January 20, 2012

A Growth Strategy Based On Hummers And McMansions

It’s Friday desk clearing time for this blogger. “What’s next for the burgeoning Occupy Homes movement? Should local activists continue to add — one by one — to the tally of foreclosed homes they are defending, as they continue to occupy ex-Marine Bobby Hull’s home in South Minneapolis? Or should they push to broaden the movement? ‘When banks are in the monopoly business, I call that cheating,’ said Bobby Hull, whose foreclosed home has been occupied since early December. ‘I want my money back!’”

“A New York man says Occupy Wall Street protestors went too far after occupying his own home where he and his two children lived. Protestors took over a man’s house in Brooklyn and presented it to a homeless family after they found it vacant and believed to have been foreclosed on by the bank. Mr Ahadzi is currently renting out a two-bedroom in a nearby neighbourhood in Brooklyn while he works to pay off the mortgage of the two-story property he says he purchased in 2007 for $424,500 but has since struggled to make payments on.”

“Just a couple years after its purchase, that home price dropped to $150,000 when the housing bubble burst. ‘Why can’t you fight for me?’ Mr Ahadzi says he asked them, himself being a victim of the foreclosure crisis after losing his job in 2009. ‘I paid the mortgage on the house for two years.’”

“Blaize McMonagle, a Florida homeowner who had one of 300 foreclosure cases heard in a courtroom during three days this week, said the judge sped through his case without a chance to defend himself. McMonagle, 30, bought his home in Winter Springs, Fla., in October 2007, but fell behind in his mortgage payments when he was laid off from his job in January 2008. He was able to pay for several months from his savings until July 2008. His bank put him in default in August-September.”

“McMonagle, who is now unemployed, said he came to the court on Tuesday morning ready to defend his case. His defense, he said, is that his bank no longer owns the loan for his home and it has ‘not been willing to work’ with he and his wife regarding a loan modification. ‘The judge asked me when the last time I paid was and then he gave a default judgment to my bank, without giving me any opportunity to defend myself,’ he said.”

“‘I didn’t get to speak,’ McMonagle said. ‘I have a constitutional right to defend myself and at least give the judge evidence and make my case, but he didn’t give me the chance to do that. He just ruled against me. I think it’s an abomination of the justice system.’”

“Mechelle Williams made headlines on Dec. 28, when she told presidential hopeful Newt Gingrich her Spencer home is scheduled for a Feb. 21 sheriff’s sale. Williams has worked at Eaton Corporation for 16 years and is thankful for the job that allowed her to purchase a four-bedroom home in 2008. ‘I was happy to have the house and the kids were so excited,’ Williams said. Though she qualified for 50 percent more than the purchase price, she ‘wanted to be very practical and keep the payment affordable.’”

“Despite that effort, she realized at the end of 2009 that it would be difficult to keep the home. Overtime hours which had been used to offset high food and gas prices were being cut, as were work hours overall. ‘The bank offered a modification that brought the payment down $10 a month. I said, ‘I can’t do this now and, within days, they started the foreclosure process,’ Williams said.”

“RE/MAX New England fired up a distress flare over the impact of the Dodd/Frank banking law. That legislation may be stalling the foreclosure recovery in Connecticut and elsewhere in the region, noted Jay Hummer, RE/MAX New England’s executive VP and regional director. ‘The present law, though written with the intent of protecting homeowners from predatory lending practices, has resulted in incredibly stringent guidelines which have stopped the flow of an open market,’ RE/MAX said in its press release.”

“Hummer specifically addressed ‘unrealistic’ appraisal requirements, saying they’re adding to the downward pull on prices. ‘If the bar for appraisals is set so high it cannot be reached, we will never see an increase in pricing,’ he said.”

“U.S. Census reports show that while the number of total housing units increased nationally by almost 14 percent from 2000 to 2010, the number of vacant housing units ballooned by almost 44 percent. Locally, 14 of 23 Atlantic County municipalities have seen the number of vacant housing units increase by 16 percent or more from 2000 to 2010. In addition, 11 of 16 towns in Cape May County and 10 of 14 towns in Cumberland County have seen a similar jump.”

“‘People are becoming frustrated by the system, and a lot of them are walking away from properties,’ said James Schroeder, an attorney and real estate agent with Keller Williams in Northfield.”

“‘Even those who can afford houses are not convinced housing prices have bottomed. They’re staying out of the market until they’re convinced housing prices have stabilized,’ said Michael Busler, a fellow at the William J. Hughes Center for Public Policy at Richard Stockton College. For example, he said, homes that may have been selling for $300,000 four to five years ago, before the crash, may be selling for $200,000 following foreclosure.”

