Money Does What Money Wants
The Chicago Tribune reports from Illinois. “As home sales have stalled in recent years and foreclosures have risen, homeowners who need to move on and those who have inherited property are turning to renting to help cover costs. So many residences are now for lease that there is ‘a saturated rental market,’ with more available units than potential tenants, said Jeanine McShea, president of brokerage services for @Properties. ‘Many people are renting out property, but most are not making money,’ said Sara Benson, a principal in Chicago-based Benson Stanley Realty.”
“Chicago-area home sales have had an uptick in recent months, but prices have continued to slide. With few forecasts of a quick real estate turnaround, many sales agents suggest slashing selling prices rather than renting in hopes of a higher price later. Most owners ‘need to fish or cut bait,’ said Benson. It is really a question of ‘you lose money now or you pay over a long, slow process,’ she said.”
“When Ed Amaya put his Oak Park bungalow up for sale in mid-2007, homes in his neighborhood sold in a matter of days, weeks at the most. ‘We had some showings; got close to a deal,’ recalled Amaya. But as the housing market soured, a sale proved elusive. So Amaya agreed to rent it to a family that was not in a position to buy. ‘We stayed in that pattern for a couple of years,’ said Amaya, who expected real estate to rebound. ‘But guess what? The market got worse.’”
The Chicago Defender in Illinois. “At the height of the national recession, which was born out of, in part, the burst housing bubble as a result of bad mortgage lending practices, President Barack Obama urged homeowners to push past pride and contact their lenders. The president, in turn, pushed for lenders to work with borrowers.”
“Initially, Illinois Attorney General Lisa Madigan was on board with the president and his call for lenders and borrowers to work with each other. But Madigan has changed her message to homeowners and urges them to contact a U.S. Department of Housing and Urban Development-certified housing counselor, or even her own office. ‘It’s just a nightmare,’ Madigan told the Defender about what homeowners are dealing with trying to work out mortgage agreements with some lenders. ‘They (lenders) don’t respond.’”
“‘Housing costs have outpaced people’s earnings and it’s come to a crisis point. Some of the programs that are there to help finance are just stretched too thin,’ Kevin Jackson of Chicago Rehab told the Defender. ‘Whether it’s a fraudulent deal to begin with where a home’s value is less than what it’s mortgaged for, or a homeowner determined to stay in a community that doesn’t meet their income needs, some end up over their heads and are faced with foreclosures…There have been some success stories, but the programs just aren’t as effective as hoped.’”
“‘People are trying to apply to and utilize the programs, but later on find out it’s just a temporary agreement as far as the financial institution is concerned. The loan modifications weren’t actually in their best interest and the homeowners find themselves in deeper debt and have had their cases re-filed,’ said attorney Ahmad Sulaiman, managing partner of a firm that specializes in foreclosure defense.”
My Suburban Life in Illinois. “The path to recovery may take some time following the most disastrous housing sales slump in more than 20 years, said John Bohnen, owner of Hinsdale-based County Line Properties. ‘Where a typical chart on housing sales might show a gradual, steady slope upwards, you can expect the Hinsdale market to be more jagged — an upward spike, then a slight downturn, another upward spike, and so on, over the coming 18 months or so,’ Bohnen said. ‘I had never seen this kind of correction in the market since the early 1990s, when there was a small skid. This is the first major correction in more than 20 years.’”
“The $8,000 tax credit program may have helped boost the market in many towns, but Hinsdale didn’t benefit, Bohnen said. ‘We still have some homes on the market that have not sold for more than 700 days,’ Bohnen said. ‘But the multi-million dollar homes continue to move. Money does what money wants.’”
From AnnArbor.com in Michigan. “April real estate activity in the Ann Arbor…is setting sales records among local real estate agents and their offices, a pace that many said should continue as the contracts signed by April 30 - the deadline for the federal homebuyer tax credit - are finalized in May and June. Realtors said they’ll be watching whether the tax credit causes prices to dip now that it’s over and buyers can’t count on what effectively generated up to an $8,000 subsidy. ‘I have heard buyers say, ‘Now that the credit is gone, we’ll just offer less,’ said David Lutton, president of Reinhart Realtors. ‘If everyone did that, we’d have lower prices moving forward.’”
