Time To Sweep Up The Confetti
The Journal Gazette reports from Indiana. “National housing experts believe the party’s over now that the homebuyer tax credits have expired. Fort Wayne real estate officials also say it may be time to sweep up the confetti. ‘I can’t imagine that (home purchases) would continue at the same pace,’ said Jim Torres, president of the Fort Wayne Area Association of Realtors. ‘We’ll have a better indication in the next few months.’”
The Courier Journal on Indiana. “House prices in the 13-county Louisville-Southern Indiana metro area are down 2.67 percent from a year ago, according to the latest data from the Federal Housing Finance Agency. They are down almost everywhere else, too. Only nine metro areas of 299 registered increases. Indiana University Southeast business professor Uric Dufrene notes this is the fourth straight quarter that Louisville prices have declined, and that’s never happened before. In fact, until the current downturn Louisville had never registered even two consecutive declines, according to figures going back to 1977.’
“Dufrene also noted that the 2.67 percent decline is Louisville’s biggest since 1983, when prices fell 3.54 percent in the January-March period. ‘What is alarming about this is that the price index was declining in the presence of the ($8,000) government tax credit and historically low mortgage rates,’ he wrote in an e-mail.”
WSTB on Indiana. “A report from the Indiana Association of Realtors shows that compared to last year, home sales statewide were up 28 percent in April. And prices went up 13 percent. Some say this is not a sign of recovery. In fact, this month numbers are already starting to plummet. ‘We are still mired in a very sluggish, slow market,’ said South Bend/Mishawaka MLS president and realtor Jim Dunfee.”
“Dunfee said homes selling now are selling for more than last year, because most of the homes sold in 2009 were foreclosures. He says when the home buyer credit stimulated activity, normal homes began selling again at normal prices. ‘They weren’t appreciated prices,’ he said. ‘In fact, many of them had depreciated. But it made that number of average sale prices go up, which has made civilians go, ‘Oh yeah, prices are going up again,’ but they are not.’”
“And he’s noticed something else since the home buyer credit expired. About 430 homes sold in this area in April, but this month only 155 have sold. ‘Since they were getting $8,000 or $6,500 to get a house, that brought people out to do it. Without that we have fallen right back where we were,’ Dunfee said.”
“‘We are cautioning homeowners to be very aggressive on their pricing, and not speculate,’ Dunfee said. ‘That is hard for them to accept when they read the national headlines about how things have turned around in April. But we are seeing, in this market, flat appreciation or slight depreciation over prices from the 2006 - 2005 market.’”
“Ben Simon’s last home took two years to sell, but he is hoping for better luck this time around. His house went on the market 10 days ago — two weeks after the expiration of the home buyer tax credit. ‘We put our house on the market right as that ended,’ said Simon. ‘So we missed the window of opportunity to jump into that whole scene of things, but it is cyclical. The people who sold their homes in that time period are now looking for places to live, so hopefully they will look this way.’”
The Dayton Daily News in Ohio. “A year has gone by and close to 90,000 foreclosures have been filed statewide since the Democratic-controlled Ohio House passed two measures by state Rep. Mike Foley aimed at helping beleaguered homeowners and renters. The Republican-controlled Senate has yet to take action on either of Foley’s bills or another sponsored by state Sen. Shannon Jones, R-Springboro.”
“The problem isn’t going away, pointed out Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio. Almost 25,000 foreclosures were filed in the state during the first three months of 2010, according to the Ohio Supreme Court report. In addition, Faith said, a Mortgage Bankers Association report found that one in 10 mortgages nationwide was either in foreclosure or 90 days delinquent.”
“‘This could be a real record-breaker of a year,’ he said.”
The Cincinnati Enquirer in Ohio. “Foreclosures shot up 13.5 percent in Greater Cincinnati and Northern Kentucky during the first three months of 2010. The region’s foreclosure growth outpaced Ohio’s 8.8 percent increased caseload but lagged Kentucky’s 28.3 percent climb. More ominously, the region’s latest casualties in the real estate crisis grew at more than twice the more moderate 5.5 percent increase during all of 2009.”
“Sister Barbara Busch, executive director of regional housing advocates Working in Neighborhoods, said through the end of 2008 unemployment or underemployment used to be a factor in about a third of counseling cases the agency handled. Since then, reduced income due to fewer hours or losing ones job accounts for nearly 70 percent of its caseload. ‘We’re seeing a lot more (cases) due to unemployment,’ she said.”
The Telegraph. “The long decline of the car industry and all its spin-off business has been exacerbated by the collapse of a housing market that has left prices close to what they were 50 years ago, when lifestyle magazines featured Detroit as the most desirable city in the United States. Decent three-bedroom homes can be bought for $10,000, but no one wants to buy.”
“Tired of Detroit’s status as the symbol of everything wrong with urban America, its new mayor has come up with a radical solution: to bulldoze the city. By reducing the amount of the space the city serves, millions of dollars would be saved, said Charles Pugh, president of the city council, and other areas improved. ‘We have to police property, put out fires, light the streets, pump water and shovel snow for all these sparsely populated areas where people really shouldn’t be living,’ said Mr Pugh, who revealed shortly before his election last year that his own home had gone into foreclosure.’”
“The plans are being watched by influential figures who believe other cities – including Philadelphia, Pittsburgh, Baltimore and Memphis – could follow suit.”
