A Bright Side Of The Housing Price Decline
A report from the New York Daily News. “A rundown, half-finished Brooklyn condo untouched since the dog days of the financial crisis has neighbors fuming. The ramshackle site in Homecrest is the shame of the neighborhood - and just one of hundreds of buildings in the city where work has stalled over the past few years. ‘They can’t afford to work on that building anymore,’ said Irving Goldfarb who lives near the unfinished condo. ‘They ran out of money. They just left it. … It’s an eyesore,’ he said. ‘There are abandoned projects and half-finished buildings all over.’”
“As of last week, there were 668 buildings on the stalled-site list - 306 of them in Brooklyn.”
The Boston Globe in Massachusetts. “As the economy plods along, more and more Cape Cod residents are moving out for the summer to live with relatives, lease cheaper apartments, or stay in campers so they can rent their homes. In Harwich alone, the number of properties listed with New England Vacation Rentals Inc. has increased to 400 from 150 in the past few years, said managing director Joanne Logie, who attributes the rise to the economic downturn, even though homeowners don’t always want to acknowledge they are struggling.”
“‘They’re kind of embarrassed,’ Logie said. ‘They’ll say, ‘We’re going to Europe for the summer,’ but you know they’re not going to Europe.’”
The Portland Press Herald in Maine. “Stefan Keenan has been auctioning off foreclosed properties for more than 25 years, and he thinks that right now, there are definitely some bargains out there. But he’s also quick to caution that buying a foreclosed property is not for everyone. It often involves more risk and a lot more research and homework than buying other properties.”
“One important thing to keep in mind, said Chris Pinkham, president of the Maine Bankers Association, is that a foreclosed property may be assessed at a very low value by a town — especially if it’s abandoned or in poor condition — but its selling price at auction will probably be a lot closer to what comparable properties have sold for. ‘And right now, that’s a moving target,’ said Pinkham.”
“Another important aspect of buying a foreclosure is the home inspection. While most home inspections are pretty routine, the inspection of a foreclosed property may find all sorts of problems with the property. ‘One bank had a property where the residents had taken the trim from the home and burned it in the wood stove for heat,’ said Pinkham.”
The Bangor Daily News in Maine. “Home and rental unit vacancy rates buried in data released recently by the U.S. Census Bureau show what real estate agents and property managers are seeing on a day-to-day basis: increasing numbers of empty homes, fewer buyers and renters, and dropping prices. ‘Prices are down, plain and simple,’ said David Caliendo, a broker who specializes in distressed and foreclosed properties. ‘There’s less demand for housing, fewer people who are out there buying, and more people who are holding off buying. Everyone’s looking for a bargain price right now.’”
New Hampshire Public Radio. “The New Hampshire Association of Realtors blames the home buyer tax credits of a year ago for the lackluster numbers today. About 800 properties changed hands this April. That’s one fifth lower than in 2010, and the median price is nearly 9% less. Kevin Bartlett, a resource economist with Real Data, a real estate tracking company, says the deeper problem is the number of homes changing hands due to foreclosure or near-foreclosure situations.”
“Bartlett says overall, distressed property sales account for over a third of all transactions which drives down the price of homes. He says, ‘in some market areas, the only thing selling are the distressed properties that are selling well below what is called assessed value.’”
The Providence Journal in Rhode Island. “Rhode Island had 1.43 percent of its mortgage loans go into foreclosure in the first quarter, which placed the state in the top five for new foreclosure starts. An expert said Rhode Island’s high unemployment is to blame. Rhode Island has had a double-digit unemployment rate for 25 straight months; the rate dropped to 11 percent for March.”
“‘There is a correlation between unemployment and foreclosure,’ said Nicolas P. Retsinas, director emeritus of Harvard University’s Joint Center for Housing Studies and a member of the real-estate faculty at Harvard Business School. ‘The people who lost their jobs yesterday are losing their houses today,’ he said.”
“The percentage of Rhode Island mortgage loans that were at least 90 days past due or in the foreclosure process was 8.45 percent, above the national average of 8.10 percent and New England’s rate of 7.06 percent.”
The Herald News in New Jersey. “The colonial for sale on Stasia Lane in Teaneck has what Realtor Julia Morrill calls ‘picture-perfect curb appeal.’ Listed at $259,000, the three-bedroom, two-bath home looks cheery and smart from the outside. But the interior does need a little work, she admits, including the kitchen, which some would lovingly label ‘vintage,’ and others would call ‘ancient.’”
