March 15, 2012

Nowhere To Go But Up

A report from the Star. “At 158 structures, Toronto has more skyscrapers and condo towers under construction than any North American city. The three runners-up combined – New York, Chicago and Miami – have 94. Expect prices in admittedly overheated Canadian markets – conspicuously the GTA and Vancouver – to ease by 5 per cent to 10 per cent this year. And then to recover and begin making gains over purchase prices in 2013. All movements go too far. Speaking of which, houses in downtown Detroit have hit rock bottom at $14,000 for a detached three-bedroom. So if the impulse in you to roll the dice on house purchases cannot be denied, think about picking up a six-pack of Motown properties whose price has nowhere to go but up.”

The Holland Sentinel in Michigan. “Holland-area Realtor Tom Smolinski specializes in short sales. He said banks appear to be holding onto foreclosed properties longer, releasing a percentage of them every spring, so they avoid flooding the market. ‘They’re trying to control supply and demand,’ Smolinski said.”

“In the area of foreclosures, Corbin Kingsbury, of Re/Max Lakeshore is a veteran, having dealt in foreclosures for the past seven years. If there’s an end to the phenomenon, it’s not yet in sight. Banks still have a lot of real estate they need to unload. ‘There’s a large supply of them out there,’ Kingsbury said. Many are being bought by investors and landlords. ‘In Holland City, a very large percentage are going to investors,’ Kingsbury said.”

The Mansfield News Journal in Ohio. “A state expert on foreclosed housing issues urged local officials to form a countywide land bank to deal with abandoned and foreclosed homes. Mansfield is believed to have 2,500 to 3,000 vacant, foreclosed or condemned properties, Mayor Tim Theaker said. Mansfield Building and Codes Manager J.R. Rice said novice landlords are buying deteriorated homes for $4,000 or $5,000 at sheriff’s sale, expecting to bring the houses up to code. That plan often doesn’t work well, he said. ‘They walk away from it, and the next thing you know, it’s on the demolition list.’”

The Springfield News Sun in Ohio. “In Ohio, there were 526,802 mortgages in negative equity in the fourth quarter last year, up from 498,174 in the previous three-month period, CoreLogic said. On average, Ohio mortgage borrowers were under water by $30,878. Travis Hatmaker wants to move his family to Waynesville, where his mother owns a home that she has agreed to sell to her son at a discount. But that would require Hatmaker and his wife to sell their house in Miamisburg, which has been on the market for the past two years.”

“Selling the house has assumed more urgency since Hatmaker was laid off two months ago as project manager for a painting business in Moraine because business was slow. ‘The last offer we got was from a Realtor, but it was way under what we paid for it,’ said Hatmaker, who said the Realtor offered $20,000 less than his $152,000 purchase price. ‘It’s hard to believe that we haven’t had more offers. We’re current on our mortgage, and we’re current on our bills. But we’re struggling.’”

“Declining home values will undoubtedly push more borrowers under water, possibly signaling a rise in foreclosures as more homeowners abandon money pits they can’t sell or refinance, said David Marshall, a finance professor at Miami University. ‘If you lose your job, but find another opportunity somewhere else, you might not be able to sell your house… but some people will say, ‘Hey, I can walk away from it,’ he said. ”

Crain’s Chicago Business in Illinois. “A New York developer of retirement communities has agreed to pay more than $86 million for the Clare at Water Tower, a 53-story luxury senior housing project in the Gold Coast that filed for bankruptcy protection last November. That is a fraction of the $272 million cost to put up the 248-unit building. Just 83 units in the Clare, or 34 percent of the total, were occupied at the end of 2011, according to a court document. Sales in the building suffered in part because many prospective residents had their money locked up in existing homes they couldn’t sell, says Tracy Cross, president of Schaumburg-based consulting firm Tracy Cross & Associates Inc.”

“As part of its purchase, Senior Care Development has agreed to change the way the project refunds deposits on its units. Currently, residents pay an entrance fee of $600,000 or more to live in the tower and monthly fees of at least $2,700, depending on unit size. Residents receive services such as health care and meals. When a resident moves away or dies, 90 percent of the entrance fee is refunded. Under the current arrangement, a fee is not refunded until other unoccupied units are sold. Because of the high number of unsold units and canceled sales, former residents or their families are stuck on a long waiting list for refunds.”

“Senior Care Development, seeing that arrangement as an impediment to future sales, has arranged to give refunds immediately after the previous resident’s unit is sold. ‘That’s one of the major Achilles’ heels of all endowment-based retirement communities,’ Mr. Cross says. ‘They need to sell all the other units before they give your deposit back.’”

Chicago Magazine in Illinois. “Today’s 12-room house had been on the market since May 2008. Its sellers were originally asking $5.8 million, but the house was sold on February 28 for $1.75 million—30 percent of its initial list price. Sergio and Lucy Amato cut their asking price half a dozen times over the years, landing in October 2011 at $3.195 million. At that point, according to the sales agent for the property from its original listing in 2008—the eventual buyer made a bid of about $1.75 million. At that price, the home would have been a short sale, but the lender agreed.”

