There Are Enormous Losses Everywhere
It’s Friday desk clearing time for this blogger. “A private lender representing a consortium of banks has taken ownership instead of foreclosing on the 33 unsold condominiums at Pond View Village and, after slashing prices by about a third, has successfully resumed selling in a slumping market. Two units have sold in recent days, according to Ruth Pino, sales agent for the Massachusetts Housing Investment Corp.”
“The first sale closed Nov. 16. It was a 1,200-square-foot, two-bedroom, 11/2-bath unit that had been priced at $320,000. It was returned to the market in August at $210,000 and sold for $205,000 - a 36 percent markdown. ‘It’s the first time we’ve experienced losses like this,’ said Cape Ann Housing Opportunity president, Joseph Flatley. ‘There are enormous losses on condos everywhere. If you’re loaning a lot of money, you’re going to experience losses.’”
“October turned out to be one of the worst months in years for home sales in Licking County, Ohio. The number of units sold decreased 35 percent, the dollar volume plummeted almost 40 percent and the average sale price fell 7.2 compared with October 2006. Foreclosures already have matched 2006’s record high.”
“‘That’s a big drop, there’s no doubt about it, Licking County Board of Realtors President Jim McKivergin. eal estate sales in Licking County have been going up for more than a decade. Whether this is an anomaly or a trend, I can’t say.
“Overall in Chicago, the foreclosure rate was 40 percent higher for the first six months of this year compared to a similar period in 2006. Harold Freeman had realized his dream of home ownership by buying a three-bedroom brick ranch in Calumet Heights. Then came the one-two punch of a job loss and increases in his adjustable rate mortgage.”
“‘My dream turned into a nightmare. The phone calls didn’t let up, morning noon and night. The pressure and stress brought on migraines. My doctor took my blood pressure and said ‘What’s going wrong in your life?’ Freeman said.”
“The final report of Gov. Martin O’Malley’s Homeownership Preservation Task Force released last week revealed Maryland is right in the middle of a growing national foreclosure crisis and Worcester County has not been immune to the trend.”
“‘During that last big boom, sub-prime lenders lowered their standards to allow people to buy properties they had no business buying,’ said County Commissioner Bud Church, a long-time area realtor. ‘They didn’t think the bottom would fall out as fast as it did and it backfired on them. Some lenders got greedy and wrote tons of mortgages that never had a shot of being paid.’”
“Toll Brothers, the nation’s largest builder of luxury homes, posted its first quarterly loss as a public company, as it continued to struggle with what its CEO called the worst housing slump in its 40-year existence.”
“‘It’s not a matter of if, but a matter of when, the oversupply [of homes] is absorbed,’ said CEO Robert Toll. ‘Then we shall return to better times. I believe those who wanted to buy but didn’t will kick themselves for their reticence.’”
“In response to an analyst’s question, Toll said the U.S. economy appears headed for a recession. ‘If I had to make a bet on recession or no recession right now, I’d probably think that we’re going to have a recession,’ he said. ‘I have no idea how deep or how long it would be. [But] it’s nothing more than an uneducated person’s opinion.’”
“This morning, Halifax (UK) reported a third month of falling house prices, adding to the weight of evidence that the market is slowing. Patrick Collinson, personal finance editor of The Guardian. Would you buy now? No, rent instead. We are in a period when the cost of renting is below the cost of buying. On top of that, house prices are flat or falling.”
“Jonathan Davis, chartered financial planner. Would you buy now? Don’t touch [the housing market] with a barge pole. Over the next year house prices will go down by 5%-10%, and over the next four to six years they will fall 30%-40%. It’s a natural market movement - when a market goes up 200% in 10-15 years it can reasonably be expected to retrace 30%-40% over a four-year period”
“The U.S. housing slump has spread south across the border, dampening a coastal real estate boom boosted in recent years by Americans snatching up vacation and retirement homes in Baja California and elsewhere in Mexico.”
“‘There is a lot of supply in the pipeline,’ said Embree Bedsole, managing director of the global advisory firm Alvarez & Marsal. ‘We’ve been debating whether that’s going to be developed.’”
“Bruce Greenberg, who heads an Arizona real estate appraisal and consulting firm, said the region’s developers tended to be smaller developers and builders who came across the border. ‘Two guys with cell phones’ was the description offered by Justin Mehren, managing director of Latin America Capital Group.”