The Appleton Post Cresent in Wisconsin. ” A flurry of condominium sales has brightened the outlook for Richmond Terrace, the 147-unit mixed residential/commercial development downtown that has struggled financially and has yet to land tenants for its retail/commercial space. The sale of residential units has picked up after asking prices for condominiums were slashed, an across-the-board cut that averaged 40 percent.”
“Joyce Bytof, CEO of Coldwell Banker The Real Estate Group, said she assembled a team of three that brainstormed and took specific steps to make unsold units more attractive to the market. ‘We knew we had to price it right,’ she said.”
Chicago Now in Illinois. “Earlier this week Crain’s reported that Shelbourne Development Group, the developer of The Chicago Spire, has closed their sales center in The NBC Tower and will now be selling units in their own offices on Wacker Drive. It seems that Shelbourne owed their landlord about $316,000 in back rent and the landlord filed an eviction notice a while back. The Chicago Sun Times also reported that key staff members have left the developer’s operation.”
“Shelbourne…even got so desperate that they tried to convince union pension funds to invest in the project under the premise that it would create union jobs. Fortunately, the unions…recognize that Chicago needs another condo development like we need a hole in the ground (uhhh, wait…..we have one of those). The unsold condos in the Spire represent about 20% of the total downtown unsold condo inventory.”
“Speaking of the hole…The Chicago Architectural Club announced a winner to their contest for ideas on what to do with the hole. The winning idea involved transforming the area around the hole into a beach and launching a yellow hot air balloon (representing the sun) that would carry a circular swimming pool. That idea probably has a better chance of coming to fruition than the original plan and is far more practical.”
“My timing was awful. Housing prices in Chicago plummeted as soon as I finished signing my name on our closing documents. That was back in 2006, when my wife and I purchased our home in suburban Chicago. We managed the neat trick of buying when housing prices in the city and suburbs were at their highest point.”
“The housing market today is a lot different. Like so many others across the area, our home has lost value. I’d guess that I’m one of the nearly 25 percent of homeowners today who is underwater. This means that I owe more on my mortgage loan than what my house is worth. How much more? I’m not sure; I don’t want to pay for the appraisal that’d give me the bad news.”
The Irish Independent. “Limerick-based Chieftain Construction group has surrendered its landmark Chicago €75m apartment tower to (a) private-equity venture. Chieftain had raised more than €8m from 47 Irish investors and $84m (€69m) from US-based Corus Bank in 2006 to finance the construction of the 35-storey Lexington Park condominium tower near Chicago’s main street, Michigan Avenue. Now the 333-unit apartment tower has a new claim to fame as the city’s ‘biggest condo tower to be taken over by its lender in the current housing crisis,’ according to the reputable local business magazine, ‘Crain’.”
“Chieftain CEO Sean O’Sullivan said that some Irish buyers were among those who had paid deposits on about 180 of the units and who had not closed their sales because construction work was not completed. Sales had been completed on only three units.”
The Chicago Tribune In Illinois. “At $169,000, it’s a lot of house for the money, and John Wozniak, co-owner of J. Lawrence Homes LLC, isn’t interested in going a penny lower. During the boom times that made Will County a real estate hot spot, the three-bedroom single-family houses for sale in his Silver Leaf community would have commanded an additional $50,000, he said.”
“The Silver Leaf housing development is a long ride from downtown Chicago, and, as Wozniak can attest, sales in the area have been slow. His Wheaton-based company operates a half-dozen communities, and during the fat years sales of 20 or more houses monthly would have been a reasonable tally. By 2009, however, sales had dwindled to one or two a month.”
“To shoppers waiting for home prices to fall further, Wozniak offers this advice: Don’t. ‘This adjustment we’ve made over the past three years is really all we can do,’ he said. ‘I don’t think we can go any lower than we are right now. I really believe that.’”
Sun Times Media in Illinois. “Many have called it the great housing bubble — a period during the early to mid-2000s when there seemed to be no end to the rise in home values. But as is the nature of any bubble, it burst — and with it came a wave of foreclosures that swept through the country. According to an April foreclosure report prepared by RealtyTrac, Illinois ranked eighth in the U.S. among states with the fastest rate of new foreclosure filings — one for every 280 homes, a 38 percent rise compared to April 2009.”
“Another leading factor for the current wave, according to Geoff Smith, senior vice president for the Woodstock Institute, a Chicago-based, nonprofit research and policy organization, is the increased number of ‘under water’ homeowners. New filings aside, what is of greater concern for Smith has been the increased number of individuals who have gone through the entire foreclosure process, which he estimated to have risen by as much as 56 percent during the first three months of 2010 compared to the same time last year.”
“‘In 95 percent of those cases, you’re seeing the properties becoming bank-owned,’ he said.”
The Pioneer Press in Minnesota. “Gary Benson is the perfect renter. He’s never been late on a payment. He keeps his St. Paul house and yard clean. He spends his own money making repairs. But perfect isn’t good enough. His family soon will be forced to move out — not for anything he did wrong, but because his landlord didn’t pay the mortgage. The house must be sold, and real estate agents say it’s easier to sell rental property if all tenants are gone.”
“‘There is no sense in kicking us out. This would be another abandoned house,’ said Benson, standing amid cardboard boxes in his living room. ‘If we left, you would have meth heads breaking in and stealing copper pipes. That is the last thing St. Paul needs.’”