“A few years back, affluent home sellers were often able to hang on longer than people who were farther down the income ladder. But as the depressed housing market ground on, many have seemingly opted to let go. In recent months, there has been a run of landmark North Shore properties sold at deep discounts. Among them were Bill Wrigley’s Lake Forest mansion, which sold at 35 percent of its original asking price; a Winnetka mansion (46 percent); another in Lake Forest (47 percent); homes in Wilmette (48 percent) and Winnetka (58 percent); and one in Highland Park (58 percent).”

The Brainerd Dispatch in Minnesota. “Brainerd, Baxter, Nisswa and most communities in Minnesota have followed the national trend experiencing steep declines in the value of homes. Homes that once sold for $500,000 are now being sold for $250,000. The examples are too numerous to mention. The $500,000 home value before ther 2006 real estate bubble burst, had a healthy assessed value that helped to fill the coffers of school district, cities and towns around the state.”

“In normal economic times, the districts and cities could count on assessed values that were soaring higher and higher every year — until the bubble burst, sending them scrambling for funding sources.”

The Star Tribune in Minnesota. “For the tiny city of Spring Park, the $68 million condominium project was going to be the perfect development, replacing old businesses and blighted properties with luxury housing near Lake Minnetonka that would build the city’s tax base. But ‘The Mist’ ran smack into the collapse of the housing market. People who put deposits down on some of its 116 units walked away, and most units are now rented. ‘They were intended as ownership units and they were very, very expensive. The timing could not have been worse,’ said Mayor Sarah Reinhardt.”

“More than half the condos in Spring Park, Hopkins, Mound, Orono, Osseo and Rogers are non-homesteaded, meaning they are vacant, rented or used as second homes. Countywide, the proportion of non-homesteaded condos jumped from 26 percent to 32 percent since 2008. ‘People lived there awhile, circumstances changed and they haven’t been able to sell them, so they’re renting and hoping values recover sometime in the future,’ said Herb Tousley, director of the University of St. Thomas’ real estate program.”

Minnesota Public Radio. “Minnesota saw a 17-percent drop in foreclosures last year, but many homeowners like the Stromseths are still struggling to keep their homes. They applied for a loan modification through the federal Home Affordable Modification Program (HAMP). And after successfully completing a three-month trial modification in 2010, they signed a permanent loan modification agreement with their servicer, Bank of America. It lowered their monthly bill by a few hundred dollars.”

“Late last summer, after a year of on-time payments, Kathy Stromseth noticed a mortgage check was returned. ‘When I called to say, ‘Why did you return my check,?’ she goes, ‘Oh well, your modification wasn’t approved.’” I said, ‘I have the letter right here from July saying you approved it.’ She goes, ‘Well, in November we declined it,’ and I said, ‘And did I get a letter?’ ‘No, we didn’t send you a letter,’ she recalled.”

“Stromseth said she was told her loan was delinquent, and her modification was never processed. Bank of America finally processed the modification last fall. But for reasons the Stromseths don’t understand — and Bank of America hasn’t explained — their loan principal and monthly payments are higher than they were when they first applied for a modification. They are asking Bank of America to recalculate their loan and recognize the original modification they agreed to back in 2010 to make their payments more affordable.”

“Kathy Stromseth gets emotional as she recalls the toll the experience has taken on her and her husband and their family. ‘Oh, life’s been hell,’ she said.”

The Kansas City Star. “Despite all that has crashed down in recent years, Americans by their nature still want to be owners, not renters. But economic, political and cultural trends are challenging the conventional wisdom, embraced for decades, of homeownership being the American Dream for all. Its benefits to the nation are no longer a no-brainer.”

“Barry and Linda Dunkin crunched some numbers and concluded their ‘dream house,’ built eight years ago, could bring on a budget nightmare in their retirement years. Barry’s business — selling equipment to auto dealerships — took a hit when 15 of his dealership accounts closed. The Dunkins’ mortgage payments and upkeep on their stone-and-stucco spread seemed menacing in the new economic normal, where ‘there’s really no such thing as security,’ as Barry, 58, put it. ‘We’re downsizing,’ he said last week.”

“They sold their dream home — in just 10 days — after pricing it at 20 percent below its appraised value from a few years back. But the long-term savings are huge; their new mortgage is half the old one and should be paid off when the empty-nesting Dunkins retire.”

“U.S. Rep. Barney Frank — the Massachusetts Democrat who championed easier paths to homeownership in the 1990s — conceded to The Atlantic magazine that the own-your-dwelling component of our American Dream was oversold: ‘We put people into homes who couldn’t afford it.’ A renter himself, Frank questioned why government policies seemed to suggest, ‘If you’re a tenant, you’re less of a person.’”

“As for lessons learned, Steve Banks of the Kansas City Regional Association of Realtors said federal incentives to buy homes had less to do with the collapse than did the choices consumers made in what to buy. ‘Too many picked a Rolex when they should’ve gotten a Timex,’ Banks said.”

Bits Bucket for March 15, 2012

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