May 31, 2012

Bits Bucket for May 31, 2012

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May 30, 2012

Ponzi State Buyers Have Got To Get In

A report from the Northwest Florida Daily News. “The number of homes sold in Okaloosa and Santa Rosa counties last month was lower than it was in April 2011, but there were positive signs in the local housing market. In April, Okaloosa County had a 6.7-month inventory of single-family homes on the market. That’s a reduction of more than 40 percent from last April, when the county had an 11.3 months’ inventory. Santa Rosa County went from an 11.5-month inventory in April 2011 to a 7.1-month inventory last month, while Walton County’s dropped from 17.6 months last year to 10.1 months last month. Those are decreases of 38.3 percent and 42.6 percent, respectively.”

“‘Buyers are seeing that finally the market has hit (bottom) and now it’s starting to bounce and they’ve got to get in if they’re going to get in at the bottom,’ said Judi Rutland, president of the Emerald Coast Association of Realtors.”

From TC Palm. “Like many Treasure Coast residents looking to buy a house, Mike Musitano isn’t sure when to jump in. Musitano said his biggest concern is housing values will fall further because of the so-called ’shadow inventory,’ homes in foreclosure that have yet to come onto the market. Concerns about the shadow inventory flooding Florida’s real estate market are ‘greatly overrated,’ Florida Realtors Chief Economist John Tuccillo said in a report. Tuccillo said lenders have no reason to flood the state’s real estate market with more homes if doing so would drive prices down and reduce the lender’s profit.”

“Veteran appraiser Bill Pittinger said the housing market has hit a bottom in the sense that the free fall in prices is over. ‘Still, we can expect at least another 18 months of erratic behavior where prices rise or fall by 2 to 5 percent,’ Pittinger said. Even once that happens, Pittinger said, a quick rise in prices in not likely.”

“‘We are more likely to bounce along bottom for quite some time,’ he said, noting that it took 19 years after the Great Depression of the 1930s for prices to regain pre-Depression levels. Pittinger said anecdotal evidence of rising prices is the result of declining inventory, not necessarily an increase in overall values.”

“Jack McCabe, CEO of McCabe Research & Consulting LLC in Deerfield Beach, said nearly 800,000 of Florida’s 11.1 million homes are in distress and will be have to be sold in foreclosure or short sales. ‘Until they’re sold or taken off the market, we’re not going to see prices bottom out,’ McCabe said. McCabe said 70 percent of Florida home sales are for cash to foreign investors. ‘That’s not an indication of a healthy market,’ he said.”

From Marco News. “The median price increased 22 percent overall from $185,000 in April 2011 to $226,000 in April 2012, according to a prepared statement that Naples Area Board of Realtors released. ‘While Naples’ total inventory is down to 7,130 units, the number of open foreclosure cases and mortgage loans that are 90 days or more past due dwarfs the Realtors’ listed inventory,’ McCabe said. ‘It’s my opinion that over the next year we are going to see fewer foreign buyers and an increasing number of distressed properties for sale that will have a negative impact in housing prices.’”

The Herald Tribune. “Since 1992, when he became Manatee County’s Property Appraiser, Charles Hackney has run unopposed in elections. In addition to overseeing a staff of 50 appraisers and IT specialists, he sits on the board of three non-profit foundations. Correspondent Chris Angermann interviewed him at his office in Bradenton. Q: How did the housing bubble affect you? A: They don’t tell you in the books for appraisals what to do when values are declining. With far fewer sales than in a typical market, it has been a real challenge. We’ve had neighborhoods where there weren’t any sales for two or three years.”

From “Homebuilders pulled more permits in St. Johns for the first time in 2011. In the first four months of 2012, the gap widened with St. Johns racking up 566 permits while Duval had 345. Julington Creek homeowner Chuck Forcier said as long as the county stays ahead of the growth curve for its schools and recreational areas, he thinks families will keep moving in. He said what the county needs is more businesses to match the increase in residents.”

“‘The one thing I worry about,’ he said, ‘is where are all the people going to work?’”

The Tampa Bay Tribune. “Wells Fargo senior economist Mark Vitner likes what he sees in coastal southwest Florida. When the housing bubble sent area home prices soaring, Midwesterners who had served as prime buyers for that part of the state got priced out of the market. Not anymore. ‘Some people recognize Florida is a bargain again,’ Vitner says. People are buying housing here and can even do so now without the need to sell their own homes.”

“So what is Florida’s biggest change ahead? Responds Vitner: ‘We will be less dependent on growth itself.’”

