Zombie Developments Populated By Weeds
The News Journal reports on Delaware. “They came from all over Delaware, four other states and the District of Columbia — all hoping to land a piece of an $11 million construction job at Delaware Technical & Community College. The crowd reflected the still dire state of the local construction sector, eager for a lifeline from public works projects. In the boom years, firms that may have passed on certain projects because of slim profit margins or the type of work are fighting hard to win any bids these days.”
“‘We will go farther and go after smaller projects. There is no project too small,’ said Gregory Moore, a principal at architecture firm Becker Morgan Group, which has offices in Dover and Salisbury, Md. ‘We would do house renovations, house additions now. There are more people and firms than there are projects to keep them busy.’”
The Star News in North Carolina. “The real estate bust altered the Wilmington-area landscape from an area crawling with workers erecting half-million-dollar houses to one littered with zombie developments populated by weeds rather than people. The home-building meltdown took with it long-time builders who could not adjust to the new market conditions. They bought their land at the height of the property boom and couldn’t afford to build for a market beset by high unemployment, tougher mortgage standards and recessionary personal budgets.”
“But others held on and now are building for a new, austere market. Welcome to the era of the $100,000 house.”
“‘Builders are now walking a tightrope as far as being profitable or not,’ said Buddy Blake, who owns Re/Max Essential in Wilmington. ‘It’s not a matter of making a good living; it’s a matter of survival.’ Margins are ’staggeringly low,’ he added.”
“‘In some cases, your $99,900 product may not have any margin but may be a loss leader,’ said Chris Stevens of Pyramid Builders, which is constructing such homes at Windsor Park in Leland.”
“Many retirees ‘were going to buy a $400,000 house when they sold their $800,000 house in New Jersey,’ Blake said. ‘Now they sell at $500,000 and buy a $100,000 house and wait to see.’ Rather than speculate on an economic turnaround, Blake was philosophical. ‘It’s just the world we’re in. We have to go down in price,’ he said. ‘The market we’ve got is the market we’re going to have for a while. We can’t keep waiting for it to get better.’”
The Winston Salem Journal in North Carolina. “Triad Guaranty Inc. reported Friday a slightly lower loss in the second quarter as the number of new mortgage defaults decreased. However, despite the foreclosure moratorium conducted by some mortgage lenders, more Triad customers fell behind on their mortgage-insurance payments.”
“Ken Jones, the company’s CEO, said high unemployment and decreasing housing values continue to affect the company’s revenues. ‘The benefit from the decline in new defaults was offset by lower cures and lower rescissions during the quarter,’ Jones said.”
“Triad was one of the first victims of the financial crisis that began in late 2007. It said in June 2008 it would discontinue writing new mortgage-insurance business and would conduct ‘an orderly transition of its business to runoff.’”
“The housing and financial crises may claim a second Winston-Salem mortgage insurance company as a victim. Republic Mortgage Insurance Co. has told policyholders and investors that it will stop writing new policies, effective Aug. 31.”
“A private mortgage insurer offers its products to residential mortgage lenders, such as banks, credit unions and mortgage brokers. Most mortgage insurers have been slammed financially as more homeowners have not been able to pay their mortgages. As of June 30, Republic was the fifth-largest U.S. mortgage insurer with $17 billion of risk-in-force, or on its books.”
“On July 29, Fannie Mae suspended Republic and its N.C. affiliate as approved mortgage insurers. It cited in its decision that the N.C. Insurance Department has given ‘no indication that any further extensions will be granted under Republic’s current circumstances.’”
The Virginian Pilot. “Commonwealth Bankshares Inc., blaming the damage inflicted by past lending procedures, said Monday that its second-quarter loss ballooned to $26.22 million from a $2.54 million loss in the year-earlier period. The Norfolk-based parent of Bank of the Commonwealth also reported that its shareholders’ equity had been wiped out during the recent quarter.”
“The biggest contributor to Commonwealth’s loss for the April-through-June quarter was a $22.5 million provision for loan losses. That was more than four times its $5 million provision a year earlier. Chris Beisel, who took over as Commonwealth’s CEO in December, said in a statement that management has completely revamped the bank’s credit-risk management process. However, economic uncertainty continued to cause difficulties for its loan portfolio, especially for those loans secured by real estate, Commonwealth said. Its nonperforming loans at the end of June swelled to $197.9 million, or 20 percent of total assets.”
