The Best Path To Wealth
A report from WTOP. “According to the latest Delta Associates Mid-Year Washington/Baltimore Condominium Report, condo sales in the Washington region plummeted 43 percent from June of 2010 to June of this year. In fact, there are so many unsold condos on the market right now, it would take nearly two and a half years to sell them off. Steve Cohen, of First Place Bank, points to a rule by Freddie Mac and Fannie Mae that states, ‘more than half of the units must be held owner-occupied, meaning the people that own them actually live there in order for Freddie and Fannie to be able write a loan in the complex.’”
“So when there are a high number of rentals or foreclosures in a condominium complex, the scale is tipped and Freddie and Fannie are unable to write a loan for any units in the complex. Another rule is also having an impact, Cohen says. The rule says a loan cannot be written by Freddie or Fannie if more than 15 percent of unit owners are late on condo fees. Cohen says, ‘In harder economic times, as people are losing their jobs, perhaps they are late on their fees or not paying their fees at all.’”
The Capital in Maryland. “You probably wouldn’t find it unless you were looking for it. The 13,400 square foot mansion, complete with eight bedrooms, a guest cottage and a horse barn, sits on Round Bay in Severna Park. Not surprisingly, this kind of luxury doesn’t come cheap, and that’s likely why the estate sat on the market off and on for five years.”
“The Annapolis plastic surgeon who owns the home originally listed the property for upward of $12 million, but had no takers, his Realtor Warren Prins said. So he dropped the price several times before finally turning to DeCaro Real Estate Auctions Inc., which put the estate on the auction block. ‘Like everyone else, (the homeowner) is chasing the market down,’ said Auctioneer Daniel DeCaro. ‘He’s come to the conclusion that he has to take a more aggressive approach.’”
“The figures seem to back up his theory. According to Metropolitan Regional Information Systems, a real estate tracking company, there were 284 properties listed for sale in Anne Arundel County for at least $1 million between January and June. So far, only 69 of those properties have sold. Another 105 listings were either withdrawn, or they expired unsold. ‘A lot of people are looking for a new way to sell their real estate,’ DeCaro said. ‘The old way isn’t working for them.’”
“At Annapolis Towne Centre at Parole, 25 luxury condos will be up for auction later this month. The units in the GrandView are expected to sell for up to 70 percent off their original prices, according to the company handling the auctions. Auctioning off the GrandView condos, built by Sturbridge Homes, became a necessity, said Mark Troen, chief operating officer of auctioneer Sheldon Good and Co. ‘In 2009, the market died after we sold 45 units,’ he said. ‘People were afraid.’”
“An auction, though, seems to boost their confidence. ‘The price that they’re paying is the market price,’ Troen said. ‘We’re not setting the price. The buyer is.’ As for the sellers? ‘They like it because the units get sold,’ he said.”
The Gaston Gazette in North Carolina. “Robert Stowe England, a product of Gaston County public schools and longtime financial writer, has a real-life thriller headed for bookshelves in September. ‘Black Box Casino’ details government incentives he says drove half of the country’s lending activity into a secretive banking system, leaving the public in the dark — and in danger.”
“We’re still living with the consequences, England says, as the country struggles to overcome high unemployment, a glut of foreclosures pinning down property values and an immobilized construction industry. ‘It is scary because it’s true,’ he says. ‘We all lived through it and the horror was more visible to the financial world.’”
“What inspired you to write the book? A: Over the years as I was writing about the mortgage industry, I had written about the decline in government standards (in mortgage lending). I wasn’t surprised in 2007 when the subprime mortgage crisis erupted. Even I was surprised, however, that this crisis led to the … crash of the public segment, which is Fannie Mae and Freddie Mac.’”
“Can you explain the title? What do you mean by black box casino and what is shadow banking? A: A black box in the financial world is a financial instrument that is very opaque and unless you’re inside, you don’t know what’s going on. The biggest black boxes were Fannie and Freddie. They were under pressure to lend more and more money to increase home ownership. The same thing was happening on Wall Street.”
“So my view is that there was a lot of speculative, risky activity going on inside those black boxes. A lot of the financial activity had moved into shadow banking. The traditional banking system has deposits and loans. In shadow banking, they turn those into securities … which are less secure.”
From WAVY in Virginia. “The rental business is booming in Hampton Roads, and the new trend isn’t leaving a lot of options for sellers in the market. Lock boxes can be seen on homes all around Norfolk, and Newport News City Council just agreed to convert a luxury condominium complex into apartments.”
“‘Right now, people are being forced to rent. When we have a lot of foreclosures people have no choice, but to rent,’ saud Vinod Agarwal, an economics professor at Old Dominion University. Agarwal added, ‘If you were interested in buying a house today and you were talking to me and I said prices are expected to decline more what does that tell you, wait.’”
“There are a few hot spots for sellers in Hampton Roads. Red Mill Commons and Church Point in Virginia Beach are a couple neighborhoods where those with money and good credit are taking advantage of deals. One home for sell on the Lafayette River came on the market at $1.2 million. It’s now down to $960,000.”
The Free Lance Star in Virginia. “Throughout most of my lifetime, the conventional wisdom has been that owning your home is the best path to wealth. Don’t throw away your money on rent, the thinking went. Instead, slowly build equity in your home so that you’ll be mortgage-free in your golden years. At that point you can even pull money out of the house to finance your retirement. Plus, it was said, housing prices always go up and keep pace with inflation.”
“The housing crash of the past few years has challenged that conventional wisdom. This attitude shift has increasingly shown up in the media. The Wall Street Journal ran an op-ed Monday titled ‘A Home Is a Lousy Investment.’ It was written by Robert Bridges, professor of clinical finance and business economics at the University of Southern California’s Marshall School of Business. Bridges based his analysis on the California housing market over the past 30 years.”
“In the op-ed, Bridges concedes that home-building has an immediate economic benefit. But he said the positive effects are fleeting, whereas business investment creates permanent jobs and income. Bridges concludes that housing should take a back seat in importance to creating sustainable jobs. A solid labor market should lead to a good housing market, not the other way around.”
“‘Owner-occupied homes will always be the basis for healthy and stable neighborhoods,’ Bridges writes. ‘But coming generations need to realize that while houses are possessions and part of a good life, they are not always good investments on the road to financial independence.’”