“Gary and Cynthia Benson already had been hit by the more familiar type of foreclosure — they lost the home they had owned for eight years. Gary Benson filed for bankruptcy in 2008.”
“The couple never has missed a rent payment. Their problem is with the new owner — Freddie Mac, the federally sponsored agency that buys and sells mortgages. Benson wants to keep renting the house, then buy it when he qualifies for a mortgage in November. In good times, banks might be patient — but not now. Real estate agent Randy Burg, who is trying to sell the Benson house, said the bank could wait, only to find out that Benson didn’t qualify for a mortgage. Better to get the family to leave soon, Burg said, to sell to the first qualified buyer.”
“Last week, the exasperated couple stood in the house that never quite became a home. ‘I am not perfect. I am not sitting here shining up my halo,’ said Gary Benson. ‘But people like us are getting dogged for other people’s greed.’”
“The most recent data from the SP Case-Shiller survey of housing prices…indicated Minneapolis-St. Paul area, which includes Pierce and St. Croix counties in Wisconsin, showed the second-worst drop at 2.7 percent for the month. This is the sixth consecutive month in which the index showed some drop for our metro area.”
“Prices for a composite of the 20 metro areas included in the survey also edged down for the sixth month but remained slightly above where they were a year ago. The overall conclusion is that while housing prices recovered somewhat in mid-2009, they are eroding again.”
“Yes, ‘cash for clunkers’ gave a temporary boost to auto sales. A large tax credit and the Federal Reserve buying more than $1 trillion worth of mortgage securities to keep home loan interest rates at historic lows gave some temporary support to housing sales and prices. The Fed’s general flooding of the economy with new money has made stock markets look healthier than underlying conditions warrant.”
“But…any withdrawal of government stimulus seems to make the economy sputter. The U.S. economy absorbed problems over six years rather than six months. They include a massively unsustainable run-up in housing construction and prices, a banking sector that is riddled with bad loans from top to bottom and a decade of large federal deficits.”
“There is no simple fix for the U.S. economy. The hangover of excessive money growth, overbuilding, inflated real estate and financial asset prices, bad investments and an inflation-adjusted doubling of the national debt between 2001 and 2010 is one that cannot be cured with aspirin or a can of gas treatment. It simply will take time, years rather than months.”
MLS president and realtor Jim Dunfee: “homes selling now are selling for more than last year, because most of the homes sold in 2009 were foreclosures . . . when the home buyer credit stimulated activity, normal homes began selling again at normal prices. ‘They weren’t appreciated prices,’ he said. ‘In fact, many of them had depreciated. But it made that number of average sale prices go up, which has made civilians go, ‘Oh yeah, prices are going up again,’ but they are not.’” I give him credit for noting that the real estate market sucks, but what are “normal” houses (he seems to be saying that foreclosures and homes priced higher than that at which the tax credit would not be a huge incentive (and note the only incentive is for those cannot afford to put any money down because if they had money to put down there would never be an incentive to take the credit and finance an increased price for the seller) or are phased out by income limitations are abnormal) at “normal” prices? He is speaking gibberish.
Ben, putting in stories of the Twin Cities this early in the morning is like throwing red meat to a ravenous wolf. I still remember the, “it’s different here” thinking. It resembles the thinking of Fantasyland here. That thinking in the Twin Cities has taken a huge hit. I think Minneapolis is just behind the really big bubble centers such as Florida, Vegas and Phoenix.
The friend I begged not to buy in August 2007 paid $378,000. The zestimate on his house is now $300,000 even. And still he tells me he could never rent his whole life. Who says you have to rent your whole life? Not me. It just made perfect sense in 2007. In many places it still does.
I love to see the entitlement mentality raging strong. Gary Benson should be allowed to stay in that house and buy it when he can get a mortgage. What happened to this country? What happened to believing in yourself and mistrusting the government? Gary Benson got booted from a house he had for eight years. Give us the story behind that. Come on. Do some work, you worthless journalists.
My favorite line from that last article is: “The U.S. economy won’t die completely, but it will sputter whenever monetary and fiscal policy are not calibrated perfectly.”
Yep, we just need The Fed and the federal government to come up with the right prescription for growth and everything will work out fine. They are so wise.
These “new buyers” with government free money and little down payment of their own will in the next few years be upside down on their loans as real estate houses will continue to fall. What do they do then? Walk away or ask for restructure of their loans” Either case increase taxes on us who can still pay will go up because of stupied, no common sense decisions by government officials who “know what’s best for us” will continue. Sad days ahead for the middle class who will soon be gone. The elite have gotten their way as serfs will pay more in ever way to them.
“It resembles the thinking of Fantasyland here.”
Are you suggesting the Twin Cities are morphing into LA?
“The hangover of excessive money growth, overbuilding, inflated real estate and financial asset prices, bad investments and an inflation-adjusted doubling of the national debt between 2001 and 2010 is one that cannot be cured with aspirin or a can of gas treatment. It simply will take time, years rather than months.”
I get the feeling that every month of deferred deleveraging extends the problem another years. And the shift of debt from the private to the public means an redistribution of the eventual pain downward.
“I get the feeling that every month of deferred deleveraging extends the problem another years.”
I get the feeling that it’s not years but months - until after the November elections. After November is when there will be h*ll to pay, or rather that’s when h*ll will begin to be paid.
