Living In A New Reality
It’s Friday desk clearing time for this blogger. “The housing malaise is in large part responsible for the consumer malaise. Houses have been the largest and most visible economic assets for Americans. We don’t save, so we ‘invest’ in houses and the appreciating value of our properties makes us feel good. So we go to the mall and the car dealer and the electronics store and spend like crazy. After all, we can run up our credit cards and take out big second mortgages since the value of our homes keep going up.”
“But, oops, when the value of our home suddenly declines, we become very conservative, stop spending, don’t buy new homes (more people are renting instead), and the economy grins to a halt. The latest economic growth numbers are sobering and grim — an annual rate of only 1.8 percent, which is less than most developing countries.”
“That’s where politics comes into the picture.”
“Many economists believe that 2012 is not normal. It comes in the aftermath of a severe economic crisis that psychologically has been the equivalent of the Great Depression. We are also living in a new reality, where the American economy is not as dynamic and robust as we like to think, where American innovation, creativity, inventiveness and ingenuity produce great patents that are, for the most part, executed in China, India and other countries.”
“The Eastern Connecticut Association of Realtors is banding together with its state affiliate and with the Builders Association of Eastern Connecticut in opposing Senate Bill 1019, which would levy a 1 percent conveyance tax on buyers of homes. Steve and Shannon Christian, of North Stonington, are selling their home and looking to buy a larger one in town for them and their six children. The tax would put the couple in a financial bind. ‘The value of my house has gone down, but my taxes haven’t gone down,’ Steve Christian said. ‘Most of the down payment for our new house will come from the equity of the house we live in now. If that’s reduced, we could be in trouble.’”
“Connecticut is losing its 25 to 34 demographic faster than any other state, he said. But the types of homes available is a major cause of these departures as well as the depressed state of housing sales. ‘We’re lacking starter homes,’ said David Fink, the Partnership for Strong Communities policy and communications chief. ‘We haven’t been building the right kind of homes in more than a decade. This is the issue that needs to be addressed.’”
“RealSource Association of Realtors from across northern New Jersey recently urged members of Congress to keep housing first on the nation’s public policy agenda during the National Association of Realtors (NAR) 2011 Midyear Legislative Meetings & Trade Expo in Washington, D.C. ‘Tax incentives for home ownership have been a part of our tax system for decades and are deeply woven into our economic fabric,’ said Patricia A. Sudal, RealSource president. ‘Reducing or eliminating the MID is a de facto tax increase on home owners, who already pay 80 to 90 percent of U.S. federal income tax.’”
“Last week thousands of Realtors from across the country convened in Washington, D.C. I was honored to be among them. During this annual event our senators and representatives set aside some time out of their busy schedules to meet with us and listen to our concerns about private property rights. We had three key messages: Home mortgage interest deductions must be kept; our country needs a successor to Fannie Mae and Freddie Mac that will preserve the secondary mortgage loan market, and to vote against any proposed legislation requiring a minimum of 20 percent down for all mortgage loans.”
“NAR First VP, Gary Thomas says ‘A functioning real estate market can again lead this country out of recession.’”
“Oregon Senator Jeff Merkley said lawmakers need to act now to put housing at the top of the national agenda. ‘Nearly three years after an economic collapse caused by the actions of Wall Street, the big financial firms are back on their feet, but homeowners are not. Falling home prices are wiping out the investments made by American families, hurting our economy and triggering another wave of foreclosures. We must act now to stem this tide and keep families in their homes.’”
“‘We need to take action now to put housing at the top of our national agenda,’ Merkley continued. ‘That includes a much improved mortgage modification system and common sense foreclosure intervention including third party mediation and a national short refinance program. It doesn’t make sense to force families into foreclosures that further drive down prices.’”
“Nikkie Hartmann’s Albany Park condo is now worth $80,000, 44 percent less than the $143,000 she paid for it in 2006. She carries a mortgage for 100 percent of the purchase price. ‘I am so underwater in my loan that I don’t believe I will be able to sell it for many years,’ Hartmann said. Hartmann’s condo is part of the ’shadow’ inventory of properties waiting to be sold if and when home prices rebound. Other properties in this category are delinquent, in foreclosure or bank-owned.”
“In fact, Illinois has the third-largest shadow inventory in the nation, following Florida and California, with 121,266 properties waiting to be sold, according to the National Association of Realtors in a March report. The Obama administration has taken many steps to stabilize the housing market including its Home Affordable Modification Program (HAMP) that is designed to help financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for the borrowers.”
“Opponents say HAMP has only prolonged the housing downturn and built up shadow inventories by delaying foreclosures rather than preventing them. Delores Conway, a real estate professor at the Rochester Business School, said there may be some validity to that argument, but that a prolonged housing recession is probably inevitable and even necessary, given the depth of the crisis.”
“‘Maybe we need to prolong it for a while because prices have dropped too sharply and too quickly and that could create some other problems,’ Conway said.”
“With the latest news out over the weekend on the dismal housing values here in Southern California one can assume that all the government acronyms HAMP, HARP, HASP, NSP, FHFA, HAFA, etc., are all brought to you today by the letter ‘F,’ as in failure. Lest you be led over the cliff, stop for a minute, take the blinders off and look objectively at the truth. And the truth of the matter is, loan- modification programs were not meant to save the struggling homeowner, but to keep the banks from inheriting a flood of foreclosures.”