“The seller recently accepted an offer from a family looking to purchase their first home, and the deal is in attorney review. The home is a prime example of what Realtors say is a trend toward homes in the $200,000 to $250,000 range. It’s a bright side of the housing price decline, especially for first-time buyers. Not only are there more options at that price point, there are sometimes diamonds in the rough or homes in a real gem of a town or neighborhood.”
“In 2010, there were about 800 sales in the $200,000 to $250,000 price range. Compare that to when the market was hot, say in 2007, when there were about 570 sales at that price. Last week on the New Jersey MLS website, there were 304 single-family homes listed in Bergen and Passaic counties in that ballpark.”
“In addition to the increased numbers, Realtor Bob Clarke with Re/Max in Tenafly said it’s interesting to note the kind of homes that are up for sale. ‘To find something a few years ago in that price range, it would have pretty much had to be a train wreck,’ Clarke said. Nowadays, he said, homes might need some work, but it’s not quite as bad as it once was. Clarke said he is showing a four-bedroom Cape Cod in Prospect Park, listed for $225,000. ‘You really wouldn’t have to do a lot of work on it,’ he said. ‘You could move right in.’”
“Many of the homes in that price range are short sales, or homes that are on the market for less than the mortgage amount, a deal that must be done with the bank’s consent. Realtor Ronald Aiosa in Pompton Plains, has two listings that are short sales, both at $200,000 and both on the market for about a month. Both homes are under contract. In Pompton Lakes, he has a four-bedroom, two-bath Cape Cod and in Ringwood he has a three-bedroom, one-bath colonial.”
“‘They both need a little bit of renovation work but it’s not ridiculous,’ he said. ‘You could probably go in there, and if you’re handy and do the work yourself, you could get away with about $25,000 in repairs and the house is great.’”
“In Teaneck the median sales price for 2010 was $360,000. According to New Jersey MLS, there are now 15 active listings between $200,000 and $250,000. In Closter the median sales price for 2010 was $535,000, but Realtor Maria Castro-Aversano has a short sale listing for $265,000. The home has two bedrooms and one bathroom on half an acre.”
“Realtors are convinced that the $200,000 home can be a sweet spot. Leo Pflieger, broker owner of Bergenfield Realty, referred to a listing he had at $233,900. The Colonial, which is not a short sale, has three bedrooms, two baths and first went on the market with a $25,000 higher price tag. Pflieger said the home had two offers in the first two weeks on the market, but those deals fell through due to problems with the prospective buyers’ financing.”
“‘If you can qualify for a mortgage,’ he said. ‘this is the perfect home to live the American dream of owning your own home’”
The Record in New Jersey. “Garage sales, which surged when the economy tanked in 2008, continue to boom. One measure of garage sale activity is Craigslist. A spokeswoman for the online network of free classifieds said the garage sale category has ‘doubled overall year to year’ during the economic downturn. The category remains strong for The Record and Herald News, too — nearly an entire page of garage sale ads this weekend, more than 200 in all.”
“Trying to stave off foreclosure, single mom Karen Simmons-Braswell of Teaneck held a series of well-publicized garage sales last summer. She put ‘every penny’ of the $8,831 in earnings toward her mortgage. Nine months later, Simmons-Braswell is still in her house and still trying to work out a loan modification with her lender. The money from the garage sales bought her valuable time.”
“‘It wasn’t the final answer but it did help,’ said Simmons-Braswell, who had received many items donated from well-wishers. ‘Some people might find it not really worth the effort. You’re sitting out there, it’s hot, you have to advertise and put up signs. But $8,800 was a good amount. It meant a lot.’”
“Average Bay State foreclosure: 463 days and counting. That is the average length of time it takes for banks to seize your home if you live here in Massachusetts, according to RealtyTrac. Back in more normal times, the bank would get wrest back the title to your home in a matter of six months or so if you fell behind on your payments. That is still the case in many small states, but it is not so anymore in big government states like Massachusetts, New York and New Jersey, which have thrown up an array of regulations designed to slow the process down.”
“In fact, in states where the courts have power to intercede, homeowners who fall behind on their mortgages or simply stop paying can spend years living in their home, albeit under the constant threat of foreclosure. In both New York and New Jersey, the average foreclosure now takes more than 2 ½ years from start to finish.”
“At current sales rate, it would take three years to find buyers for the estimated 872,000 empty homes banks across the country are sitting on right now, the The New York Times reports.”