“If Florida can grow more internally, the state may one day be able to shuck its unfortunate nickname: the Ponzi State. The state was so dubbed for its historical dependence on the wealth of newly arriving people to sustain the costs of the ones already here. ‘Ponzi State’ headlined a 2009 New Yorker magazine story by George Packer (who credits USF history professor Gary Mormino for the Ponzi reference).”

The Sun Sentinel. “More than 18,000 Canadians own homes — many of them beachfront condominiums — in Broward County as of last year, according to an analysis of Florida Department of Revenue tax data. That’s nearly triple the number from 2006. Less than two weeks ago, Toronto resident Mario D’Orazio bought a condo in Playa Del Mar on Galt Ocean Mile in Fort Lauderdale for $335,000. The two-bedroom unit needs major renovations — ‘It still looks like 1975 when you walk in,’ said D’Orazio, but it has a spectacular water view. He plans to vacation there three or four times a year.”

“The big price declines have eased and values are starting to climb. Canadians have noticed the recent price increases, said D’Orazio’s real estate agent, Michelle Farber Ross. About three-quarters of her business is Canadian buyers. ‘If they’re going to buy a piece of the South Florida lifestyle, now is the time to do it,’ she said.”

“Despite the recent rise in home prices, four in 10 Palm Beach County mortgage holders owe more than the properties are worth, Zillow says. For now, an underwater mortgage ‘is only a paper loss,’ Stan Humphries, chief economist for Zillow, said in a statement. Values will continue to rise in the months and years ahead, he said.”

“The figure, 43 percent, is up slightly from a year ago, and the lost value totals $11.1 billion. Nearly a third of the 107,482 ‘underwater’ homes are worth only half of what’s owed, Zillow said.”

The News Press. “A recent settlement marks the end of a three-year legal standoff between the loneliest condominium dweller in Fort Myers and a one-time billionaire developer. Weehawken, N.J.-based firefighter Victor Vangelakos, closed on his unit in the 32-story, waterfront Oasis I condo on the east edge of downtown for $430,000 in November 2008. Of the few who hung in, all but Vangelakos agreed to swap their units for similar ones in Oasis II next door.”

‘But Vangelakos, unable to persuade his lender to accept the swap, chose to stay in the otherwise deserted Oasis I. He sued Related to get his down payment back. He still owns the two-bedroom, two-bath unit, but it’s now worth only $108,300, less than a fourth of the original price, according to the Lee County Property Appraiser’s office.”

“Vangelakos and his family had the run of the place when they came to vacation, but the place was creepy: The silence of the tomb settled in when there was a pause in a conversation.”

“Vangelakos’ attorney, John Ewing, said that under a confidentiality agreement in a settlement of the lawsuit, neither side is allowed to comment. But he said the case was one of a rash of similar lawsuits filed after the real estate bubble burst at the beginning of 2006. ‘There’s no condo recovery litigation that’s new,’ Ewing said. ‘There’s a lot that’s been going on for two, three, four years.’”

Bits Bucket for May 30, 2012

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May 29, 2012

Bits Bucket for May 29, 2012

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May 28, 2012

This Week In Bubble History

A reader had this suggestion. “As an old timer I always look forward to Friday’s ‘Desk Cleaning’ column. How about a Sunday ‘Today in Bubble History’ where your post from 5 years etc, are posted, to give us a background from whence we came.”

May 25, 2007. “The Merced Sun Star. ‘The housing market isn’t crashing. That’s the good news local Realtors heard Thursday when state Department of Real Estate Commissioner Jeff Davi visited Merced. ‘There’s no bubble in California real estate,’ Davi told a crowd of 140 at UC Merced’s Lakireddy Auditorium. ‘It’s been a soft landing and a subtle downturn.’”

“Davi gave a half-hour talk that first recapped the ‘euphoria’ of the five-year period between 2000 and 2005, when California’s real estate market saw huge growth. That upswing fueled speculation, contributed to the breakdown in subprime lending, and drove thousands of people to become real estate agents, Davi said. One in 53 adults in California now holds a real estate license, which is twice the number of attorneys in the state.”

“Statewide home sales slumped 23 percent between 2005 and 2006, a ‘very significant drop’ that marked the beginning of the downturn, he said. ‘The run’s over, that’s all right,’ Davi said. ‘We’re transitioning from a seller’s market to a buyer’s market. We’ve been through this before in the ’90s.’”

