June 30, 2011

A Product That’s Become Almost Unaffordable

The Sussex Pilot reports from Delaware. “A couple of weeks ago, Delaware Gov. Jack Markell became the latest in a string of state leaders across the country to declare the month of June as ‘Home Ownership Month,’ illustrating the importance of real estate to grow and sustain the nation’s fragile economic recovery. Despite its struggles in recent years, real estate continues to be one of the best long-term investments ‘from sea to shining sea.’ Disregarding the appreciation that inevitably occurs over the years, other benefits to owning and maintaining your own home include tax advantages, long-term financial security and the freedom that comes with owning your own little piece of the American Dream.”

“‘While it may be hard for people who have bought their homes in the last five years to see it right now, owning your own home is one of the best long-term decisions anyone can possibly make,’ says Sandy Greene, 2011 president of the Sussex County Association of Realtors. ‘We’ve definitely hit a pretty big speed bump since 2006, but things will eventually work themselves out. And if you haven’t yet bought a house, right now is perhaps the greatest time in history to do so.’”

“‘We have had to weather the storm, to be sure, but I think we have effectively done so and are optimistic in the months and years ahead,’ says Greene. ‘As long as we have the Atlantic Ocean close by and a low tax rate, people are still going to want to buy homes here.’”

“‘There’s no question that owning your own home, whether new or existing, is a sound financial decision over the long term,’ says Greene. ‘All of us at SCAOR applaud Gov. Markell and his colleagues around the country for recognizing this essential part of the American economy. Owning your own home is, and will continue to be, the American Dream, something that people all around the world aspire to.’”

The Capital in Maryland. “Dawn Kyle sits at her kitchen table with a pile of papers splayed out in front of her, tears in her eyes. She’s not sure how she got to this point, but the papers - letters, financial documents and notes - provide a glimpse into her dire situation. In just weeks, she, her 70-year-old mother and her two teenage children must be out of the Glen Burnie home they have shared for 14 years.”

“‘We don’t have a place to go,’ she said. ‘We’ve done everything they told us to. I don’t know what else we could have done.’”

“Kyle has now entered into an agreement through Freddie Mac’s ‘Cash for Keys’ program. Her family must be out of their home by July 11. Freddie Mac will pay Kyle $2,500. She hopes to stay in the county so that her son can graduate from nearby Severna Park High School. ‘We’ve been on the edge for such a long time … and then all of a sudden, to have the rug pulled out from under us,’ she said. ‘I believed them. They’re the bank, for God sakes.’”

The Fairfax Connection in Virginia. “Home sales in May across Northern Virginia may be down over 2010, but sales prices are rebounding. Local real estate brokers and mortgage experts say they believe 2011 will be a strong year. The median sold price was $375,000, up 7.14 percent and the average sold price was $432,829 up 5.4 per cent over May 2010.”

“Susan Taylor, a broker who sells high end houses in the Old Town section of Alexandria, said her sales this year were not a factor of the federal program to guarantee ‘jumbo mortgages,’ but were to ‘conservative people who saved their money.’ Taylor said the nature of financing has also changed. She said for the first time there are significant military sales in Old Town. The G.I. Bill provides a Veteran’s Administration loan with no down payment and easier terms and serving military families assigned to the Pentagon is other area military bases are entitled to get them.”

“Taylor said the buyers are far more focused than in earlier years. ‘Buyers are very savvy now,’ Taylor said, ‘there is no impulse buying.’”

The Star News in North Carolina. “A local economist said Wilmington’s former dependence on construction and development is making a difficult employment rebound that much harder. The problem is ’structural,’ said William Hall, an economist at the University of North Carolina Wilmington.”

“And it’s the hardest of three forms of joblessness to get over. Construction, development, real estate and related industries once accounted for one in five local jobs. Following the crash in the housing market, that figure is now one in 11, Hall said. Unless construction comes back strong, those jobs are not going to re-materialize, he added.”

“Those workers are ‘laid off and their skills are no longer needed,’ Hall said. ‘For them to find gainful employment they have to find new skills.’”

The Charlotte Observer in North Carolina. “In the latest fallout from the housing bubble, federal prosecutors in Charlotte on Tuesday filed charges against three more defendants for mortgage fraud-related offenses. The 4-year-old probe has centered on seven high-priced south Charlotte and Union County neighborhoods. It involved about 80 homes and $100 million in loans.”

“Generally, the groups agreed to buy a new house at its true price, then arranged for a ’straw buyer’ - a pretender - to take a loan to buy the house for much more than the true price. That required falsifying paperwork to convince a lender that the house was worth far more than it actually was - and that the straw buyer planned to live in the house and could afford to make the payments.”

“After the sale was completed, the mortgage fraud groups split the difference between the true price of the house and the inflated loan amount, court documents allege. The charges on Tuesday came as the Financial Crimes Enforcement Network said depository institutions filed 25,495 suspicious activity reports for mortgage loan fraud in the first quarter of this year, up 31 percent from a year ago.”

“Based on per capita rankings, North Carolina was the No. 3 state for the reports, its highest ever ranking, behind California and Nevada.”

The Mainstream Business Journal. “A bipartisan group of U.S. senators and representatives last week joined with NAHB and other business and consumer groups in calling on federal regulators to revise a pending proposal that would require a minimum 20% downpayment for ‘qualified residential mortgages.’”