Naw. That will just be the beginning of the 2012 election cycle.
With a brand new set of incumbents.
From Ben’s Post…
“Joyce Bytof, CEO of Coldwell Banker The Real Estate Group, said she assembled a team of three that brainstormed and took specific steps to make unsold units more attractive to the market. ‘We knew we had to price it right,’ she said
From the Appleton article …
“The sales occurring now are what we call ‘distress’ sales,” Brosman said. “The seller has to sell in order to retain the property and get some cash flow coming in. So we don’t use the sale prices as evidence of market value.”
There it is again, Hiding the Evidence.
Don’t you just LOVE these fuzzy little creative RE critters.
“And the shift of debt from the private to the public means an redistribution of the eventual pain downward.”
Wall Street succeeded in getting the politicians and government financial authorities to dump Wall Street’s toxic mortgage debt on the US Treasury. But don’t worry — TTT assures us that US debt will retain its AAA rating forever!
Can anyone offer comment on the connection between retaining the US Aaa debt rating and future Treasury interest rates?
Bloomberg
Geithner Says U.S. Will ‘Never’ Lose Its Aaa Debt Rating
February 08, 2010, 6:26 AM EST
By Rebecca Christie
Feb. 8 (Bloomberg) — Treasury Secretary Timothy F. Geithner said the U.S. is in no danger of losing its Aaa debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010.
“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”
Geithner said investors around the world turn to U.S. Treasury securities and dollar-denominated assets whenever they are worried about global stability. That reflects “basic confidence” in the U.S. and its ability to bounce back from the global recession, he said.
Moody’s Investors Service Inc. last week said the U.S. government’s bond rating will come under pressure in the future unless additional measures are taken to reduce budget deficits projected for the next decade.
The U.S. plans to rein in the deficit once the labor market recovers, Geithner said. In the short run, that means focusing on ways to “make sure that this economy is growing again,” he said. The administration says the deficit will shrink over the next four years as more Americans find jobs and the economy accelerates.
“This is within our capacity to do,” Geithner said.
The Obama administration has proposed additional tax cuts and small-business assistance in its bid to jumpstart the U.S. economy. Geithner and other officials have said it’s too soon to start cutting spending because ending stimulus programs now could derail the economy.
…
is one that cannot be cured with aspirin or a can of gas treatment.
———————————————————————
I dunno about the aspirin but a can of gas (and a match) can solve a lot or problems.
May I refer you to my favorite bar tender, Mr. Vyacheslav Molotov.
“And the shift of debt from the private to the public means an redistribution of the eventual pain downward.”
That’s the hallmark of too-big-to-fail: The big Wall Street players get to pocket 100 percent of their gambling jack pots, but when they lose big time, they get to dump their bad debt on the U.S. currency base.
““The plans are being watched by influential figures who believe other cities – including Philadelphia, Pittsburgh, Baltimore and Memphis – could follow suit.”
Ah yes, then all the poor can move out of town and on to the next big city, NY perhaps or LA.
“His family soon will be forced to move out — not for anything he did wrong, but because his landlord didn’t pay the mortgage.”
Had dinner with someone here in Salinas on Friday in the same boat. Been renting for 4 yrs, three renters total in house. Just found out that for over a year, maybe two, that the landlord has been pocketing the money and not paying the mortgage. The best part, he is a ‘Realtor’, in his thirties, owns several properties, and drives a Viper. I hope he has dumped his cash into the Vipor so that it is ripe for repo. The renter knows another Realtor who told her to stop paying and wait it out as the banks will pay $1000 per renter to get them out. I’ll let you know how this one plays out.
Gary Benson didn’t do anything wrong? In that article it also states he was foreclosed on a house he owned for eight years. I wish they would tell that story.
Here’s another victim story and I’m still looking for the victim. Oh, that’s right, it is those Americans that choose to live reasonable, responsible lives. They will pay for all of the Gary Bensons of this world.
Here’s another victim story and I’m still looking for the victim. Oh, that’s right, it is those Americans that choose to live reasonable, responsible lives. They will pay for all of the Gary Bensons of this world.
They’ll also pay for their own complicity in electing politicians who are whores for Wall Street and the corporate cartels. This is called “chickens coming home to roost.”
Are there any politicians that aren’t whores to vote for?
Yes. But I’ll leave it to you to find them.
My litmus test: Any senator or representative who voted for TARP or any subsequent bailout, or who voted against auditing the Fed, have shown their true colors. The small minority of principled Senators and politicians who stood up to Wall Street, such as Ron Paul or Alan Grayson, are the good guys. Or at least as good as it gets.
‘This adjustment we’ve made over the past three years is really all we can do,’ he said. ‘I don’t think we can go any lower than we are right now. I really believe that’
I’ve been thinking about the time thing; prices go up like crazy for 10 years, maybe more in some places, then fall for 3 and it’s supposed to be fixed? And especially considering this - the govt/fed is doing what it can to keep prices from falling.
Although unrealistic at times, hope is healthier than despair.
I personally am hopeful that affordable pricing will some day return to other American housing markets besides Detroit’s, despite Uncle Sam’s best efforts to prevent this from happening.
Hope the nite before…..and despair the morning after.