“It appears the truth about HAMP was that it was meant to help banks stem foreclosures. Any benefit realized by homeowners was an afterthought. In that context, the whole struggle for homeowners to actually get permanent modifications makes sense. No one really cares if a homeowner gets one. All the pressure on lenders by the government to approve more modifications has been done to slow foreclosures and the number of properties banks take back - not keep taxpayers in their homes.”
“I am led once again to write about this, because I and all the other active Realtors out there are on the front lines of this housing mess. I have just completed some BPOs (broker price opinions) for some struggling homeowners who are killing themselves and their families trying to stay in homes they can’t afford. Instead, they could easily facilitate a short sale.”
“CoreLogic’s Home Price Index for April showed that any recovery in U.S. home sales has not reached Idaho. In March, Valley prices dropped 12.1 percent from March 2010, with distressed sales included, and 8.37 without. ‘You have to include the distressed sales,’ said Brian Greber, director of the Center for Business Research and Economic Development at Boise State University. ‘If you exclude them, you’re just fooling yourself.’”
“Greber said Idaho’s problems today are complicated by factors that contributed to the boom that inflated the state’s real estate market. For the 10 years leading up to the 2007 housing crisis, much of the sales activity was second homes and investment properties — sales that ended when the economy weakened. And even people who bought homes to live in were out-of-staters who sold a home elsewhere and relocated to Idaho, he added.”
“The number of vacation homes in Montana has skyrocketed over the past decade, although most of the growth came before the recession. Jim Sylvester, an economist at the University of Montana, said that between 2000 and 2010, Montana’s statewide seasonal housing grew 59 percent, or about 14,000 homes. In some counties, seasonal housing now represents 25 percent or more of the entire housing market.”
“Jim Kelley, of Kelley Appraisal in Kalispell, said Flathead Valley’s vacation homes are a mix of modest cabins on the Bitterroot and Ashley lakes and high-end homes on Flathead and Whitefish lakes. The influx of pricey lakeside homes before the recession helped drive up prices in the local housing market, Kelley said. ‘People coming in and building these large multi-million homes largely contributed to the increase in property values we saw up to 2007,’ Kelley said.”
“The Twin Cities had the unfortunate distinction in March of having the biggest home price decline in the Standard & Poor’s/Case-Shiller Home Price Index. ‘What I think is unfortunate is we don’t seem to be at the bottom. We actually seem to have a double dip,’ said economist Jeanne Boeh of Augsburg College.”
“Boeh says as prices descend, more homeowners will be underwater on their mortgages — owing more than their home is worth. And that will inhibit people from selling their homes. The result: the market will continue to be dominated by foreclosures and short sales. ‘All that means we are not coming out of this housing market anytime soon,’ she said.”
“In the seven years before its peak in July 2006, the home-price index surged 155 percent. Since then, it’s fallen 33 percent.”
“Q: We recently completed a short sale and yesterday a collection agency called and told us that we still owed more money since the property was sold for less than what we owed the bank. Do we have to pay? A: Maybe.”
“Q: We lost our foreclosure case and are afraid that the sheriff will throw us out. How does this process work? A: After the court rules for a lender in a foreclosure case, you have roughly two to four months before you have to leave the home.”
“Q: We are in foreclosure and are trying to obtain a loan modification on our rental house. Our tenant found out about it and said that since we were not paying the mortgage, she would not pay the rent. Can she do that? A: Not without being evicted.”
“Neil Conner always thought he’d be a real estate agent. He made real estate his livelihood, a job path that he planned to nurture for the rest of his working life. The real estate market collapse sent his best laid career plans spinning.”
“In November 2007, just before home sales nose-dived nationally, Conner opened his own firm in Salem. He hired several sales agents and settled into his new role, including a yearlong stint as president of Roanoke’s real estate professionals association and spokesman for local market conditions. In a good year, Conner sold 45 to 50 houses. In 2008, he booked less than half that number of transactions.”
“‘My overhead went up, my income was cut in half,’ he said. ‘It was just the perfect storm.’”
“Conner closed PropertyPros in late 2008 and early the next year landed a job in sales for Renaissance Contract Lighting & Furnishings, a Roanoke manufacturing facility. ‘I didn’t know what would happen,’ said Conner. ‘I always thought I’d be a Realtor, and life handed me a set of circumstances that said that may not be true.’”
“People should be flocking to the Golden State, and for a while they were: between 1940 and 1990, 12.4 million Americans immigrated to California. But then people started leaving. Since 1990, four million more people have moved from California to other states than have moved from other states to California. Companies are leaving, too. In just the first three and a half months of this year, 70 companies left the state.”
“It’s hard to blame them. California now has the country’s highest cost of living, highest sales tax, third-highest marginal income tax rate, worst business climate, second-worst roads, fifth-highest gas prices, worst air quality, second-highest unemployment rate, highest home prices, and third-highest foreclosure rate.”
“So is it time for Californians to move to Arizona? Probably, but I haven’t given up on the Golden State (although I did leave California — where I was born and raised — five years ago and have no plans of returning), because I think its long-term future is bright.”
“The state will probably still be a disaster 10 or 20 years from now, but eventually, maybe in 2060 or so, California will recover. The state can’t stay moribund forever; it has too many things going for it. Sure, California has problems, but most of those problems are solvable. At some point, things will become so bad that a critical mass of fed-up voters will demand reforms. But that could take a while.”