“They argued that such a plan goes against the intent of Congress, would keep homeownership out of reach of most first-time home buyers and many middle-class households, and would deal a devastating body blow to the already fragile housing market. Under the Dodd-Frank financial reform law passed last year, securitizers are required to have ’skin in the game’ by retaining 5% of the credit risk of each loan backing a security.”

“Last month, Isakson, Landrieu and Hagan led a bipartisan group of 39 senators in writing a letter to federal regulators urging them to modify the proposed risk retention rule because it imposes unnecessarily tight downpayment constraints that would restrict credit to middle-class families working to own a home.”

“‘Well underwritten loans, regardless of downpayment, were not the cause of the mortgage crisis. The proposed regulation also establishes overly narrow debt-to-income guidelines that will preclude capable, creditworthy home buyers from access to affordable housing finance,’ it said.”

“Reps. Campbell and Sherman spearheaded a similar effort in the House, garnering a strong majority of lawmakers to join together to write a subsequent letter opposing the rule. ‘This economy cannot recover if housing does not recover. It’s one-sixth of the economy,’ added Campbell. ‘If this regulation as proposed goes into effect, we not only won’t have a strong housing market, we’ll have a weaker one. We cannot set up a system that is so onerous and so difficult that the average American won’t be able to get financing to buy a house, which will further drop the price of housing and will further sink this economy,’ he said.”

“Giving the issue a local perspective, Sen. Kay Hagan (D-N.C.) said that in Raleigh, N.C., where the median house price is $217,000, home buyers would need more than $43,000 for a downpayment under the proposed rule. ‘That’s almost equal to the median annual income in my state,’ she said. ‘Many families in North Carolina and across the country cannot afford such an onerous downpayment.’”

The Times Leader in Pennsylvania. “For two decades, Rick Arnold never looked for work beyond a 45-mile comfort circle around his Mountain Top home building company’s headquarters. But a sluggish economy combined with lending institutions tightening of loans has put a strain on the real estate market and caused people like Arnold to think outside the box.”

“Arnold went from building four or five custom homes a year as recently as 2007 to having one home constructed last year and one under contract this year. And he’s been going throughout Northeastern and Central Pennsylvania for work, as far away as Williamsport, Danville and Gibson, and in some cases doing jobs on his own, without a work crew.”

“‘You have to be willing to roll up your sleeves and travel,’ Arnold said. ‘A lot of us had our hands full with all the work we could handle. But when the slack ran out of the rope, we all started looking around.’”

“Joe Peterson, owner of Hanover Homes North in Wilkes-Barre, serves on the board of the National Association of Home Builders, said fewer projects are planned for this year and he sees no light at the end of the tunnel. He said he doesn’t even want to be greedy and see the boom that was experienced between 2004 and 2007. He’d be satisfied getting back to ‘the normal times,’ with the home building numbers that were seen in the late 1990s and the first half of the last decade.”

“That level where they turned down projects that weren’t profitable enough, or had so many phone calls it took you a week to return them, or when a builder said ‘no thank you’ to a smaller project or one that was an hour’s drive away. ‘I don’t know if it will ever come back to that point where I have so many (projects) that I can pick and choose,’ Arnold said.”

“Builders cited two chief reasons for the diminishing confidence in their business: Rising costs of building materials, such as shingles, copper and vinyl siding and competition from foreclosures and properties at risk of foreclosure, which sell at an average 20 percent discount. Arnold said ‘materials haven’t gone backwards in price.’ He noted fuel costs, insurance and electricity also have risen.”

“‘It’s become a product that’s become almost unaffordable,’ Arnold said.”

Bits Bucket for June 30, 2011

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June 29, 2011

Changing Long-Held Perceptions

The Greenville News reports from South Carolina. “Unemployment, job security, and the inability to obtain financing for a mortgage are some of the factors that weighed down statewide home sales in May. Local real estate professionals say one of the biggest hindrances to the housing market throughout the state is unemployment. ‘We need more jobs. We need free flow of financing again, and I’m not talking about when banks were giving money to anybody that could fog a mirror. I’m talking about financially, reasonable, sound financing and streamlining the short sale foreclosure process,’ said Nick Kremydas, CEO of the South Carolina Association of Realtors.”

“Condos, he said, have had some of the biggest price drops, creating a lot of movement with cash buyers coming in to take advantage of the inventory. Much like the national figures, the local statistics are being compared to those months in 2010 when there was an ‘artificial’ increase in sales activity because of the tax credit, Kremydas said. ‘I think a real test for our numbers is going to be in July and August and how we compare to last year and the year before when there was no tax credit,’ he said.”

The Atlanta Journal Constitution in Georgia. “Metro Atlanta’s already distressed housing market now must absorb a new blow: the closing of one southside military base and deep cutbacks at another, adding thousands more homes for sale as families move. It’s clear that hundreds of families are trying to sell quickly in a market where homes languish. Those able to sell are taking heavy losses, even with the federal government’s Housing Assistance Program, or HAP, set up specifically to help military families by covering the expected financial shortfalls they incur from home sales.”

“The Army Times recently reported that, according to an internal audit by the Army Corps of Engineers, nine out of 10 military homeowners affected by base closings and realignments most likely do not qualify for HAP.”

“Reservists Nicole and Edward Hill have tried to sell their Locust Grove home since 2009. They’re not directly affected by the BRAC, but they want to sell because they know they won’t be in the Atlanta area more than another year or so. They recently took the home off the market after learning HAP had run out of money for the remainder of its fiscal year, which ends in September. They plan to try again in the fall.”

