June 30, 2012

Bits Bucket for June 30, 2012

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June 29, 2012

A Sense Of Blinding Positive Anticipation

It’s Friday desk clearing time for this blogger. “National Association of Realtors Chief Economist Lawrence Yun said he ‘would not be surprised’ if U.S. home prices jumped 10% by June of next year. ‘This time next year, there could be a 10% price appreciation. I would not be surprised to see that,’ Yun said.”

“Nat Bosa, the Vancouver developer responsible for many of San Diego’s downtown condo towers, says his next project will top all those. He’s planning a 41-story, 232-unit tower at the southeast corner of Broadway and Pacific Highway. But it will be the most expensive with a starting price of $750,000. Bosa, who has completed seven downtown condo towers so far and has at least five other sites to come, said he plans to start construction on this newest one next year because it is what he considers his most dramatic to date.”

“‘Why leave great wine in the cellar for someone else to drink?’ he asked. ‘I want to drink it.’”

“After the sluggish post-recession period when trophy homes with eight-figure price tags seemed to linger on the market for years—if they were even listed at all—there’s movement in this rarefied segment. In the last few months, a handful of these pricey properties, which are invariably located on the Upper East or West Sides, have traded hands. Buyers are now nosing around others in the $30 million-plus category with an intensity not seen in years, say brokers, who explain that the renewed interest is due to an uptick in inventory as well as a change in buyers’ attitudes.”

“‘People weren’t listing these types of homes for years because they were worried about dropped value,’ says Bonnie Pfeifer Evans, a salesperson at the Corcoran Group, adding that ‘uncertainty’ about the markets in Europe has made New York real estate seem like a safe long-term investment.”

“Over the next seven months, an 838-meter-high (0.52 mile) skyscraper will be constructed in Changsha, China Business Journal reported. The structure will be 10 meter higher than the Burj Khalifa Tower which is currently still the tallest building in the world. The number of skyscrapers under construction in China now exceeds 200, which equals the total number of all skyscrapers currently standing tall across the U.S.”

“But beware! Research by foreign-funded institutions shows that over the past 140 years, a craze for skyscraper construction is a reliable signal for an impending economic crisis. The latest examples of this theory would be those skyscraping office buildings and hotels in Dubai, including the Burj Khalifa Tower. Soon after these buildings were completed, economic crisis hit the country. ‘The building boom starts with easy credit,’ said Andrew Lawrence, a Hong Kong-based analyst for Barclay’s Capital, ‘But it also comes with a sense of blinding positive anticipation. By the time the building spree has ended, the local economies will already have taken a turn for the worse.’”

“To tap into the growing demand of Malaysians investing in Australian properties, Maybank has expanded its ‘Overseas Mortgage Loan Scheme’ for purchase of residential properties in Melbourne, Australia. The bank first introduced the scheme in ringgit last January to finance the purchase of London properties. As at May 2012, it had successfully approved new loans from this portfolio exceeding RM260 million, it stated.”

“‘The right investment property in Melbourne offers great returns and exceptional growth potential given that the Australian market has not suffered a fall in median house prices, in fact it has grown by an average of 9.1 per cent per annum on average for the past 10 years,’ Maybank deputy president Lim Hong Tat said.”

“There is no danger of a collapse in Australia’s housing market. Indeed, if anything the market is undersupplied, assistant Reserve Bank governor Guy Debelle told a mortgage conference in Adelaide. For the nation as a whole there weren’t enough houses to go around. The Economist magazine recently found Australian home prices among the most overvalued in the world on the basis of mismatch between rent and home prices.”

“Dr Debelle told the conference such claims were more a sign of economists in search of a headline than a reflection of reality.”

“The latest property update from the Real Estate Institute of NSW has found prices for residential properties in Sydney stabilised in the three months to March, and the annual median house price for the 12 months to March dropped by 6.7 per cent to $560,000. REINSW CEO Tim McKibbin said the figures reveal a buyer’s market. ‘If you’re sitting and waiting for the market to ease further I frankly can’t see that happening,’ Mr McKibbin told AAP. ‘Now is an excellent opportunity for purchasers to be coming into the market.’”

