The Housing Bubble

The Day reports from Connecticut. “Foreclosure activity in New London County soared by more than 60 percent in the first half of this year compared with the same period in 2009, according to RealtyTrac, leading a state economist to conclude that one of the causes of the current recession has now turned into a victim of the downturn. ‘Some of what we’re seeing is because of the backwash effects of the broader collapse of the economy,’ said University of Connecticut economist Steven P. Lanza. ‘The headwinds for this housing crisis are going to be around for a long time.’”

“But Jeff Gentes, foreclosure-prevention staff attorney at the Connecticut Fair Housing Center, said the statewide statistics may be a bit misleading, since in the first half of 2009 a national foreclosure-prevention program was just getting under way. The program led to banks and mortgage companies delaying some foreclosures in the first half of 2009, he said, which made the same period this year look worse than it might have otherwise.”

“Still, he said, ‘I don’t see things getting better for a while …. The job market could easily just stay at a long-term crisis mode for another two years, and I wouldn’t be shocked if jobs were more or less flat till 2015.’”

The Norwich Bulletin in Connecticut. “Property revaluations being conducted now could bring results very different from previous years. The process of assessing property values was last done in 2005, at the height of the housing bubble, Voluntown tax assessor Mildred Peringer said. Since then, home prices have decreased significantly, making it likely that assessments will drop, she said.”

“Generally, housing values appreciate as time goes by, Peringer said. A revaluation has not brought down the grand list in the nearly 20 years she has been tax assessor, she said.”

The Times Argus in Vermont. “The effects of the recession continue to be felt in Vermont where bankruptcies are up 17 percent this year. Michelle Kainen, a White River Junction lawyer, whose case load is up 15 percent from a year ago, said it’s rare when she sees a married couple come into her office with both spouses employed. She said either that or one or both have taken jobs that pay far less than their previous job. Kainen said she’s also seeing more small business bankruptcies.”

“For longtime Bethel bankruptcy lawyer Ray Obuchowski, the jump in filings is not unexpected. He said the fallout from this recession is different in that it has hit a wider segment of the population. ‘We’ve seen a lot more of-upper income and lower- upper income people,’ Obuchowski said, ‘who have been squeezed by all the traditional factors of divorce, job loss, health reasons, that resulted in them being unable to meet their housing payments.’”

The Providence Journal in Rhode Island. “Americans have endured 11 recessions since World War II. But this one is different. It has the highest percentage of long-term unemployed (those without jobs for more than six months), the Congressional Research Service said in a recent report. ‘The incidence of long-term unemployment currently is higher than at any time in the post-war period,’ the Congressional Research Service said.”

“Over the last 30 years or so, the nation’s economy has changed, giving greater emphasis to the production of services over the production of goods. Recessions now have less to do with inventory, more to do with speculative price bubbles — in technology stocks or the housing market, for example. The duration of unemployment has lengthened in this recession.”

“The state was particularly hard hit by the recession, mainly because of a higher than average run-up in housing prices. The steep price hikes were not sustained by income growth and featured lax lending practices. When the bubble burst, Rhode Island had further to fall.”

“‘No jobs are really being created,’ said Edward M. Mazze, distinguished university professor of business administration at the University of Rhode Island. Partly because of high rates of foreclosures and consumer debt amid this recession, ‘businesses are afraid to spend because consumers are not spending,’ Mazze said.”

The Patriot Ledger in Massachusetts. “After sinking to the lowest levels in nearly two decades last year, local homebuilding is gradually reviving in 2010. Housing starts, while still a far cry from the boom years, are up sharply in some South Shore towns. Pulte Homes wants to resume construction of the Residences at Union Station, a condo project in Braintree that stalled after only one of 12 buildings was completed. Some of the units in the first building sold for more than $700,000. Condos in the future phases would start in the mid-$300,000 range, a Pulte executive said recently.”

“Before the housing downturn, J.P. Gallagher Group of Norwell routinely built $1 million, 4,000-square-foot suburban spreads. Today, the emphasis is on downsizing, co-owner Paul Gallagher said. Typical custom homes being built in Norwell and surrounding towns are 3,200 square feet and sell for approximately $800,000.”

“‘It’s just a different mindset,’ Gallagher said. ‘People are just trying to simplify a little bit, and finding they don’t need two acres of land and having an enormous yard to cut on Saturday and Sunday.’”

The Boston Globe in Massachusetts. “A second-floor condominium in a luxury building just off the Rose Fitzgerald Kennedy Greenway boasts a gourmet kitchen, golden-colored polished concrete floors, and spectacular views of Boston Harbor. This spring, it gained an undesirable distinction: The 2,600-square-foot condo went into foreclosure.”