“‘It’s frustrating,’ said Nicole Hill. The subdivision where they live with their three children had homes whose values ranged from $200,000 to more than $1 million about five years ago. ‘Houses on the golf course were selling for half a million when we bought our house in 2005. Now, many are in foreclosure and selling in the $200,000 range,’ Hill said. ‘It’s disappointing that the market has gotten so low and there’s no outlet for it to rebound anytime soon. We’re just sitting on toxic property.’”

The Birmingham News in Alabama. “Owning a home has long been the American dream, but for many in today’s sour economy and slumping real estate market, that dream has lost part of its luster. Meanwhile, more and more home owners who are looking to sell are finding the rental market a viable alternative.”

“Pat Snow, a self-employed artist who recently moved from Birmingham to Austin, Texas, decided to rent out his North Crestwood home instead of putting it up for sale. ‘In two or three years, if the market rebounds, I can probably sell it and make more money,’ he said.”

“The crisis of confidence in real estate is changing long-held perceptions, said Howard Finch, dean of the Brock School of Business at Samford University. ‘The entire adult generation that’s 30-plus has been raised with the idea that real estate prices almost always go up and real estate is a sound investment,’ he said. ‘But the last few years have significantly damaged confidence in residential real estate as an investment, and for that reason, a lot of people are more inclined to rent and put those marginal dollars in some other type of investment than their primary residence.’”

“A true real estate recovery won’t happen until there is meaningful job creation, said Tommy Brigham, chairman of Birmingham’s Ark Real Estate Strategies, adding that the longtime mantra of ‘location, location, location,’ has been replaced by ‘jobs, jobs, jobs.’”

“In the meantime, people hanging on to their homes because they’re afraid of losing money in a sale should consider the options they’ll have if they do sell, he said. ‘They might get out by selling low, but look at what they get by buying low,’ he said. ‘They’re really getting a much better bargain in the end.’”

The Bradenton Herald in Florida. “Sales of existing homes and condos were up in Manatee and Sarasota in May while pricing was down. Angie Cegnar, current president of Manatee Association of Realtors, said she has been involved in real estate for 37 years, and the current marketplace reminds her of the 1970s. ‘There are great, huge deals in condos right now,’ she said. Some waterfront units that were selling for $450,000 have dropped to $190,000.”

The St Petersburg Times in Florida. “Despite repeated efforts, real estate agent Colleen Tuttle had no luck swinging a short sale on behalf of a client who offered the bank $800,000 in cash for an Apollo Beach home with a stunning view of Tampa Bay. So Tuttle was frustrated and angry that an investor group got title to the house for just $10,010 in February after the homeowners association foreclosed. ‘It may not be illegal, but it’s immoral,’ she said.”

“State Sen. Michael Fasano said he plans to propose legislation that would require homeowners associations to notify lenders when they start to foreclose, thereby giving the bank a chance to pay the delinquent fees or kick-start its own foreclosure action.”

“Bush Ross, a Tampa law firm that represents Andalucia Master, said associations are moving against delinquent homeowners because banks are taking so long to foreclose.”

“Eric Appleton, a lawyer with the firm, said associations can’t notify the banks when they start foreclosing because that would violate federal law barring communication with a non-party about a debt. Because the bank doesn’t owe the assessments, it’s not a party to the association’s foreclosure action. One solution, Appleton said, would be to make banks responsible for delinquent fees. ‘At the end of the day,’ he said, ‘banks are the ultimate beneficiaries of associations and their efforts to maintain the common areas and amenities.”’

The Palm Beach Post in Florida. “Tom and Patrice Sherhag’s foreclosure began with a missed quarterly HOA payment of $75 in October. The assessment due to the Palmetto Pines Homeowners Association in unincorporated Boca Raton grew to $318 by the end of November. In January, the association filed a lien for the original $75 on the Sherhags’ home and despite subsequent checks written for hundreds of dollars, snowballing court and attorneys costs have since upped the final bill to an estimated $4,605. The actual debt owed the association: $80.25.”

“The Sherhags, who bought their home nearly 15 years ago, are not in foreclosure with their bank. ‘This is a trap. Once you’re one month behind, it’s ‘I got you.’ said Andrew Smith, a Boca Raton attorney defending the Sherhags in the May foreclosure filed by the association. ‘Why target someone who is one month behind?’”

“The law allows associations to go after debtors with foreclosure actions that make them responsible for paying legal fees. For some associations, especially those with units abandoned by investors, a repossession can be an effective way to regain lost dues by allowing it to take over the home and rent it out until a bank’s more lengthy foreclosure process concludes.”

“Eric Glazer, an attorney who specializes in homeowner association law in Hollywood, said while it’s unusual to pursue a foreclosure for small debts, he understands why some associations do it. ‘The question becomes are you supposed to wait for two years of assessments to be late,’ Glazer said.”

“Still, he said there are alternatives, such as setting up payment plans. ‘If you go through the very expensive route of foreclosure, $75 becomes 20 times that overnight,’ Glazer said. ‘Associations need to realize that people have fallen on hard times and these aren’t just investors going delinquent.’”

The Herald Tribune in Florida. “The buzzword in the real estate industry these days is ‘inventories.’ In Sarasota County, inventories had fallen to a 5.8-month supply of homes and a 7.4-month supply of condos at the end of May from a 22.9-month supply of homes and 24.3-month supply of condos at the end of May 2008.”