“While strong economic performance has bolstered residential real estate activity in Alberta to date, recreational markets are still feeling the pinch, says a report released by RE/MAX. The report said Sylvan Lake and Canmore have seen price declines in recreational property. For example, the report said the typical starting price for a three-bedroom, winterized recreational property on a standard-sized waterfront lot in Sylvan Lake has dropped to $750,000 from $800,000 a year ago. In 2010, it was $1.2 million.”

“With just three waterfront sales to date, Sylvan Lake appears to be heading for another year of modest activity, said the report. ‘The market for recreational properties continues to steadily improve after bottoming out in 2010, yet the pace is exceptionally reserved as buyers take time to make their decisions,’ it said.”

“After years of decline, the Treasure Valley housing market has started to echo the pre-2007 boom. Prices have turned upward. Bidding wars have broken out. Builders are rushing to take out permits. And investors are back. Mike Turner, CEO of Front Street Brokers, said the biggest reason so few homes are for sale is because so many people owe more on their mortgages than their houses are worth. That negative equity affected one in four Idaho mortgage holders in the last three months of 2011, according to Core-Logic.”

“‘A lot of us are just stuck in our homes,’ Turner said. ‘The silver lining is it’s actually helping our market improve faster than expected by keeping the supply low.’”

“Stacie Cudmore, an agent with Keller Williams Realty Boise said most of her recent clients have had to pay more than the asking price, especially when buying a home in foreclosure. At least one paid about $37,000 more, she said. ‘If I had more money or more buying power, I’d be buying everything I could to invest,’ she said.”

“House foreclosures are sad for the people losing their homes. But they are also unpleasant for neighbors who find themselves looking at neglected, unmowed lawns of houses that now belong to unresponsive financial institutions. Township Committeewoman Betty Ann Fort said the township’s zoning official, John Barczyk, is ‘getting complaints’ about the appearance of vacant houses. Fort said she emailed the township’s planning consultant, Michael Sullivan, about what she termed the ‘dilemma’ of foreclosed houses. ‘His recommendation was a property maintenance ordinance,’ Fort said. ‘I wonder if there is another way.’”

“The question of who is responsible for the costs associated with foreclosed homes has once again surfaced in Illinois courts. First, and still unresolved, is the dispute centering on whether Fannie Mae and Freddie Mac are required, as the owners of foreclosed properties, to pay fees to register and maintain vacant buildings in Chicago.”

“‘The Federal Housing Finance Agency recognizes the difficulties faced by local officials that are struggling with shrinking tax bases,’ the agency said in a statement. ‘However, FHFA must resist when local governments impose unlawful tax-raising programs on Fannie Mae and Freddie Mac that, in turn, create a cost for taxpayers across the country.’”

“According to the National Conference of State Legislatures, a bipartisan organization serving the legislators of all 50 states, more than 400 foreclosure laws were enacted across the United States in 2011 alone, and most slowed down the process. The Nevada law, passed in October, has led to a dramatic drop in foreclosures.”

“Ricky Beach, a real estate agent in Reno, Nevada, said the new law, AB 284, ‘has pretty much killed the market here.’ The lack of foreclosure activity has led to a dearth of inventory, he said, with the number of homes for sale in the area down to 778 today from more than 1,700 in September. This has triggered a ‘mini-bubble’ in housing prices because the few properties available are receiving multiple bids. The only problem: No one thinks the gains are sustainable.”

“‘The bill did nothing to solve the crisis — it’s just prolonged it,’ Beach said. ‘Sooner or later the banks will work out how to deal with the law. And then foreclosures will hit the market, and prices will crash back down.’”