“Agents also are waiting to see the impact of foreclosures and short sales this year. Year-to-date data from the Washtenaw County clerk’s office shows that the number of homes foreclosed increased 14.9 percent, with a total of 463 sheriff’s deeds recorded through April.”
“An $18 million loan that financed Ann Arbor’s largest downtown redevelopment is in default, according to a foreclosure filing, with the lender seeking a total of $20.1 million from developers Joseph Freed & Associates. The loan for Ashley Terrace dates from 2005, when Chicago-based Freed finalized plans to build the 10-story high-rise consisting of 99 condos, 71 of which are excluded from the foreclosure.”
“Ed Shaffran was among those who cautioned against overbuilding. He said that the Ashley Terrace foreclosure appears to signal what he warned against: New construction downtown could only be built at a price that would effectively price a typical unit out of the range of most buyers. Today, active listings at Ashley Terrace include a two-bedroom condo at $355,000 - or about $285 per square foot. A one-bedroom model for $274,500 is $297 per square foot. In comparison, homes in that price range in the city are on the market for under $225 per square foot, and a buyer could choose new construction with an Ann Arbor address for under $150 per foot.”
“‘The pricing was high,’ Shaffran said. ‘Extremely high.’”
Crain’s Detroit Business in Michigan. “At one point during the presale period for the 63 condominiums atop the Book Cadillac building, all but four units were sold. But after the irrational exuberance of 2006 became more rational, deals were closed on just five units when the building opened in October 2008. Today, the residential portion of the building is half occupied in a mix of condos and rental units. ‘Is it where we wanted to be? No,’ said Cleveland-based developer John Ferchill, who led the historic redevelopment project. ‘But it’s better than where we were.’”
“While Scott Allen, president of Fourmidable Group Inc, hasn’t been in the Book Cadillac rental units, he said condo projects with some of the units converted to rental typically don’t offer the same level of service as full rental buildings. ‘A condo community doesn’t have the budget for the same kind of in-house management that an actual apartment building offers,’ Allen said. ‘In an apartment, we install full-time managers, not just people trying to sell condos.’”
The Greene County Daily World in Indiana. “A wet spring season has accelerated grass growth and the Worthington Town Council discussed how to deal with residents who have let their lawns get to an unsightly state. Town Marshal Dennis Conaway said there are properties that the town is forced to mow every year because they are owned by ‘conglomerates’ located outside the state. ‘The guy has never even seen his property,’ the marshal said.”
“Town council president Hal Harp agreed that the absentee owners are a serious problem for the town to deal with. ‘The problem we are faced with is that we’re not even able to notify the owner of the property that there is a grass problem if they are in foreclosure. We have several where people have just abandoned their house. Just let everything go. The mail is still going in the mail box. The only thing we can do is mow them and then file a lien against the property,’ Harp explained. ‘It’s really a problem that we have not been able to solve.’”
“Council member Debbi Dyer added, ‘So many of them that we found were in foreclosure, the banks that have them are in California, Florida and other places.’”
“Harp replied, ‘The paper, the titles move from mortgage company to mortgage company and you can’t track down the owners. We’ve got a house on Third Street that was in the flood (in 2008) and it’s still full of water as far as I know, because they can’t find the owner. He’s in Florida someplace.’”
From Fox 4 KC in Missouri. “Mayor Mark Funkhouser fears an auction of 200 foreclosed homes later this week will be infested with out-of-town sharks. The auctions traditionally only attract out-of-town bankers and investors, who often want to flip the property, sight unseen, without making any improvements to them. Mildred Angel says living next door to a foreclosed home on Palmer Avenue has been a nightmare. ‘All kinds of things come out of there, snakes,’ Angel said.”
“At an afternoon press conference in front of a rehabbed house, Mayor Funkhouser issued a challenge. ‘We would like some local investors to participate in this auction and buy some of these properties,’ Funkhouser said. ‘We need people living in the house, mowing the yards, shoveling the sidewalk and participating in the community as opposed to vacant. And we have thousands, thousands of vacant homes in KC.’”
The Park Rapids Enterprise in Minnesota. “For the first quarter of 2010, Hubbard County’s foreclosure rate rose 60 percent over the same quarter last year. ‘A little bit of it would be job-related; some people just have too many obligations,’ said Mark Hewitt, CEO of Northwoods Bank in Park Rapids. ‘They used to be able to get out of it by selling their property or refinancing it and now those options are gone. I think that’s the biggest cause, then, because housing values have dropped here like they have everywhere.’”