“But while the drop in inventories has agents throughout the region cheering, there is reason to believe the trend will be short-lived: Piles of unprocessed foreclosures are stacking up inside and outside the court system, caused by delays from the robo-signing fiasco that began in September.”

“‘There are 330,000 open foreclosures in Florida right now and that number would be much higher if it were not for the temporary suspension caused by the foreclosure-processing mess,’ said Jack McCabe, a Deerfield Beach-based real estate consultant. ‘Foreclosures will definitely ramp up again later this summer and fall and we will see inventory numbers go up again.’”

“‘In a normal market, declining inventories would be a good sign, but this is not an normal market by any means,’ McCabe said. ‘Half of all sales in recent months have been distressed properties, and 50 percent have been cash deals because financing has been relatively unavailable. These are not symptoms of a healthy market.’”

“Many recent sales have involved investors, who will put the houses and condos back on the market in the next 12 to 18 months.”

“Real estate agents counter, but it is also possible that banks will not be able to ramp up their foreclosure processing as much as expected in the months ahead and consumer demand will rise enough to meet any increased supplies.”

“‘Most of the distressed properties that will come on the market will be priced at less than $350,000, and we already have a less than six-month supply in that category,’ said Stephen L. Lingley, an agent with Signature Sotheby’s in Venice. ‘I also believe that banks won’t be dumping 2,000 properties a month. They can’t process that many. The courts can’t process that many. We’re more likely to see a couple hundred a month.’”

Bits Bucket for June 29, 2011

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June 28, 2011

Free-Flowing Financing, Greed And Unrealistic Demand

The Advertiser reports from Louisiana. “Two real estate agents, Terrica Smith and Stacey Arceneaux believe that today’s market in Louisiana benefits neither party. ‘It’s not a buyers or sellers market, it is a stabilized market,’ Smith said. ‘Buyers market doesn’t mean you can go out and buy a $200,000 house for $150,000 and sellers aren’t selling homes in 24 hours. The low interest rates make it a good time to buy, but overall the market is stable.’”

“Stable, however, is a relative term. Two homeowners, Melissa Clements and Zonghuaun “Bradley” Wu, haven’t had such luck in selling their homes and as a result have seen their property remain unsold for more than 10 months. Clements, whose home is located in Youngsville, is asking for $159,000. She and her husband were so excited about the potential buyer they went out and purchased land to prepare to start building their new home.”

“‘We thought we had it sold and two weeks before the closing they backed out,’ Clements said. ‘We had started packing everything, purchased the land and they backed out. So now not only are we paying a mortgage, but now we are paying a note for the land. Right now we are having to live month-to-month.’”

“Wu, who followed his career to California, is in a similar situation with his five bedroom, three bath home located on Broadmoor Boulevard. He’s asking for $220,000. ‘Of course I’m frustrated,’ Wu said. ‘Definitely. We want to sell so that we don’t have to worry about it financially and we haven’t been able to achieve that so far.’”

“Arceneaux and Smith said there are other reasons besides the economy as to why homeowners are finding it difficult. ‘The number one reason why someone’s home is on the market for a long time is because of the price,’ Arceneaux said. “If a house is on the market for six to eight months the first thought of a buyer is ‘What is wrong with it?’ In most cases nothing is wrong with the house, it is just priced too high.’”

The Express News in Texas. “In recent years, San Antonio real estate agent Richard Zepeda has seen prospective homebuyers do something they didn’t used to do. In the morning, they’ll go to a home they’re considering purchasing, and from there, they’ll drive to work and time how long it takes. Then, during afternoon rush hour, they’ll time their drive back to the home. Buyers aren’t just worried about traffic anymore, Zepeda says, they’re worried about gasoline costs.”

“Builder David Anderson of David Anderson Homes said some areas that used to be mainstays of his business have dried up, and gas prices are partly to blame. Agents said gas was especially a consideration for first-time homebuyers. Some of them, Anderson said, ‘can’t get loans qualified because they’re spending $200 a month on fuel costs.’”

“Anderson said that although many buyers are feeling the pressure of higher prices, he acknowledged it was just one facet of a range of considerations that can sway buyer decisions. ‘I think there are several factors playing,’ he said, ‘and the biggest is fear.’”

The Houston Chronicle in Texas. “Demand for apartments and single-family rental homes has been on the rise as tough lending standards mean fewer Houstonians can qualify for mortgages. Some would-be buyers aren’t purchasing homes because they’re trying to sell their existing properties here or in other markets. The number of proposed apartment projects is rising.”

“When it comes to the condo market, Houston is no South Florida. But lately we’ve been getting our share of distressed sales of waterfront properties. The latest is at Endeavour, the luxury high-rise built on the Clear Lake shore before the housing slump. The developer filed for bankruptcy protection in 2009.”

“An auction will be held next month to unload 21 of the two- and three-bedroom condos that range from 1,650 to 5,533 square feet. Starting bids will begin at $165,000 on units previously priced from $640,000 to $2 million , according to Kennedy Wilson, which is conducting the July 17 auction. Bidding on a five-bedroom, 5½ -bath penthouse will start at $490,000.”

The Kingswood Observer in Texas. “It didn’t take the latest real estate numbers for Liz Frazier, of Spring, to realize selling a house was no longer the simple proposition it was a few years ago. ‘We had several showings by Realtors and some drive-by interest from the sign out front,’ the former Realtor said. ‘As far as sticking points on the sale went, we hadn’t gotten far enough along to see what the problem was.’”

