May 31, 2011

Bits Bucket for May 31, 2011

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May 30, 2011

It’s Just A Matter Of When

Readers suggested a topic on housing inventory. “I would like to see a topic on how much empty inventory we will end up with and what’s going to happen to it. Locally, builders are still building or trying to build. I’m in the DC area are the builders may have slowed down but they haven’t stopped. They’re still trying to build houses, condos, and office space. We have no need for more of any of that. Lots of office space or condos are sitting empty right now, but builders have submitted plans to build more condos and offices and tear down older office buildings to make larger office buildings. Some of the builders plans have stalled because of people complaining about various things like transportation issues but the builders are continuing to overbuild.”

“What’s going to happen to all this inventory? The answer is not that it will get used when the economy turns around. There is simply too much, period, and the builders are just adding to trying to add to the glut.”

“At the rate the builders are going, they will be building 20 floor condo towers in Wyoming in 2020. By 2030 they will be building condo towers in Northern Alaska, the Canadian Arctic, Siberia, and other remote places such as the Atacama desert and the Australian Outback. By 2050 they will be building condo towers in Antarctica. By 2060 they will be building condo towers on the ocean floor and/or moon. This has to fall apart at some point.”

A reply, “All-cash Asian, Australian, Canadian and European investors?”

Another, “Low-cost, high-density, and assisted-living/senior housing?”

One said, “The above situation reminds me of that ‘Ghost Towers of Bangkok’ video I saw a few years ago. It showed never-occupied office and apartment towers that were built before the Asian currency crisis of the late 1990s.”

The Wall Street Journal. “Friday brought a disappointing statistic: The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes plunged 11.6% on a monthly basis to 81.9, the industry group said. As we report, the index, which tracks agreements to purchase homes, had increased the two previous months. A reading of 100 refers to the level of sales in 2001. The reading indicates more pain lies ahead.”

“Adrian Miller, senior VP, Miller Tabak: ‘Sales will continue to underwhelm at best and be outright horrible at worst as the decline in prices remains unabated. As long as we have a supply overhang of 6.5 months of new homes, 9.2 months of existing homes and an estimated 3.87 million of homes as part of the so called ’shadow inventory’ tied to foreclosures, home prices have no catalyst to begin to improve.”

“Daniel Oppenheim, analyst, Credit Suisse: ‘They key is that weak sales at the end of the spring selling season will likely lead to even further pricing pressure in the coming months, which in turn will pressure homebuilders to cut prices, or lose more sales.’”

“Adam Rudiger, analyst, Wells Fargo: ‘Overall, we believe this is just one more data point, on top of a multitude of others, that the housing market remains weak (both in the existing and new market) and that 2011 has not yet been the turning point for which some might have hoped.’”

The Arizona Republic. “Metro Phoenix has a “shadow inventory” of nearly 100,000 homes. These homes are either in foreclosure or the owners are behind on their mortgage payments, signaling that the houses could eventually join the supply of properties offered by lenders for sale at a deep discount. Analysts and investors have warily eyed the tough-to-measure shadow inventory since last year, when worries arose that banks were delaying foreclosures and holding onto large numbers of homes after foreclosing.”

“New data from California-based John Burns Real Estate Consulting, one of the nation’s leading housing researchers, puts the number of homes in the Phoenix area’s shadow inventory at about 92,000, the size of a small Valley suburb. But that number, which includes Pinal County, isn’t alarming housing analysts. That’s because the rate of sales is as important as the raw number of homes. If sales are brisk, the homes are snapped up quickly, meaning they won’t lead to lower prices.”

“Other markets racked by the housing downturn since 2007, including Las Vegas, Orlando and Sacramento, are in worse shape - sometimes much worse. Based on historical rates of home sales, the Valley’s inventory would clear out much faster than other cities’. ‘(Metro) Phoenix’s shadow-inventory figure may look scary, but the area is in much better shape than other markets,’ said Tim Sullivan, a principal with Burns Real Estate. ‘Foreclosure homes are selling and selling fast in Phoenix, which makes a big difference.’”

“Homes are selling at foreclosure auctions at record-setting paces, with more than 1,300 sold in Maricopa County last month. The number of foreclosure and normal resale homes on the Arizona Multiple Listing Service is a five-month supply, based on the long-term rate of sales. These homes, because they’re already listed, aren’t part of the shadow inventory.”

“So, Phoenix’s combined supply of homes, including shadow inventory and current inventory, should take 17 months to sell. Other cities with high foreclosure rates all have higher levels of total supply. Las Vegas has a 21-month combined supply, according to Burns.”

From “Crazy deals are roiling the local housing market, turning the usually busy spring home-buying and selling season upside down. Michelle Greene bought a foreclosed home in Covington for $30,100 late last year, and it’s worth $80,000 today. Laura Schatz is thrilled to pay just $87,000 for a Pleasant Ridge fixer-upper, despite months of uncertainty on when the deal will close. And Jeff Bardua of Independence is just glad to finally sell the house he’s been trying to unload for a year, even at a $42,000 loss.”

