The Housing Bubble

It’s Friday desk clearing time for this blogger. “A Del City family fears they may be out on the streets after a shocking notice appeared on their door Tuesday. Nick Evans and his brother packed up their families earlier this year and moved from Reno, Nevada to Oklahoma looking for a new life. Evans was able to find work right away, but as soon as they moved in to a rental home in Del City, they knew something was wrong. When they moved in, the city wouldn’t let them hook up water because of an issue with the owner of the home. A notice condemning the home suddenly appeared on their door giving them until 9 a.m. Wednesday to get out.”

“Evans says, ‘It’s pretty frustrating. I thought I was coming to Oklahoma to make a better life for ourselves and it’s turned out to be a lot worse situation.’”

“The person who actually owns that home lives in California. We’ve learned that person has at least ten other properties in Oklahoma County now facing foreclosure.”

“Over five days in April, Allegheny County Judge Michael McCarthy oversaw 138 rapid-fire mortgage conciliation conferences designed to bring lenders together with homeowners who are in over their heads. Not every homeowner leaves with a smile. Joseph Moses of Mt. Lebanon appeared before McCarthy, unemployed and $7,000 behind on mortgage payments since early 2009. HSBC Bank USA filed foreclosure proceedings that June and was demanding full payment on the $235,204 mortgage.”

“‘If your wife and you get employment (that) you can show the lender, do so — but this case has been in conciliation for several years, and I can’t just keep pushing paper,’ McCarthy told Moses, removing him from the program. ‘Good luck to you, sir.’”

“The judge later explained: ‘I can’t let people live in their homes indefinitely without paying anything.’”

“From 2000 to 2010 the supply of new housing units outpaced demand by 50 percent in the four largest metro Atlanta counties (Fulton, Gwinnett, DeKalb and Cobb). The result: In those four counties alone, more than 143,000 houses, condos, apartments and other units were vacant in 2010. That’s good news for renters and bad news for landlords and often for neighborhoods.”

“Just ask Edward Nyankori, an Atlanta man who thought he was ahead of the investment game when he purchased a few rental properties eight years ago. That belief was quickly shattered when the economy tanked.”

“‘People are not willing to pay the price I need just to break even, because there are so many other things on the market,’ he said.”

“Alma Welch, once a globe-trotting Salt Lake City Olympic booster moving among Utah’s wealthy elite, has been turned out of her posh Federal Heights mansion and is struggling to pay medical bills and survive on what little remains of a once multimillion-dollar estate. Take away the Olympic glitz and big-dollar amounts, and Welch’s experience is akin to those of thousands of Utahns who built fortunes only to see them toppled by Utah’s real estate collapse.”

“More than 15,000 residents have lost their homes since 2008 and, like Welch, they often talk of divorce, medical calamity and financial miscalculation. ‘I was at the top of the world,’ Welch said. ‘If it can happen to me, if I can end up homeless, it can happen to anybody.’”

“One of the biggest disasters in securitized mortgage history became official on Monday when the $196.3 million in mortgages for the Biscayne Landing project in North Miami were completely written off. Yes, that’s a 100 percent write-down, according to Trepp LLC. A pool of commercial mortgage-backed securities (CMBS) granted for nearly $200 million is now valued at zero.”

“At one point, Boca Developers planned to build 6,000 homes on the 188-acre Superfund site. It completed two condo towers, which were later lost to another lender, and then went into default on the CMBS debt.”

“There are a million stories in the Naked City, and about 1,500 of them involve the doomed and domed four-story complex of five-star mondo-condos known as Chapala One. By its glitzy grand opening in 2008, construction of Chapala One cost about $35 million. It was more than two years late. And with total costs running closer to $60 million, the project managed to be upside-down and underwater at the same time.”

“The economy had tanked, and suddenly there weren’t a lot of people interested in $3.5-million penthouses. The lender initiated foreclosure proceedings. In the meantime, $6 million in bills didn’t get paid, precipitating a daisy chain of grief and pain that was left to a jury to apportion blame and responsibility. The bad juju involved in transforming a union hall for working stiffs into luxury condos for gazillionaires should now be obvious, but at the time, it was somehow overlooked.”

“In the Northeast, where residential construction starts were down 29.4 percent to 60,000, and building permits issued were down 16.7 percent, also to 60,000. Jeff Wittmann, a homebuilder in Woodbridge Township, knows how bleak the market has been. For the past two years, he has held onto on a quarter-acre parcel in Woodbridge Township, waiting for the right buyer to come. He is offering to sell the lot itself for $199,000, or the four-bedroom colonial home and two-car garage he envisions there for $499,000. He has already lowered the asking price from $529,000.”

“‘If we have a buyer, the house could be completed in five months,’ Wittmann said, who is president of the Colonia-based Kimball Builders. ‘A couple of people looked at it, but nobody for real.’”

“Las Vegas real estate broker Ken Lowman would love to sell one of his luxury listings, an 8,500-square-foot., 8 bedroom masterpiece with an amazing poolside cabana and gourmet kitchen, for its original price of $4 million. But the value of homes in the area has plummeted, forcing Lowman to put the mansion on the market for nearly half its price.”