“So comforting to know that Pollyanna is alive, well and still gainfully employed at the University of Central Florida. Sean Snaith sees only blue skies, no matter how dark the horizon may appear. To wit: ‘We are in for a couple quarters where there won’t be much good news for the real-estate industry. But I think 2008 will be the year we put the housing situation behind us.’”
“Were one to substitute ‘years’ for ‘quarters” in Snaith’s appraisal of the Orlando housing market, his forecast might be credible.”
“As Mike Thomas noted in his Nov. 29 column, Fortune magazine actually ranked Orlando No. 1 in projected residential devaluation, with a prognostication that the loss would be 34.6 percent during the next five years. Apparently, the ‘Chicken Littles’ to whom Snaith referred include those on the payroll of that esteemed publication.”
“A group of Denver investors is selling off its commercial properties and reinvesting in distressed condominiums. Over the last 18 months, Colorado & Santa Fe has sold about $225 million of commercial real estate in Colorado, Texas and Arizona.”
“The company’s CEO, Marcel Arsenault, has created a new company that will reinvest the proceeds from those sales in distressed condominiums, primarily in Florida.”
“‘Orlando, Fort Myers and Tampa Bay are the areas where projects are being taken back by lenders, and we’re bidding in those markets,’ Arsenault said. ‘Florida is a terrible market. There’s blood in the streets, and it’s going to get worse.’”
“Residents of a southwest condo building are outraged after spending several bone-chilling days in -20C temperatures with no heat in their building. ‘There’s no heat, there’s no hot water,’ said Elizabeth Lock, who moved into a hotel at 2 a.m. Saturday after trying to spend a third night in her freezing one-bedroom condo.”
“‘I was just too cold and I couldn’t sleep,’ she said. Elizabeth Lock and her spouse, Gordon Marr, try to warm up using the oven in their condo before they decided to check into a hotel early Saturday.”
“The heat went out late Thursday afternoon, along with power in the common areas, pitching the hallways of the building into darkness. ‘It’s a dangerous situation,’ said Lock, who has been warming her unit with heat from an open oven.”
“Residents of the 20 units say they’ve received no explanation from anyone in charge and have no one to contact for building problems. Matt Vermunt, who previously worked with the original developer, has been receiving calls from concerned residents.”
“He says part of the problem is that the building lacks a condo management group and that building management has been plunged into disarray since the original developer was removed from the project.”
“Resident Heather Murray shivered her way through the nights wearing layers of clothing under two thick duvets. She said it’s too expensive moving to a hotel — especially since she thinks it’s doubtful she’ll get that money back.”
“She bought her one-bedroom unit in the newly converted building this spring for about $250,000, she said. Though she’d like to move out after experiencing the problems at the location, she’s doubtful about being able to sell in Calgary’s current market.”
“On Saturday, she boiled 15 pots of water so that she could have a hot bath. ‘This place is a gong show,’ she said.”
Another great week! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
Many thanks to you Sri Ben, and to all those who post and make my teeny brain a bit more linear!
~Curtsey~
Leigh
So Mr Toll thinks we are in for a recession of unknown duration but that folks who don’t buy his McMansions now will be kicking themselves for their reticence? That’s logical. Not.
I noticed the same thing. I think Toll is past the point of caring whether or not his arguments are logical.
If we aren’t in a recession and things are this bad, just wait until we are in a recession.
Too Funny!
He can spell a five dollar word, yet profess to be “uneducated”.
This is the very same CEO who said, “We’re in deep doo doo.”
Great, no more developments for him!
Good night Irene! Really, ya just can’t make this stuff up!
Leigh
Didn’t he say back in ‘05 that we were going to become like Europe where people spent 50% of their income on homes and people would be living at home until their 30’s just to afford a home? Why doesn’t anyone ask him about his illustrious predictions that have seem to come to nothing.
Yes, something to the effect:
Europeans are 7x, we are only 3.5x?
40 year olds living w/pa and mum until we kick them out and the mansion will cost $4m vs $1m.
Or some such nonsense.
Toll brothers…er…doo doo brothers!
Har!
Leigh
Licking County
C’mon folks! A story about Licking County and no wisecracks about taking a licking, etc?
Ok. Ok. Licking Cnt!