“Realtors say they’ve never seen the local market so bloated with distressed sales - with foreclosures, properties owned by the bank or homes in which the sellers are in line to take a loss. Some houses will go for as much as 40 percent discounts. Median sale prices are at their lowest in years: Down 24 percent since 2006 to $106,000 in Southwest Ohio; off 6 percent to $126,000 in Northern Kentucky. So far this year, nearly one of every two homes sold in Southwest Ohio and one of every three in Northern Kentucky have been distressed sales.”

“‘It’s probably going to take three to five years for things to get sorted out,’ says John Glascock, economist and director of the University of Cincinnati’s Real Estate Center.”

“No one is willing to predict when the glut of distressed housing will be erased, giving the market the giant lift it needs. More than 20 percent of mortgage holders in Ohio and nearly 9 percent in Kentucky now owe more on their homes than their properties are worth. That imbalance, combined with high job losses, has led to the mounting inventory of distressed properties.”

“”The good news is that this inventory is being gobbled up, and it has to sell off in order for the market to continue to stabilize,’ says Pete Kopf, president of the Cincinnati Area Board of Realtors. The bad news? ‘More foreclosures are coming,’ Kopf says. ‘It’s just a matter of when.’”

“In Covington, Greene and her husband have become new landlords with the property they bought for $30,100 in October. Since then, they’ve spent $8,000 to install new central air, replace carpet, upgrade the kitchen and fix plumbing problems. ‘We had it rented in four days to a family that signed a year-long lease,’ Greene says. ‘It had just been sitting vacant before we bought it.’”

“In Pleasant Ridge, Schatz has been trying to negotiate a time-consuming and complicated “short sale” with Chase Bank for the home she wants to buy. Schatz says she’s not sure what the seller owes the bank, but her initial offer of $85,000 required the lender’s approval. Just after receiving a counter offer from Chase this month for $87,000, Schatz learned that the house had been broken into and all of its copper piping removed.”

“Schatz says the damage could have been avoided. ‘If the bank could move things more quickly, I could have already taken ownership of the house and prevented this from happening,’ she says.”

“For Bardua, keeping up with his monthly mortgage of $900 became out of the question after he lost his job last year. When his lender declined to rework his mortgage, he turned instead to pursue a short sale. Although he still owed $132,000 for his home on five acres, he listed the house for $90,000. In December, Bardua received an offer for $87,000 - roughly $45,000 less than what he owed.”

“Five months later, Bardua’s lender, Bank of America, accepted the buyer’s offer. ‘It was a long haul,’ he says. ‘It was a relief, but I still feel like my freedom is gone. I’ve worked for all these years to pay my mortgage, and then I got into a bind.’”

“At the end of last year, major lenders including Bank of America, JPMorgan Chase and GMAC put the brakes on filing foreclosures while they scanned over potentially flawed paperwork. That work has since resumed, and the foreclosures are moving ahead. ‘Some of the banks indicated that they were signing up to 10,000 foreclosures a month, which begs the question, ‘What kind of backlog is out there?’ says Realtor Rebecca Weber. ‘It would be a disaster if they released all of that inventory at the same time.’”

Bits Bucket for May 30, 2011

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May 29, 2011

Egging On The Worst Behavior

Readers suggested a topic based on a quote from a previous post. “From today’s desk clearing thread: ‘…and start moving the government out of the business of egging on the worst behavior.’ Proposed weekend topic: What was it that started the government down the path of egging on the worst behavior to begin with?”

A reply, “My opinion? That oft-repeated notion that homeownership makes people better. As in, their kids do better in school, they’re more engaged in their communities, the birds in their trees sing sweeter tunes, you get my drift.”

To which was said, “I agree that’s how it was sold. But the reason to keep it going was $$$, campaign contributions, tax revenues, etc. Also, of course, those that get in early on a ponzi scheme tend to benefit disproportionately and have an incentive to keep it going.”

“Did anyone ever examine whether one “owning” a house was the cause of all of those supposedly good things or instead merely a symptom of having a stable job with a decent income, enough income to be able to do all of those supposedly good things?”

Another added, “Homeownership was a byproduct of being an upstanding citizen. Back in the days of real down payments, and real credit checks before the banks handed you a couple hundred thousand bucks. Then the marketers/advertisers started promoting the view that you could turn yourself in a upstanding individual by owning a home.”

The first poster replied, “Presumably, before everyone who could breath qualified for a mortgage, owning a nice home, funded by a prudently-underwritten mortgage loan, was an indicator of middle-class stability; the same people who worked hard, had decent jobs, and lived in upscale neighborhoods also were more engaged in their communities, had above-average children, and enjoyed the sounds of the most gifted song birds singing sweet tunes in the canopy of trees above their heads.”