“Just days before new Houston Association of Realtors data showed area home sales had taken another tumble in month-over-month comparisons for May — falling 11.9 percent this time — Frazier awaited the closing on her four-bedroom house, which sold for $189,900. She considered herself fortunate that the right buyer came along at the right time. After ‘only months’ on the market, she said, a deal was struck with well-to-do parents who wanted to give the house to their newlywed child as a gift. ‘Cash buyers have always been very welcome,’ she said.”

“Meanwhile, in the Heights, Deborah Jeans, who has been trying to sell her $332,000 home for more than a year, hopes she starts hearing from some of those who will be filling some of the area’s new jobs but also want to live closer to the city of Houston itself. ‘I’ve been hearing from people who like my house but are not really in the market,’ she said. ‘Most people are looking to move into town, then go, ‘Gosh, for that much, I could get a really big house out where I live.’”

The Oklahoman. “Sales didn’t reflect the spring boom Realtors were hoping for, and the jump in average price had to do with the mix of properties that sold, not property values in general, Realtors said. So, what explains the hike in average sales prices here in May? After months of lingering on the market, upscale houses are starting to sell again, said Ryan Hukill, a Realtor with Paradigm AdvantEdge Real Estate.”

“Hukill said the homes he sells average between $225,000 and $240,000, which means he sells quite a few at $350,000 and above, which has been sluggish. ‘Fall and winter were dismal. The past two months have started to pop,’ he said.”

“Hukill also noted that the wave of first-time buyers drawn to purchasing by last year’s unprecedented federal tax credits left something of a void of first-timers that is showing up in the statistics — which also is pushing the average sales price up. ‘We’ve taken the little buyer out of the market,’ with increased credit and down-payment requirements, said Steve Mann, president of the Oklahoma City Metro Association of Realtors.”

“But ‘perfect’ credit isn’t required to buy a house, said Scott Senner, a mortgage banker with First Commercial Bank in Edmond. ‘There is a perception among the general public, and real estate community, that a buyer or homeowner needs to have ‘perfect’ credit and a down payment to purchase or refinance a home. That is absolutely not the case,’ Senner said.”

KFOR in Oklahoma. “Over the past couple of years the housing market has been inundated with foreclosures. While it seems to have leveled off in some areas, there are many people still struggling to pay for their homes. Now, the federal government is stepping in to help some of those in trouble.”

“Janice Cantrell is one of thousands of Americans facing foreclosure. She lost her job in January of 2009 and has been struggling since then. She now works two jobs, but it’s still not enough to cover her mortgage and back payments. She says, ‘It’s just been a trial I don’t ever want to go through again.’”

“Roland Chupik, with Oklahoma City’s Neighborhood Housing Services, says, ‘We know folks who are in this situation; they can’t sleep at night, particularly if they’re unemployed.’ Chupik says helping Janice and others is why he’s excited about a brand new, forgivable loan being offered through the U.S. Department of Housing and Urban Development.”

“More than 300 qualified Oklahoma families will be randomly selected to receive the assistance. Chupik says, ‘This is an incredible opportunity for them to correct a huge problem, to keep a roof over their head.’”

The Kansas City Star. “Homeowners have to brace for yesteryear values on their property. The fat times are gone and aren’t likely to return, Jackson County officials said, when we talked after homeowners got reassessment notices. ‘We went through 10 years where property values were going up like crazy,’ Jackson County Director of Assessment Curtis L. Koons said. ‘It’s done a complete 180 on what they were.’”

“Before 2006, foreclosure sales weren’t considered when the county staff reassessed the value of thousands of parcels of property. They were excluded in market value calculations of property because they weren’t considered transactions between willing and able buyers and sellers. But in the real estate bust period, foreclosures couldn’t be ignored. ‘It got to the point where those sales do affect the market,’ Koons said.”

“Foreclosures and ’short sales,’ in which the seller settles on getting a lot less for a property, now make up the majority of real estate transactions. ‘About anyone buying a house today is in a short sale,’ Koons said.”

“Jackson County isn’t alone. Hard hit areas include Florida, Nevada, California and Arizona. Easy credit unhinged the real estate market from traditional loan practices based on the actual value of homes. Mountains of free-flowing financing, greed and unrealistic demand helped create the bubble that burst, resulting in foreclosures, stalled sales and plunging real estate prices.”

“The equity growth of 10 percent to 15 percent that homeowners experienced in the mid-1990s to 2006 is gone. Today owners can expect 1960s, 1970s and 1980s increases of about 1.5 percent. It is a saner approach compared to the wild ride we’ve been on.”

Bits Bucket for June 28, 2011

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June 27, 2011

When Are We Going To Get Back To Normal?

The Greeley Tribune reports from Colorado. “For months, Mitzi Williams has been searching for a house in Greeley. She doesn’t want anything extravagant — just a rental with two or three bedrooms and a yard for her dogs. But she and several other potential renters these days are caught in the middle of the tightest rental market the area has seen since 2002. Just Friday, hours before she had hoped to walk through a potential home, she got the call. ‘They called back and told me they rented it already,’ said Williams. ‘I’m online every day looking.’”

“Real estate officials believe it’s a product of not only the high foreclosure rate in Greeley in the past few years that has kicked former owners back into the rental market, but the lack of people qualifying for home loans, and new employees. Vacant single-family homes aren’t even included in the state surveys on vacancy rates. But the number of vacant homes on the market for sale is unheard of, said Lori Jarrett, owner of Take Me Home Real Estate, which deals in real estate throughout northern Colorado.”

