The Feeling Was That You Couldn’t Go Wrong
USA Today reports on Florida. “When Mark Weeks was laid off from his $90,000-a-year construction job 2½ years ago,he vowed to hang onto his family’s house. But his new job as a safety officer for a Cocoa, Fla., crane rental company barely paid a third of what he used to make, and he wound up unable to pay his mortgage. Wells Fargo filed foreclosure proceedings in December, when Weeks was six months behind on his payments. Weeks hired a lawyer to fight it and move the case to a court-appointed mediator. ‘We just want them to work with us because we can’t make it right now,’ Weeks said. ‘We weren’t asking them to give us a home for free.’”
“Teri Schrettenbrunner, head of Wells Fargo Home Mortgage Communication, said the bank is committed to helping homeowners facing true financial hardship stay in their homes they can afford, but, as is the case with all lending institutions, it has to honor the terms of its contract with the investors. ‘We are bound by the contracts we have with … whoever owns the loan on the back end to do what they find acceptable in modification,’ Schrettenbrunner said.”
The Herald Tribune in Florida. “These days, nearly every Realtor keeps track of foreclosure levels. But foreclosures were in Adam Robinson’s sights even before…establishing his website in 2003. ‘Everybody wants foreclosures right now, and they want a deal on them even though they all already are a deal compared to a few years ago,’ Robinson said. ‘A lot of people are buying properties right off the site without even seeing them.’”
“The Paramount Bay condominium is a 47-story steel-and-glass cadaver, conceived at the height of the real estate boom as another ultraluxury tower in a city that would soon be choking on them. None of this deters Barry Sternlicht, the real estate investor who owns the building. Mr. Sternlicht hopes to foreclose on many of Corus’s errant borrowers, restyle their buildings and sell units for a significant profit once the real estate market recovers. He says he and his investors can afford to wait until then because the F.D.I.C. has provided them with $1.4 billion in zero-coupon financing and an additional $1 billion in low-cost loans that can be used to complete unfinished projects.”
“‘Look at this,’ he says, pointing out the landmarks in the distance: South Beach, Key Biscayne and the downtown Miami skyline. ‘Someone is going to want to live here — someday.’”
“But Linus Wilson, a finance professor at the University of Louisiana, Lafayette, who has studied the F.D.I.C.’s real estate sales, says he thinks the price Mr. Sternlicht paid for Corus will hobble his returns. Mr. Wilson points out that 59 percent of the loans on Corus’s books were no longer performing before the bank failed in September. Corus described another $558 million in the portfolio as ‘problem loans’ that were near default.”
‘Mr. Wilson argues that if Mr. Sternlicht doesn’t sell condos right away, he may have trouble making his first loan payment of $150 million that comes due in October 2011. ‘It is far from guaranteed that he and his investors will make money on this transaction,’ Mr. Wilson says.”
“New construction in Sarasota County is down 93 percent since the 2006 peak, or that it is less than half of what it was in 1988 as the savings and loan crisis rumbled through the economy. And 1988 was a bad year for the local economy, particularly in South Sarasota County, where problems in the commercial lending industry were compounded by the collapse of giant General Development Corp., said Chad Maxwell, a certified commercial investment member. ‘This region was impacted even more severely than the rest of the country by the S&L crisis,’ Maxwell said. ‘It was a good 10 to 15 years for prices to recover’ in South Sarasota County.”
Wink News in Florida . “The economic impact of the oil spill is starting to spread beyond the beaches of Louisiana and Alabama. Some Southwest Florida real estate agents say buyers are backing out of deals because of uncertainty about the oil. Marc Joseph’s office has been getting the calls for more than a week from people unsure about oil who are having second thoughts about buying a Southwest Florida home. Joseph does not plan to make any claims with BP, saying it would be too difficult to quantify for an industry still recovering from collapsing prices and foreclosures.”
“‘Very frustrating,’ Joseph said. ‘We’ve hit every obstacle imaginable down here.’”
