January 20, 2015

Investors Who’d Buy Anything, Figuring Values Would Rise

A report from Crain’s New York. “In November, a buyer made Jerry Gottesman an offer not even someone who prides himself on holding onto real estate through booms and busts could refuse: an $800 million bid for a parking lot by the High Line that he bought in the early 1980s for roughly $2.4 million. Last week, three large residential development sites were put up for sale with asking prices of $1,000 or more per buildable square foot—a 50% premium above the value of dirt in Manhattan just a year ago.”

“Manhattan condo builders, who are driving the land boom, would have to sell at nosebleed prices to recoup their investment. A 1,000-square-foot apartment, for instance, would have to fetch $3 million or more to break even. Builders would have to sell units for even more just to make a ‘basic return,’ said Michael Shvo, a developer with a handful of luxury projects in Manhattan. Compounding the risk, more than 6,000 condo units are in the pipeline for 2015, with more to come. ‘It takes three years to bring a project up out of the ground,’ said Mr. Shvo. ‘Development is a futures business. You’re buying for the future, and you have to believe that the numbers will go up, especially if you’re paying $1,000 a foot.’”

From CNBC. “After a scorching four years, the luxury real-estate market may be cooling off. Sales of homes for $1 million or more fell 20 percent in the fourth quarter compared with those in the third quarter and posted their worst year-on-year growth since 2011, according to the CNBC Luxury Real-Estate Report, conducted by Redfin. Sales of homes priced at $5 million or more were also weak, falling 10 percent in the quarter. ‘We’re seeing sales of luxury homes continue to taper,’ said Nela Richardson, chief economist at Redfin. ‘The top of the market is losing steam.’”

“The most expensive home deal in the fourth quarter was the $70 million sale of the 23,000-square-foot ultra-modern home in Beverly Hills, California, sold to the founder of the Minecraft video game. The house, built on spec was listed for $85 million. Among the biggest discounts in the quarter was the $5 million sale of a waterfront property in Newport, Rhode Island, that had once been listed for $12.9 million. A property in Santa Paula, California, listed for $6.34 million ended up selling for $3.5 million.”

From Forbes on Colorado. “Peace Ranch, the 600-acre spread near Aspen, Colo., surrounded by national forest, closed last week for $17.15 million, according to broker Joshua Saslove of Douglas Elliman Joshua & Col, who had the listing. It had initially been listed for $49.5 million. Sellers Tom and Molly Bedell bought the ranch for $12.5 million in 2003. Last year Tom Bedell told Forbes he put some $30 million into the ranch, adding roads, reclaiming creeks, building horse facilities, and remodeling and building new housing.”

Vegas Inc in Nevada. “When the market hit bottom in early 2012, single-family homes sold for a median $118,000 and, within that, bank-owned homes for $100,000. A year and a half later, the overall median had soared to $180,000 and bank-owned homes to almost $173,000, according to data from the Greater Las Vegas Association of Realtors’ listing service. Last month, the overall median was $204,000, but bank-owned homes went for $155,500, down 24 percent from the market at large, GLVAR data show.”

“After the economy crashed, foreclosures swept through the valley and most borrowers were left underwater. With rock-bottom prices everywhere, though, even busted, abandoned homes found buyers — often investors who’d buy anything, figuring values would rise. ‘The hedge funds didn’t care,’ said broker Thomas Blanchard, owner of 1st Realty Group. ‘They were buying a piece of the market.’”

My Suncoast in Florida. “Foreclosures on the Suncoast have hit an 8-year low. But while the foreclosure decline is notable, Susan Phelps, a realtor at Berkshire Hathaway says the story isn’t all good because there are still hundreds of foreclosed properties that have yet to hit the market. ‘The ghost properties are those properties that are in paperwork limbo. The banks doesn’t exactly know how to clear the title and so they sit in neighborhoods deteriorating and vacant, causing problems and affecting property values,’ said Phelps. And despite the recent turn in the market, Florida still leads the nation in foreclosures.”