“‘There’s so much property on the market for sale right now, and 32 percent of property on market is vacant,’ Jarrett said. ‘To me that’s unheard of. If there’s that many properties vacant and so many people needing housing, it would make sense for so many properties to rent until the market turns around for the sale.’”

The Salt Lake Tribune in Utah. “The high-end home market has taken a beating during the past four years, even more so than the market for more affordable properties. You either need to have a lot of cash to buy a property in this price range — about a third of such homes along the Wasatch Front are purchased with cash — or a fairly high six-figure income. And in these challenging economic times, there just aren’t enough of those types of folks around.”

“In Draper, Lisa Armstrong is trying to sell another former Parade of Homes property, this one built in 2002. She and her former husband bought it in 2003; outdoor features such as a pool were added in 2004. It has no shortage of luxury items throughout its 7,600 square feet.”

“In 2008, Armstrong had the home on the market for its appraised priced of $2.1 million, but took it off when there were no takers. ‘Now, prices are back to where they were in 2002,’ she said. Now remarried, Armstrong says she’d like to sell the home for about $1.1 million — an amount, she says, is what she has invested in the property.”

“Ginger Williams of Draper has her home, with 8,332 square feet of space, listed for $995,000. She and her husband purchased the lot with the stunning views at the height of the market in 2006, designing and building their home in 2007. Williams said they have about $1.4 million invested in the property. ‘We bought the lot at the very worst time you could have possibly bought,’ she said.”

“Although the couple want to sell and design and build another home nearby, Williams says she’s not going to give her house away to do it. ‘If it doesn’t sell for this price, we’ll just take it off the market. This is as low as we’re going to go.’”

From Vegas Inc. in Nevada. “The demand for existing homes in Las Vegas strengthened in May but that hasn’t stopped prices from falling, according to SalesTraq. The 4,942 sales in May is 17 percent higher than May 2010 and one of the strongest months since existing home sales started rebounding in 2009. The median price dipped to $106,200 in May, $700 less than April and nearly 14 percent below the $123,000 price in May 2010. At that rate, the year-end median price would be the lowest it’s been since 1990.”

“Foreclosures and investors remain a big factor in the housing market’s dynamics with 2,233 homes repossessed in May, the highest number for this year and 2010, according to SalesTraq. It was 31 percent higher than May 2010. Foreclosures amounted to 2,005 of the 4,942 existing home sales in May with their median price at $102,000.”

“Some 51 percent of homes sold in May were bought with cash and 79 percent were vacant, SalesTraq reported.”

From KTNV in Nevada. “Armed with bug spray, Benedeane Blake-White is fighting a losing battle. ‘Just recently, the last couple weeks, we’ve been inundated with mosquitoes.’ And after searching her backyard near Durango and Blue Diamond, she decided to peer over her next door neighbor’s wall. That’s when she saw it… ‘A nasty green pool and tiny baby little mosquitoes,’ says Blake-White. ‘They were just everywhere.’”

“Blake-White hasn’t seen anyone living at the home for quite some time. County records show it went into default back in 2009 and a new foreclosure notice was just posted on the front gate this week. The notice shows more than $431,951.71 owed on the home. It’s now worth half that.”

The Las Vegas Sun in Nevada. “Although burglaries happen all over — gated communities, apartments, unattended homes — police said the greatest concentration tends to be in the southern end of the Northwest Area Command, an area dubbed the ‘Rainbow Corridor’ because of Rainbow Boulevard running north-south down the middle.”

“Part of the success of the new initiative lies with residents communicating with officers and safeguarding their homes, police said. The changing nature of neighborhoods since the economy’s collapse, however, makes that more challenging because people don’t know their neighbors and, as a result, might not notice irregularities as easily, Lt. Daniel Zehnder said.”

“‘There is no such thing as a bad part of town anymore,’ he said. ‘That crime has migrated because the people have migrated because the housing has diversified.’”

Inside Tucson Business in Arizona. “Although active residential listings in the Tucson area have decreased for four consecutive months, as many as 2,100 bank-owned houses are not on the market. As of June 1, Bryan Hill, owner of Tucson Foreclosure Source, said there are 2,127 ‘pre-market REO’ units. REO is real estate owned by banks.”

“Most shadow inventory is concentrated in the central and southern parts of the city. In these areas, Hill reports there are about 1,160 pre-market REOs, or 55 percent of the total. Throughout the city of Tucson, there were about 5,800 homes listed for sale. Of that total, 1,700 units are classified as distressed. The data shows ‘most areas of the city have larger shadow inventories than active listings,’ said Hill.”

The Arizona Republic. “An apparent breakdown in the basic economic law of supply and demand has shaken Phoenix-area real-estate agents’ confidence in the local housing market, according to a report. Despite several consecutive months of increasing buyer demand for housing, the median price of homes hasn’t budged, said Bob Bemis, CEO of the Arizona Regional Multiple Listing Service.”

“Another reason for the drop in confidence, Bemis said, could be that agents were coming to the realization that home prices are not going to change significantly from what they are today. ‘The Number 1 question is, ‘When are we going to get back to normal?’ he said. ‘I think it’s very possible that this is it - we’re not going to have boom days returning like we did in 2005 and 2006.’”