“The heat went out late Thursday afternoon, along with power in the common areas, pitching the hallways of the building into darkness.
In California (and probably many other places), if there’s no heat, hot water, functional roof (i.e., very leaky, etc), you can legally not pay your rent! (You need to follow a certain procedure, first, but the County will help you.)
Of course if you’re one of these “owners”, you’re SCREWED!
(And, again, I’m not a bitter renter! I just realize that owning almost never pencils out for pure financial reasons)
Let’s wax poetic on the joys of homeonwership. the renters are bouncing and the owners are crying, if their tears don’t freeze first.
Where do I send my HOA?
Hey!
I’m not a bitter renter either, a renter by choice!
Pinch!
Leigh
“The heat went out late Thursday afternoon, along with power in the common areas, pitching the hallways of the building into darkness”
My first thought was the cost of heating oil is too high to heat this building. I wonder if we are going to have more frozen stories like this one because heating oil is sky high.
“He says part of the problem is that the building lacks a condo management group and that building management has been plunged into disarray since the original developer was removed from the project.”
I’m guessing a big part of the problem is that everyone in America expects someone else to “do something” about their problems, but they won’t lift a finger when it comes to collective responsibility. When they freeze in the dark long enough, they just might stir themselves to step up and handle the problem.
Uhh Sammy,
The people that are without hot water are in Canada.
Read it again. The condo is in Calgary. That’s Canada.
Read !!
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
And don’t forget to read the comments that follow the article; much of it will be on the test.
That’s scary. Well written summation of the problems to come. I may not buy anything for 5 - 10 years. By then it will be for cash.
I am cross eyed from reading so much . A great article wawawa.
I did what I was told and read!
good boy
Im female.
“‘It’s not a matter of if, but a matter of when, the oversupply [of homes] is absorbed,’ said CEO Robert Toll. ‘Then we shall return to better times. I believe those who wanted to buy but didn’t will kick themselves for their reticence.’”
Toll’s Curse…
“‘It’s not a matter of if, but a matter of when, the oversupply [of homes] is absorbed,’
chuckle. Oh… true. The homes will eventually be sold. But at what market clearing price? This market needs to be restarted… and that is going to take one heck of a discount. Not to mention years for people to save up a down payment.
Toll’s curse? More like his prayer.
Got popcorn?
Neil
The market can stay irrational longer than you can stay solvent, Mr. Toll.
“So comforting to know that Pollyanna is alive, well and still gainfully employed at the University of Central Florida. Sean Snaith sees only blue skies, no matter how dark the horizon may appear. To wit: ‘We are in for a couple quarters where there won’t be much good news for the real-estate industry. But I think 2008 will be the year we put the housing situation behind us.’”
Snaith can always go back and lie about how good things are in Stockton, after they tire of his act in Central Florida…
Hahahah, I just love how little old Stockton is a focal point of this shit. These farking banks are going to be paying me to take these homes off their hands and they will make positive cash flow little of my skin!!!!
I was so jelous of the guys buying the stuff at the courthouse in the 90’s (I was broke). They would buy for $35k, put $5k into it (paint and fix windows) then sell them through us for $75k. I dealt with a contractor that did this 7 times in one year!!! He would start work on this crap before he was even the legal owner (no other work), list it with us and have it sold and closed in 45 days and make $30k! This is back when $30k/yr was decent money here.
The smart RE brokers were buying stuff 80/10/10 ie. 80% first mort, 10% owner carry and a 10% commission (for you non math guys that is no money down) and putting them to rent for a positive cash flow of $25-$100/mo. I know $25/mo don’t sound like much but what percent return is $25/mo with no money down? I am taking vacancy, upkeep and shitty renters into account.
My friends, here in stockton it will be landlords paradice in 2012-2017! The banks are going to be handing out free BJs along with their positive cash flowing REO!!!!
“Sean Snaith sees only blue skies, no matter how dark the horizon may appear.”
Might those be the blue skies of the eye of a cat 5 hurricane?
The comments on this article are great.
Your village called. They want their idiot back.
lol
Txchick did herself proud
That Pollyanna line is precious. I gotta start using that!
“The first sale closed Nov. 16. It was a 1,200-square-foot, two-bedroom, 11/2-bath unit that had been priced at $320,000. It was returned to the market in August at $210,000 and sold for $205,000 - a 36 percent markdown.”
