Irrational Appreciation Amnesia
It’s Friday desk clearing time for this blogger. “President Barack Obama has made numerous visits in recent months to rejuvenated auto factories and high-tech companies to tout his economic policies to address high unemployment. West Coast Democrats note that you don’t see him making stops in neighborhoods recovering from housing foreclosures, because there’d actually have to be a housing market recovery.”
“‘How bad does it have to get before this administration wakes up and seriously tackles this housing catastrophe?’ Rep. Dennis Cardoza, D-Calif., said in a recent statement. ‘Without bold action, millions of more families will lose their homes and our economy will continue to stall. If this administration continues to stick its head in the sand and wait for the housing crisis to run its course, I am afraid the president could end up losing his current residence in 2012.’”
“There’s a proposal making its way on Capitol Hill that could have a dramatic impact on anybody planning to buy a home. It would raise the down-payment requirement to 20 percent. But critics are outraged, accusing federal regulators of trying to fix the housing crisis by killing the housing market. Realtor Shawn Perez has been busy showing homes, like the one in Buckhead. It’s a quaint brick 3-2, priced to sell at $349,000. The down-payment would be $70,000.”
“‘It would be like a punch in the gut to the current market,’ Perez said. ‘It would be devastating.’”
“Since the real estate bubble burst three years ago, some homeowners going into default find it to be a first step toward renegotiating loan terms with banks. Others could be making “strategic defaults” in order to set the process in motion. They can also lead to outright foreclosure and eviction. But with real estate values dropping and jobs scarce, some homeowners have nothing left to lose.”
“One homeowner in Hailey said that after losing his job, he was advised by a lawyer to not pay his mortgage in order to get attention from Wells Fargo Bank. He hoped the move would result in a home loan modification that would allow him to stay in his home. He said that after six months the attempt failed on a technicality (he had not purchased his home during a specified time period). He is now hoping to succeed in making a short sale, but he does not expect to get what his house is worth.”
“‘I can’t understand why they advise you to go into default, because when you do, people see you are in default and you will never get market value for your home,’ he said.”
“Another Hailey resident and construction worker moved out of his house and stopped making payments two years ago in the hope of getting a loan modification. Two years later, he still technically owns his property. He is hoping the bank will eventually take a deed in lieu of foreclosure, since this process will save the bank additional fees from the foreclosure process. He is also considering filing for bankruptcy.”
“‘This will screw up my credit, but the fact is it was my stellar credit that got me into this in the first place,’ he said.”
“Woodside subdivision resident Fred Burmester succeeded recently in getting a long-term home loan modification, cutting his monthly payments in half. ‘I did a lot of homework before I got started,’ Burmester said. ‘It’s not a free giveaway. I had an income and that made a difference.’”
“His home is now listed for sale. ‘Now my payment is in line with what rents are in my neighborhood,’ he said. ‘I would be happy to never own again after this is over.’”
“Lincoln County saw foreclosure activity spike in April, as lenders resubmitted many of the default notices they had rescinded during the first three months of 2011. ReconTrust, the foreclosure arm of Bank of America, is rescinding fully 57 notices of default from January-March and resubmitting 34 of them in the next two months. B of A spokesman Richard Simon said the rescissions were prompted by an internal review of foreclosure procedures following concerns about ‘robosigning.’”
“‘In October [2010],’ Simon said, ‘Bank of America announced a voluntary freeze on foreclosures to review processes and ensure that our foreclosure decisions are accurate and that our customers are provided with every opportunity for home retention.’”
“Simon said that review concluded in December and that the bank is taking a ‘deliberate and phased approach to restarting the foreclosure process. At the end of March,’ he said, ‘we restarted the foreclosure process in Oregon and that led to a significant increase in filings in April, including both restarted files and new ones.’”
“A local real estate company has joined with a well-known international firm to focus worldwide attention on Oregon’s north coast. ‘The Oregon coast is like Malibu or San Francisco,’ said Philip White, CEO of Sotheby’s International.”
“White said Sotheby’s conducts more than 5 million real estate transactions a year, which ‘is less than at the height of the market. Depending on the local market, prices are down 50 to 75 percent compared to previous years. High-end homeowners don’t have to sell and they are waiting until the market improves.’”
“Here on the north coast, said Farzahn Kamali, the principal broker and owner of the new Kamali Sotheby’s, homes have decreased in value by 25 to 30 percent over the last two years. ‘We see properties closing anywhere from 25 to 50 percent of what they were two or three years ago,’ he said. ‘So it has less to do with valuation and more to do with the seller coming to grips with the market.’”
“White said that international reach is just what the north Oregon coast real estate market could use. ‘What we’re finding is that even though the market is somewhat localized,’ said White, ‘with many buyers being people who have come to the coast for generations, the real estate market in general is becoming very global.’”
“Snorkelling, swimming, surfing and suntanning aren’t the only reasons Canadians visit Hawaii these days. They’re saying aloha to condos and homes that have plummeted in price as much as 60% since January 2008. ‘What’s really driving the market is foreclosures,’ says Re/Max Resort Realty’s Howard Dinits, who lives on Maui.”