‘Malik Ahmad, a Las Vegas foreclosure defence lawyer who has spent the last six years trying to help vulnerable borrowers deal with unscrupulous banks, said the law had completely changed his view of the nature of the crisis. ‘This law has become a mockery,’ Ahmad said. ‘I am now turning down clients every day who I know have no intention of ever trying to pay their mortgage. They just want to stay in their homes for free. And that is a bad situation for everyone, lenders and homeowners.’”

Weekend Topic Suggestions

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Bits Bucket for June 29, 2012

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June 28, 2012

Bits Bucket for June 28, 2012

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June 27, 2012

Shades Of 2005 In Florida

The Bradenton Herald reports from Florida. “Sales of existing homes rose in May along with prices, according to figures released Thursday by the Manatee Association of Realtors. ‘What I have really noticed is the inventory of waterfront homes,’ said Sherry Flathman, a residential and commercial Realtor for Wagner Realty. ‘These homes are selling as soon as they come up — several have sold overnight.’”

The Sun Sentinel. “At the end of May, there were 5,313 single-family homes on the market in Broward, 49 percent less than a year ago. The number of condos is down 46 percent. Chip Rowand, a real estate agent for the Keyes Co. in Weston, said the market now is ’shades of 2005,’ the peak of the housing bubble. ‘The first words out of the agent’s mouth when they call me about a property is, ‘Is it still available?’ Rowand said.”

“South Florida broker Douglas Rill said he recently showed a client a three-bedroom home in good condition listed for $105,000. When they arrived, they had trouble finding parking spaces on the street because there were about 30 other buyers waiting to see the home as well. Rill said they hopped the front gate and toured the home, angering the other buyers. The property likely will fetch $130,000 or more — but not from his client. ‘He wanted to under-bid the $105,000,’ Rill said. ‘I think that’s being silly.’”

From Ocala.com. “Judy Ray, president of the Ocala/ Marion County Association of Realtors, said the increased sale prices and declining inventory were spurred by consumers’ desire to buy while prices are low. ‘People are getting tired of waiting … and from my seat, it’s not just an investor market,’ she said. ‘People are recognizing prices are not going to get any better.’”

“Homes sold for 88.5 percent of the original asking price during May 2012, the highest for the past 12 months and 3.5 percent higher than the same month a year ago. ‘People who are thinking, ‘I can get 2006 prices,’ no they can’t. If you bought your home during the boom, you’re still going to be upside down,’Ray said.”

“Florida remains No. 1 for mortgage fraud. The state had $260 million worth of fraud under investigation at the end of the first quarter of the year, up from $117 million in the fourth period of 2011, MortgageDaily.com said. The big increase is a result of law enforcement officials formally charging more suspects, the website said. North Carolina was second, with $226 million in fraud. California was third with $208 million.”

“Florida has held the top spot in four of the past five quarters and has been a regular among the top five states since the index began in early 2006.”

Tampa Bay News. “Frank Gregoire, a former chairman of the Florida Real Estate Appraisal Board and the appraisal committee for the National Association of Realtors, will testify before a congressional committee on Thursday about the impact of appraisal oversight brought about after the collapse of the housing market. Lenders are suspicious if they see that home prices and values are going up, because national numbers still show the opposite, he said. ‘As long as the appraiser can demonstrate that his data is supported and correct, the lender should just lay off,’ Gregoire said.”

“The original Home Affordable Refinance Program reduced fees and loosened eligibility requirements starting in January, but a revised government program was not fully available until March. Borrowers must be current on their payments and the loans have to be originated by May 31, 2009, and backed by Fannie Mae or Freddie Mac, the government-run companies that own about half of all home loans nationwide.”

“Nearly one-third of mortgages are underwater, according to first-quarter data from Zillow. Nearly 5 percent of mortgages carry a balance that’s twice the home’s value, Zillow said. Those homeowners now can qualify for the revised program, which eliminates a provision that required mortgages be within 125 percent of the value of the home. ‘If someone owes $300,000 on a $100,000 home, we could still look at refinancing that,’ said Doug Leever, mortgage sales manager for Miramar, Fla.-based Tropical Financial Credit Union.”