I don’t see much on South Dakota, and I had a person ask me about it a few weeks ago:
‘The number of foreclosed homes and other properties being sold from the courthouse steps in Minnehaha and Lincoln counties is outpacing the past two years. That’s a surprise because foreclosure numbers declined last year after a busy 2008. Lincoln County Sheriff Dennis Johnson was hoping the downward trend would continue. ‘As of now, that is not happening,’ he said.’
http://www.argusleader.com/article/20100523/NEWS/5230312/1001/news
“Tired of Detroit’s status as the symbol of everything wrong with urban America, its new mayor has come up with a radical solution: to bulldoze the city. By reducing the amount of the space the city serves, millions of dollars would be saved, said Charles Pugh, president of the city council, and other areas improved. ‘We have to police property, put out fires, light the streets, pump water and shovel snow for all these sparsely populated areas where people really shouldn’t be living,’ said Mr Pugh, who revealed shortly before his election last year that his own home had gone into foreclosure.’”
“The plans are being watched by influential figures who believe other cities – including Philadelphia, Pittsburgh, Baltimore and Memphis – could follow suit.”
None of these cities will ever change their socialist ways. They will tinker at the edges. None of these cities will ever come back to their glory days. Ever.
No one wants to live or work under socialism (unless you are the government). It is that simple.
Can you imagine if one of the above mentioned cities declared today:
1. A ban on ALL public unions
2. Cut all public servant workers pay/benefits/pension to match that of the average citizen
3. Cut all income and corporate taxes to zero
4. Cut all property taxes
5. Gave out real school vouchers given directly to the parents that can be used at any school (including homeschooling)
6. Actually focusing on clean and safe streets as the #1 priority
7. Want a public handout? - then you work for it
8. Put criminals in jail
9. Look at factories and small businesses as ASSETS worth protecting
10. Tax trial lawyers at 95%, institute loser pays and liability caps
11. Shoot a criminal – get lunch with the mayor (instead of getting hounded by the DA)
Imagine the rush of people and businesses that will actually WANT to move back into that city
’sparsely populated areas where people really shouldn’t be living’
This statement caught my attention. The housing bubble caused some distortions that result in this logic applied to relatively new housing. I’ve read that some subdivisions in Maricopa Co, AZ, are so far out that the retail never followed. These people may walk in mass when the long job commute and hour trips to buy groceries wear them out. Throw in the HOA problem, and I could imagine 10 year old subdivisions getting bulldozed - with a federal grant of course.
“Throw in the HOA problem, and I could imagine 10 year old subdivisions getting bulldozed - with a federal grant of course.”
The economy certainly could benefit from shovel-ready projects like that one!
They can start by bulldozing all of Maricopa - that place is out in the middle of nowhere and a small two-land road is the only way to the town. It’s fine as long as there aren’t any accidents. The problem is that there is always an accident. 4000 sq. ft homes for $100,000 out there and they still can’t get rid of them.
’sparsely populated areas where people really shouldn’t be living’
This statement caught my attention.
Yeah, I’ve had friends in CA, MN and Texas that lived so far out, that it was like driving the Extraterrestrial Highway/Area 51 road just to find them.
There will always be people that want to live like that. Here in N AZ, there are a bunch of folks that have to truck in water, etc. But I think the trend, if it is one, involves areas that municipalities provide services for. Some of these people in Detroit can’t wait to get out - it’s that bad. Check out the comment on this article:
‘After 15 years paying the mortgage in Detroit, I can justify it no more. My once full block is 50% vacant, I owe $41K and the mortgage company just appraised the house for $9K. I have had it on the market for 2 weeks for $9,000 and haven’t even had an inquiry. Our only hope in this market, with its dismal future, is to wait 90 days and hope the mortgage company will take deed in lieu. Dave Bing doesn’t know what to do about Detroit, but I do. Leave, no matter what the cost. In this case, about $41K.’
http://www.thetakeaway.org/2010/may/28/hope-housing/
I suppose that a great many people look and point at Detroit as a dead or dying city, when unbeknown to them, their own state, city or berg is in fact, on the same long, slow slide into decadent decay to some degree or other.
Welcome to the Brave New America.
Detroit = canary in the mind shaft for other American cities
“Some of these people in Detroit can’t wait to get out - it’s that bad.”
It is bad and always a gamble with great risk to try to stay or leave. Many times, there is no really viable economic choice.
I have seen this type situation on smaller scales before Ben.
Northern Minnesota was very dependant on the good money jobs of the Boom and Bust cycles of the US Iron Mining Industry. In the late 90’s and early 80’s, a good 13k people were directly employed in various mining companies with nearly 100 representative small towns and communities on the Mesabi Iron Range dependant on their seconday jobs and income.
The Reserve Mining Co. small cities and communities in northern MN of Babbitt(inland ore mining) and Silver Bay (lakeside on Superior processing and shipping) were two examples.
Babbitt had good jobs and excellent wages and then the local mine went bankrupt and closed. Heck, some highly skilled working husbands and wives were bringing in joint incomes of 140-160k with over-time. Then, suddenly and for a long while, it was damned near a ghost town with eveything there except working people. Silver Bay was not much better off and you could have easily barganed for a cute house overlooking Lake Superior for 24-30k at times.
Houses, hospital, school, municipal infrastuctures, all in place and operational. A perfectly functional little city with once a thriving population of 1,200 plus souls then, virtually empty, wasn’t a pretty sight or healthy for dark houses in those northern Mn winters nights.