The Gazette in Maryland. “Portions of Hyattsville’s University Town Center complex sold for $25.1 million under foreclosure and a second auction for a 302,798-square-foot office building is scheduled for Wednesday outside of the Upper Marlboro courthouse. The foreclosure marks a low point for developer Herschel Blumberg. The Metro I building was turned over for sale by CWCapital Asset Management last year after default on a $37.6 million loan.’
“Wells Fargo Bank, which held the debt on the other properties, placed the winning bid for 227,000 feet of retail space, including a 14-screen movie theater, as well as condominiums and office space in the complex. The center has struggled for years in the economic downturn and faced foreclosure for more than a year. Two condo towers at the site, One Independent Plaza, with 112 units, and Plaza Lofts 22, with 22 units, remain largely vacant.”
“The Washington, D.C., area’s reputed immunity from recession has not protected its office market from the worldwide economic chill, nor have local real estate companies escaped the ongoing spasms on Wall Street. Panic selling has hurt the stock prices of the handful of real estate investment trusts in Maryland, but some were in a tailspin even before the wild swings in financial markets began Aug. 4.”
“Developers that grew spoiled on record federal hiring in recent years will have to adjust to steep drop in agency growth implicit in the debt ceiling deal, according to a report by Delta Associates, a real estate research firm in Alexandria, Va. ‘Federal budget austerity measures, no matter how they play out for 2012 and beyond, will impact Federal hiring in the Washington metro area,’ the study said.”
The Fredrick News Post in Maryland. “July’s home sales stalled in Frederick County, even before the downgrade of the nation’s credit rating, according to Realestate Business Intelligence. William Armstrong, treasurer of the National Association of Realtors and a Frederick resident, said Sunday that he blamed Standard & Poor’s and other financial firms for not downgrading the U.S. credit rating before last Friday. ”
“Armstrong said those firms were giving the U.S. an AAA rating when many of the mortgage loans were subprime. Standard & Poor’s downgraded the credit rating to AA+ last Friday. ‘Economic policy over the past several years coming from inside the Beltway has actually worked against a housing market recovery,’ Miller said.”
“Armstrong said banks, cautioned by the national credit downgrade and which used to lend ‘to anyone who was breathing,’ have now tightened credit to the degree that even those who would normally qualify for a loan are turned down.”
“In July, 221 homes were sold in Frederick County, a 14 percent decline from June, though up less than 1 percent from July 2010, according to RBI. There were 1,240 active listings on the Frederick market in July, and the median price of a home sold last in the county was $235,000, nearly 7 percent higher than June, but 41 percent less than July 2010.”
The Times Tribune in Pennsylvania. “Since the start of the recession, the jobless picture in the Scranton/Wilkes-Barre/Hazleton metro area went from bad to the worst in the state as the region got whacked by declines in the manufacturing and construction sectors. Mark Price, Ph.D., a labor market economist with the Keystone Research Foundation, said declines in manufacturing and construction employment accounted for much of the unemployment rate increase.”
“‘The rest of the state took a hit in those sectors,’ Dr. Price said. ‘Scranton/ Wilkes-Barre got clobbered.’ The recession and housing crisis put households on austerity plans, unable to replace their appliances, cars and others durable goods. The banking and financial crisis prevented consumers from tapping into home equity to bolster consumption.”
“While the local metro area, which includes Lackawanna, Luzerne and Wyoming counties, didn’t see the construction boom or housing bubble of other parts of the country, many residents worked in construction, building in the red hot Pocono counties of Pike, Wayne and Monroe. When those markets crashed, that idled Northeast Pennsylvania tradespeople, who show up on the residential unemployment rate.”
“Frank Corcione, Ph.D., retired professor of economics and finance at the University of Scranton, called the joblessness in the U.S. today as ’structural’ and predicted that high unemployment would be part of the landscape for the near future. Jobs at Bethlehem Steel have been replaced with jobs at McDonalds, he said.”