“Fast forward to the subprime lending era: Confused gubmint economists, who thought that home ownership caused desirable social outcomes, lowered the bar to the level where all manner of riffraff and no-account lowlife could qualify for a loan. Suddenly home ownership became a much better indicator for future financial hardship than for desirable social outcomes. Way to go, social engineering flunkies!”

One added, “I would argue that the government was the trailing horse here; turning a blind eye to the depredations of GMAC, GreenPointe, Countrywide and their ilk, who were already in full swing by the time our (stated,) economic policy turned to real estate to bail it out of the tech crash in early 2000.”

“As early as the mid- 90’s, these mortgage lenders had blanketed the country non-stop, day and night with national advertising campaigns offering cheap money to the masses. They proved so popular that opposing them would have meant political suicide. George Bush’s “ownership society” only codified the carnage that was already well underway.”

And lastly, “In my opinion Wall Street saw that the American middle class had accumulated a massive amount of money. They then took over our government through bribery and set themselves to work stripping that wealth. Mission accomplished.”

Bits Bucket for May 29, 2011

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May 28, 2011

Bits Bucket for May 28, 2011

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May 27, 2011

The Other Side Of The Knife

It’s Friday desk clearing time. NovaStar was part of a crop of new lenders that had sprung up in the 1990s. Promotional memos NovaStar sent to its 16,400 unsupervised mortgage brokers across the country told the tale of easy credit terms. ‘Did You Know NovaStar Offers to Completely Ignore Consumer Credit!’ one screamed. Patricia and Ricardo had bought their three-bedroom home in a middle-class section of southwestern Atlanta in 1983 for $30,000. In 2004, she had a 9 percent adjustable-rate mortgage that she wanted to change to a fixed-rate loan. She received an offer in the mail from NovaStar and called the toll-free number.”

“‘I told them I wanted to come out of the adjustable and they said they would give me the fixed rate if I would accept it at 10 percent,’ Patricia said. ‘I could have stayed where I was but I told them definitely a 30-year fixed rate.’”

“Even the initial monthly housing payment, including taxes and insurance, was barely affordable: $1,215.33. As documented in their loan file, the Jordans’ total monthly net income was only $2,697. Their monthly housing and other debt costs totaled $1,642, so after they paid their debts each month, the Jordans had only $1,055 to live on. Two years after signing up for the loan, its interest rate was set to ratchet up. Only then did Ms. Jordan learn that NovaStar had put her into an adjustable loan, not the fixed rate she had been promised. ‘I got duped,’ she contended.”

“At the end of May 2007, Jorge Sanchez loaded his cousin’s pickup truck and moved his young family from an apartment into a house in Fitchburg. That was six years after Sanchez and his wife, Minerva Abrajan, natives of Puebla, Mexico, arrived in Madison. They’re not citizens, but, as permanent residents who pay U.S. taxes, the UW-Madison janitors obtained a mortgage under a new loan program aimed at extending home ownership to people who previously couldn’t qualify.”

“‘We wanted a house because we had two kids already,’ Sanchez said. ‘We wanted something better for them.’”

“The new program opened a door to home loans to non-citizens, helping usher in a sharp increase in homeownership among local Latinos in the second half of the last decade — shortly before a corresponding increase in foreclosure filings against the same group a few years later.”

“Ellen Bernards, a foreclosure prevention counselor for Greenpath Debt Solutions and co-chair of the Dane County Foreclosure Prevention Task Force, said at least three-quarters of her Latino clients facing foreclosure had taken out ITIN loans and that many, like Sanchez, were issued subprime mortgages with adjustable rates by private lenders.”

“She stressed that many of the ITIN loans failed for the same reasons other mortgage loans failed: the recession, which was especially cruel to Latinos. And they suffered from bad timing — a large group of Latinos for the first time became eligible for home loans just when the subprime loan crisis hit its peak. ‘It was a nuts lending time across the board,’ Bernards said.”

“Sanchez said that even if his wife hadn’t had to quit work for six months the family likely would have lost the house after five years, when the payments could have ballooned. He said he often felt confused by the process and acknowledged he should have done more to understand the loan before he signed. Much has changed for the family, and the more than $30,000 they spent on the house is gone. But their perspective has not.”

“‘We lost our house but we kept our jobs,’ Sanchez said.”

“The office condo deals are getting even better in downtown Wichita. Prices on two bank-owned floors at the Broadway Plaza building were reduced last week to just $59,000 apiece. The fifth and 10th floors of the structure are mostly vacant. They are just two of a handful office condo floors that originally were developed by Minnesota-based Real Development Corp. Most of them were sold to California investors, and many of them subsequently landed in foreclosure. Prices since then have plummeted.”

“‘You have to remember a lot of these had mortgages on them in 2006 of more than $400,000,’ says Royce Jantz, a broker with J.P. Weigand & Sons Inc., who is listing the floors at Broadway Plaza, along with foreclosed floors in the Petroleum Building, Sutton Place and the Orpheum Office Center.”

