The Housing Bubble

A report from the Credit Union Journal. “With the housing crisis and the recession firmly in the rear-view mirror, more and more credit unions are looking for ways to help consumers qualify for home loans — even if that means accepting a significantly lower down payment than might ordinarily be required. One example is Orange County’s Credit Union, a $1.5 billion institution based in Santa Ana, Calif., which has unveiled two new products designed to help consumers purchase a new home in a very tough housing market. The products — a conventional loan with zero down payment and a loan with 3 percent down — allow borrowers to qualify for a home for basically little or no down payment. ‘While members wait to save for these large down payments, the price of homes continues to rise,’ said Carlos Miramontez, vice president of mortgage lending at OCCU. ‘We refer to this as the ‘cost of waiting.’”

“The zero-down and 3 percent down home loans help eliminate this barrier, he added. Moreover, the 3 percent down mortgage can be used for a loan amount up to $850,000. On the other side of the country, the biggest credit union of them all, the $82 billion Navy Federal Credit Union of Vienna, Va., has offered a similar product at Orange County’s Credit Union.”

“Kevin Parker, assistant vice president of field mortgage at Navy FCU, noted that VA loans have provided veterans and active duty members with a ‘zero-down’ mortgage option for many years. Navy Federal itself has also offered a ‘HomeBuyer’s Choice’ mortgage product with zero down and has even offered ‘jumbo mortgages’ with a zero-down option for at least a decade.”

From Fox 17 in Tennessee. “Real estate experts called Nashville’s housing market pace unprecedented, after data shows mid-state homes are selling nearly 50 percent faster than last year. Managing broker/owner Debra Beagle said competition is stiff at all price points with low inventory. Many millennials are keeping up with parents putting down their refinanced homes. ‘Pulling equity from their homes and giving their kids cash to even be competitive in the multiple offer situations,’ Beagle said.”

From Bloomberg on Connecticut. “Luxury-home listings in the Connecticut town plunged 31 percent from a year earlier, according to a report by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. That’s largely because sellers who failed to get their hoped-for price quit trying to find buyers and took their properties off the market to wait for a better day.”

“‘When there’s too much to choose from it takes off the intensity of the buying process,’ said Scott Durkin, chief operating officer of Douglas Elliman. ‘It doesn’t give you any sense of urgency and it doesn’t get you off the fence.’”

From Free Malaysia Today. “A property named by the United States Department of Justice (DoJ) in its civil forfeiture suit last year to seize assets purchased with funds allegedly embezzled from 1MDB, is now up for sale, the Wall Street Journal reported. A luxury penthouse in New York City, which was sold for a record price of US$51 million (RM215 million) in 2014, is about to be listed again but with a much lower price of US$45 million, the report said, citing people with knowledge on the plans.”

“Quoting an employee with the company listing the property, the WSJ reported that the unit is now priced to move. The owner had reportedly tried to sell the unit for US$70 million in 2015, and had even dropped the price to US$55 million at a later date, before the US DoJ civil suits in July 2016. ‘It’s a pedigree apartment, one of the best in the city, but the market is arguably a bit weaker on the luxury end,’ the employee said, adding that he did not know why the owner wants to sell.”

From The Real Deal on Florida. “Greater Downtown Miami’s preconstruction condo market has surpassed the halfway point, with over half of the more than 10,000 units in the pipeline now completed. And due to the growing inventory of new condos, resale pricing continues to fall in the urban core, according to a new report. Resale prices, which rose in 2012, 2013, 2014 and 2015, fell beginning in 2016 and continued dropping through the second quarter of this year. Existing inventory sold for about $400 per square foot mid-year 2017, compared to the peak of $457 per square foot in 2015, according to the report.”

“The Downtown Development Authority’s Mid-Year Residential Real Estate Market Study shows 5,180 units have been delivered since 2012 and 5,078 units are under construction. May was the best month for closed sales in two years as sellers adjusted to the market. More than 140 existing units sold in May and 160 were pending, the report shows. Growing inventory and declining prices have led rents to drop, as well.”

From the Kenbridge Victoria Dispatch. “Lunenburg Realtor Sidney Smyth Sr. said it’s still a buyers market. ‘Stuff is selling, but it’s gotta be priced right,’ Smyth said. ‘Price is still everything. If you price it right, you can get some activity, if it’s not priced right it just sits there, which is indicative of all the real estate signs that are starting to rust in the county.’”