The Birmingham News in Alabama. “Sales of beach houses, condos and other vacation properties are bouncing back across the nation after a deep slump, but a giant question mark looms over the budding recovery in Alabama’s coastal communities, in the form of the massive Gulf of Mexico oil spill. So far this year, gross commissions are up 19 percent over 2009 for ERA Class offices in Gulf Shores, Foley and Lillian. The numbers are being boosted by foreclosures, short sales and other deals, said Gulf Shores broker Frank Malone, such as two-bedroom Gulf front condos that can be had for less than $300,000, or about half the price seen five years ago.”
“Cautious buyers help keep the pressure on those prices, Malone added, a trend that’s particularly true in the vacation home market. Many shoppers have done extensive homework before even calling a broker, and they are driven with less emotion than they were during the housing boom. ‘Back in the day, the feeling was that you couldn’t go wrong, and then a lot of people got caught,’ he said.”
“George Haughton of RealtySouth, does about half of his business in the second home market, said this year’s sales are better than he can remember since before Hurricane Katrina hit the Gulf Coast in 2005. And at the height of the boom, it wasn’t uncommon for Haughton to show a condo with several other potential buyers milling around.”
“‘Then it was a race to the fax machine to submit an offer before the other agent,’ he said. ‘Those days are no longer.’”
The Atlanta Journal Constitution in Georgia. “When executive Wade Ledbetter leaped at the opportunity to move up in his company, the shackles of relocation snatched him back down to earth. The $30,000 he’d invested in home improvements, the 20 percent he’d put down on his house and the extra payment every year for 7 1/2 years would be a wash, along with settling on a selling price well below what he’d paid for the home and just about all its contents. Add living away from his family in a one-bedroom apartment for eight months while his home languished on the market and his frustration accrued.’
“‘It was horrible,’ said Ledbetter. ‘It was constant, horrid stress. There were a number of times I said to myself, ‘What have I done?’”
“Jill Heineck, chief relocation officer for The Agent Advisory, said one client secured a career advancement from a regional chain to a global one. The company wanted to move him to New England from Tennessee and offered a $140,000 relocation package. But he had purchased a $400,000 home three years earlier, and found it was valued at only $300,000 when it came time to move.”
“After paying that gap plus the cost to close the sale, he wouldn’t be able to afford a down payment on a new home in New England. While his salary increase was significant, it couldn’t bail him out of the jam. End result: He stayed put.”
“When pressed, candidates take another option: short sales. It’s the kind of work keeping John Damiano, an associate broker with RE/MAX of Greater Atlanta, busy. Unwilling to risk foreclosure, new employees — especially those who have been unemployed — willingly take a loss on their house in order to expedite the move to a new job.”
“‘A lot of talented people, the opportunities are passing them by because the package to [cover their entire move] isn’t there. A lot of them are deciding to go through short sales because they can’t afford two mortgages. It’s a difficult position to be in, through no fault of their own,’ Damiano said.”
‘Sometimes, it’s a no-win situation. Munson’s relocation company worked with a candidate from Connecticut who got a job in Atlanta. He carried two mortgages on his home, owed more than $200,000 on his house beyond its value and was going to be paid $150,000 a year. ‘I told him to stay in the house and look for a job in Connecticut,’ Munson said.”
The Post & Courier in South Carolina. “The region’s commercial real estate market, which swelled during the boom years and is now reeling from the recession as businesses shut their doors or downsize, will be dealing with higher vacancy rates and less new development for some time, industry observers say. Darkened storefronts are visible on almost any major corridor in the Charleston metro area, and ‘land available’ or ‘commercial property’ signs sprout up where in better times, office buildings or supermarkets were proposed.”
“As for speculative buildings — office, industrial or retail properties that go up without committed tenants in hand — risk-averse lenders aren’t giving a penny. A recent national survey by the Society of Industrial and Office Realtors found that nine out of 10 respondents believed development was virtually nonexistent in their markets.”
“‘There is not much retail being developed because of a lack of financing. Banks are sitting on the money,’ said Charlie Carmody, broker in charge of Charleston-based CB Richard Ellis Carmody. ‘Because of the lack of tenants wanting to do expansions right now and the amount of available space that is already there, you are not going to develop a new shopping center when there is one right down the street already vacant.’”
