year. A timely completion now seems unlikely since ‘MGM/CityCenter is delaying the ability of Perini to complete its work under construction agreement,’ the lawsuit alleges.”
“The Harmon was scaled back from 48 stories to 26 stories in January 2009. MGM Mirage eliminated 200 high-end condominium residences, of which only 44 percent had sold, but retained the 400-room hotel component. The move saves an estimated $600 million in construction costs, and defers another $200 million for interior finishes.”
“‘By canceling the Harmon condominium component, we will be able to avoid the need for substantial redesign of the Harmon resulting from contractor construction errors,’ CityCenter President and CEO Bobby Baldwin said in a previous statement. It also keeps the project focused on ‘maximizing’ sales at CityCenter’s other condo towers, he added.”