May 31, 2007. “The Sacramento Bee reports from California. ‘First it was individual homeowners who turned to the auction block to sell fast at a discounted price. Then home builders. Now come the banks. Home loan lenders, stuck with rising numbers of repossessed homes, will auction 242 houses next month to bidders in Sacramento, Modesto and San Mateo. It’s the biggest home auction in Northern California in the wake of a five-year housing boom. The auction especially signals a new sales rival to home builders, investors and individual sellers: the banks.”

“ reports that banks owned 661 homes in April in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That’s up from 92 in April 2006. Statewide, banks owned nearly 5,500 homes in April, according to the Web site. The same month in 2006 it was 1,111. Many of those still haven’t reached the market, said’s Alexis McGee.”

“The Marin Independent Journal. ‘A Novato mortgage company has laid off nearly all its employees, becoming the third Marin brokerage in just over a month to issue pink slips. Pro30 Funding laid off about 40 staffers last week. While the mortgage industry has been buffeted by defaults nationwide, particular in the ’subprime’ sector, Pro30 founder Bill Coleman said 99 percent of his clients had good credit records. In many cases, he said, borrowers were defaulting on the loans without making a single payment, perhaps so they could live without housing expenses for six to nine months during the foreclosure process.”

“‘The appreciation started to decline, and people looked at their payments and said they’re not going to make money,’ Coleman speculated.”

May 30, 2007. “The Daily Bulletin. ‘The median price of a home in California hit $597,640 in April, an all-time high, but the California Association of Realtors’ chief economist says that number is at least a little misleading. ‘Although the median price continues to rise, this reflects the fall-off in sales in the lower priced markets of the state where new home inventories and foreclosures are competing with the existing home market,’ Leslie Appleton-Young said in a release.”

“‘There is a lot of strength in the $1 million market in Los Angeles,’ said Jack Kyser, chief economist with the L.A. County Economic Development Corp. ‘That makes the median numbers somewhat misleading…I think it will be 2008 before we see anything that could be called stability in the market.’”

“The Bakersfield Californian. ‘Local real estate appraiser Gary Crabtree announced in a letter Monday that he will no longer provide news media with monthly reports that examine the local real estate market, saying that his business has been damaged because ‘industry insiders don’t want to hear the truth’ about a troubled market.”

“For two years, Crabtree has been providing reports that compile single-family home market statistics, including unsold inventory, existing home prices and new home prices. As a result, local lenders have ceased to give him appraisal assignments, Crabtree said in his letter, citing a similar ‘persecution’ during the real estate recession of the ’90s. In his letter, Crabtree wrote that lenders have been asking appraisers to ‘hit’ values in violation of the industry’s ethical standards.”

“‘That is absolutely true,’ said Ted Faravelli Jr., a spokesman for the California Association of Real Estate Appraisers. ‘I’m ashamed to say that.’”

May 29, 2007. “From Chicago Business. ‘Chicago-area foreclosures, which set a record last year, are projected to reach full-blown crisis levels in 2007. Cook County is on pace to record at least 30,000 and as many as 36,000 foreclosure filings this year, according to Cook County Circuit Court Judge Dorothy Kinnaird. That would mean a 35% to 62% increase from 2006, when 22,248 filings were easily the highest in county history after having risen 36% from the previous year.”

“The data show foreclosures up in nearly every part of the city and suburbs, from the middle-class South Shore neighborhood (up 55%, to 331 foreclosures, last year) to the well-heeled suburb of Wilmette (up 192%, to 38). ‘It’s not just unsophisticated borrowers who got into trouble,’ says David Rose, the analyst who authored the report. ‘It just shows you how risky these (adjustable-rate mortgages) really are.’”

“From Minnesota Public Radio. ‘After years of a housing boom in Minnesota, Zola Thompson wasn’t expecting a soft real estate market when it came time for her to sell. ‘I kept seeing this thing going lower and lower, and I really would like to get as much as we can out of it because we’re going to be living on some of this in our old age, and I just wanted to get as much as we could,’ says Thompson.”

“Glen Dorfman of the Minnesota Association of Realtors recommends that sellers accept the market for what it is, and not hold out for a recovery. Dorfman says market conditions are more likely to get worse than better if, as expected, the rate of foreclosures continues to climb. That would dump even more homes on an already saturated market, pushing prices down further.”

“‘I’ve been saying to everybody who will listen, if you have your house on the market and your realtor tells you to update the living room carpeting, or stage it…then you should do that,’ says Dorfman. ‘And if you need to reduce the price today $10,000 to $20,000, it’s far better to reduce it 10 or 20 than in six months having to reduce it 70 [thousand] or 80 [thousand].’”