“‘I have the home listed today for $2.35 million,’ said Lowman. ‘It’s definitely challenging to have to sell property at prices vastly reduced from just a matter of three or four years (ago). In the luxury market today, 20-25% of the sales are unfortunately foreclosures.’”

“The Obama Administration wants the government to gradually step away from the mortgage market and turn it over to the private sector. As a part of its plan, the temporary loan limit increase for expensive homes, also known as ‘jumbos,’ will expire after September 31 and will drop from $729,750 to $625,500. States with expensive home markets could be drastically affected by the move, which would mean larger down payments for higher-end homes.”

“‘We strongly oppose a reduction in loan limits because it means financing would become even more difficult,’ said Walt Molony, a senior public affairs specialist for the National Association of Realtors. ‘If more expensive loans were entirely dependent on private financing, you could see a real crisis in areas like California when capital disappears.’”

“The Warren Group reported Tuesday that 518 foreclosures were completed last month, a 62 percent decline from April 2010 levels. But the number of foreclosure petitions filed last month represented the highest number of petitions filed in any month in Massachusetts since last September. Warren Group CEO Tim Warren said he would not be surprised to see monthly petitions exceeding last year’s levels by the end of the year – based on the number of foreclosures that were initiated in April.”

“‘I was optimistic about the real estate market in the latter part of last year, and those improvements just haven’t materialized,’ Warren said. ‘I think foreclosures are going to be with us for quite a while longer. I’m just not too optimistic that it’s going to slide down a slippery slope to a perfect solution.’”

“Weld County has seen one of the sharpest increases in overall housing vacancy rates over the past decade, a 135 percent increase, trailing only Garfield County’s 166 percent and Arapahoe’s 141 percent. ‘I think there are some properties kind of frozen in the marketplace because banks are not turning them over and that’s creating demand in other areas,’ said Becky Safarik, Greeley community development director.”

“In Baldwin County, the population increased by nearly 30 percent, new census data revealed. The housing also proliferated, until the number of housing units had swollen by 40 percent to a total of 104,000. But more than 13 percent of those units, excluding seasonal or vacation homes, were vacant in 2010, according to the census.”

“Anthony Kaiser, chief operating officer for Century 21/Meyer Real Estate, said that in the early part of the decade, Baldwin County saw a tremendous surge in new housing, including builders taking over swaths of land for development. ‘As a result, when the economy went down, due to the recession and the hurricanes, … then we began to see where all those subdivisions began to be empty and began to go into foreclosures,’ Kaiser said.”

“A majority of Americans do not expect the housing market to recover before 2014, according to a new survey that shows growing numbers expect a longer wait for market conditions to return to pre-recession levels. The many foreclosed and to-be foreclosed homes are another major factor delaying a housing recovery, said RealtyTrac Senior VP Rick Sharga. These factors are mirrored within the Inland Empire, where the post-2007 housing crash has been particularly profound.”

“Trulia and RealtyTrac’s data show Americans expect, on average, to pay 38 percent less for a foreclosure than a comparable property. What’s more, the U.S. has enough bank-owned properties to last two years. Even though the pace of foreclosures has slowed, banks are repossessing homes faster than buyers can pick them up, Sharga said.”

“Banks spend more than 400 days processing a foreclosure in California, Sharga said. ‘We’re not expecting a bump from the bottom. We’re expecting prices to flatten for a couple years,’ he said.”

“Owning a home was a huge part of the American Dream, and it was dutifully drummed into my head as long as I can remember. Only people who wanted to be poor threw money away on rent, I was told, over and over. I’ve yet to own a home and have no plans to do so even though median prices have fallen more than 60 percent. It raises the question of whether that thinking is wrong or just a reflection of the different society we live in today compared with that of our grandparents and parents.”

“Look, it’s not wrong. Not at all. And don’t let anyone tell you otherwise.”

“For someone who has moved around quite frequently, locking myself long-term to a piece of property simply didn’t make sense. Moving to Las Vegas from Los Angeles in early 2005, lifestyle came into the equation as well. I wanted a piece of the Strip, and the only way to achieve that was to rent. For less than $900 a month, I was able to rent a 750-square-foot unit at the Meridian. I had a third-floor unit with a balcony overlooking the Strip north of Flamingo Road. That was until Meridian was bought out in the condo conversion craze shortly after I moved in, and the developer offered units for sale to tenants.”

“When someone wants to know if you’ll pay $385,000 for a one-bedroom unit that’s built as an apartment when new homes are selling for a median price of less than $300,000, what are they smoking? I decided in 2007 to rent a town house rather than purchase at Meridian. That unit I could have bought is now worth less than $100,000.”

“It was that 20th-Century, American-Dream thinking that prompted many Las Vegans to buy even during the boom. After the median price shot up 68 percent from $164,000 in 2003 to $275,000 in 2005, many plunged into buying. The price peaked in 2006 before it fell. A lot of those people are underwater—they owe more on their mortgages than the homes are worth. I’m sure a lot of those folks now wish they’d rented.”

“Just because renting is a viable option, it doesn’t mean the dream of homeownership has died forever. I may still purchase a home one day, but sometimes dreams don’t follow one path and instead have alternatives, especially if I choose bachelor, high-rise living. For now.”