March 27, 2012

Totally Upside Down Forever

OC Metro reports from California. “Construction is underway on the first of what may ultimately be 14,000 new homes and apartments east of San Juan Capistrano on one of the last and largest parcels of undeveloped land in Orange County. Many of the homes in Sendero are slated to be priced between $330,000 and $700,000. An improving economy and the success of the Irvine Company over the past two and a half years selling homes in Irvine, particularly those priced under $1 million, has now buoyed CEO Tony Moiso’s belief that the time is right to jump-start his biggest and final development. ‘You never know, but all the signs are telling us that now is the time to get back into the market,’ Moiso said.”

The Victor Valley Daily Press. “A private investor who recently bought 233 abandoned housing lots in four Victor Valley subdivisions plans to sit on them until the housing market picks up, according to a broker involved in the deal. Construction halted after the housing market collapsed and a bank foreclosed on the properties.”

“In a separate recent transaction, another Southern California private investor bought 142 lots at the Tuscany III subdivision. During the past four years, investors have come into the High Desert, slowly buying up housing subdivisions as prices plummeted. A Newport Beach investor, for example, has purchased nearly 1,000 lots in Hesperia, according to Russ Blewett, Hesperia mayor and a former housing developer.”

“In February 2006, an average home in the desert sold for $327,561, according to data compiled by Larry Trombley of Century 21 Rose Realty. This year during the same month, a home averaged $116,812. Blewett said it’s good news that speculators are purchasing cheap housing lots from banks. The investors will maintain the lots and sell them to homebuilders for profit when the market starts recovering, he said. ‘I wouldn’t let banks own anything,’ Blewett said. ‘Frankly, they don’t know what to do with it.’”

LA Observed. “KB Home has made a bunch of mistakes over the past two years by purchasing land in foreclosure-plagued markets. From the Wall Street Journal: ‘In mid-2010, for example, KB bought land for nearly 700 new homes in Riverside and San Bernadino Counties in California, with a plan to finish development quickly and sell homes within six months. That plan, the order numbers show, hasn’t worked out as the company hoped. According to Metrostudy, KB Home has 43 active communities selling homes in five California counties and 42 active communities in central Florida, both areas with huge foreclosure problems. ‘They invested a lot of capital in the Inland Empire last year, and that’s a lousy market. It’s still one of the worst markets in the country,’ said John Burns, a consultant based in Irvine, Calif. ‘They put their eggs in the wrong basket.’”

The Desert Sun. “Shenandoah Springs Village was going to be exclusive. Mod homes within minutes of Interstate 10 backed by an emerald-green golf course and powered by hydrogen fuel cells and solar panels. A hotel-type concierge would run your errands during treatments at the spa and wellness center. The price tag for a piece of paradise: $500,000.”

“Four years later, five model homes sit vacant, picked over like roadkill. Los Angeles-based homebuilder Ronald Safren’s five models aren’t the only never-occupied ‘new’ houses abandoned in the Coachella Valley. The Cove’s dozen or so neighbors still wonder what will happen. Just two of the homes appear to be occupied. Some of the windows are boarded. A local phone number for Innovative Communities has been disconnected.”

“Ken McClintock bought his lot nearby for $90,000 and put a funky manufactured home on the property, hoping to capitalize on proximity. When The Cove lagged, he and a partner gave up their dreams of developing their own neighborhood on the other side of the wall. In 2008, the retired night club owner sold his home in Long Beach and moved into the manufactured unit in the desert.”

“Lots in the area now sell for $10,000. Cove homes originally listed for $400,000. Sanding a wooden table in his driveway, McClintock shrugs about his lost investment. He feels older and wiser. ‘Nobody could predict what was going to happen,’ he said.”

“Once the lawsuits are resolved, Shenandoah Springs will be significantly downsized — to a couple hundred homes at most. Price tag: mid-$300,000, tops. Shenandoah’s developers hope to revive the project. ‘We have to pick up the pieces,’ said Safren.”