News 14 in North Carolina. “The Hue, a condominium building in downtown Raleigh, closed before anyone had a chance to live in it. The multimillion dollar downtown building now has a sign in front announcing it will be closed until further notice. ‘They weren’t able to sell sufficient enough condos to get the financing that they needed from the federal government,’ David Diaz, the president and CEO for the Downtown Raleigh Alliance, said.”
“Diaz said the cost to own one of the condos was reasonable. He said it was in the lower end of the price scale when it came to downtown condos. ‘The average condominium downtown, that’s going for a couple of hundred thousand dollars or higher,’ Diaz said. ‘They had units that were in the $130,000 and $140,000 range.’”
The News & Observer in North Carolina. “When Leslie Black purchased her first home in December in the Rutledge Landing subdivision outside Knightdale, she didn’t expect her opinion of the neighborhood to change so quickly. But shortly after Black moved in, foreclosure signs popped up in front of four houses across the street. The owner of the never-occupied homes, Perry Builders, had gone out of business, and the properties had been taken over by the lender, Branch Banking & Trust.”
“‘They were for sale and then boom,’ said Black, who took advantage of the government tax credit for first-time homeowners to leave her apartment in Raleigh. ‘If I would have known, I wouldn’t have moved in here.’”
“At the peak of the housing boom, Perry Builders was constructing hundreds of homes each year, many of them in eastern Wake County. Rutledge Landing, in a largely undeveloped area, was popular with first-time homebuyers. Single-family homes started at $100,000. It also attracted people with plans to speculate in residential real estate.”
“Among them was John T. Dunn. (who) lives in suburban Washington but grew up near Knightdale. He bought 10 houses in Rutledge Landing in 2003 and 2004. The mortgages had adjustable rate riders, meaning the interest rates reset after a period of time and could spike as high as 13 percent. ‘My intention was to be able to refinance and get a better rate,’ Dunn said.”
“That didn’t happen, and lenders foreclosed on all of his Rutledge Landing homes in 2007. Dunn, who now runs the Self-Sufficient Living Education Institute, a fledgling nonprofit, said he regrets having had to give up the properties. ‘When you don’t have no choice, there’s no alternative,’ he said.”
“One of Dunn’s foreclosed homes is next to property owned by Jim Shallal, a personal trainer and masseur who lives in New York City. Shallal bought nine homes in Rutledge Landing in 2004 after learning about the development from a friend who was a mortgage broker. ‘I was thinking, God, this is just like buying a small apartment building, and it’s better because they’re houses, and the property value of a house goes up higher than an apartment building,’ Shallal said.”
“Shallal’s optimism at that point is best exemplified by the creatively spelled name he chose for his North Carolina real estate company: Furocious Muscle LLC.”
“Like Dunn, Shallal got caught when the interest rates on his loans spiked. After much effort, he was able to refinance the loans and now uses a management company to rent the properties, mostly to people who qualify for the government’s Section 8 housing subsidy program. Shallal wishes the mortgage companies had never lent him the money, which he says he should never have qualified for. He wanted to sell his Rutledge Landing homes long ago, but the foreclosures have made that impossible.”
“‘How am I going to compete with someone selling their house for $100,000 and I’m trying to sell mine for $123,000?’ he lamented.”
“Three of the subdivision’s planned four stages have been completed. The fourth was to include higher-priced houses on land behind Leslie Black’s home on Sweetgrass Street. In addition to the foreclosed homes and empty lots on Sweetgrass, Perry Builders has left behind a partially built shell of a house that has been untouched for more than a year. In addition to the foreclosed homes and empty lots on Sweetgrass, Perry Builders has left behind a partially built shell of a house that has been untouched for more than a year.”
“Black’s neighborBrian Morrill knows all too well what the foreclosures across the street are likely to mean. Morrill and his wife paid $152,000 for their house in late 2007, or $12,000 more than Black paid for a home that is 200 square feet bigger. Morrill is getting a divorce and would like to sell his house. But he doesn’t dare list it. ‘I’m not even going to bother,’ he said. ‘I’m too upside down on it.’”