“‘The last thing they want to do is pay $200,000 this year when they could get it for $180,000 next year,’ Busler said.”

“Foreclosure filings are down across the country and in local official records, but area realtors say that those numbers don’t reflect reality. ‘The number of filings don’t necessarily go in line with how many listings there are, because there are properties we have that we’ve basically been babysitting for over a year because they’re not ready to be listed yet. There are just so many vacant properties that aren’t on the market right now,’ says Jennifer Vozka of Remax Invest in Rhinelander.”

“Boise’s housing market gains a bit of unwelcome and retroactive notoriety, thanks to a New York Times article published this week. Using newly released Fed transcripts, the article details Federal Reserve officials’ apparent lack of concern about the housing bubble and its potential effects on the broader economy.”

“Former Federal Reserve Bank of San Francisco President Janet Yellen relaying information from her region: One builder she spoke with, she said, ‘toured some new subdivisions on the outskirts of Boise and discovered that the houses, most of which are unoccupied, are now being dressed up to look occupied — with curtains, things in the driveway, and so forth — so as not to discourage potential buyers.’”

“According to the article, the anecdote brought laughs in September 2006.”

“Market differentiations are beginning to show up — a shift from 2008 when house prices were down across the board, says economist William Emmons of the St. Louis Federal Reserve. Emmons, who was sharing his own viewpoint and not speaking for the Fed, said he often shows a map of mortgage delinquencies in the St. Louis region when he makes presentations about foreclosure to groups in the area.”

“‘The Mississippi River is the dividing line. On the Illinois side, there’s a higher level of delinquency and distress,’ he said. ‘It’s not because the local economies are that different, but in Illinois everything takes longer.”’

“For a more extreme example, he points to Florida, a judicial state, and California, primarily a nonjudicial state. ‘They both had extreme booms, and they’ve had huge declines in house prices. In 2006 they looked the same: no foreclosures. In 2009 they looked the same: a huge increase in foreclosures. But by late last year you could start to see a difference. California had much less evidence of bottled-up problems and Florida is still as bad as it always was,’ he said. ‘I think it’s going to be 10 years for Florida to get through this.’”

“Emmons believes that Americans have yet to take a hard look at the financial factors that fed the economic collapse, including the reliance on consumer spending and housing for the nation’s long-term economic growth. ‘That was not a good idea,’ he said. ‘That was not a sound long-term growth strategy — to generate long-term economic growth based on people borrowing money to buy Hummers and McMansions.”’

“According to Intermountain MLS, the average selling price of Boise homes has fallen $136,000 since 2007. Christian Eschen has worked as a real estate agent in Boise for seven years. Working on commission, Eschen has been hit hard by the market’s decline. ‘Since homes are selling for 40 to 60 percent less than they were five years ago, this has translated into a drop in income of about 50 percent per transaction for me,’ Eschen said. ‘This is for doing the same amount of work, or more if it’s a short sale or a foreclosure.’”

“For Fallon Eisenbarth, a Boise homeowner of 11 years, renting her property seems the only option. Her family is outgrowing their current home, which has depreciated in value by $62,500 since 2008. In renting, the Eisenbarth family says they are taking on more risk than they had planned but have no choice until the market rises. ‘As real estate appreciated, we stayed excited and planned to sell after a little while,’ Eisenbarth said. ‘Due to the decline in the market some of our plans have changed. Now we will not be selling anytime soon.’”

“While the number of sales he makes is only slightly lower than before the decline, selling prices are drastically lower. ‘Four years ago you could not buy a trailer with a foundation for $100,000,’ Eschen said. ‘Now that gets you a nice three-bedroom, two-bath house.’”

“Lain Walburn said she never imagined buying property at such a young age, but at 26, she signed on the dotted line and became a homeowner. Walburn attributes this opportunity to the plunging real estate market in Boise. While many struggle to pay their mortgages and watch property values diminish, Walburn is reaping the benefits of a system in turmoil. She was given a low-interest rate loan that required only a small down payment. Walburn purchased a four-bedroom Boise home with a swimming pool for a mere $99,000. The original asking price was $150,000.”

“Walburn purchased a home in foreclosure. ‘When the market was good, there was no way we would’ve been able to buy a house,’ Walburn said. ‘If it weren’t for the super low prices, we would’ve waited a few more years.’”

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