There’s No Return To Normal
It’s Friday desk clearing time for this blogger. “New figures by the Honolulu Board of Realtors show the median price of real estate on Oahu taking a plunge in the month of August. Brian Benton, a sales manager with Prudential Locations and former BOR president, believes there’s no reason to panic. While home foreclosures have had a dramatic impact on real estate prices on the mainland, the same dynamic is not taking shape in Hawaii. ‘You’re always going to be in a situation where people understand the value of real estate in Hawaii,’ said Benton. ‘It’s not like I’m going to be buying a house at fifty cents on the dollar - that is just not going to happen.’”
“Pacific Business News reported that more than 39 percent of all home sales in Maui County in the second quarter were foreclosures. The 250 foreclosure sales on Maui, Molokai and Lanai represented an 8 percent increase from the second quarter of 2010, it reported. Maui County’s foreclosure sales percentage outpaced the state’s three other counties: Kauai, 33 percent foreclosure sales; the Big Island, 27 percent; and Oahu, 13 percent.”
“The UH economists report: ‘There is no clear sign of a bottom for prices, with first-half, single-family home sale prices down nearly 6 percent on Maui and 4 percent on the Big Island. Prevailing single-family home prices are now 42 to 43 percent below peak in these counties.’”
“Gene Kessler has owned four homes in his lifetime, and until recently had enjoyed homeownership for 45 years. He’s not bemoaning the loss of his three-bedroom home in New Ulm, Minn. Rather, Kessler is relieved that he’s no longer on the hook for a $1,250 a month mortgage on a home whose value has declined dramatically. Like most homeowners, Kessler had run the numbers and asked himself questions like, ‘How much house can I afford?’ before he forked over a $40,000 down payment on the 2,000-square-foot, brick home that cost him $164,900.”
“But with the sagging housing market, all that equity has dried up. Kessler’s home is now worth just $111,000. ‘I found out about the process of walking away and how it would affect my credit,’ he says. ‘I also found out that big businesses and smart investors have been doing this for years, so emotionally I don’t feel bad about this at all. I don’t think I’ll ever buy another house again. I like the feeling of not having that mortgage hanging over my head.’”
“Bob and Sandy Lagow have had their mountain home on the market for more than a year and have had only one showing. The 3,000-square-foot home on 21 acres on Green Mountain Meadow in Livermore was custom made and carries a selling price of $750,000. In this economy, higher end homes are languishing on the market much longer than lower-priced homes like Grier’s. Some don’t sell at all.”
“The Lagows are eager to move to New Mexico and a warmer climate. The Lagows are retired and can afford to be patient. ‘We’re in no hurry. When the house sells, it sells. We will wait it out and hopefully someone will come and buy it.’”
“The on-again, off-again completion of Edenmoor is back on. The Lancaster County Forfeited Land Commission approved and signed a contract recently with Saybrook Capital, a California-based company that buys distressed and defaulted municipal bonds. The contract allows the company to purchase the property and complete development at Edenmoor, an Indian Land community that went into foreclosure after the developers abandoned the property.”
“Edenmoor resident Jan Tacy paid $850 in bond assessment fees last year. ‘And that’s for the privilege of living in Edenmoor. For that, we get nothing. We have roads falling apart, no amenities, and we still pay $525 a year in HOA (homeowners association) fees,’ Tacy said.”
“While nine alleged co-conspirators involved in the Craig Adams mortgage fraud case head for a 2012 trial and five more already have pled guilty, federal investigators are wrapping up a lower-profile case against a ring of Southwest Florida property flippers. Matthew Landsman is the latest to be sentenced for his role in the scheme, which involved artificially inflating the values of condominium units in Palmer Ranch and lying on loan applications. In her closing statements before sentencing Michael Chadwick in October, U.S. District Court Judge Elizabeth Kovachevich said flipping schemes proliferated to such an extent that they contributed to the economic crisis and high unemployment.”