““‘They both need a little bit of renovation work but it’s not ridiculous,’ he said. ‘You could probably go in there, and if you’re handy and do the work yourself, you could get away with about $25,000 in repairs and the house is great.’”
“Pflieger said the home had two offers in the first two weeks on the market, but those deals fell through due to problems with the prospective buyers’ financing.”
So people can barely qualify and then they need more than a three percent downpayment to bring the house up to living quality and in a price range of over $200K!
I am amazed how cavalier people are about this sort of thing. Then again many of them are younger than us and have not tried to sell their little project to see if their risk worked out or not.
Our little fixer came out even but that’s with a lot of free labor because DH is an ex builder. We also had some pretty competitively priced connections that saved us money. If we had hired we would have gone in the red.
I know someone who last year bought a 2400 sq foot home for $265k. They’ve put $40k in it so far and aren’t done yet. It’s my opinion they’ve priced themselves out of their neighborhood but they don’t see it that way. There have been recent sales for up to $140/sq foot but not in this neighborhood or not w/so little land.
I am amazed how cavalier people are about this sort of thing.
Absolutely.
The guy in the article refers to $25k as if cash just grows on trees. He talks like a man with a paper @$$hole. Just like most schlepps leaching off the housing business. They don’t procure materials, they don’t build, they don’t trim…. they set up a toll booth at the front door and talk $hit all week long. Extortionist flunkies.
I’m burning down toll booths. Join me.
LOL
OR
You can live with a just OK/plain kitchen. Like the rest of 98% of us.
Hey - does the:
Sink work?
Fridge work?
Stove work?
Cabinet doors open?
Well - You got yourself a working kitchen.
Save for 5 years and redo it yourself. Like what used to happen before the housing bubble and where granite countertops became the “norm”
Were we talking updated kitchens?
I was talking like concrete blocks of the foundation absorbing water because they never put on gutters and the water flowed back toward the house. Absorb, freeze, expand…soon you’ve got a deteriorating foundation.
I was talking about they never fixed that leak under the shower and now the ceiling on the lower floor is bubbling w/rot and there’s a horrible smell. Maybe mold?
I’m talking they never repainted their cedar siding and a whole side of the house is just exposed to the elements. If it doesn’t have some sort of protection it’s going to split from the weathering. (We replaced $1000 worth on our last home and didn’t even dent the number of planks that should have been done) We weren’t the ones who let the house go that far but we sure as heck ended up paying for it.
You can live with a just OK/plain kitchen.
“I was talking like concrete blocks of the foundation absorbing water because they never put on gutters and the water flowed back toward the house. Absorb, freeze, expand…soon you’ve got a deteriorating foundation.”
Smart lady you are.
Damp proofing with Karnak is good practice and typical but it doesn’t do much for high groundwater and seepage. WR Grace makes a rubber membrane product that is part of our master specifications. It’s classy stuff.
I would far rather have an ugly but functional kitchen in a cheaper house. I’ll do my kitchen MY way, instead of living with somebody else’s HGTV p*rn or a Home Depot Flipper Special.
“‘If you can qualify for a mortgage,’ he said. ‘this is the perfect home to live the American dream of owning your own home’”
Doesn’t the relationship of the price to your income affect the ability to qualify for a mortgage? Now if the house was $150K…
Here is a point — they are talking about suburban homes now reaching 50 plus years old. In Brooklyn were I lived, where neighborhoods were being abandoned and my neighborhood was redlined 50 years ago (when my house was 50 years old), the houses are still selling for $1 million.
And they are smaller, with no off-street parking (and it’s getting harder and harder to park on the street as the well off move in).
So there is a relative value story as well. The suburbs and Sunbelt areas that were new back when the older cities went to hell are new no longer.
There are other additional costs that people don’t think about when moving into the suburbs around NYC.
Have a friend who bought in the suburbs in 2008 and growing angrier and angrier because…
1) the cost of the daily Metro North train commute has repeatedly risen and is now $34 PER DAY, which is the equivalent of more than two hours pay (after taxes) per day. (But stuck in a cr@p job for the family health insurance.)
2) property taxes (which are much higher outside the city limits) are higher than they anticipated and rising. (Previous owner was getting senior discount on taxes and they apparently didn’t do their due diligence or figure in possible increases.)