The Chicago Sun Times in Illinois. “The length of time it takes for foreclosures to clear the market is growing, with the Chicago area posting among the longest foreclosure processes in the country — nearly 2 1/2 years. ‘We’re seeing approximately a two-year process, longer, if a homeowner is contesting it,’ says Robin Coffey, assistant deputy director at Neighborhood Housing Services of Chicago, a nonprofit community redevelopment group. ‘The biggest issue with this long foreclosure timeframe is these zombie properties sitting abandoned and in distressed conditions, making it difficult for any type of recovery in the low- to moderate-income neighborhoods we operate in,’ she says.”

The Philadelphia Inquirer in Pennsylvania. “Despite the national decline in filings in 2014, portions of the housing market in the eight-county Philadelphia region are still mired in foreclosures, short sales, and bank repossessions, the RealtyTrac data show. Bank-owned homes and foreclosures ‘have declined in our area,” said Val Nunnenkamp of Berkshire Hathaway Home Services Fox & Roach Realtors, in Marlton - to about 18 percent of the for-sale inventory from 30 percent. Nunnenkamp added that ‘there are still numerous abandoned homes that have not come to the market yet, which could increase the percentage.’”

“These are ‘zombie houses’ - more than 6,100 in the eight-county region - vacated by borrowers at the start of never-completed foreclosure proceedings. Andrew Frank of Long & Foster Real Estate, who handles distressed sales in Montgomery and Bucks Counties as well as in the city, said he has ‘yet to see a decline nor hear about a decline.’ ‘The litigation process actually seems like it is getting longer in Pennsylvania, Frank said, adding that he has had some properties for two to three years before an official eviction.”

“If prospective home buyers are looking at properties as a result of the filings, that’s where things are different, said Chris Nelson of Re/Max Services, in Collegeville. ‘We all know that banks are now selling notes, auctioning homes, and every other creative thing we can think of’ to get them off their balance sheets, Nelson said.”

The Long Island Exchange in New York. “Long Island homeowners and advocates gathered at the home of New York Communities for Change member Charles Pollydore, a homeowner from Hempstead on the brink of homelessness. While Governor Cuomo announced yesterday his plans to give $1.5 billion from the larger $5 billion surplus to upstate cities, he has been silent about using the money from banks settlement to help the victims of fraudulent mortgages. ‘The Governor is elected to serve and protect all New Yorkers,’ Pollydore said. ‘So why is he giving our money away to Wall Street bankers, who caused this whole mess in the first place? Who gets to bail me out in my time of need?’”

The New England Center for Investigative Journalism. “An examination of hundreds of court documents in Massachusetts and interviews nationwide with scores of former homeowners, housing advocates, and attorneys about private mortgage insurance found that consumer have scant control over whether their insurance company will demand money from them after a foreclosure. Nationwide, the number of people at risk of being pursued for a mortgage deficiency by insurers or lenders runs into the hundreds of thousands. The companies that dominate the insurance business covered 977,000 loans in 2013 alone, representing about 12 percent of new home mortgages nationally, according to Inside Mortgage Finance.”

“Most of these borrowers, they say, had no idea they could be dunned for more money after they lost their homes. For some, the debts were so much larger than their annual salaries that they couldn’t fathom making payments. Leslie and Edward Simpkins lost their Maryland home in 2010 after Edward, 47, was laid off from his $48,000-a-year union job as a painter. He now earns only $15,000 a year working part time. Leslie Simpkins, a 38-year-old homemaker with three young children, said the couple was shocked to hear from Mortgage Guaranty that they owed $120,000 for losses on the home they purchased in 2007 for $245,000. They attempted to settle with the company’s attorney but were unable to pay even $30,000.”

“They moved into her mother-in-law’s house and now worry Mortgage Guaranty will put a lien on that home because their relative co-signed for the couple’s original home. ‘We owe the money. We just don’t have it,’ she said. ‘Talk about lack of sleep, talk of lack of sanity.’”

Bits Bucket for January 20, 2015

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