May 29, 2007. “National Mortgage News. ‘We got us an industry catfight! This tiff started early last week at the Mortgage Bankers Association’s National Secondary Market Conference in New York where, according to reporting by National Mortgage News’ Ted Cornwell, trade group officials made a number of veiled public comments blaming the foreclosure crisis on, well, loan brokers. Some mortgage bankers believe that brokers work for incentives (commission, yield spread premiums) and could care less about a loan’s long-term performance.”

“National Association of Mortgage Brokers president Harry Dinham fired off a statement saying, ‘It is truly unfortunate that the president of the Mortgage Bankers Association has attempted to shift blame away from Wall Street, federally chartered banks, state-chartered lenders and underwriters for the subprime situation we find ourselves in today.’”

“From Fitch Ratings. ‘Home prices were virtually unchanged for 2006 subprime mortgages even as subprime defaults rose to double digit levels, according to Fitch Ratings in a new report. The analysis showed that subprime loans originated in the first quarter-2006 (1Q’06) have experienced only 0.5% of home price inflation (HPI) after 12 months, but that defaults have jumped to 8.3% of outstanding mortgage balances.”

“The low HPI is exacerbating the increased risk associated with these loan attributes said Managing Director Glenn Costello. ‘Some of these borrowers are probably experiencing outright home price declines.’”

May 29, 2007. “The Times Dispatch from Virginia. ‘What a difference from a few years ago when builders in the Richmond area couldn’t build fast enough and received multiple offers on houses in the planning stages. ‘Everyone got used to the craziness,’ said Rich Napier, president of the Home Builders Association of Virginia. ‘We’re back to a more normal pace,’ he said.”

“Local builders are sweetening the deals to unload existing inventory in a soft market for new homes. They aren’t cutting costs, as they would if the market tanked, but they are offering incentives to entice more buyers. Napier built the Richmond Symphony Designer House last year. The 7,600- square-foot French country home in Founders Bridge, Chesterfield County, is still on the market for $1.95 million. The house has $125,000 worth of electronics, and $200,000 worth of discounts is built into the price, Napier said.”

“‘I’m not happy that it’s sitting there, but there are not that many $2 million buyers walking around out there,’ he said. Still, ‘for those who think the sky is falling, it’s just not happening,’ Napier said.”

“Economist Christine Chmura said the housing industry may have hit bottom. The number of building-permit applications statewide flattened over the last three months, and that could signal a turn, she said. ‘It’s unusual for the general economy to be strong overall but the housing market to be in a recession,’ Chmura said. ‘The main problem is affordability. Prices are rising faster than income, and that makes it difficult to purchase a home.’”

May 30, 2007. “From Bloomberg. ‘After years of easy profits, a chain reaction of delinquency, default and foreclosure has ripped through the subprime mortgage industry, which originated $722 billion of loans last year. Since the beginning of 2006, more than 50 U.S. mortgage companies have put themselves up for sale, closed or declared bankruptcy, according to data compiled by Bloomberg.”

“The imprint of ‘Secured Funding’ is all that remains of the corporate logo that once graced the outside of the two-story building. What little remains of Secured Funding, which specialized in home equity loans, or second mortgages, to people with lousy credit, is now housed in a building across the near-empty parking lot, where a receptionist tells a caller: ‘Our wholesale division is closed. We’re no longer doing business with brokers.’”

“‘Even with explanations, most borrowers didn’t really understand what types of loans they were getting,’ says Maureen McCormack, (a) former Secured Funding employee. ‘They just cared about the monthly payment.’”

May 27, 2007. “The Arizona Republic. ‘Few in the housing industry, those who are seeing listings increase and more mortgages fall through because of tighter guidelines, will be surprised to hear housing analyst RL Brown’s April report on the market. New-home sales, new-home permits and resales were all down in April from March in metro Phoenix. Brown said the hope that supply and demand for homes in metro Phoenix will balance out in 2007 grows ‘fainter and fainter.’”

“Here are some of his new realties for the housing market: The housing industry will eventually ‘give back’ one way or another much of the profit gains of 2004-05. The demise of ‘wink-wink’ financing will cut the ranks of home buyers. Appraisals will be based on today’s comparable sales, not comps from 2005-06, and appraisers ‘will be edgy as cats at a dog show.’”

“He said 2007 is a transition period for the market and ‘if you made a lot of money in 2005 and even 2006, hope you banked some of it.’”