“The proportion of housing units in which the owners live fell 2 percentage points from 2000 to 2010 in Lucas, Fulton, Ottawa, and Wood counties in Ohio and Monroe and Lenawee counties in Michigan. ‘You’re comparing a low point, then a very high point, and then a low point,’ said Dave Browning, a longtime local real estate observer and principal of Wells Bowen Realty. ‘An argument could be made that the economic conditions in 2000 aren’t all that different than they were in 2010.’”

“‘We saw the first four or five years of the new millennium of good solid productive real estate; the end of 2004 through 2006 was crazy, with people doing things that didn’t make any logical sense, and from 2007 on, we’ve seen the other side of that knife.’”

“The IDI Group Cos. auctioned off more than a tenth of its 242-unit Riverview residential building in Lansdowne on Sunday. Out of the 33 units up for auction, 27 sold at prices as high as $350,000. About a third of the auctioned off condo units, which include one-, two-, and three-bedroom residences, had rock bottom minimum bids starting at $95,000, or a whopping 69 percent of the original asking price. Arlington-based IDI delivered the high-rise in mid-2008 — a devastating point in the local real estate market — with one-bedrooms priced in the high $200,000s to three-bedrooms priced from the mid-$400,000s.”

“IDI teamed up with RCC Inc. of California to originally build 10 high-rise buildings and four low-rise buildings at Leisure World of Virginia. Instead, just four high-rise and three low-rise buildings stand there today.”

“House property values fell in all Australia’s capital cities in April. Sydney’s fell 0.3 per cent to a $667,500 median, the third lowest fall. The city had a 0.6 per cent drop during March. ”The magnitude of the corrections are not extreme, and is not a cause for alarm at this stage,’ a Residex forecaster, John Edwards, said. ‘But it is very unusual to see the total market in a correction phase.”’

“The last time all the capital cities were in a downturn was June 2008, during the global financial crisis. Before that it was June 1990, when Australia was heading into recession. ‘Both times before, the reasons for the downturn were much more obvious,’ Mr Edwards said. ”In a situation like this, given other weak economic indicators, considerable care will need to be exercised by the Reserve Bank in regards to interest rates until the market regains some level of confidence,” Mr Edwards said.”

“A chorus of economists and labor market observers say that the ‘natural’ or ’structural’ rate of unemployment has shifted up, meaning that Americans looking for work should get used to having a harder time finding it. The unemployment rate is currently 9% and could take until 2016 to reach the natural rate.”

“A boom in the construction industry in the 2000s, an expansion of credit and gains in productivity through technology disguised the significant structural changes in the economy. ‘We delayed the pain and papered-over the problem,’ said Diane Swonk, chief economist and senior managing director at Mesirow Financial. ‘The recession washed that away.’”

“Just as busts follow booms, booms are supposed to follow busts. But there has been no boom, not even a boomlet, to light a candle in the gloom of the housing collapse. Many economists thought that a recovery from the real-estate meltdown that started in 2007 would be well on its way by 2011. The unhappiness is understandable. But some extension of this pain would not be a terrible thing in the long run.”

“Negative reinforcement is a principle of behavioral psychology whereby repeated punishment reduces the likelihood that a human or rat will continue doing something. A parade of shocks on the housing front is delivering Americans much negative reinforcement. And they need it. In the recent real estate bubble, consumers who couldn’t afford it desired far grander digs than a simple nest with room for the chicks. They wanted media rooms, wine cellars and hotel-sized kitchens opening onto three-car garages.”

“And they had the federal government cheering them on.”

“Only constant negative reinforcement will change a society that never seems to learn that home ownership is not the low-risk path to wealth and happiness. In the 1920s, Americans gorged on Florida real estate, some of it underwater. The Depression came and – ka-boom! – property values fell like a rock in the Everglades.”

“Then as now, scams and the collusion of government had created a market of glass, leaving taxpayers to pick up the shards. Then as now, a busted housing sector hurt the larger economy. Only it’s worse now.”

“But the Feds are eyeing the beginning of the end for subsidies that help feed real-estate frenzies. In the meantime, let the pounding bad news on housing change American attitudes toward homebuying – and start moving the government out of the business of egging on the worst behavior.”

Weekend Topic Suggestions

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Bits Bucket for May 27, 2011

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May 26, 2011

The Greatest Wealth In California

KHSL TV reports from California. “Chico’s housing market is slowly rebounding with more homes selling this year than last, but at lower prices. The City Finance Committee got an update on the market this week, with staff reporting that 47 percent of the total homes sold this year sold for less than the borrowers owed. And the demand is down, in part because it’s harder to qualify for a loan. Debbie Brodie is a State Director for the California Association of Realtors. She says, ‘In 2005 you could get into a house with no money down, no closing costs, no job. Those days are gone.’”

