May 9, 2014

You Never Hear About The Houses That Don’t Sell

It’s Friday desk clearing time for this blogger. “Casey Bui, managing broker at Rockwell Realty said the inventory is so tight in some areas that he’s seen houses sell for $100,000 over their list price in close-in Seattle neighborhoods like Capitol Hill and Madison Valley. Brokers are supposed to list property at fair-market value, he said, so it’s hard to see how lenders would approve financing deals so far above list price. ‘Just on the face of it,’ he said, ‘it makes you think, ‘Bubble.’”

“Sales of single-family homes in Salt Lake County fell 4 percent in the first quarter, the first decline in five years in year-over-year quarter listings. But a surge in home building shows a market in good health. The improvement in the market was the main reason Sandy resident Kim Crook, chose to put her family’s home up for sale. ‘We bought this home nine years ago when the market was at its peak, (then) the market definitely took a turn for the worse,’ Crook said. They have had plenty of interest in the two weeks it has been on the market, she said, but no offers yet. ‘We’ve had a ton of traffic come through,’ Crook said. ‘So (we’re) just waiting for an offer.’”

“Halfway through the traditionally booming spring selling season, home sales here have disappointed, dropping for the fourth month in a row, year-over-year listing data for April show. With investor activity slowing and short-sale bargains drying up, real estate agents said Tampa Bay housing’s weaknesses are beginning to show through. Some sellers also have unrealistic expectations of what their homes are worth, due in part to last year’s run up in prices thanks to so much investor activity. But with fewer cash deals, more sellers must rely on traditional buyers, whose lender influences how much the buyer can spend and can easily spike a deal. ‘Sellers are starting (their prices) a little high because the market climbed and they’re trying to continue that trend,’ Charles Rutenberg agent Michele Brigandi said.”

“Nashville-area home closings fell slightly in April for the second straight month, but the Greater Nashville Association of Realtors says it’s not time to hit the panic button yet. ‘Inventory is at its highest point since November of last year and is in the fourth month of an increase,’ said GNAR’s President Hagan Stone.”

“Many local realtors will join others from across the country in Washington next week in meetings with Congress to urge that body to make decisions to support and protect home ownership. ‘Even with an improving market, there’s still significant concern about potential legislative decisions impacting the housing market,’ said Stone. ‘The wrong decisions could easily have a major negative impact on the overall market in a very short time.’”

“Realtors rallied at the State House yesterday to bring attention to five pieces of proposed legislation they say would reverse gains in the housing market and could result in the loss of 2,000 jobs. ‘Right now we’re in the midst of a nice up tick in homes,’ said Susan Arnold, chief executive officer of the Rhode Island Association of Realtors. ‘We don’t want to cripple anything.’”

“Bruce Lane, broker owner of Williams & Stuart Real Estate with offices in Warwick, Cranston and Pawtuxet Village, is especially concerned by Senate bill 2409, which would change the status of independent contractors. If enacted, the bill would define brokers as employees subject to payroll taxes, disability insurance and Workers Compensation. Lane estimated of the state’s 4,000 real estate brokers about half would lose their jobs. ‘This is such a scary bill on such a fragile economy,’ he said.”

“Two weeks from now, Bryce and Ashlee Collins are likely to be the terrified owners of two homes. One is the three-bedroom Etobicoke backsplit they bought last month and where they plan to raise their six-month-old son. The other is the detached house they’ve renovated over the last four years in up-and-coming Little Portugal. It’s been on the market for a month now without an offer. The Collins are panicked, living proof of the vagaries of the Toronto real estate market. ‘My wife and I consider ourselves somewhat knowledgeable about the real estate market, but we were not mentally prepared for this,’ says Bryce. ‘All you hear about are the bidding wars but, as two agents have said to us: ‘You never hear about the houses that do not sell.’”

“Consumers are being warned to avoid risky home loans that could see them or their families left homeless. Family guarantees, which allow a borrower to use a family member’s home as collateral, could see both the borrower and their relative lose their homes if repayments are not met. ‘We’re only six years from when poor lending practices dropped us into the global financial crisis and now these loans seem to have found their way back into the mix,’ said Consumer group Choice spokesman Tom Godfrey.”

