June 18, 2013

Features Of The Bubble Are Becoming More Commonplace

The Pioneer Press reports from Minnesota. “Despite the steady rise in home prices over the past few months, Twin Cities’ real estate veterans say it’s too soon to call the market a bubble again. But it’s also almost impossible to avoid a bidding war on almost any home priced below $200,000. Gary Pederson’s search involved bidding wars on five houses in St. Paul. He finally landed a three-bedroom, two-bath home in Midway by offering 10 percent over the $189,900 asking price. The house he bought went on the market at noon on a Monday. His real estate agent had given him a head’s up that it was coming up for sale, and Pederson had driven by it the previous week.”

“He got a walk-through of the house at 4:30 p.m. that Monday and then made an offer. By Tuesday, the buyer had five offers. His previous experiences with being out-bid made him decide to bid up the price on this Midway home. ‘Realtors are telling people you have to be ready to go,’ Pederson said. ‘I’m expecting the neighborhood will see an increase in values.’”

The Des Moines Register in Iowa. “Third-grade teacher Erin Denny’s summer to-do list is massive: She’s finishing her master’s degree, planning her wedding and buying a house. The surprising challenge of the three might be buying a home. In about a month, she’s lost two houses to other buyers — within less than a day of viewing them. One home in Clive had been on the market for two days when she and her fiance took a tour. ‘We went home that night to talk about it, and decided to put in an offer,’ Denny said. The next morning, the house had been sold. ‘The people who looked at it right after us put in an offer. … We didn’t even get overnight to think about it. Homes in our price range are moving so quickly, you just have to make almost instant decisions, which is kind of scary.’”

“Tales like Denny’s — a main feature of the bubble that eventually led to the housing crash and recession — are becoming more commonplace as the Des Moines-area market rebounds. Buyers and sellers describe multiple offers, bidding wars and barely there listings.”

“‘The market is crazy. We didn’t see this last year,’ said Iowa Realty agent Carrie Brugger, adding that the last six offers she and business partner have written for clients have had competing buyers. ‘It’s a lot more frenzied now. I see it across the market — from homes selling from $80,000 to $800,000.’”

The Pantagraph in Illinois. “The housing market is on the mend and more help is available for those struggling to keep their homes in McLean County, but foreclosed and abandoned houses continue to hurt neighborhoods. Homes already in the midst of foreclosure are still working through the system, and neighborhoods must put up with the often abandoned and unkempt properties waiting to be resold. Bloomington’s west side has a number of them, said Valerie Dumser, a board member of the West Bloomington Revitalization Partnership and resident of the area.”

“‘It doesn’t do much for the values of our homes,’ Dumser said. ‘It doesn’t say much for the neighborhoods. People don’t want to move into a neighborhood that looks empty and neglected.’”

“Some of those empty homes have been sitting for years, Dumser said. That may be because McLean County foreclosures now take an average of 20 months to be resolved — twice as long as before the housing crisis, according to an ongoing study by Diego Mendez-Carbajo, chairman of the Department of Economics at Illinois Wesleyan University. Though fewer new foreclosures are being filed, the ones held over from previous years are still numerous.”

The Journal Sentinel in Wisconsin. “May foreclosure filings in southeast Wisconsin dropped 45% from a year earlier, another sign of a recovering housing market. Russell Kashian, a University of Wisconsin-Whitewater economics professor who tracks residential real estate in the state, said he is surprised foreclosure filings decreased that much in a job market that has been lackluster. ‘It’s surprising we’re doing that great,’ Kashian said. ‘We’re not exactly booming.’”

“After stumbling hard during the economic downturn, the condominium market in downtown Milwaukee is back on its feet and making a quiet comeback. Robert Monnat, partner at Mandel Group Inc. in Milwaukee said the majority of the area’s oversupply from the housing bubble has been absorbed. The downtown condo market consists of about 3,100 units in all. Of that number, about a fourth make up a sort of ’shadow inventory’ of condos that were converted to rental units when the number of buyers shrank during the downturn. Some will come back on the market as condos. ‘You have a fairly large supply of condominium units that were built that are actually masquerading right now as apartments,’ Monnat said.”

From The Sun in Wisconsin. “Wisconsin home sales jumped 9.2 percent statewide in April 2013 compared to a year earlier, which marks 22 straight months of positive growth. According to relator data, Polk County home sales increased 38.89 percent in the first quarter 2013 when compared to the same quarter a year ago. Borrowing rates remain low and banks are loosening restrictions on mortgages, said Logan Kelly, an economics professor at UW-River Falls, which also impacts the rate at which homes sell.”

“‘One of the drivers of real estate is mortgages,’ he said. ‘We’re starting to see lending practices loosen up a little bit. They were locked up really tight. To quality for a loan was really tight, and its beginning to loosen up.’”

“Although the gains in the housing market have come without significant improvement in employment, Kelly noted that the consistent rise in growth is an indicator that the economy, and consumer confidence, is improving. ‘It does say something about that person’s expectation of the future,’ he said. ‘They aren’t expecting to lose their job and are not expecting to have any major decreases in income over the next couple of years.’”

The Gawker. “The U.S. Attorney for the Western District of Wisconsin announced a major conviction today in the ongoing criminal prosecution of the people who brought the economy to its knees four years ago via a toxic campaign of mortgage fraud. Meet James Wazlawik of Prescott, Wisc. Wazlawik was sentenced to one day in jail and three years supervised release after pleading guilty to ‘making a false statement to a bank in connection with a home equity loan.’ His crime: When he applied for a $150,000 home equity loan from Citibank in 2005, he put his signature to an ‘income verification form’ claiming that his monthly income was $8,500. In fact, it was substantially less than that.”

“Here’s how Wazlawik put it in a sentencing letter to U.S. District Court Judge Lynn Adelman: ‘I did not know a person could get a loan without consistent income. I was told by the broker that there was a program called NINA-no income no asset that anyone with good credit could apply for. So I applied for this loan thinking that the money available on the line of credit would be able to be used to grow our business…When I took this mortgage, I still had a significant amount of credit available on my first mortgage, which was also a line of credit. What I did not count on was the economy beginning to sour.’”

“So Wazlawik, surprised to find that ‘a person could get a loan without a consistent income,’ took advantage of a loan officer’s offer and signed on the dotted line. But why would a loan officer encourage someone without consistent income to obtain a home equity loan? Probably because Citibank, the victim in this case—the U.S. Attorney’s press release notes that the bank ‘lost $146,829 when Wazlawik was unable to repay the loan’—spent most of the last decade feverishly buying, packaging, and reselling mortgages that it knew would never be repaid.”

“In 2012, Citigroup paid $158 million to the federal government to settle claims that in order to obtain insurance from the Federal Housing Administration, it systematically lied about the likelihood its loans would be repaid—sort of like providing false information on a loan application. Justice Department prosecutors calculated that 30 percent of Citibank’s FHA-insured loans went into default. That’s $1.44 billion dollars worth of bad loans.”

“Like Wazlawik, Citibank failed to anticipate the economy turning sour. It has since been the recipient of more than $476.2 billion in cash and guarantees from American taxpayers, making it the single largest recipient of federal bailout funds after the economy collapsed as a direct result of what Citibank did with loans like Wazlawik’s.”

“To date, no one in the executive ranks of Citibank—or any of the other Wall Street institutions that solicited and profited from loans like the one Citibank issued to Wazlawik—have been criminally targeted by the Department of Justice.”

Bits Bucket for June 18, 2013

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