The Asian Journal. “Three years into the mortgage meltdown, California homeowners still have little relief from the foreclosure crisis. Increasingly, homeowners are taking matters into their own hands — stepping up pressure on banks, going after mortgage scammers and educating themselves about how to avoid becoming victims of foreclosure or fraud.”

“Peggy Mears has fought for three years to keep her three-bedroom house in Fontana, Calif. Mears, hoping to lower her monthly mortgage payments, contacted her lender OneWest Bank (formerly IndyMac Bank) to modify the terms of her home loan. Three years and three loan modifications later, Mears says she is still at risk of losing her home.”

“One trial modification lowered her monthly payment by $50, while another increased it by $300. All the while, Mears’ family lived under daily threat of losing their home, because her bank continued with foreclosure proceedings even as they worked with Mears to modify her home loan — a practice banks call ‘dual track.’”

“‘I was stressed out — I couldn’t sleep at night and my nerves were on end,’ Mears told a group of ethnic-media journalists at a news briefing in Los Angeles last Thursday. Mears eventually got fed-up and joined the Home Defenders League. Last December, Mears and two dozen other homeowners were arrested after holding a sit-in at a JP Morgan Chase Bank branch in downtown Los Angeles. They demanded that the bank halt foreclosures and work more effectively with homeowners to modify their loans.”

“‘We were making a statement: If you refuse to let us live in our homes, we will live in your home,’ Mears said.”

“‘It is embarrassing to say, ‘I’m losing my home,’ she said. ‘It hurts, especially after you’ve lived there for 20 years and you’ve worked hard all your life and done everything that you are supposed to do.’ Mears said homeowners facing foreclosure feel ashamed and don’t want to speak out about the prospect of losing their homes, which she called ‘your greatest wealth.’”

The Ventura County Star. “California homeowners and some former homeowners can take heart from this week’s announcement of a crackdown on mortgage fraud in the Golden State. The Attorney General’s Office said it has created a task force to investigate and prosecute some of the unfair practices that let down homeowners, cost some families their homes and trashed the housing market.”

“State Attorney General Kamala Harris’ office cited estimates that the foreclosure crisis has cost California homeowners as much as $640 billion in equity.”

From KABC. “Harris and Los Angeles Mayor Antonio Villaraigosa announced the creation of a 25-person task force to target businesses that Harris says helped cause the downfall of the housing market and put thousands of houses into foreclosure. ‘California, as the biggest state in the country, was hit the hardest,’ said Harris. ‘Last year alone there were nearly 550,000 foreclosure filings against California homes.’”

“‘The American Dream — for most of us, home ownership is a pillar of that dream, and too many people in this city have lost that dream,’ said Villaraigosa at Monday’s news conference.”

“‘Where there is the evidence to prove a crime, you can be sure those crimes will be prosecuted,’ said Harris.”

The Record Searchlight. “A continued stream of Shasta County foreclosures early this year meant opportunity for first-time homebuyers chasing record affordability and investors looking for predictable returns. Area real estate agents say banks are doing a good job of manipulating the market by not flooding the area with foreclosures, which would drive down values more.”

“‘If you were … building a monster subdivision, say 200 homes, you have a choice of building the houses and putting them all on the market at the same time, which would cause your own prices to decline, or release the homes as demand would allow. Which would you choose?’ said Josh Barker of ReMax Town & Country in Redding.”

The Modesto Bee. “Stanislaus County’s median home price remained fairly flat during April, sticking at $130,000. That’s the same as March and about what it has been the past two years. Lenders own thousands of those homes. Foreclosure-Radar estimates banks own 2,289 homes in Stanislaus, 3,218 in San Joaquin and 1,232 in Merced. More foreclosures are in the works.”

The Merced Sun Star. “Rep. Dennis Cardoza gave the following reaction to Treasury Secretary Timothy Geithner’s comments that the U.S. has ’several more years to go’ before the housing market recovers, and ‘it’s going to take time still to heal.’”

“‘This Administration’s hands-off approach to the housing crisis is stunning, and Mr. Geithner’s laissez-faire remarks show they have no intention of seriously attacking the central cause of our current economic downturn,’ Cardoza said in a news release. ‘The half-baked federal housing programs created thus far have failed to stem the crisis. In fact, more Americans will go into foreclosure this year than in any year since the housing crisis began. How many more families must needlessly lose their homes before this Administration wakes up?’”

The Daily Bulletin. “Apparently the foreclosure crisis is finally being reflected in Inland Valley population figures - which, unusually for this fast-growing area, show a big drop. Ontario and Rancho Cucamonga, for example, fell by 10,000 residents each from 2010, according to estimates by the state Department of Finance, and most of our other cities also emptied by a few thousand residents.”