“‘Many island properties here were bought as second homes by speculators in the States. In the economic downturn people used revenue from these holiday rentals to make payments on their main homes -then they defaulted on the island properties. In some areas prices have dropped 40 to 60% and it’s as bad as Phoenix.’”
“Dinits doesn’t see prices strengthening any time soon — ‘I don’t think we’ll see irrational appreciation in the next five years, although Americans do have amnesia.’”
“Report author Angie Zigomanis said the drop in home prices to June this year had been caused by the government’s withdrawal of stimulus spending, rising interest rates and a 50 per cent pull-back in the number of first-home buyers entering the market. But he said buyers would return as investment from the mining boom started revving up the economy through 2012.”
“‘Mr Zigomanis forecast Sydney’s median house price to be $640,000 in June 2011, or a 1 per cent rise on a year earlier. The report noted that house prices would ‘remain 9 per cent below the peak of March 2004′ but home loan affordability was ‘at its best level since 2002.’”
“Melbourne’s forecast median house price would hit $575,000, a 3 per cent rise on a year earlier. The report predicts price rises will be ‘minimal’ over the 2011-14 period at 6 per cent, or a fall of 4 per cent during the period when inflation is taken into account. In Brisbane, the median house price would slide 4 per cent over the year to $440,000. The report noted that ‘underlying demand in the Queensland market has been weakened by lower overseas and interstate migration inflows that have fallen to long term lows.’”
“It has been five years since I started to scrutinise the total stock of residential units in the pipeline, that is, current stock plus expected completions minus demolitions from en bloc programmes. Occasionally, people still ask: ‘Why look at completed supply when land sales are hotly bid and developers sell out most of their stock before construction has completed?’”
“Regardless of the take up of pre-sales, physical supply and demand will ultimately influence future prices, rentals and returns. Two weeks ago, National Development Minister Khaw Boon Wan cautioned in his blog about the ‘massive supply that will hit the market from 2013.’”
“Mr Khaw’s worry is about the total 50,826 units that could be completed in 2013 to 2015. With a historical long-term average supply of 8,000 units per year, the average of 17,000 units per year of supply from 2013 to 2015 seems risky should demand from users and tenants not increase in tandem.”
“From its trough in 2Q2009, the price index for non-landed residential properties in the Core Central Region (CCR) increased 42 per cent to 204 points from 144 points. The same index for Outside Central Region (OCR) climbed more rapidly, up 54 per cent to 185 points from 120 points. Many Singaporeans are not surprised to hear of transactions in the outskirts, such as Jurong West, Pasir Ris and Yishun, at S$1,000 to S$1,500 per square foot - even for mass market finishes on 99-year leasehold land.”
“While many investors may be concerned about short-term market jitters, others are looking to take advantage of the uncertainty by searching for solid long-term value buys that offer strong downside protection in the older CCR properties. Our recommendation will be to explore the larger-sized apartments of 2,000 to 4,000 sq ft that were completed before this century. The investment search might take a lot more effort as many gems lay hidden from us and probably hidden from the risks of the impending ‘massive supply.’”
“Bakersfield’s tallest office building could be sold to the highest bidder at an upcoming foreclosure auction. County records show the owner of Stockdale Tower is about $2 million behind on payments of a $24 million loan. But, developer Terry Moreland says he is negotiating a solution with a bank that will allow him to keep the property.”
“Moreland put the building up for sale in 2008, asking for as much as $45 million. But, Moreland says the offers he received came in below that. And, like so many other developers in the last five years, Moreland was also caught when deals on five separate housing tracts went sour. Like most of the tracks in Bakersfield they came to a stop because of the economy.”
“Two of the five tracts went into Chapter 11 bankruptcy. Moreland says he’s pressing forward with the other three. But, the tough economic times aren’t getting him down. He says he saw the same thing in the 1980s. ‘Those are all fallouts of things that come and go, but we’re in it for the long run.’”
“As a homebuilder for about 40 years, and as co-owner of Saddletree Homes and Symphony Homes in Colorado Springs, Lee Bolin said he still enjoys his work so much that he’d probably build homes even if he was just breaking even — although he certainly is in business to make a profit. ‘I can’t imagine anything that could be more rewarding than what I get to do,’ Bolin said. ‘I’ve often said that I’ve never really worked for a living because I get to do my hobby everyday.’ Although, he added, ‘it’s a little more like work right now than normal.’”
“Saddletree builds homes from $300,000 and up, while Symphony is a semi-custom builder whose prices start in the low $600,000s”
“Q: We’ve heard for the past couple of years that more jobs are needed to help boost the new-home and resale markets. That said, what else, if anything, will help get the homebuilding industry out of its funk? A: The realization that our country has been through times such as these before and has come out on the other end. Buying a new home now, at as close to cost as is possible, affords them (buyers) the opportunity to enjoy the appreciation that is sure to come.”
“Q: Any timetable that you can predict on when the market will fully turnaround?”
“A: This won’t last forever and I feel that by the end of this year or early 2012 we will begin to see improvement. Every recession has had a recovery. If you don’t believe there’s going to be a recovery, then you’d better pack up and go to Alaska and learn how to hunt bears or something.”