May 23, 2007. “The Boston Globe reports from Massachusetts. ‘The housing slump isn’t over yet after all. After getting off to a strong start in 2007, home sales in Massachusetts fell 1.7 percent in April compared to the same period last year, and the median home price declined 2.3 percent, to $345,000, according to the Massachusetts Association of Realtors. April’s sluggish pace is bad news for home sellers and brokers, who were hoping that robust sales in January and February meant the deep downturn that began last year was at an end.”

“Michael Ball said he misjudged the market when he purchased a small Cape on the South Shore in July 2005, to renovate and resell. He purchased the worn but charming house when Massachusetts real estate prices were at a peak. By the time he finished the work and put the house on the market last October, home sales were in freefall. He dropped the price $35,000, to $635,000, and hired an agent last month after failing to sell it on his own. He said he could not go much lower on price, because of remodeling costs.”

“‘Everyone who goes in to see it loves it,’ said his agent, Maryann Zaccardi. But buyers, ‘faced with an abundance of inventory, feel that there’s no real need to act quickly.’”

May 26, 2007. “The New York Times. ‘As dozens of condominium towers conceived during Florida’s real estate boom near completion, investors who snatched up units in the preconstruction phase in hopes of turning a quick profit are increasingly trying to break contracts, even walking away from fat deposits. ‘I get two or three of these calls a day,’ said James Ryan, a lawyer in Boca Raton who said he had 40 clients looking to get out of condo contracts. One, Mr. Ryan said, abandoned a $340,000 deposit rather than close on a $1.6 million unit that lost its appeal as the market faltered.”

“Tom Leon said he planned to give up $200,000 in deposits on two condo units in Miami, priced at $500,000 each, after finding ‘no loopholes’ in his contracts. He said he was not especially bitter, since he had made money flipping other properties at the height of the boom. ‘There are some people that mentally can never bring themselves around to that, especially in real estate. But there’s a time to hold and a time to fold, and in my opinion, this is a time to fold,’ said Mr. Leon, adding that he never had any intention of living in either of the units.”

“The St Petersburg Times. ‘Realtors couldn’t sell Paul Swisher’s house. Since listing his house in March 2006, he’s dropped the price by $86,000 from $425,000, which his Realtor recommended, to $339,000. He’s also gotten rid of the Realtor. Frustrated by a home on the market for nearly 15 months, the St. Petersburg resident has taken a new tack to attract potential buyers: a 3-by-4 whiteboard on his lawn.”

“‘Hey, what’s up with this?’ he wrote this week. ‘Do I have to hit somebody over the head with a brick? This is a truly beautiful home. Are you going to force me to stand out here in a clown suit?’”

How Important Is This To Our Fragile Economy?

Readers suggested a topic on policy and recession. “‘What would be the likely impacts on U.S. housing of a potential post-election U.S. recession in 2013? I’m thinking the impact on housing would be failed intervention efforts and falling prices, but then I am a known pessimist.’ ‘The U.S. economy will likely fall into recession in the first half of 2013 if large tax increases and scheduled government spending cuts are allowed to go into effect in January, the Congressional Budget Office said Tuesday. The combination of tax increases and spending cuts, often referred to as a ‘fiscal cliff,’ would sharply reduce the federal budget deficit but would temporarily arrest the economic recovery, said the CBO, which serves as Congress’s budget calculator.’”

A reply, “Why not do it gradually over 3 years instead of all at once?”

To which was said, “Because any attempt to do it gradually will end in deadlock. The Republicans will insist on no tax increase and indeed futher tax cuts and increasing spending on the military and turning Medicare into vouchers, cutting Social Security and getting rid of ACA (assuming the Supremes don’t take care of it). Democrats will want to allow the tax increases to happen on some portion of the high earners and fix some of the wealthy loopholes and probably cut some military and fiddle with some other stuff.”

“Neither side really wants it all to happen at once, but they are so far apart on what they want to happen instead that there is no way to get to a compromise. That is why the super committee ‘failed.’ I don’t think it really did. It was set up to see if the committee could come up with something that both sides would like better than the default. It couldn’t. Serious analysts didn’t really expect it to absent really clear polling that the overwhelming majority of the electorate would blame one side or the other for the economic results of the default. It tried. It didn’t come up with anything. We get the default.”

One had this, “If they increase taxes (reducing disposable income), GDP goes down. If the government spends less (which means borrows less, since we are broke) GDP goes down.
So if one is willing to take on more debt (or lower tax rates further) for another 3 years, they can put off the recession for another 3 years. That is, unless we have actual growth that isn’t just increases in debt. But that hasn’t happened in many, many years.”