3) Utilities are higher than anticipated, so in winter they set the thermostat as low as possible, shut off part of the house and live in snuggies…
4) Not finding the neighbors to be simpatico. (But again the vehicles in the driveways should have been a clue.)
Hard to watch someone you care about paint themselves into a corner while pursuing their fantasy of happy families.
Perhaps your friend’s solution to the housing problem is the you walk away site…
‘One bank had a property where the residents had taken the trim from the home and burned it in the wood stove for heat,’ said Pinkham.”
Welcome to New England. Yep. Winters are brutal, long and they’ll always be that way. Where supplemental heat means a house that smells like smoke for 6 months and you’re still chilled to the bone. Where the 2 week sniffles turns into 6 months of sinus infection because of smoke particulates. Where austerity means 6 months of no work because the ground is frozen 6 feet deep.
Uh huh….. it’s beautiful here. For 2-3 months a year.
Burning house trim?
That would last not even 30 minutes. And it is pine.
FYI - I have a wood stove. House does not smell and the heat is amazing.
It is a little work cleaning out the ash every few days and splitting enough wood to last you through the winter.
But there is nothing like wood stove heat. It warms your bones.
And the entire house. To the point of you need wear a T-shirt and shorts on
Heat is heat. And when it’s not distributed, it’s useless.
heat is heat? Not so grasshopper…
Google:
Convection (forced air) heat
Radiant heat
There are actually three catagories of heat transfer.
Conduction
Convection
Radiation
Yes so. It’s why we have these conveyance systems like pipes and ducts.
I hate gas forced air heat - it “heats” up the house but it’s just tepid air blowing around. The only thing it’s really good for is to power an air filter system, but ours doesn’t seem to be working well.
I like radiant heat but it’s gotten a little expensive.
Radiant floors have been elevated to granite counters. The talk about it is vomit inducing.
A good way to shut down the stupid talk about “heat” is tell them that electric is most efficient. Most of the goobers can’t get beyond it but it’s true.
Radiant heat is nice. It is quiet and doesn’t blow dust all around the house like forced air heating - less cleaning needed. And walking around in socks doesn’t give cold feet.
Yes it’s comfortable but it’s not the holy grail.
“Burning house trim? That would last not even 30 minutes. And it is pine.”
There is more than pine in that wood. Think: wood preservatives, stains, and/or paints. Last thing you want burning in your stove. Even a city gal like me knew that.
Since wood/forestry is abundant in Maine, I have to conclude that in burning trim, these FBs were either lazy (and stupid), or just plain malicious.
The one reason that I think that, EVENTUALLY, houses in the south will rise in value relative to houses in the north.
I grew up in NJ. It sucks. I live in FL now; it’s much, much better. Yes, there are somethings that are great about the NE (the summers in upstate NY for one), but, in general, the south is just a “nicer” place to live. Now, those are huge generalizations, so take them with that in mind, but I really do expect that we’ll see (over the next 50-100 years) more of the population of the world migrating towards the equator.
Man is a tropical animal.
Certain climates, peninsular Florida among them, only work when combined with modern medicine. If viruses and bacteria evolve in a dangerous direction, or if we lack the resources to control their vectors, tropical disease mortality will return with a vengeance. I vaccinated myself against yellow fever for that reason.
O-taxed….
Generally I agree with you. Not having spent much time south of VA, I can’t speak for it but the VA area (outside DC) and lower DE beat living in New England. Not marginally but substantially. Yeah…. summers are nice in NE blah blah….3 months out of the year. The other 9 months are payback.
“Uh huh….. it’s beautiful here. For 2-3 months a year.”
Yep, that’s New England. I once scraped a light coating of frost off my windshield in the Boston suburbs the morning after Labor Day in order to drive to work. The morning after Labor Day! I knew I was too far north.
OTOH, it’s chilly here for 2-3 months a year. Nothin’ could be finer than to be in Carolina…
“it’s chilly here for 2-3 months a year. Nothin’ could be finer than to be in Carolina…”
You must not live in the NC northwestern mountains, where there are four seasons — June, July, August, and WINTER!
I’m with both of you.
Where austerity means 6 months of no work because the ground is frozen 6 feet deep.
Maybe in NY?, but dh was doing residential construction in Massachusetts all winter. He had plenty of stories of shoveling out the work area when he was framing. There were some breaks in the action and sometimes they’d break for the day early when the wind made things dangerous or the snow coming down too hard but there were only a few weeks of ground freeze issues. In those days Dover was pretty hot and then I think he was driving out to Acton. Then he’d drive all the way back and hit school in Boston after a long day of work.