“The Australian Prudential Regulation Authority has previously expressed concern about relaxed lending practices. But Mr Godfrey said risky products were still being seen across the market, particularly among second-tier lenders. Principal solicitor at the Consumer Credit Legal Centre Katherine Lane said borrowers could face bankruptcy if they could not meet their repayments, while family members who act as guarantors could lose their house, too. ‘The lenders can sell whichever house they want to, so if one house is hard to sell, they’ll want to sell the other and it’s possible the guarantor could lose their home first,’ she said.”

“Most Swedes with a home mortgage are doomed to die before repaying their debt, according to a study published by Sweden’s central bank. The study revealed that the debt of 25% of them grows every year, while for 15%, their debt stays the same year after year. The remaining 60% pay back their mortgages at a very slow pace. ‘If the borrowers who have reduced their debts over this period continue to reduce these debts at the same rate, on average they will be free of debt in about 100 years,’ according to the calculations of central bank economists Jakob Windstrand and Dilan Oelcer.”

“Needing cash after his divorce, longtime Mariners Harbor resident Tony Wong decided to refinance his home. But instead of boosting Wong’s financial bottom line, the move ended up draining his bank account and burying the school safety officer in debts exceeding $660,000. Wong is fighting back with a federal lawsuit. ‘I was tricked. Honestly, that’s how I feel,’ Wong told the Advance. ‘It was a nightmare.’”

“The interest rate was 11.075 percent, with monthly payments of about $3,750, including principal, interest, tax and insurance, said Wong’s court filings. He believed he could pay the higher rate by tightening his belt and dipping into his savings, then refinance again in a year. Despite a shaky credit rating, Wong said he was told he wouldn’t have a problem. Wong paid the new rate for the first six or seven months, before he depleted his savings and the bottom fell out, his filings contend.”

“Elizabeth M. Lynch, a lawyer for the Manhattan-based nonprofit MFY Legal Services, which is representing Wong, said he sought a loan modification without success. He now owes more than $663,000 and his home’s current market value is only $345,000, according to court filings and online city Finance Department records. ‘There’s no way he can refinance now because the debt he owes is so high,’ said Ms. Lynch.”

“There are those on Wall Street and in the plutocracy who feel that Timothy Geithner is a hero who deftly steered the country from economic ruin. To many ordinary Americans, however, he is considered a Wall Street puppet. ‘I did not view Wall Street as a cabal of idiots or crooks,’ he writes in ‘Stress Test.’ ‘My jobs mostly exposed me to talented senior bankers, and selection bias probably gave me an impression that the U.S. financial sector was more capable and ethical than it really was.’”

“For much of the past five years, Geithner has publicly been fighting with the idea of too-big-to-fail. Geithner and Obama marketed the Dodd-Frank bill as a way to end future bailouts. In 2010, right before the bill passed, Geithner said, ‘The reforms will end too-big-to-fail.’ Obama went further: ‘Because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more tax-funded bailouts, period.’”

“But it is now clear that Geithner never believed his own talking points. To him, too-big-to-fail and the so-called moral hazard, or safety net, that it would create can’t really ever be fully taken away. During his lecture, one student asked a question about a provision of the reform laws that is supposed to let the government wind down a complex financial institution without creating a domino effect. The question prompted Geithner onto a tangent about too-big-to-fail. ‘Does it still exist?’ he said. ‘Yeah, of course it does.’ Ending too-big-to-fail was ‘like Moby-Dick for economists or regulators. It’s not just quixotic, it’s misguided.’”

“Geithner paused for a moment. ‘Can you design a system ever that allows you to be indifferent to the failure of any institution, in any state of the world?’ he asked aloud before answering his own question. ‘You can design a system, and I think we have, that allows you to be indifferent in most states of the world: the five-year flood, the 15-year flood, the 30-year flood, maybe even the 50-year flood,’ he said. ‘But there are constellations of storms, of panics, of fires that are so bad that it’s very hard to imagine that you could be indifferent to the failure of the financial system.’”

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