In Babbitt, everyone was trying to sell nice 3bdr houses to retirees and tourists for 20-24K, when less than 16 miles away, the fancy trendy in-lake country properties were still being offered for 500k and up. Some people lost their shirts and some people made out like happy bandits. For a time, it was a real gamble if these towns, and others, would even survive.
Fortunately, the mining company reopened 4 years later under a new owners, name and management and and the towns somewhat recovered.
Detroit proper is a prime on the example of “House Arrest”, house extortion and a really huge poor neighborhood in plain awful condition, all rolled into one.
The big questions for Detroit may well be, is there any hope at all and who really wants to gamble on a long shot ?
Sorry but I keep thinking…US Steel n’ Gary, Indiana…US Steel n’ Gary, Indiana…
Hello HousingBubbleBloggers
I had the pleasure to host, at work, some gentlemen from Ann Arbor, Michigan. They told me first hand about what’s going on in Detroit and recommended this movie:
http://www.youtube.com/watch?v=ReqG6qbx_c0&feature=related
The link is to part 1 out of 8 (all are in YouTube). It is a superb documentary called “Requiem for Detroit ” which tells 100 years of history in 80 minutes. It is quite amazing - especially how history repeated itself there, and what it has become.
Very sad….
Regards
arit from Vancouver, Canada
That is truly one of the most disturbing video documentaries I have ever viewed. Watching it makes me realize that I, too, live in denial over where America stands at the onset of the 21st century.
Comment:
America needs a leader who can look problems like those of Detroit squarely in the eye and plan how to get past them.
The current extend-and-pretend efforts are not going to get us where we need to go.
“There will always be people that want to live like that.”
After the novelty wears off, though, they start whinning that their road needs to be paved, that their road needs to be scrapped regularly,that their garbage needs to be collected in front of their house, instead of having to drive it to the dumpster, etc. And then we locals end up paying in increased taxes for their “back to the land” experience. Happens all the time here.
Except that the sparsely populated areas in Detroit are in the city! The population is concentrated in the suburbs now. But I’m glad they’re pulling down those abandoned houses- many were abandoned since I was a girl more than 40 years ago.
“Dufrene also noted that the 2.67 percent decline is Louisville’s biggest since 1983, when prices fell 3.54 percent in the January-March period. ‘What is alarming about this is that the price index was declining in the presence of the ($8,000) government tax credit and historically low mortgage rates,’ he wrote in an e-mail.”
That does kind of make you wonder how Louisville prices are going to move after the expiration of the $8,000 credit and reversion of mortgage rates to historic norms.
P.S. My niece and her husband (a home builder) bought a swanky, largish McMansion in Lexington when they were newlywed back in 2006, against uncle’s sage advice. Back then, I was the voice of one crying in the wilderness regarding the incipient housing bust, even though there was ample evidence. I am wondering if Lexington prices are behaving similarly to Louisville prices at this stage of the housing bust?
I guess the fact that Uncle Sam used the $8K tax credit to encourage them to catch falling knives hasn’t done much to enhance the first-time buyer cohort’s housing bust experience?
P.S. Besides the first-time buyer market and the second-home market, what other housing sub-markets does Zandi have in mind?
Posted on Wed, May. 26, 2010
First-timer, boomers feel housing downturn most
By Alan J. Heavens
Inquirer Real Estate Writer
Although the situation is open to interpretation as well as change, there are growing concerns that the effects of this economic downturn could have a long-lasting effect on the housing market.
A study by the Mortgage Bankers Association, conducted by University of Kentucky economics professor Joe Peek, concludes that “the current financial crisis and recession exceeded the devastation created by other post-World War II recessions.”
Saving rates have risen substantially. Many Americans will continue to cut spending sharply out of necessity, “others out of fear of what the future holds,” Peek said.
When it comes to housing, he said, it was unlikely that the dramatic rise in loan delinquencies, foreclosures and bankruptcies would show a “meaningful” decrease in the foreseeable future.
“High unemployment and low house prices are widely projected to remain for an extended period, as well as the rise in problem loans at banks that will restrain their willingness and ability to provide credit,” Peek said.
Two groups expected to feel the pinch are young first-time buyers and the so-called active-adult purchasers who downsize as their children grow and move out.
“The impact of a higher unemployment rate for Americans ages 16 to 24 could have a lasting effect on lifetime earnings and attitudes toward risk and social policies,” Peek said.
In addition, those nearing retirement are delaying it and reentering the labor force “in an effort to rebuild some of the retirement wealth that was wiped out by the recession,” he said.
The housing industry had been banking on both of these groups to sustain growth during the coming decades - especially the empty-nester baby boomers.
“The tougher economic circumstances for twentysomethings and fiftysomethings will weigh on housing demand over the coming decade,” said Mark Zandi, Moody’s Economy.com chief economist in West Chester. “The first-time buyer and second-home markets would be most directly impacted.”
Economist Patrick Newport of IHS Global Insight of Lexington, Mass., said that Peek’s assessments “are a lot more dismal than ours, and ours is hardly rosy.”
He said today’s housing market “is imposing a bit more discipline by requiring bigger down payments and better credit scores for buying homes.”