“In fact, half of the units at Greenway Place, a newly renovated 12-unit, eight-story historic building, have gone into foreclosure, at least briefly, over the past two years. In May, a buyer purchased a foreclosed unit in Folio Boston, a luxury condo complex, for $650,000 — about $275,000 less than it sold for in 2006.”

“Investor Ryan Connelly, bought the second-floor unit at a foreclosure auction in 2008 for $901,000, according to the unit deed. Even after making major improvements, including the golden flooring, he has yet to find a buyer, according to listing broker Herion Karbunara. In May, the unit fell back into foreclosure and is now listed for $1.4 million — $1.2 million less than it was marketed for in 2008.”

“Connelly did not respond to requests for an interview, but Karbunara said the lowered price ‘breaks his heart.’”

WBUR in Massachusetts. “He never thought he’d say this, but Taylor Boas is so glad he did not get the $8,000 tax credit for buying a house. ‘The tax credit in this market, in the Boston area,’ Boas said, ’seemed to benefit the sellers more than the buyers. Because I think people would bid up the price.’”

“That’s what happened to him. Back in April when the tax credit was on, he and his wife were moving to the area from Indiana and put in an offer on a house in Watertown. They lost out. It sold for $6,000 more than the asking price. Last month they found a similar house two blocks away and got it for $100,000 less, well below asking price. ‘We definitely got a better deal,’ Boas said.”

The New York Post. “The most painful words to any veteran of the New York real estate scene might be ‘if only.’ If only we had known Park Slope was going to gentrify; if only we bought that two-bedroom in the Village in 1973; if only we hadn’t read all those Eloise books. ‘You hear those stories from your grandparents,’ Cem Onur says and laughs.”

“Onur and his wife, Ozlem, think this is one of those coulda-woulda-shoulda moments. The market is depressed. Mortgage rates are low. Sellers are eager to make a deal. ‘This is going to be the lowest point in, let’s hope, the next 20 or 30 years,’ says Onur. ‘I don’t want to wait until two or three years down the line when I say, ‘Goddammit! I should have bought!’”

“‘Interest rates are so low, it’s ridiculous,’ says Jennifer Marrero, who signed a contract on a 710-square-foot, one-bedroom penthouse co-op (with another 326 square feet of outdoor space) at Embelesar 118 in East Harlem this week for $422,260.”

“Not too long ago, Dawn and Sean Blachar, two first-timers, wandered into an open house for an Upper East Side two-bedroom listed for $975,000. As Dawn remembered it, the place was a wreck. The kitchen would need to be gutted, and the owner had let her cats run riot on the floors and walls. Dawn asked if the seller was open to negotiation and, to sweeten the deal, offered to put one-third down in cash. The broker stepped into the other room with the owner of the property and came back a few moments later: The seller would take $925,000.”

“The $50,000 discount was enticing — but the Blachars finally decided they weren’t prepared for a long and costly renovation. When they saw an ad for the apartment a few weeks ago, they noticed that the price was now $915,000. ‘I think the bottom is close to being hit,’ Dawn says. ‘The market is close to being back. The bottom is near. We are probably going to buy in the next five to six months.’”

The New York Daily News. “In the desperate battle to end New York’s home foreclosure crisis, a windowless storage closet in a Queens courthouse serves as ground zero. The 6-feet-by-10-feet room has been turned into a conference room where banks and homeowners meet to work out their differences in a new statewide program aimed at keeping debtors from losing their homes. Every week, about 250 to 300 conferences fill the calendar.”

“Nurse Margaret Byron wanted to trim a $4,000-a-month mortgage on her Far Rockaway home after her husband lost his job. Four conferences later, the bank finally agreed to reduce it to $3,800. ‘We expected more from it than what we got,’ says Byron.”

“Delores Small and husband Philip had a $1,693 mortgage on their home in Cambria Heights. After Philip retired from the state, Delores’ office manager job was cut from five days a week to two. They stopped paying the mortgage last year. Before the bank foreclosed, the Smalls were scammed by a debt settlement company, paying several thousand dollars to get a loan modification that never materialized. Then came the notice to attend the conference to try and avoid default. After three conferences, they got the mortgage reduced, but only by $17 a month to $1,676.”

“‘They have you over a barrel and they are going to push you off the cliff,’ says Delores.”

“At a recent conference in the Queens storage closet, a bank lawyer told a 33-year-old woman from Laurelton to expect a permanent modification by month’s end. She got a temporary modification in April that cut her monthly payment from $2,911 to $2,890. She admits it’s not much, but says she has little choice. ‘Whatever the bank offers me,’ she told The News, ‘I will take it.’”