I don’t care what they had planned to sell it for, but that seems like a decent price to me for decent middle class housing. That is what they intended to build, isn’t it?
bitter renters can be very nimble during this downturn. you are insulated from higher gas prices by moving closer to work, rent increases, property tax increases, increase in HOA fees, falling values, foreclosed neighborhoods and any other mess there is.
They will have new psychological disorders called “renter envy “disorders .At first ,health insurance companies will not want to pay for the treatment of these disorders ,but after awhile the disease will be so widespread that it will be covered by health insurance .
People who are renters will be able to command higher paying jobs because they will be considered “smart”,and not subject to the mania disease that took hold of America during 2003 through August of 2007.
As I have said before ,renters will be the only people considered for
political positions because they will be known for not taking bribes ,like homeowners did . Renters will be invited to all the parties and people will want to know what they think about every subject ,and what they forecast for the future .Yes,it will be the rein of the renters ,but it will be a good thing after the rein of the commissioned sales people .
VIVA the RENTERS
“[But] it’s nothing more than an uneducated person’s opinion.’”
Gee Bob, it’s kinda late to start playing stupid isn’t it ?
Lately, the uneducated opinions have been MUCH more accurate in predicting this housing crash than the “educated” economists out there.
PROTESTERS JAM HOPE NOW PHONE LINES
Bangalore, India: Just after the US president announced his new HOPE NOW initiative across America phone lines have started to be jammed. The TAJ call center recently won an exclusive US government contract to handle the traffic for the program. “It’s a welcome change after tech-support” says Vishwas Jayaprakash, a 3 year veteran customer service operator. But instead of freezing rates for American subprime borrowers, Vishwas found himself overwhelmed by angry callers that were protesting the freeze. “Sorry Madam, we cannot ask your landlord to freeze your rent for 5 years” was one his scripted replies. Others asked how to report borrowers that lied on their mortgage application to the authorities, about prison terms for fraudulent mortgage brokers, real estate agents and fund managers. “It’s hard to earn a commission on these type of calls”, says Vishwas, but he was able to make up for it with some of the homeowners. “I got them a brand new home equity line of credit, one even did qualify for a new car loan. It’s a great feeling to help people in need”. As the saying goes, good deeds never get lost; someone’s 401k money market contribution into a structures investment vehicle funds someone else’s credit for a new flatscreen TV as holiday present.
Does anyone else see the irony: Outsourcing calls about a program that is supposed to “help” American FBers.
Doug, I agree. I am in disbelief.
It’s just made up, just like most news these days. Cheers…
We’ve been had.
So where did that story come from?
The Onion?
“It’s hard to earn a commission on these types of calls.”
This guy works for commissions. Isn’t commission-based incentives what got us into this problem in the first place?
No disrespect intended~
Link please.
Thank you,
Leigh
… this may sound very naive.. but aren’t government contracts always supposed to go to US companies? I don’t think I’ve ever heard of a foreign company winning a bid on a government contract. (Not that I’m very experienced w/ gov’t contracts).
(Seems to me that if foreign companies with lowball bids can win gov’t contracts, US companies would never win at all).
The social statistics tell a story that GDP can’t.
US teen births tilt up, unmarried rate hits record
http://www.alertnet.org/thenews/newsdesk/N05617851.htm
Study: U.S. Slipping Down Life Expectancy Rankings
http://www.foxnews.com/story/0,2933,293008,00.html
America Loses Its Stature as Tallest Country
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/12/AR2007081200809.html?hpid=moreheadlines
“Over the next year house prices will go down by 5%-10%, and over the next four to six years they will fall 30%-40%. It’s a natural market movement - when a market goes up 200% in 10-15 years it can reasonably be expected to retrace 30%-40% over a four-year period”
I do not agree with this prediction. I think this thing is going to hit hard, and it’s going to hit fast. Once it gains traction, we are going to see massive, colossal drops within a very short period of time. The bleeding is going to be horrendous. Hang on.
Within a relatively short period of time, our economy will start to put itself together again. Notice, prices won’t go back to what they used to be (probably never). But - they will stabilize. And it won’t take 4 years.
1st Quarter 2008: chaotic, big slides. Tons of foreclosures. Drops of 30 - 35%.