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“The tougher economic circumstances for twentysomethings and fiftysomethings will weigh on housing demand over the coming decade,
It USED to be:
Twentysomethings did not even LOOK at house until age 30, married (with kids) and had saved a large downpayment. Twentysomethings RENTED.
Fiftysomethings had the mortgage paid off or were damn close to paying ot off. Fiftysomethings goal in life was to pay off the mortgage and have a party.
“Fiftysomethings had the mortgage paid off or were damn close to paying ot off. Fiftysomethings goal in life was to pay off the mortgage and have a party.”
It is about time for financially prudent fiftysomethings to prepare themselves for the inevitable future request to support financially imprudent fiftysomethings in their old age.
My nephew and is wife are on they’re 3rd house and they are bearly 30 years old.
The first house was a really nice Hummer Class house.
Their second was new McMansion Class with hot tubs, huge TV’s and everything.
Now they are staying in his FIL’s summer house out on the lake while they building their new house.
This heavy cruiser is gonna be in the Garage Mahal Class.
The kid is a glorified welder in a Mining company and she has a MS Psych degree.
My brother just shakes his head. laughs and says “I should have been smart enough to marry a local banker’s daughter.”
Yeah…and I should have been smart enough to grab her younger sister !!
“But…any withdrawal of government stimulus seems to make the economy sputter. The U.S. economy absorbed problems over six years rather than six months. They include a massively unsustainable run-up in housing construction and prices, a banking sector that is riddled with bad loans from top to bottom and a decade of large federal deficits.”
Sounds like the economy will need endless hair-of-the-dog stimulus to keep it afloat. Hopefully the figurative version of this plan will work better than the literal version works in alcoholics’ personal lives. I am remembering my uncle, whose never-ending hair-of-the-dog measures ended up in loss of family, career, and eventually, his own life. But perhaps the monetary policy version of hair-of-the-dog has less pernicious effects than the analogous alcohol-fueled version?
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7786450/Spain-is-trapped-in-a-perverse-spiral-as-wage-cuts-deepen-the-crisis.html
Spain has an overhang of 1.6 million houses - six times the US shadow inventory. And a 20.5% unemployment rate and horrific debt burdens and budget deficits.
Yeah, this is going to end well.
Spanish housing bubble = U.S. bubble on steroids
But spain is actually CUTTING the number of public workers and their pay/benefits/pensions…
At least they are attemting to cut spending.
And, so far, no EU TARP for spain.
Sounds like they are also cutting housing demand in the process, which should set the stage for a resoundingly spectacular crash!
And how is cutting incomes and creating more unemployment going to fix their problem?
Not that there is a fix.
I think the goal of TTT and his gang is to get Germany and Europe to take up the role of spending like a drunken sailor while Greece and Spain get their sht together. I’m not sure Germany will go along, but they did get them to go along iwth Euro TARP.
“I’m not sure Germany will go along, but they did get them to go along iwth Euro TARP.”
That was a big hit with the German populace!
Don’t be beastly to the Germans
Published: May 30 2010 20:35 | Last updated: May 30 2010 20:35
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One of the reasons the European Union is now in trouble is that previous German governments thought too much about “Europe” and too little about domestic public opinion. The euro was created – and the Deutschmark abolished – without securing the explicit consent of the people. So it is unsurprising that there is now a public backlash in Germany, at the spectacle of a crisis in the euro-zone.
The Merkel government is right to pay heed to public opinion. But it also should be more open in acknowledging one of the main reasons that Germany participated in the rescue package. German banks would suffer badly if Greece partially defaulted on its debts.
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Until this guy’s advice no longer qualifies as “Common Sense,” the credit bubble will not be through deflating.
* The Wall Street
* COMMON SENSE
* MAY 26, 2010
More Than Ever, Keep the Focus Long-Term
By JAMES B. STEWART
The correction that made such a brief appearance two weeks ago has returned, this time apparently to stay. For me, that means opportunity.
Last week the Nasdaq Composite dropped convincingly below the Common Sense buying threshold, which is a 10% decline from the most recent high reached on April 23. (The Common Sense approach calls for buying on corrections of 10% in the Nasdaq and selling after rallies of 25%.)
Just two weeks ago I fretted that a buying opportunity and come and gone so fast I was unable to take advantage of it. The $1 trillion rescue plan unveiled by the European Union and the International Monetary Fund had triggered a huge rally, and it looked like the bull market was back. I needn’t have worried. European sovereign worries have returned with a vengeance. Not only did the market’s plunge renew a buying opportunity, but indexes fell so rapidly last week that the Nasdaq was well below the 10% threshold on Thursday, when I made some purchases.
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Can anyone document whether the Japanese stock market had a helpful “Common Sense” adviser like James Stewart, to steer greater fools into buying stocks there over the past two decades. Any Japanese investors who followed such “Common Sense” advice starting around 1990 or so would find themselves still down by 75 percent from the peak.
Of course, this can’t happen here, because this is ‘Merica!
Have an opportunity to move from Pittsburgh to Maryland for work. I am in the tech field. I have been looking at Ellicott City as I have relatives nearby. Does anyone have information on RE situation in that area. Thanks.
You’ll probably need to ask this early in the day to get good responses.
So glad my old friend didn’t buy again in Chicago. She kept asking me to join up with her, and my refrain was always, ‘perhaps you could start reading the HBB, and THEN we’ll talk’. She recently moved to Ft Worth.