“‘Appraisals have dropped,’ he said. ‘Just this year we’ve seen drops in some of the properties we’ve been involved with up to 30 percent. A year ago we weren’t seeing in the appraisals, the drops. We’re required when we get property back now through foreclosures, to get a current appraisal and we’re getting numbers that are substantially lower.’”
“Park Rapids realtor Justin Clack said low appraisals haven’t negatively affected many local sales yet. ‘When there are foreclosures and the banks list them with us, they seem to sell pretty well,’ he said. ‘It’s not real difficult to sell a foreclosure. Usually they’re priced very reasonably.’”
“But it seems the endless parade of foreclosed properties shows no signs of slowing. And ultimately those discounted bargains could, as Hewitt says, drag the whole housing market into the cellar.”
The Globe & Mail. “Patricia Hermann is the ultimate house sitter. Ms. Hermann is a ‘home manager’ for Showhomes Management LLC. In the past four years, she has lived in six monster homes in Minnesota, where she works as a nurse. The average emergency room nurse in the state makes about $70,000 – good money, but not enough to make the mortgage payments on the $850,000, five-bedroom Tudor-style she’s currently calling home.”
“‘I’ve been doing this since 2006 and I kind of take it one year a time,’ said Ms. Hermann. ‘Maybe I’ll decide to get a place of my own again some day, but I’ve gotten so spoiled that it would be hard to move into a little apartment.’”
“Buyers know the sellers are motivated to unload the property. Empty houses can depreciate quickly because maintenance is neglected, and buyers have a hard time picturing themselves living in what is currently an empty shell. In the U.S., buyers already have a lot of choice: For every qualified one, there about 40 homes available. ‘The bottom line is vacant houses get low-balled by bottom fishers,’ said Thomas Scott, VP of operations at Showhomes.”
“Ms. Hermann’s torn between loving where she’s living and hoping the homeowner is able to sell the luxurious home. She has been there for nine months, and the longest she’s ever lived in one of the homes is 16 months. ‘I think with this economy, I may be here for a while,’ she said. ‘I feel bad for the homeowners, they get worried. But I know I’m helping. The house looks amazing.’”
The Twin Cities Daily Planet in Minnesota. “Two years ago, Paul Stutler, an Eagan resident, discovered major water intrusion problems in his home - the result of a defect left by the builder. Though state law required the builder to pay for the repairs, Stutler’s home warranty claim was ignored, and he sued to get his house fixed. After months of legal wrangling, he got a settlement, but not before spending $40,000 on attorney fees.”
“It’s a familiar story in some cities. In places like Woodbury and Eagan, many a suburban dream home has turned out to be a nightmare. After moving to Woodbury six years ago, Steve Palmer discovered moisture problems in his home, and a forensic engineer found multiple code violations. The experience drained more than just his bank accounts. ‘I missed business, I neglected my family… My marriage is suffering because of it, my finances, everything. I mean, my life is in shambles,’ Palmer said.”
“Finally, after months of work, the House and Senate passed the bill and sent it to Pawlenty’s desk shortly before adjourning the 2009 legislative session. Gov. Tim Pawlenty vetoed the bill. In a letter to lawmakers, he said the legislation would have further burdened an industry that was already devastated by the housing market crash. ‘You gotta be kidding me,’ Palmer said, recounting his reaction upon hearing the news.”
The Legal Newsline. “New York Attorney General Andrew Cuomo is probing eight banks he believes might have misled credit rating agencies. The targets might have fooled credit agencies into giving higher grades to mortgage securities than they should have received, Cuomo feels. The banks under investigation are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch. Lynch is owned by Bank of America, the target of another lawsuit brought by Cuomo.”
“The three credit rating agencies are Standard & Poors, Fitch Ratings and Moody’s Investors Service. Those three are already the target of a lawsuit brought by Ohio Attorney General Richard Cordray. Cordray said the credit-rating firms marketed mortgage-backed securities, saying they had the highest ratings and lowest risk. Cordray said the rating firms put high rating on the on toxic mortgage debt in return for high fees paid by those they were rating.”