One said, “Yep. We, being the entitled society we are, have become intolerant of any pain. Afterall, even the losers get to go for ice cream and get participant trophies.”

And finally, “I see discussions about various bills moving through Congress, various initiatives designed to buoy the housing market. I read recently that over half of first time buyers are using FHA loans, while the FHA is in deep trouble. I appreciate that Congress responds first and foremost to its paymasters. But it’s still something they can’t admit out loud because it would be admitting to bribery.”

“With the various legislation moving through Congress, what kinds of questions should the legislators be asking? They always ask, ‘How will this impact investors’ aka the FIRE sector. What kinds of tests / questions should they have for housing-related legislation?”

The Mail Tribune. “Ten of 14 components used to measure Southern Oregon’s economic health declined, and another, airport passenger traffic, remained unchanged, indicating the region has yet to gain traction coming out of the Great Recession, according to the latest Rogue Valley economic index produced by the University of Oregon. ‘In general, this recovery has been slow going — and particularly slow going for regions dependent on the housing market,’ said Tim Duy, director of the Oregon Economic Forum at the University of Oregon.”

“The economic components measured in the study range from new residential construction permits to employment in several sectors. He pointed out new construction remains below past levels, something that likely won’t change until migration patterns seen until the recession return. ‘Steady inflows of new residents stimulated economic gains,’ he said. ‘That process has halted and has not been replaced.’”

“As the U.S. economy improves, Duy said, new migration will begin and create housing demand seen before the recession. “Some of the other businesses reliant on external activity will see greater growth as well,” he said. ‘That’s assuming there isn’t a disaster in Congress or in Europe.’”

The Coeur d’Alene Press. “Last Thursday, more than 10,000 Realtors met on the lawn near the Washington Monument in Washington, D.C., in an attempt to get the attention of government. The message; Home ownership matters.”

“The Federal Flood Insurance program is set to expire again in just a few days. This may create another standoff as the parties in Washington use the opportunity to leverage other agendas. The problem is that, like it did six months ago when the program last expired, it will bring many home sales to a grinding halt. Banks won’t lend money to buy homes that appear to be in danger of flooding according to maps drawn by FEMA.”

“How important is this to our fragile economy? When you consider that real estate sales account for 15 percent of our Gross National Product, it is very important. To allow the expiration of this insurance program will be very damaging indeed to the fragile and gradual recovery currently under way in many parts of the country including here in North Idaho.”

“This recovery repeats a historic cycle for real estate but the recovery period will be longer than past recessions by all accounts. Even with government flood insurance it will take awhile to dig out of the depths to which we had fallen at the end of the boom.”

“Should the flood insurance program be renewed the future of real estate is once again looking good. As we have reported here before, as a long-term investment, real estate has always paid off for those who have invested their hard-earned money for the long term while short-term ‘flippers’ often get burned as many did in 2008.”

“Driving up the cost or making financing even more difficult through the loss of the flood insurance program, particularly in the face of the newer, more restrictive zoning could deal a blow to the housing industry that could cost this nation dearly. As we all have learned to say, ‘Home Ownership Matters.’”

The Billings Gazette. “Thousands of workers chasing quick riches by flooding into the Bakken oil field have helped jump-start home sales in Billings. And the wave is starting to make Billings houses harder to find — and more expensive. At the current pace, Billings should see 300 new, single-family homes built this year, compared to 197 permits last year. But the city has a long way to go to return to the peak set in 2003 when 601 homes were built.’

“Steve Gountanis and his father built 47 homes in Arizona during the boom times when a house could appreciate $30,000 a month. But the conservative family refused invitations to build whole subdivisions, so their business didn’t fail when the housing bubble collapsed. Unless a house was pre-sold, local bankers would only lend on entry-level homes during the recession, so that’s what builders built. But Steve Gountanis, who moved back to his hometown of Billings, had his own nest egg that allowed him to bypass the banks and continue to build $350,000 homes.”

“‘When this market really took off three to four weeks ago, I was in a sweet spot. I sold three houses in one week,’ he said.”

“Whisper Ridge will have patio homes starting at $350,000 and houses starting at $400,000. Nearby, River Rock Estates subdivision will eventually have 67 homes in the $400,000 to $700,000 range.”

“At the end of April, a homebuyer who qualified could pay as little as 3.88 percent interest on a 30-year fixed-rate mortgage and 3.12 percent on a 15-year loan. That interest rate is amazing, said Myles Egan, who has been selling homes in Billings for 38 years. ‘I think what’s going to happen with the shortage of new homes is the value of existing homes will see very good appreciation this year because people don’t have a lot of choices right now,’ Egan said.”