2nd Quarter ‘08: worse. Drops of up to 40 - 45%.
3rd Quarter: Drops of up to 50 - 60%.
4th Quarter:
1st Quarter 2009: Bad, but it’s not dropping any longer.
Rest of year: economy tries to stabilise itself. People are older but wiser. Just in time for the election at the end of the year.
Meanwhile: Bush wishes he could leave, permanently. To his house in Paraguay.
http://promo.realestate.yahoo.com/last_of_the_red_hot_markets.html
Wenatchee,WA… sold in ten hours.
Good article, thanks.
‘Real estate developers, seeing others profit, get in on the act by building thousands more homes. Eventually, speculators are merely selling to one another at ever more inflated prices. And when the last to buy or build can no longer flip those houses, prices plummet.’
Really?! Who knew?
6512 Nancy Road, Rancho Palos Verdes, 90275
status: ACT MLS#: P954303 $1,550,000*
List Dt: 08/30/2007 PType: SFR-D Orig Price: $1,850,000
Bed: 4 APN#: 7557-011-023 Yr Built: 1936 Area: 167
Baths: F: 2 3Q: 1 H: 1 Zone: Style: Spanish Map: 823h3
nice price reduction and house was recently built. Not.
“On Saturday, she boiled 15 pots of water so that she could have a hot bath. ‘This place is a gong show,’ she said.”
15 pots? How fat is this person? I know there are bigger issues, but this caught my attention. Look, I live on a peninsula with one power line and one road in and out, so power goes out every winter at least once, and for awhile, so I know about boiling water for baths, and chopping up wood, and hunting down Bigfoot for his fur, and stuff like that, and 15 boiling pots of water means this person is really super fat, or else lying, or else they are floaty fat SOUP.
I recall last winter power was out for 4 and a half days right before Christmas. I heated three whole pots of water to almost boiling point on my wood stove and I had a few very decent baths, with soap, and even some gardenia scented bath crystals. I could even have had a rubber ducky, except that I had flung him out the back door to scare away a racoon, in a different, unrelated story.
I’m just sayin. Is all. This person is fat, or lying, or is blubber soup.
It’s this sort of exaggeration that makes me mad, and causes me to disbelieve my fellow lying, fat, human beings.
So you’re really not fat?
You have it backwards. If she were fat she would only need 3-5 pots, otherwise the tub would over flow. Did you not take basic science? lol I have never understood a bath. You sit there and soap up and rinse in your own butt water. haha
Regards,
Lane
Lane
Haw! You’re pretty funny.
Priced topped out here in SoFla in the fall of 2005. So the down cycle is still unfolding.
Remember, housing is just a part of the total debt structure that is likely to implode.
First come the foreclosures, then unmployment, then some non-mortgage related defaults, then more unemployment, then a slew of non-mortgage related bankruptcies, then more unemployment.
Even the Great Depression took a year or so to pick up steam and the current debt is not limited to the US but is spread across the globe. So, this will likely become a world wide contagion and everyone, as is expected, will be blaming the US.
BTW, I recall watching one of those Housing shows on cable and recall folks biying a pretty nice oceanfront townhouse in Belize. And I remember sitting there and thinking, “Belize? You can buy the same house for less in Tampa … just wait for a couple of years”.
To paraphrase Bob Toll, “McMansion for everyone”.
You’re in the US. You deserve it.
“do not agree with this prediction. I think this thing is going to hit hard, and it’s going to hit fast. Once it gains traction, we are going to see massive, colossal drops within a very short period of time. The bleeding is going to be horrendous. Hang on.”
The pain begins when all these people who pulled their homes off the market hoping for a recovery next spring find out there will be no recovery and now they have to compete with more homes. That’s when the price slashing begins.
Mark my words, when this is all over the new mantra will be:
200 THOUSAND DOLLARS… THAT’S A FREAKIN’ LOT OF MONEY FOR A HOUSE!!!!
—————
“The first sale closed Nov. 16. It was a 1,200-square-foot, two-bedroom, 11/2-bath unit that had been priced at $320,000. It was returned to the market in August at $210,000 and sold for $205,000 - a 36 percent markdown. ‘It’s the first time we’ve experienced losses like this,’ said Cape Ann Housing Opportunity president, Joseph Flatley. ‘There are enormous losses on condos everywhere.