Bakersfield Californian. “Homeowners in the northwest Bakersfield subdivision of North Pointe have resorted to erecting signs on their lawns to protest what they say is a change in neighborhood building standards that allegedly are lowering the value of their houses. When Jennifer Yester bought her four-bedroom, three-bathroom house in North Pointe, the sales agent assured her the community would be upscale. Yester liked what she heard, and paid $420,000 for a new home. The owner of the land sold the last 25 lots all at once to Farrow Homes. The new builder’s models stunned Yester and many others who had purchased places from the original builders.”

“They start in the upper $200,000s. ‘I thought, wow, we’re going to be totally upside down forever,’ Yester said. ‘I’ve heard maybe 40 people say they’re just going to walk away, which means we’re going to have a ton of abandoned homes and that’s going to be a nightmare.’”

From Bakersfield Now. “The Menis family has lived in southwest Bakersfield since 2004. They watched their home in the Southern Oaks development be built from the ground up. When the nation went through the economic downfall, the Menis family felt it, too. For two years, they didn’t make a payment, and they watched the price of their adjustable-rate mortgage skyrocket. ‘The payment got up high enough to pretty much where you couldn’t make them,’ Ken Menis said.”

“Like most Americans, they tried to get a modification and even tried to short-sell the home. But, eventually, they were forced into bankruptcy. Not knowing where else to turn, they sought legal help. The attorney found several items the Menis’ loan paperwork that the family couldn’t have imagined. ‘When (the attorney) looked at the (loan paperwork), right there he said these signatures don’t look the same,’ Menis said.”

The Modesto Bee. “Regulations are stricter, pay has dropped and times are tough for real estate appraisers, but there was guarded optimism at last week’s Appraisal Institute conference in Modesto. Bank-owned properties, short sale properties and traditional owner-occupied homes too often are appraised as being worth about the same, but Mark Verschelden said they shouldn’t be. The 22-year appraising veteran said Stanislaus County’s traditional owner-occupied homes have been selling for about 20 percent more than bank-owned foreclosures.”

“‘They’re not letting us bring these home values back up,’ said Verschelden, explaining his frustration. ‘But somebody’s got to get in and show there are differences in value from a vacant foreclosed house and the owner-occupied home across the street.’”

“Disparities between sales prices and appraised values can cause conflict, especially when a low appraisal kills a deal. ‘People don’t understand the whole appraisal process,’ said Walter Watson, another independent Modesto appraiser. ‘Our job isn’t to control values. It’s to report on what’s going on in the market.’”

The Santa Cruz Sentinel. “Rob Cornett has spent six months looking to buy a four-bedroom home in Watsonville for his growing family. He’s comfortable borrowing $330,000. But even though prices have fallen by half in some cases from the boom years and interest rates are near historic lows, which should favor buyers, he’s stumbling at the starting blocks. ‘I grew up in Watsonville. I live in Watsonville. I’d like to own in Watsonville,’ said Cornett.”

“Cornett wanted to make offers for 34 Villa St. and 113 Kingfisher Drive, homes that previously sold for $450,000 to $500,000, but cash investors beat him to the punch. ‘We never got to see the inside (of 34 Villa) because they required an offer to be submitted first,’ he said.”

“Cornett makes too much money to qualify as low income but doesn’t have $60,000 to put 20 percent down for a conventional loan. He has saved up more than $10,000 but wants to keep it in reserve for emergencies or repairs the new house might need. So instead of putting down 3.5 percent for a Federal Housing Administration loan, he’s opting for a USDA program that would guarantee the loan and let him borrow 100 percent of the purchase price. That makes his offer weaker than those putting more money down or paying all cash.”

“By the end of last week, Cornett thought he might get 40 La Hacienda for $343,000, with a $11,000 credit due to repairs needed. Then he learned he had to qualify for a loan from Bank of America, the loan servicer, even if he didn’t plan to get a loan there, and the deal was off. ‘They don’t offer zero down,’ he said.”

Bits Bucket for March 27, 2012

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