The Miami Herald. “Home prices in greater Miami rose 3.2 percent in April from a year earlier, according to S&P’s Case-Shiller Home Price Indices. While the Miami foreclosure rate has been declining steadily for more than a year, the foreclosure rate in the Miami area remained more than five times the national rate of 3.41 percent in April. The percentage of homes that are delinquent for 90 days or more dropped to 24.35 percent in April in Miami from 26.43 percent a year earlier.”

“‘Miami is still sitting on a large overhang of delinquent loans, but the slow foreclosure process is only allowing a gradual flow of these homes into the market,’ Michelle Meyer, an economist with BankofAmerica Merrill Lynch, said in a report.”

The Palm Beach Post. “Since 2007, homeowners whose banks have forgiven unpaid mortgage debt after a short sale, principal reduction or foreclosure have not had to count that money as income on their tax returns. Not everyone can benefit from the debt relief act. It only covers forgiven debt on principal residences and up to $2 million, or $1 million if married but filing separately. The act also does not apply to second mortgages where the money was used for non-household expenses.”

“Jupiter resident Michael Schoenewolff, who hopes to benefit from the debt relief act this year, said he believes Congress will vote to extend the tax break. Schoenewolff has a short sale contract on his home that would leave him with $95,000 in forgiven debt. ‘The average person can’t handle another $100,000 in income to be taxed,’ he said. ‘I think they have to vote to extend it in order to allow the housing market and economy to recover.’”

The Naples News. “After operating a successful Canadian nursing home for 18 years, Helen Valent sold it for about $2 million and moved to Naples a decade ago. But her dreams were shattered after a banker introduced her to a real estate agent and she got involved in land deals that court papers allege were set up by the agent, the loan officer and bank vice president. From September 2004 to June 2005, court papers say, more than $1.3 million in Valent’s bank account dwindled to nothing after it was debited 15 times.”

“The loan officer and vice president left the bank, the real estate agent was indicted in 2009 on charges that still are pending, the multimillion dollar projects Valent invested in were foreclosed on — and last summer, the bank tried to foreclose on her roughly $1 million North Naples home. Financially drained, Valent turned the tables on Fifth Third Bank a few weeks ago. She countersued. ‘I lost everything,’ Valent said. ‘I trusted him because he said, ‘Don’t worry, don’t worry,’ she said of the loan officer. ‘You’re like a sister to me. You can trust me.’”

“Although the bank has dismissed the foreclosure and lien, that doesn’t affect her pending counterclaim, which seeks compensation for her losses, damages and debt forgiveness on $14.69 million in judgments. Valent’s six-bedroom home, once filled with furniture for five elderly residents of her future business, A Paradise Retirement Inn, is nearly vacant because she feared imminent eviction and sold most it.’

“‘I lived with the stress. I developed diabetes and had a heart attack on Christmas Eve. I’ll never forget that,’ Valent said in a recent interview, sobbing in her kitchen. ‘No one was listening, no one.’”

Bits Bucket for June 27, 2012

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June 26, 2012

Bits Bucket for June 26, 2012

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June 25, 2012

Bits Bucket for June 25, 2012

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June 24, 2012

How A Housing Recovery Is Defined

Readers suggested a topic on the current house buying environment. “How many more FOMC meetings without a QE3 announcement will it take for the QE3 cargo cult to give up their faith that a quantitative easing ‘Third Coming’ is on the way?”

A reply, “It’s like the ‘Age of the Grasshopper’ versus the ‘Age of the Ant.’ We’ve been in the Age of the Grasshopper. An economy that requires growing debt to keep growing or even to stay even is like a junkie who requires more and more drugs.”