“A lot of people were gambling — a lot,’ Kovachevich said. ‘So we are facing a very serious economic situation in our state and an employment situation in our state which affects everybody.”"
“Despite several years of falling home prices, the gap between income levels and home values in Hampton Roads is wider than before the housing boom, according to a recent report. The bottom line: Home prices could continue to fall in Hampton Roads for some time, wrote Svenja Gudell, a senior economist at Zillow, in the report. ‘Markets in which the price-to-income level is still substantially above historical levels may see further declines in home values before stabilizing,’ she wrote.”
“Another option, Gudell wrote, is that home values in markets such as Hampton Roads may stabilize but stay flat for a longer period of time, waiting for incomes to catch up. ‘Interpreting price-to-income ratios is part art and part science,’ she wrote. ‘Generally, for markets which have had some stability in price-to-income ratios, deviations from long-term trends tend to be followed by a return to historical levels.’”
“‘We can quibble with whether that’s the correct equilibrium or not,’ said Vinod Agarwal, an economist at Old Dominion University. ‘But regardless of how we look it, this report does show that prices are still too high in this area.’”
“Robert Van Ausdal has worked in the construction business in Las Vegas for fifteen years as a construction glazer, installing glass windows in the city’s high-rise hotel projects. He now finds part-time work installing shower screens in people’s homes. He is describing the construction site of the Fontainebleau, a 63 storey mega-hotel: ‘It’s disheartening to see the cranes just sitting there with their booms on the ground and nobody on the construction site.’”
“The planned development featured more than 3,800 rooms - but construction was halted in the spring of 2008 with the hotel around 70% complete. It remains the biggest monument to the city’s property crash, an enormous rusting hulk at the end of the Las Vegas Strip. Condominium sales were supposed to have funded a large portion of the Fontainebleau’s construction cost. When the property market crashed this source of funding evaporated and the developer’s bank, Bank of America, withdrew their line of credit.”
“Anthony Marnell is a Las Vegas architect who built many of the city’s major hotels including the Mirage, the Bellagio and Wynn Las Vegas. Asked for his advice for a construction worker in the city, Mr Marnell doesn’t mince his words. ‘Go someplace else. Leave Las Vegas. There are no big construction projects happening here.’”
“Millions of new jobs could fire up the country and melt the Memphis area’s double-digit jobless rate. But an extraordinary financial downdraft still chills the United States. Some economists doubt it will soon relent, in spite of Washington’s stimulus. ‘I’m appalled by the reflexive use of the word ’stimulus,’ which implies you can dump money on the economy and it will restart along the same lines as a few years ago. This cannot work,’ said James Galbraith, a University of Texas economist who contends the recovery will take another decade.”
“Cities won’t crumble — the complex of colleges, hospitals and government services are wellsprings of jobs, Galbraith said. But to get by, people must have a trade or skill, Galbraith said — like a medical technician assisting a carpenter fixing the house of a bookkeeper working at a truck line hauling for a medical warehouse.”
“Bruce Yandle, an economist at Virginia’s George Mason University, agrees. The country faces a parched era until families work off debts and can afford new houses again. Three million excess houses in U.S. cities sit unsold, Yandle said, while the poor job market frustrates young adults doubling up or living with relatives. Household formations number 390,000 per year, compared with 1 million annually before the economy sagged, Yandle said, so it’ll take years to absorb the surplus houses.”
“‘We’re a people accustomed to fixing things,’ Yandle said. ‘But there’s not a short path to a fix for this one — namely the magnitude of the mal-allocated capital’ into housing. I don’t think there is any policy or stimulus,’ Yandle said, ‘that you can put in place and whammo, this economy is going to get up and start running fast again.’”
“‘There’s no return to normal,’ Galbraith said, referring to the mid-2000s, when an easy-money policy spurred a housing and financial services boom that collapsed under mortgage fraud and miscues.”