“‘The rating agencies’ total disregard for the life’s work of ordinary Ohioans caused the collapse of our housing and credit markets and is at the heart of what’s wrong with Wall Street today,’ Cordray said.”
“Duke University professor Michael Munger has said that Cuomo should look in the mirror when he seeks causes of the financial crisis. Munger says Cuomo’s reign as secretary of the Department of Housing and Urban Development Authority under President Bill Clinton was a big cause of the financial problems of today. Cuomo required Fannie Mae and Freddie Mac to buy $2.4 trillion in mortgages over a 10-year span. Cuomo said that meant affordable housing for 28.1 million low- and moderate-income families.”
“‘The fact is that pressure had been placed on both private banks and Fannie Mae and Freddie Mac to increase the amount of affordable housing available for people who couldn’t afford it,’ Munger said. Banks were making loans they wouldn’t make under normal circumstances. They were pressed by both Congress and Cuomo and the HUD. Basically, they were putting a government stamp of approval on them to buy these as investment-grade assets. To put it bluntly, the government was setting a trap… For Andrew Cuomo to blame somebody else, he caused it as much as anybody, or his agency caused it more than anybody — and certainly more than any bank merger.’”
The Journal Sentinel in Wisconsin. “Sales of existing homes in Wisconsin rose 16.8% in the first three months of 2010 and sale prices remained stable. John Flor, chairman of the Wisconsin Realtors Association, noted that it was the third consecutive quarter of gains in home sales and the second straight quarter with double-digit growth in the state. But Flor and others acknowledged tax credits intended to stimulate the housing market contributed to the increases.”
“‘I think the second half of the year will be a better reflection of what I call the normalization of the market,’ said William Malkasian, president of the state Realtors organization. ‘We’ll have a better idea then of what it’s going to look like. But I think we’re off life-support.’”
Channel 3000 in Wisconsin. “A family that had apparently been squatting in a West Side home currently in foreclosure has moved out of the residence. The family was asked to move by the Madison police, according to officials with Operation Welcome Home, a local homeless advocacy group. On Tuesday, the owner of the home filed a trespassing complaint. The complaint allowed law enforcement officials to get involved.”
“The mother, Desiree Wilson, and her two children had moved into the home two weeks ago without the owner’s permission. At a press conference on Monday, Operation Welcome Home announced that it helped the family move in without the owner’s permission. They said they entered through a broken door and changed the locks. They said that they launched an effort to encourage homeless people to move into houses going through the foreclosure process.”
“‘We believe that housing is a human right, and we know that we’re part of a bigger movement that’s been doing this across the country,’ said Operation Welcome Home organizer Z! Haukeness.”
“Madison police said there was really little they could do because the owner of the home originally said he just didn’t care. Capt. Jay Lengfeld, of the Madison Police Department’s west precinct said officers contacted the property owner, who told them he didn’t care about the squatters — as the property was going through foreclosure. But on Tuesday, the property owner changed his mind, citing concerns for liability. Prior to that — even though neighbors had called to report the problem — the owner just didn’t want to get involved.”
The Capital Times in Wisconsin. “‘We’re asking them to turn over the property to the community whose tax dollars are funding what they are doing,’ says Z! Haukeness of Operation Welcome Home, citing billions of dollars in bailouts to mortgage lenders.”
From Fox 11 “More and more homes in the state are going from ‘for sale’ to ’sold.’ ‘We’re on the rebound. Things are moving in the right direction,’ said Chuck Peeters, the president of the Realtors Association of Northeast Wisconsin.”
“Even though the numbers show the market is improving, there are still many people having a tough time trying to sell their house. ‘I guess the worst part is just sitting there and waiting for somebody to be interested in it,’ said Shane Meyer, of Green Bay.”
“Meyer has been trying to sell his home on Green Bay’s east side for 2 1/2 years. He’s had to drop the asking price from a $250,000 down to about $200,000. He says the federal incentives did not lead to more people coming to look. ‘I don’t know if it’s the wrong price range or what but I haven’t noticed any increase in people looking at it or calling,’ said Meyer.”
“The tax credit ended last month, which is why some worry the housing market has peaked. People in the industry say there is still some momentum. Shane Meyer hopes it means he can finally get his home off his hands. ‘It’s all a matter of time, sooner or later it will sell.’”