“The powers that be are all pointing to growth - reducing debt as a percentage of GDP - as the way out. I think it’s a route fraught with risk. It’s like taking out a too-big mortgage and counting on income growth to eventually make it manageable. Countries add another component - despite all their unmanageable debt, they keep piling on more.”

One said, “The Fed can make it possible for banks to make loans, should a qualified borrower walk in the door. It cannot make more qualified borrowers walk into a bank looking to take out a loan.”

To which was said, “Low interest rates do tend to make more people qualified.”

And another, “Let’s forget having any income and just drop the rate to zero, then EVERYBODY qualifies.”

And finally, “While we are at it, loosen up the length of the loan repayment period to infinity…”

From Reuters. “Highlights from Federal Reserve Chairman Ben Bernanke’s news conference following the Fed’s policy meeting on Wednesday. ‘Housing usually plays a very important role in economic recovery both through construction itself and related industries but also because higher house prices increase consumer wealth and promote consumer spending. Housing does seem to be doing somewhat better. There are some good signs in housing but nevertheless we are not getting the size of the boost, the amount of help in the recovery that would normally get from a housing recovery.’”

“‘Access to credit is a major issue. There’s no question about it. Mortgage access is much tighter than it has been for a long time. Even credit card access is more restricted than it has been in the past.’”

“‘The step we took, the extension of the maturity extension program, I think is a substantive step and it will provide some additional support. Yes, additional asset purchases would be among the things that we would certainly consider if we need to take additional measures to strengthen the economy.’”

“‘There are additional steps that can be taken and we have demonstrated through both communications techniques, guidance about future policy, which is something the Japanese have done as well, by the way - and through asset purchases, also something … Japan has done - that central banks do have some ability to provide financial accommodations to support the recovery even when the short-term interest rates are close to zero.’”

From Reason.com. “Let’s consider the strongest arguments that we are witnessing a housing recovery to see if they stand up to the long-term analysis. Argument #1: With record low interest rates everyone will be looking to get back into homeownership. The Federal government’s goal of lowering long-term rates has been successful. Led by the Federal Reserve’s quantitative easing program and the Treasury’s continued bailouts for Fannie and Freddie, mortgage rates are lower than ever before. Unfortunately, low rates do not always translate into demand.”

“There have actually been ‘record’ low rates for several years now, but the cheapness of a mortgage is only one factor in the home-buying process. Consider while mortgage applications are up with super low rates, nearly four out of five of those have been for refinancing, not home purchases. That is because household debt is still a massive deadweight on the capacity of families to buy a new home. At the same time, household wealth has been crushed over the past few years. Refinancing is not recovery, and low rates are not a sign of a positive future.”

“Outstanding household mortgage debt is still twice the level it was in 2000. And add to that that one in five homes are still worth less than the mortgage that was taken out to buy it. Combined you get very limited amounts of money for buying new homes at this moment.”

“Part of the challenge in this debate is how a recovery is defined. I argue that it will be when foreclosures have been worked out of the system, negative equity is cleared away, and prices have stabilized. By that standard, we still do not have a housing recovery.”

From KPBS. “Real estate agents are struggling to find sellers. One Coldwell Banker broker recently circulated a bold flier in Pacific Beach. It highlighted a $686,000 home that sold at $60,000 above asking price in ’seven days with multiple offers.’”

“Chicago transplants, Maria Minos and her husband, have been looking for a two-bedroom, two-bath home with a yard since January. Like thousands of others in San Diego, the Minos’ routinely compete with up to 15 other would-be buyers on each property. The couple said they’ve begun to over-bid on homes, even if they hadn’t been inside the house. ‘We have started over-bidding. The most I’ve over bid on a house so far is $30,000,’ said Minos.”

“‘What’s really killing this for people like myself who just want to live in the home, is the house flippers. They’re putting down a lot of cash, and it’s being accepted over conventional loans,’ said Minos.”

Bits Bucket for June 24, 2012

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June 23, 2012

Bits Bucket for June 23, 2012

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