The News Herald in Arizona. “Arizona State University’s President Michael Crow visited Lake Havasu City in May and announced that one of the nation’s largest universities would open its first campus outside of the Phoenix area in this small city by the lake. From commercial to residential — no one really seems to know exactly how the coming of ASU will affect real estate in the immediate area.”

“Bob McClory bought nine vacant lots surrounding the former Daytona Middle School in 2004. First he was going to build a strip mall, then it was announced that The Shops at Lake Havasu was being built. So he scrapped that idea, he said. Then he was going to build a gate-guarded community, but then the housing bubble burst.”

“Then he thought about an assisted living center, but then that market started degrading as well, he said. ‘Now it’s just empty land,’ he said.”

“All along Swanson Avenue, there are signs for properties for sale. Including three vacant lots that Havasu Management Services, Inc.’s owner Bob Bennett has had for sale for more than a decade.’

“‘I don’t see any way that the prices are affected by the college at this point,’ he said. ‘I don’t see sales increasing or anything because of it. I’m in favor of them having the campus. I wouldn’t mind if they came over and bought this cotton-picking property, but I don’t anticipate it ever happening.’”

Bits Bucket for June 27, 2011

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June 26, 2011

Where Is The End Of This Shadow Inventory?

Readers suggested a topic on the foreclosure market. “I have noticed that Fannie and Freddie Homepath and Homesteps programs have attractively priced homes. Supposedly aimed at first time home buyers. The interesting thing is that I have called on several and have failed to get even a showing on them because; on the attractively priced ones at least; there is an offer on the home within minutes of it hitting the website. So how does an unconnected buyer get a fair shake? Isn’t there so much shadow inventory that every eligible new buyer should be considered and given a chance?”

“Should a buyer who wants a good deal wait for the market to be flooded? Or will the banks ever let that happen; will they stretch it out to decades? So Fannie owned stuff is rather picked over at this point; but fresh inventory is waiting in the wings. Foreclosure auctions by BofA thru Recontrust have been suspended since last October. Seems largely clogged up; our home has been rescheduled 4 times and we are not even trying to contest it! Wonder if the August auction on wife’s home, where we live but haven’t paid since last March, will be rescheduled again as well?”

“And the numbers of non-payers who are also stayers is growing and growing! Since the stigma is gone; less uhauls are coming and going in the night to leave props abandoned and neighbors scratching their heads. People are clued into the free rent aspect of not being able to afford their mortgages, so some are staying rather than leaving in shame.”

“Where is the end of this shadow inventory, when the price is the price, and everyone is given a fair shake?”

A reply, “Keep reporting the bad agents. If your agent won’t do it, do it yourself. Write letters to the sellers and banks if you are ever refused a showing.”

“You would think the banks would have caught on by now. On many listings I now see them refusing offers for the first 25 days on market. That probably helps. I figure it won’t be long before they’ll be listing the house with two different agents simultaneously (winner takes all) - that might help cut down the questionable antics.”

Another said, “If you come in with another realtor the agent has to split the commission. If it really is a good deal, he or she would much rather not show it, keep the price low, and steer it to one his investors. Repeat, repeat, repeat. Hell, he or she can even agree with his or her investors to split the profits on the flip. Not ethical, but done every day. If the listing Realtor has their eye on it for one of their investors, you do not stand a chance. Only the picked over properties actually have non-hand picked showings.”

The Desert Sun. “Foreclosure activity in the Coachella Valley plummeted by more than one-third in May compared to the same month a year ago, marking the second straight month with a significant decline, a new report shows. It’s an encouraging sign, economists and area real estate professionals said, but it will still take years for lenders to unload all of the homes and condominiums remaining in the valley’s foreclosure pipeline.”

“‘It isn’t over by any means, but I think we’ve reached the peak of foreclosures and now we’re headed the other way,’ said Jim Franklin, president of the Palm Springs Regional Association of Realtors.”

“James Saccacio, chief executive of RealtyTrac, cautioned that as new foreclosure activity has declined steadily in recent months, the inventory of unsold bank-owned properties nationwide actually increased in April and May. ‘That points to continued weak demand from buyers, making it tough for lenders to unload their … inventory,’ Saccacio said. ‘Even at a significantly lower level than a year ago, the new supply of bank-owned properties exceeds the amount being sold each month.’”

“There is also some concern among some housing industry analysts about the size of the ’shadow inventory,’ or homes ready for sale but that are being held off the market. Franklin doesn’t believe the valley’s shadow inventory is a major concern. ‘The homes I’ve seen that have been foreclosed on have come back onto the market within two or three months,’ about the time it takes to clean and fix them up, Franklin said.”

The Bakersfield Californian. “Our question: How concerned should prospective buyers be about the excessive number of homes in shadow inventory?”

“Scott Tobias, President-Elect, Bakersfield Association of Realtors: There is no doubt that the number of foreclosed properties and those that will be foreclosed will affect the real estate market. How it affects price depends a lot on how many are put up “for sale” at any given time. If supply gets too far ahead of demand there will be a decrease in prices. Knowing that too much inventory will affect prices negatively will probably keep banks and asset managers from dumping houses on the market all at once.”

“So, should buyers wait to see what happens? Based on the availability of financing at very favorable rates and terms, this a very good time to buy. There is no certainty that the favorable financing will remain in the future any more than wondering if prices will hold. The point is, at the prices we are seeing now it is unlikely they will drop very much lower and in the long run they will increase.”