‘Perhaps the cruelest blow was to Pomona. Its population was said to have withered by 14,000 in one year to fall below 150,000. Instead of being outstripped only by L.A., Long Beach, Glendale and Santa Clarita, Pomona is now smaller than Lancaster and Palmdale too. Meanwhile, Lancaster (157,795) and Palmdale (153,334) both grew year-over-year, Lancaster by 10,000 and Palmdale by 700. People are flocking to Lancaster? Huh. Were they priced out of Fresno?”

“Foreclosures certainly played a large part in the lower numbers, although how much is hard to say, demographic specialist Dan Sheya of the Finance Department told me. ‘People had to go somewhere and they didn’t always stay in the same area,’ Sheya said.”

“‘Pomona wasn’t the only one to drop,’ Sheya noted. “Every large city in California got hit hard. Los Angeles was 360,000 lower. San Jose, San Diego, San Francisco, they all got hit hard. But the city of Pomona especially hard, the city of Oakland especially hard.”

NBC Los Angeles. “In the past decade, California has lost nearly a quarter-million of its youngest residents, those aged 5 to 9 years, according to a census analysis co-authored by USC’s Edward Flores and Dowell Myers. That’s more than an 8-percent decline. The problem is even worse in L.A. County, where the numbers show the decline in young children is 21 percent. The loss of children reflects the difficult living conditions for families facing high housing costs and diminishing job opportunities, Flores and Myers say.”

“Myers, a renowned author and demographer, says this loss of our young population is unprecedented in California. ‘We’re heading into uncharted territory,’ he said.”

LA Weekly. “We are ground zero of the ‘missing children’ of California,’ Myers has said. Myers says part of the reason for the decline is that tough economic conditions have driven families with young kids away in hopes of finding more affordable housing and better job prospects. As of March, California had the third worst job market in the nation.”

“The result of this exodus, claims Myers, is that there will be ‘fewer workers to support the retiring Baby Boomers.’”

The Mercury News. “There’s no easy fix to the housing crisis, but many South Bay experts say one of the most promising is a ’short sale’ — selling the home for less than the loan balance. More than 40 percent of attempted short sales fail to close, according to a recent survey by the California Association of Realtors. DataQuick estimates that there were about 15,839 short sales in California in the first quarter of this year, which suggests another 10,000 failed to close.”

“Another stumbling block is the second mortgage, which often has no underlying equity. Katie Haslam, with Zip Realty in Palo Alto, recently saw the short sale of a home in San Jose’s East Foothills fall apart at the last moment. The problem was that the primary and secondary lenders couldn’t agree on how much the lender holding the second mortgage would receive. With no equity underlying the $75,000 second, the bank holding the first mortgage offered $10,000. The second mortgage holder held out for $20,000, and the sale collapsed. The house was auctioned as a foreclosure in April. There were no offers.”

“‘It’s bad for the neighborhood because property values are going to go down; bad for the economy, and bad for the lender because they are going to sell it for less,’ said Jackie Walker, the Coldwell Banker agent who represented the sellers.”

The Desert Sun. “Home sales dipped slightly in the Coachella Valley during April but fared better than in Riverside County, the state and the nation, new data show. The swing in sales numbers — and prices — hasn’t been dramatic, but it illustrates the road to recovery remains uneven when it comes to the local housing market, said Greg Berkemer, executive VP of the California Desert Association of Realtors.”

“‘Although the market has yet to hit a consistent rhythm, available inventory, interest rates and attractive prices still make the dream possible — in a beautiful desert where rising rivers and tornadoes won’t take it away,’ Berkemer said.”

The Bakersfield Californian. “McAllister Ranch, the iconic failed housing development of the foreclosure crisis, has found new life. It will become Kern County’s newest water bank, owned and managed jointly by the Rosedale Rio Bravo and Buena Vista water storage districts.”

“The 2,070 acre development in extreme southwest Bakersfield was once expected to boast 6,000 homes, a golf course and man made lake. Now, the majority of it will remain undeveloped, according to Eric Averett, Rosedale’s general manager. ‘It’s an exciting project,’ he said. The water bank will be used to enhance local supplies, he said, instead of ‘buying into the very expensive state project.’”

“‘It’s an ideal water banking property,’ Averett said. ‘We didn’t think there were many opportunities like this left.’”

Bits Bucket for May 26, 2011

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May 25, 2011

A Mess, A Battle, A War Zone In Florida

The St Petersburg Times reports from Florida. “Josephine Cartagena stepped out of Jefferson High School on Saturday morning with tears in her eyes. Her home is facing foreclosure. But that wasn’t the reason for her tears. These were happy ones. On this morning, she had found hope. Cartagena is one of more than 100 people who attended a foreclosure prevention assistance workshop hosted by U.S. Rep. Kathy Castor. The Chase representative she talked with on Saturday helped her set up a meeting with a person in Tampa to talk further about modifying her loan. ‘It’s like a beacon of light for me to be able to keep my house,’ Cartagena said.”

“But not everyone left happy. ‘There’s nothing being done here,’ said Ronald Roppolo of Brandon. ‘You keep submitting the same paperwork and nobody knows what the other people are doing.’”