Hope she doesn’t buy there.
HELLO PDX lady! and SD bear, Sf gal. All other friends too!
“To shoppers waiting for home prices to fall further, Wozniak offers this advice: Don’t. ‘This adjustment we’ve made over the past three years is really all we can do,’ he said. ‘I don’t think we can go any lower than we are right now. I really believe that.’”
…which brings to mind the similarity between real estate investing and belief in Candy-crapping Unicorns™.
I call BS on the NY Times editorial referenced here. You will not easily convince me that a matter of a few weeks delay had a material effect on a financial crisis that built over a period of decades. It takes a considerable length of time to destroy a financial system — not something that can be accomplished within a few weeks.
Merkel feels the heat from Europe’s financial fires
By Simon Sturdee (AFP) – 19 hours ago
BERLIN — Barely half a year into her second term at the head of Europe’s biggest economy, German Chancellor Angela Merkel has found herself under fire at home and abroad over a whole range of issues, with the Greek debt crisis top of the list.
But her actions are largely explained by severe political pressure at home, commentators say.
With Greece teetering on the edge of financial meltdown a few weeks ago, Merkel was accused of foot-dragging over riding to the rescue together with Germany’s European Union partners and the International Monetary Fund.
Similar charges were levelled when it came to arming Europe with a trillion-dollar fire extinguisher to stop the flames spreading to other debt-ridden eurozone members such as Portugal and Spain.
“When Germany finally agreed to contribute to a bailout fund — under threat of a continentwide crash — Europe’s economic problems were far worse, and Germany and others had to ante up a lot more cash,” a New York Times editorial said.
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This Utah housing story makes me long for Olygal’s pithy insights.
Utah’s foreclosure crisis: Worst lurks ahead
Having lagged behind other hard-hit regions where housing markets are now slowly improving, Utah has yet to reach the peak of its crisis.
By Tony Semerad and Julia Lyon
The Salt Lake Tribune
Updated: 05/25/2010 12:24:28 PM MDT
Before a life-altering off-road vehicle accident in American Fork Canyon, Clancy Talbot of Bountiful earned as much as $10,000 per month selling identity theft protection. Now, tens of thousands of dollars in medical bills later, she may be about to lose her home.
For eight months after Talbot’s July 2008 accident — she was literally impaled by a tree — the 37-year-old mother of three could not work. She and her husband modified one of their mortgages, but have not been able to refinance the second. They’ve tightened everywhere they can. Payments are ballooning and the total is now more than they can afford.
More than 22,000 homeowners in Utah found themselves in some stage of foreclosure between July 2008 and April 2010, according to a Salt Lake Tribune computer analysis based on data from RealtyTrac, which tracks U.S. foreclosures. And having lagged behind other hard-hit regions where housing markets are now slowly improving, Utah has yet to reach the peak of its crisis.
In Salt Lake City, foreclosure filings doubled in the first three months of 2010 compared with the same time last year, the highest rate of increase for all U.S. cities. The number leapt an additional 44 percent in April, raising the share of all Utah homes in foreclosure to one in every 221, fifth highest in the nation.
“I truly believe that we have not seen the worst of this,” said Julia Borst, president of the Utah Mortgage Lenders Association. “I can’t even explain to you the gravity of it.”
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Foreclosure: Seven counties in distress
“And having lagged behind other hard-hit regions where housing markets are now slowly improving, Utah has yet to reach the peak of its crisis.”
I’m not buying it. Journalists are easily deceived by the ability of Uncle Sam’s various housing market life support measures to mask the visible symptoms of a critically injured housing market.
Nobody can argue this is not a shovel-ready project.
Detroit to bulldoze thousands of homes in fight for survival
Tired of Detroit’s status as the symbol of everything wrong with urban America, its new mayor has come up with a radical solution: to bulldoze the city.
By Alex Spillius in Detroit
Published: 10:00PM BST 28 May 2010
A vacant home in Detroit. Photo: AP Photo/Paul Sancya
David Bing, a businessman and former all-star basketball player who entered politics late in life, says he has no choice.
The 2010 census is expected to reveal a population of about 800,000, down from a peak of 1.8 million in the Motor City heyday of the late 1950s.
The long decline of the car industry and all its spin-off business has been exacerbated by the collapse of a housing market that has left prices close to what they were 50 years ago, when lifestyle magazines featured Detroit as the most desirable city in the United States.
Decent three-bedroom homes can be bought for $10,000, but no one wants to buy.
Decades of poor and at times corrupt administration have also taken their toll, and with the city facing a deficit of between $85 and $124 million this year, the answer, says Mr Bing, is to accept reality and reduce the size of the city.
“There is just too much land and too many expenses for us to continue to manage the city as we have in the past,” he said. “If we don’t do it, this whole city is going to go down.”
Plans currently being devised would be the most revolutionary carried out by a major American city.
Large chunks of neighbourhoods would be razed and converted to parks, urban farms or simply abandoned. As an opening bid, Mr Bing has vowed to demolish 3,000 homes this year, and a further 7,000 over the following three years. Some are speculating that up to 40,000 homes could eventually go.
The plans are being watched by influential figures who believe other cities – including Philadelphia, Pittsburgh, Baltimore and Memphis – could follow suit. The Obama administration is being advised by Dan Kildee, who pioneered the policy in Flint in his role as treasurer of Genesee County.
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