“David Cates, president, Lenox Homes: ‘I don’t think homebuyers should be concerned. Shadow inventory is driven by the lending institutions. I think that the shadow inventory right now may very well heal itself.”

“Last year there was talk of about 4,000 homes hanging out there in the shadow. All the prospective clients pulled back waiting to see if there’s a better deal in these REO/shadow markets. People waited and nothing happened. Ultimately, the shadow inventory came out in pieces.”

“Our market is the first-time homebuyer. They’re very, very conservative and don’t want to make a mistake. They don’t want to be the one that buys the house as the market’s going down. I believe the lenders will continue to bring it to market in a piecemeal format. I think that we’re absorbing the units. People will hold out, maybe. They might sit on the fence a little longer. But, all in all, when it gets down to it, it’s not going to affect those decisions.”

Bits Bucket for June 26, 2011

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June 25, 2011

Trying To Do Something About The Economic Disaster

Readers suggested a topic on financial reform and the economy. “Welcome to Obama-World. Businesses must drastically cut their number of employees due to increased taxes, charges, regulation, fees, etc. Have you read the financial reform legislation? It dramatically hinders the ability of banks to hedge risk and efficiently take advantage of changing market situations. In case you take the position, screw the banks, please note that all fees and charges are being passed down to the borrowers, chilling new American investment.”

“Have you read the new definitions of interest and increased costs being placed into loan agreements recently, especially by Wells Fargo, Citi and BoA, which does just that expressly? This is true even in the 100 million plus range where the borrowers have bargaining power and are represented by competent counsel. Not all regulation is bad, but inefficient regulation targeted to please the angry masses who don’t understand finance is horrible.”

A reply, “Lots of good ammo there why the big banks have to go:

1) They banks dump their risk off on the unsuspecting.
2) They take advantage of changing market situations to the detriment of other investors.
3) They’re passing on fees and charges to the borrowers; can’t cut back on the bonuses after all.
4) They’re so powerful that even large borrowers have to bend over.

Thanks for the ammo!”

Another said, “Knowledgeable people who are against Obama blame him for trying to do something about the economic disaster, because it’s hopeless, not for causing it. Let’s just say I have reason to know all about the financial reform legislation. And it didn’t go far enough.”

One added this, “The problem with the big banks I do think, is that they have given influence money to our elected officials. The guy in the White House is one of the largest recipients. It just cannot end well.”

A reply, “Ultimately, off-shoring of jobs and on-shoring of cheap international labor has come home to roost. I have said for years, who do these companies think is going to buy their products when no one has a decent job any more?”

This was added, “Bingo!!!! It has nothing to do with regulations, and everything to do with Americans having decent, stable, well-paying jobs that enable them to go out and buy all the products at higher prices…which enable companies to higher/keep workers at decent wages, which enable the workers to go out and buy things, which enable the companies to keep paying their workers, which enables the workers to…”

To which was said, “Respectfully, you are wrong. Demand and output is ever so slowly increasing at the manufacturing level.”

“But the number of jobs to fuel manufacturing today are less than the number needed in 2000 - when productive output was 30% less than today ! (cheaper machine tools, software, and lean manufacturing principals). - Oh, and a better ability to use them. And only manufacturing’s higher paid jobs will feed a proper housing recovery.”

From Dow Jones Newswire. “U.S. Treasury Secretary Timothy Geithner defended the Obama administration’s regulatory policies Friday, saying in a television interview that concerns they are harming job growth are unfounded. Geithner noted that the financial system was ‘messed up’ and ‘we had to reform it’ with the Dodd-Frank financial overhaul. But implementation of the 2010 law is ‘not having a meaningful effect’ on reducing jobs nor hamstringing the economy, he stressed.”

“‘If you look at the access to credit for the vast bulk of the American economy, availability of credit is much, much higher today than it was before Dodd Frank bill passed,’ he said.”

“Geithner also dismissed concerns expressed recently by J.P. Morgan Chase Chief Executive Jamie Dimon that new banking regulations would lead to a decline in lending.”

From Reuters. “Bemoaning a rise in ’short-termism,’ departing Federal Deposit Insurance Corp Chairman Sheila Bair urged fellow regulators to resist pressure to ease capital requirements and new rules on systemically important financial institutions. Bair, in her final speech as FDIC chief, said short-term thinking among bankers and lawmakers was fueling calls to roll back some provisions of the Dodd-Frank financial reform law enacted last year.”

“Bair said that the FDIC and the Federal Reserve must fully implement Dodd-Frank authorities that allow them to seize and shut down failing large financial institutions. ‘The FDIC and the Federal Reserve are going to need to stick to their guns and insist that these companies simplify their structure, if necessary, to ensure that they can be resolved without a bailout in some future crisis,’ said Bair, who leaves office on July 8.”

“She said the focus on near-term profits that led to excessive risk-taking in the run-up to the 2007-09 financial crisis is now resurfacing in complaints by bankers about higher capital requirements. ‘This is a terrific example of the sort of static, short-term thinking that got us into this mess in the first place,’ Bair said at the National Press Club.”

“Bair rejected the idea that financial regulators are to blame for the slow U.S. recovery and broader economic problems. She said most Dodd-Frank rules had not been finalized yet but would stabilize the financial sector for the next downturn. ‘What the financial regulators are doing supports a healthy, vibrant, sustainable economy, not the other way round,’ she said in response to questions after her speech.”

Bits Bucket for June 25, 2011

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