“Chris Thayer of Tampa felt the same way. Thayer said he was approved for the Making Home Affordable Program last year but his lender, Bank of America, has since retracted the offer. He came Saturday to find out why, but wasn’t able to get an answer. ‘I just wanted to get assistance,’ Thayer said.”

The Bradenton Herald. “One Realtor calls it ‘the quiet before the storm.’ The ’storm’ is the flurry of foreclosed homes expected to saturate the market soon with word today that foreclosure filings in Manatee County increased 75 percent from March to April. ‘If those foreclosed homes are all stockpiled, at some point they’re going to all be on the market, and that’s going to further decrease the price of homes,’ says May Aston, a Realtor with ReMax Alliance Group who has been working with foreclosure sales since 1991. ‘And that’s not what we want. We want to stabilize, and you can’t stabilize if you keep getting clumped on the market.’”

“‘They’re just not on the market yet,’ says Nikki Smith, a Realtor with Coldwell Banker. ‘Right now, it’s almost like we don’t have any inventory.’ The lack of homes for sale is creating a seller’s market, Aston says, when the high rate of foreclosures should be creating a buyer’s market. ‘When we do get a property on the market, there’s five or six offers out there at a time. Then there’s a bidding war, which drives the price up.’”

“Smith says she suspects that the increased involvement of attorneys may be keeping even foreclosed properties from going on the market. ‘People have become very savvy. They’ve found all kinds of ways to make sure they stay in their house. Attorneys are involved. It’s a mess, a battle, a war zone.’”

The News Press. “The existing-home median price in Lee County surged to a two-year high of $118,900 - up 17 percent from $101,900 in March, according to statistics released by Florida Realtors. But real estate authorities said the sharp increase likely was caused mostly by the changing market for bank-owned foreclosure homes, not an actual 17 percent increase in value.”

“In Lee County, ‘the real reason it’s going up so much is that the low end, the foreclosure market, that spigot has been cut off. The low end is not coming on the market and buyers have to substitute higher-priced properties,’ said Denny Grimes, president of Denny Grimes & Co. at Royal Shell in Fort Myers.”

“A new experiment to help prevent foreclosures from further clogging the courts is coming to Southwest Florida in about two weeks. The program allows homeowners who have Fannie Mae-backed mortgage loans to go to mediation with their lender before a foreclosure lawsuit is filed, rather than after.”

“‘Before foreclosure, a lot of things are possible,’ said Roderick N. Petrey, Collins Center president. After foreclosure, ‘banks don’t want to make a deal,’ he said.

“But the problem is that even though the court mediation is mandatory, many homeowners simply don’t show up. ‘A lot of them are scared,’ Petrey said.”

“Currently it takes about 600 days in Florida for a foreclosure lawsuit to be processed. In the meantime, the houses are in inventory limbo until they are sold at fire-sale prices and further depress the real estate market, Petrey said. He is on the board of the BAC Florida Bank in Miami, which realizes about 40 cents on the dollar when a foreclosed property is sold, he said. And it appears the bottom of the real estate market has not been reached yet, Petrey said.”

“Within the next year, Hillsborough and Hernando counties expect to join Pasco, Pinellas and 20 other Florida counties in shifting foreclosure sales online. The foreclosure-heavy state was the first in the nation to allow online sales, when the Legislature approved the practice in October 2008.”

“Online, potential bidders are warned multiple times to check whether a property has multiple liens. An Orlando accountant submitted a $20,000 deposit for a home on which there was a mortgage for $220,000. After the bidding ended, he discovered a homeowners association had foreclosed for delinquent fees, the Orlando Sentinel reported in February. John Dey lost his deposit.”

“‘I said, ‘Oh, my God,’ he told the newspaper. ‘I just all of sudden lost $20,000. I’m sick to my stomach.’ He added: ‘At least it’s not $200,000.’”

The Tampa Tribune. “Florida’s turbulent housing market has had an unintended consequence: Thousands of homeowners don’t pay a dollar in property tax. Blame higher homestead exemptions and falling home prices that essentially removed houses from the tax rolls. Consider this condo conversion at the Towers at Carrollwood Village. One condo unit sold for $90,000 in 2005 and is now valued at $19,657. The homestead exemption is $17,250, bringing the taxable value to zero.”

“The Villas Condominiums has 282 units, said Chris Weiss of the Hillsborough County property appraiser’s office, and was also saturated with investor-owners. Both complexes have been hit hard by foreclosures, he said. A condo at the New Tampa development sold for $106,900 in 2005 and is now worth just $16,230. The homestead exemption brings the taxable value to nothing.”

“Private property appraiser David Teacher said he understands people wanting their neighbors to pay their fair share but, he said, there is an upside. Falling home prices and no — or low — property tax is a big incentive for investors to buy. Teacher said he has seen homes in East Tampa selling for as low as $7,000. Sure, he said, they need work, but most still could be good deals.”