“Despite all the positive signs on the Billings home front, this region remains tied to wider economies. ‘Billings really is doing very well and the housing is showing it,’ said president Wayne Nelson at Stockman Bank, the largest real-estate lender in Yellowstone County. ‘But we can’t operate on all eight cylinders without the national economy getting back on its feet.’”

Bits Bucket for May 28, 2012

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May 27, 2012

Bits Bucket for May 27, 2012

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May 26, 2012

Bits Bucket for May 26, 2012

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May 25, 2012

The Epic Pace Of Property Appreciation

It’s Friday desk clearing time for this blogger. “In the Crans-Montana resort, also in the Valais canton, chalet blocks five to ten storeys high extend for as far as the eye can see. Come spring and their shutters remain closed barring a few exceptions. A March 11 initiative saw the Swiss narrowly back a cap on second homes in every community. For Angela Turnbull from the real estate agency Angela Immobilier, acquiring a property in Crans-Montana ‘has never been so attractive.’ The new law ‘will certainly mean that few or even no new-builds whatsoever will see the light of day in the years to come,’ she says.”

“And by logic of supply and demand, this will likely lead to an jump in value of second homes. ‘Switzerland is becoming the hottest property owners’ club in the world,’ said Turnbull, who recommends that investors, and wealthy foreigners in particular, should act fast.”

“Norway’s central bank has emphasized that it is reluctant to widen the interest rate gap to Europe even as house prices have reached records while acknowledging last week that housing market developments and household debt may become a source of ‘instability in the Norwegian economy in the longer term.’ Norway isn’t in the grip of a housing bubble and a shortage of supply in the property market will prevent prices from falling, said Erna Solberg, the leader of the Conservative Party and the front-runner to take over as prime minister in next year’s election.”

“‘I argue against a housing bubble because a housing bubble is an influx of prices without demand; in Norway it’s demand that’s the biggest reason,’ Solber said. ‘I don’t think house prices will fall.’”

“Most economists and real estate insiders do agree that real estate values in Toronto will almost certainly be higher in 20 years. So for a young couple looking to invest for the long-term, there’s really no bad time to buy. That is, if there’s something they can afford. Amy and Chris Poole have lost out on four offers and backed out of three others. They say competition at open houses is so intense they’ve seen things get physical. Chris described a recent open house they attended. ‘The listing agent is backed into the corner by the fireplace, and somebody is standing there being quite loud saying, ‘I’m going to work with you, I’m going to make sure we get this property, whatever it takes, 120, 130 percent over asking, I’ll do it,’ just to try and intimidate everyone else,’ he recalled.”

‘Amy said that was the last open house they’ve been to. ‘You just walk through and everyone is sizing each other up, giving each other bad looks,’ she said.”

“Chris has heard the warnings that Toronto is building too much too fast. ‘Standing from our balcony there, we can see 14 cranes,’ Chris said. But he said he knows the other side of the argument. ‘Maybe we are behind what London, New York, what San Francisco is all about. Maybe this is sustainable, maybe this is the way things are going to be for a while,’ he said. ‘It’s hard to tell.’”

“Some people are hunting for high-rise apartments in Central Jakarta, others for sprawling housing estates in Bekasi, Tangerang and Bogor, but either way, demand for property is growing fast, and many of the largest developers are responding with a building spree. Residential property prices have spiked along with the rising demand.”

“‘In Jakarta, prices have gone up by 30 to 40 percent cumulatively over the past three years,’ said Luke Rowe, a senior technical adviser at Jones Lang LaSalle, a real estate services firm. Indonesians have fueled much of the push for property, but Rowe said the market would fare much better if foreigners were allowed to participate, as they can in Malaysia, Singapore and Australia.”

“Judith, a native of Zhejiang in China who lives in London, said her father paid the deposit on six off-plan flats in Colindale, north London, at a Shanghai exhibition a year ago despite the fact she warned him about its remote location. ‘The moment my father sat down, the agent wanted him to pay a reservation fee. Once he showed that he liked them, they said he had to pay the fee or someone else would snap them up,’ she said.”

“His experience shows the potential pitfalls facing a growing number of Far Eastern people buying British homes unseen as developers target places such as Hong Kong, Shanghai and Singapore because British buyers are struggling to get mortgages. Estate agents said overseas buyers of property as an investment were at risk of getting lower-than-expected returns as the mass marketing of the homes at events meant many landlords would likely have to vie for tenants all at once, pushing rents down, said Camilla Dell, managing partner at Black Brick Property Solutions, which helps overseas buyers find London homes.”

