The Housing Bubble

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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.”

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