I am in suburban Boston in a 1950 brick apartment building. With wonderful radiant heat. Nothing like it. Warm as toast, quiet, dust free and not as drying as forced air.
“I am in suburban Boston”
Then you have an odd moniker.
“As the economy plods along, more and more Cape Cod residents are moving out for the summer to live with relatives, lease cheaper apartments, or stay in campers so they can rent their homes.
This is a growing trend. As an RV’er I’ve noticed parks seem to be filling with more and more seasonal people. Soon I’ll be back to working away from family and out of town and I’ll haul my fifth wheel and live it for my next project. I look forward to getting the pulse on this trend once again.
When your survival depends on vacating from and renting out your only shelter for 3-4 months a year, something is very wrong.
What surprises me is that there are that many people willing to rent on Cape Cod. Sure, its great for a week or so vacation, but finding a renter for a 3-4 month stretch has got to be a lot tougher these days, especially for a vacation-specific area like Cape Cod.
They probably rent them out in 1-2 week blocks to different vacationers all summer.
“When your survival depends on vacating from and renting out your only shelter for 3-4 months a year, something is very wrong.”
At least on Long Island, it is not a new phenomenon.
Have an acquaintance that rents out a second home in Montauk for a few weeks every year and was able to make enough to pay the mortgage on the house for the whole year and expense repairs/improvements as a rental property.
What seems new is that they are lying about spending the summer in Europe to save face.
Would be priceless for them to run into someone in an RV park who thought they were in Europe.
When I was bicycling around the United States during 1981-82, I camped out a lot. When I overnighted in campgrounds, there were people who were living there until they had to move on. Or they were vagabonding around the country like I was.
Which one is the dummy:
1. Karen Simmons-Braswell, who sits in the hot sun all day selling her worldly goods for pennies-on-the-dollar in garage sales and then sends all the money she makes to the bank, or
2. The guy in the bank who sits in a comfortable air-conditioned office collecting the money Karen Simmons-Braswell sends him.
She made over $8800 on her garage sales. That’s quite a take. I wonder if she’s already sold the appliances.
Or less stuff will make it easier to fit what remains into the rental apartment that lies in her future. It’s all good.
I still cruise the DC craigs list furniture stuff. This time of year a lot is students dumping all their IKEA stuff to try to make a buck instead of tossing it and leaving town. But there seems to be a rising subset of people getting rid of small pieces (a chair, a few lamps, etc.) because they moved/are moving to a smaller place and can’t find a place to put it.
Be careful about bed bugs. Now that the weather is warm. Leave the item in the car. Park car in the sun all day. That is supposed to get hot enough to kill vermin.
“Trying to stave off foreclosure, single mom Karen Simmons-Braswell of Teaneck held a series of well-publicized garage sales last summer. She put ‘every penny’ of the $8,831 in earnings toward her mortgage.
What the heck did she sell? When I have a garage sale - if I make $500 that is an EXCELLENT day and it means I cleaned out the garage and basement…
That does sound strange.
Maybe she is running sales for other people. There are folks around here who will do that for you, for a percentage of the take.
I have neighbors who appear to be in the “help me out” yard sale business. As in, friends and relatives donate stuff to help them through their hard times, then they have a yard sale.
From my perch in the nabe, I’m doubtful that they’re clearing four figures on the sales. Three figures is more like it.
“That is still the case in many small states, but it is not so anymore in big government states like Massachusetts, New York and New Jersey, which have thrown up an array of regulations designed to slow the process down.”
Good comments on this article:
NotANative wrote:
Our courts and the servicing agencies don’t have the capacity to deal with foreclosure on this scale. Couple that with “efficiencies” in origination that sometimes ran afoul of existing state law and there is a real mess that will take a huge amount of time and effort to sort through. The “big government” states are just ahead of the curve in giving homeowners their due process so that property titles are correct and clear of possible claims.
Look for foot dragging until the banks can make their illegal processes legal, magically turning a clouded title to one blessed by the government.
5/23/2011 12:57 PM EDT
sesvv wrote:
Fair enough. Scott says “That is still the case in many small states”. So there it should say “small government states”?
Still not sure what is a “big government state”. Based on his examples of MA, NY and NJ, I assumed that “big government states” meant states with strong consumer protection enforcement. However “big government states” is a key catch-phrase of one of the two national political parties.