“‘I have yet to see a development where the rents have exceeded the advertised rent,’ said Ashley Jones, managing director at London-based estate agent Barclay Residential. ‘I cannot see all of this having a happy ending.’”

“Macau, where casinos raked in $33 billion last year, is expected to make around $40 billion in 2012, with a growth rate estimated at 18 to 25 percent, down from 42 percent in 2011. High-spending Chinese gamblers account for around 70 percent of revenues, but their spending is dropping, analysts say. ‘To assume that Macau gaming revenues will continue to grow at a double-digit pace, is to assume that the epic pace of property appreciation in China continues,’ said Mike Turner, analyst at Washington-based brokerage Compass Point.”

“Macau’s boom in the past two years has been due in large part to the assets of many VIP customers in China appreciating sharply. Those big spenders are also given credit by junket operators based on the value of their property or stocks. So with property prices easing and stock markets weak in China, Turner expects this to be mirrored in gambling revenues.”

“Adelaide University director of housing Professor Andrew Beer said the market was the ’slowest it had been since the year 2000.’ ‘The market is adjusting to slower economic conditions and a fall in access to credit for some people in the community,’ he said. ‘But there are no grounds to panic.’”

“Real Estate Institute of SA president Greg Moulton said variations in suburb price performance showed the market was ‘very, very patchy.’ ‘Pricing has to be spot on and if it is a little bit above the mark, buyers will make cheaper offers,’ he said. Mr Moulton said many vendors were deciding to rent their home rather than sell if they did not achieve their target sale price.”

“About 15% of total houses in Gujarat are empty. Leading the pack of cities with the most number of vacant houses are Ahmedabad and Surat with about three lakh units each - of the total Rs 1.75 crore houses across the state, over 24 lakh are lying unoccupied, according to census 2011. A large number of these units belong to investors, who buy houses and exit after booking profits.”

“State urban development minister Nitin Patel said, ‘These houses were vacant because of the investors . Large number of houses are vacant because there was no demand in the market and these houses were technically with the builders. Also a large number of people invest in real investors to get good benefits.’”

“Industry sources say this is mainly due to the fact that Gujarat has been an investor-driven market. Many investors prefer paying the builders but not getting their properties registered to avoid registration charges. ‘The figure also reflects such homes,’ says a developer.”

“Nearly 1 in 3 homeowners with a mortgage in Los Angeles County owes more on the loan than the property is worth, according to Zillow. In the hard-hit Inland Empire, that climbs to more than half of borrowers. Underwater homeowners in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties were a staggering $138.9 billion deep in negative equity at the end of the first quarter, Zillow reported. Nationally, underwater borrowers owe about $1.2 trillion more than what those properties are worth, Zillow estimates.”

“Richard Green, director of the USC Lusk Center for Real Estate, has studied the issue and found that borrowers who had put higher down payments on their properties were less likely to abandon their homes even if they couldn’t sell their homes for enough to pay off their mortgages. ‘People don’t like to walk away from something they have put money into,’ Green said. ‘People seem to hate realizing losses.’”

“Q: We own a home in Georgia. Due to a job change, my husband moved out of state and took a large pay cut. I stayed in the home for a year after he moved and we depleted our savings during that time. We were finally able to rent the home out, but the rent does not cover our expenses. Now the mortgage company will not accept our request for a loan modification. We are in the arrears since January of this year. I am truly perplexed why the mortgage company will not work with us.”

“A: You stopped making payments to your lender in January and now the lender has the right to foreclose on the home, sell it and use those proceeds to pay whatever is owed on the debt. In your situation, you can wait for the lender to foreclose or you can try to sell the home. As for your tenant, you are now well into positive balance on your home budget. You’ve stopped paying the lender and you’re collecting rent on the home.”

“About two dozen people picketed the Wells Fargo Home Mortgage office in downtown Plainfield to publicize a Joliet woman’s foreclosure troubles. Tom Goyda, a spokesman for Wells Fargo, said the company had been working with Barrow-Leggett for two years in an effort to help her remain in her home. The latest review a month ago did not identify ‘an option that works,’ he said in an email.”

“During Monday’s protest, some drivers passing by beeped their horns in support. Other drivers frowned in disapproval. ‘My husband has been out of work for three years,’ yelled one woman driving by. ‘We still pay our mortgage.’”

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Bits Bucket for May 25, 2012

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