From Chicago Magazine in Illinois. “Twenty years ago, Hinsdale was the poster child for the teardown trend, garnering national attention as monstrous McMansions stomped out sweet 19th-century homes by the dozens. More than half of the housing stock in Hinsdale has been replaced since the late ’90s, estimates Jean Follett, a historic preservation consultant and former Hinsdale trustee. Residents who lamented the lost charm, though, are having the last laugh. The housing market in the tony western suburb is stagnating. One theory: Some of those now-dated homes aren’t budging.”

“It’s a rough combo if you’re trying to unload a house, says real estate broker Alex Haried, who lives in Hinsdale. Because the prices are high, he explains, developers and flippers can’t come in and make updates —the way they do in nearby Western Springs and Elmhurst—which would make a house sell quickly. The ennui in the market shows in sale prices: While the median list price in September was $1.14 million, the average sale was a precipitously lower $750,000 (which leaves room in high-roller budgets for new quartz countertops).”

The Record Searchlight in California. “What some say are the last remnants of the decade’s-long foreclosure mess is still funneling through the local housing market. While foreclosure activity is a whisper of what it was at the peak of the crisis six years ago, a national database reported Wednesday that Shasta County had the third-highest foreclosure rate in California in the third quarter of 2017.”

“One in every 439 homes was in some stage of foreclosure, ATTOM Data Solutions, formerly Realty Trac, said. Only Kern County (1 in every 334 homes) and Riverside County (1 in every 431) had higher foreclosure rates in the third quarter, which covers July through September.”

“‘When people are wondering why are foreclosures still taking place, they have to understand this is one of the last bad loan products now cycling through the market,’ said Josh Barker of ReMax Town & Country in Redding. ‘The majority of these loans are interest-only that are now resetting . . . and people can’t afford the higher payment.’”

“And unlike many other areas of California, home values in Shasta County have not rebounded from their bubble peak, so these underwater families can’t afford to sell.”

From Bridge Michigan. “Sifting through a stack of letters on her kitchen table from a reverse mortgage company, Linda Pryczynski recalled how the nightmare began. In 2007, her husband Warren took out a reverse mortgage on their modest duplex to pay off the remainder of an old debt of $100,000, a loan for a truck and for household expenses. ‘My husband saw it on one of those TV commercials that’s on all the time,’ the Muskegon resident said. ‘He thought it would be a good idea.’”

“Her husband died in 2016 at age 94, leaving behind tax and mortgage debt Pryczynski said she couldn’t possibly pay off. Facing foreclosure, Pryczynski filed for bankruptcy earlier this year and fears the prospect she could lose her home. That’s because she was not named in the reverse mortgage – a home loan available, and marketed to, older Americans – leaving her no protection at the time of his death.”

“Karen Tjapkes, her attorney, said the original loan on their duplex has ballooned with interest and other fees, from $148,000 to $216,000. Pryczynski also owes roughly $11,000 in back taxes, much of which were paid by the lender. ‘I can’t possibly pay $216,000,’ Pryczynski said. ‘I supposed I could move to my daughter’s place in West Virginia. But that’s not my home. This is my home. It would tear me apart if I had to leave.’”

“She’s hardly alone. Advocates for Michigan seniors like Pryczynski say that reverse mortgage foreclosures are on the rise – even as traditional mortgage foreclosures are falling – reflecting a disturbing national trend. ‘I’ve been seeing a surge in these cases,’ said Joe McGuire, a lawyer for Michigan Legal Services, a Detroit-based nonprofit that fights to keep seniors threatened by foreclosure in their homes. ‘A lot of times seniors don’t understand what they are getting into.’”

“Federal analysis shows these foreclosures are on the rise. The U.S. Department of Housing and Urban Development – which insures reverse mortgages through the Federal Housing Administration – says nearly 90,000 reverse mortgages in the U.S. were at least 12 months behind in paying taxes and insurance last year and could be expected to result in ‘involuntary termination.’ That is twice the number of the previous year.”

“According to the report, nearly 1-in-5 reverse mortgage loans taken out in the U.S. from 2009 to June 2016 are expected to go into default because of unpaid taxes or insurance.”