“‘What better investment,’ he said. ‘Look at the return on your money. Some homes are selling for less than the cost of a car.’”

The Herald Tribune. “Sarasota County’s tax base took a hit for the fourth year in a row, dropping $2.7 billion — a bigger decline than state economists had projected. North Port continues to be the hardest hit among the county’s four cities, according to Sarasota County Property Appraiser Bill Furst, who put that city’s decline at 8.8 percent. North Port’s tax base has now dropped 59 percent since 2007.”

“The property appraiser’s estimate puts the four-year decline in Sarasota County’s tax base at $22.9 billion. That is a measurement in the change of the taxable value of property after exemptions, such as the homestead exemption and the Save Our Homes adjustment. Market values have dropped even more steeply. From 2007 to 2010, the market value of property dropped $30 billion, from $85 billion to $55 billion.”

“Claiming the real estate world has changed, Benderson Development wants to shed its promise that the University Town Center mall project would include 437 affordable homes. ‘2011 literally is a different planet,’ said Benderson project manager Paul Blackketter.”

“Referring to the sharp drop in home prices over the past four years, University of Central Florida economist Sean Snaith termed affordable housing ‘the housing formerly known as luxury housing.’ ‘I’m sure at the time … affordable housing was a real issue,’ he said. But now? ‘It seems kind of senseless.’”

The Sun Sentinel. “Miami developer Jorge Perez is taking reservations for a proposed oceanfront condominium in Hollywood – and he’s asking buyers to put down 70 percent of the purchase price before closing. During the housing boom, most condo buyers put down only 20 percent. Many were investors who turned big profits by flipping the units before they were even completed. Ultimately, not enough long-term owners bought condos. Values plummeted, creating a glut of properties for sale that left the condo market – and Perez – reeling.”

“The luxury condo will feature 49 units with two, three, four and five bedrooms, and the average sales price is $350 to $450 a square foot. Unit prices are expected to range from about $600,000 to $2 million.”

“‘I don’t think there’s enough people willing to belly up to the bar,’ said Longtime Miami housing consultant Lewis Goodkin. Goodkin said he’s surprised Perez is eager to jump back into the beleaguered condo sector. Perez is counting on demand from international buyers who have helped stabilize the overbuilt Miami market in the past two years, Goodkin said.”

“‘That’s the only justification I could see,’ he said. ‘If he was building this for the domestic market, I would absolutely not touch it.’”

“Apogee Beach will be about a mile south of Trump Hollywood, the luxury condo Perez built as part of a licensing agreement with Donald Trump. That was one of a handful of projects Perez handed back to lenders amid the housing downturn.”

From Flagler Live. “In Palm Coast and Flagler County, property values are still falling at double-digit rates. Home prices are also still falling. Short sales aside, homes are not selling. Foreclosures are burdening the housing supply. The county’s population has stalled or fallen in the past couple of years. Not only is there no indication that the housing market is returning. There is no indication that either city or county need new development.”

“Yet the city and the county have on paper close to 40,000 new homes approved between them, and 9 million square feet of new commercial and retail space. Those homes would more than double the population of the county–assuming there was demand for them, and assuming that, between the lingering crash in housing and values, that demand could somehow override the depressing effect a glut of home would have on local housing prices regardless of broader economic conditions.”

The Orlando Sentinel. “Twenty-five years of growth management, down the toilet. And all because legislators kept repeating the Big Lie. In the waning hours of the session, the Florida Legislature planted a sloppy smooch on the lips of the developers: It virtually eliminated state control of growth and turned the tables on any homeowner who tries to challenge a cookie-cutter subdivision planned for next door.”

“The accepted mantra was that excessive regulation had halted economic growth — code for ‘out-of-control homebuilding’ — in Florida. Really? On which planet? Look around. Exactly where has growth been hampered by all these dreadful regulations? How about in Orange County? Is there a single suitable swath of prime development land even left that isn’t besmirched by squat little houses?”

“The state Department of Community Affairs, before it was skinned alive, took a snapshot of developments either approved or pending since 2007, when the economy melted. The result? Some 630,965 new homes had been approved or requested for 410,126 acres. In Lake County alone, for example, the School Board estimated about 100,000 parcels have development approvals, which could more than double the population of Lake if houses went up on them all.”

“So, build! What’s stopping construction? Nothing.”

“What legislators failed even to mention is that during the boom years developers pushed to build what they wanted, when they wanted and where they wanted it. Weak — sometimes corrupt — elected officials helped them. The result was overbuilding of biblical proportion, which in turn created an extra heaping helping of special pain for Central Florida that other areas of the country sidestepped when the downturn hit.”

“Developers not only have failed to shoulder their share of responsibility for the economic disaster and the resulting vortex of foreclosures, but in the fantasy universe of the Florida Legislature, they’ve become the victims.”