5/23/2011 1:19 PM EDT
I am a victim…Help me government, while I live here for free….
You wanna buy a property with a clouded title? Step right up.
200k is still too much, most places.
Oh yes, a 200K house is an unattainable dream for the bottom 50%. Even 100K is pushing it for the under $500/wk crowd.
Yup. 125-150K is the sweet spot for the median home buyer (income of around 50-60K). 200K assumes an income closer to 70-80K, which, despite what many Realtards and bankers think, is not the majority of the population.
That’s what made the 450K median in my area so laughable; that assumes the median earner is making ~150K a year? ROFL, yeah right..
The median income (at that time) was about 50K. You do the math.
You guys are talking 1st time buyers right? Cuz a lot of older buyers can still bring former equity to the table. We had a major downpayment on our first home (the beauty of marrying late), almost doubled it before moving here and didn’t lose any of it when buying and selling where we are now. When you’re putting down large down payments and if you’re in a lower tax state $300k is easy in the later years of your career when you’ve gotta do a 15 year mortgage. Is the end of career worker making the median income? Perhaps but probably not. So there are people out there that can easily afford more than $200k.
In our area as others there are more homes than there are people but it plays out this way: what’s been built in the last 30 years is mostly aimed at the higher income. The house price distribution doesn’t match the income range distribution. So we have lots of really high stuff sitting, even more junk, neglected or serious issues low stuff and these are what I see abandoned. In between where the median lies the inventory is squeezed if it’s in any type of clean shape.
‘One bank had a property where the residents had taken the trim from the home and burned it in the wood stove for heat,’
Was the owner perchance a Keynesian economist?
‘There’s less demand for housing, fewer people who are out there buying, and more people who are holding off buying. Everyone’s looking for a bargain price right now.’
I’m thinking of asking for lower rent next year.
Taking about lower rent. My rent was increased from $1920 to $2000. The new-comer is required to pay close to $2200. I heard my friend in Austin, his rent is increase from $1700 to $2200(changed from lease to month-by-month). I am not so sure about renting stability around here, southern California. This is one reason I hate so-called economics turns better.
“At current sales rate, it would take three years to find buyers for the estimated 872,000 empty homes banks across the country are sitting on right now, the The New York Times reports.”
Aren’t there legal requirements for banks to move REO to the market? Or do they have the right to let homes crumble into dust if they choose to do so?
I find it hard to understand how so many homes could be held off the market without collusion to manipulate the market. I thought price fixing was illegal under the Sherman Antitrust Act? I am not sure how one could prove collusion to artificially prop up home prices is occurring, but there evidently is a smoking gun.
Banks (all lenders really) could never stand a anti trust test…Why do you think all their CD rates are the same…
“Why do you think all their CD rates are the same…”
Competition?
““Why do you think all their CD rates are the same…”
Competition?”
if it was compitition, they would be paying you more, competing to keep you business not the lowest rate they can, like the guy said above PIRATES
More important reason IMHO is that they do not need to borrow from you and me if they can get lower rate somewhere else, be it just a few printed paper or a few 0s and 1s in the hard drive or memory.
Pirates…All of them…
Aren’t there legal requirements for banks to move REO to the market? Or do they have the right to let homes crumble into dust if they choose to do so?
Here in Tucson, there’s a code enforcement reporting form that’s quite the joy to use. Especially if your report includes words like “property appears to be abandoned.”
I don’t know what magical powers the city has, but when it comes to unoccupied properties, they get cleaned up in a jiffy.
The issue isn’t anti-trust but enforcement. How long before the regulators force them to start marking down the value of those “assets?” Until they do, there is no incentive to sell.
It isn’t banks that are holding the houses, however. It is mortgage services, acting on behalf of bondholders. The bondholders are the owners of these houses, not the banks.
The question is, what is happening to those bonds? Are they Freddie and Fannie guaranteed?
Imagine of the federal government pushed bondholders to realize the losses, has Fannie and Freddie make good on the guarantees — and then emptied the housing projects into all the empty homes! Affordable housing for all!
Bear,
National banks, at least, have 5 years to move REO off their books. The can petition the Treasury (OCC) for more time in unusual circumstances, which some might argue is now the case. To meet this legal requirement, banks can sell REO for whatever it might bring, or write it off completely. A book value write-off still does not mean the property is abandoned although abandonment might in fact be cheaper in many cases than maintaining the place in the hopes it might someday sell.
Our laws simply cannot force people, or banks, to sell their assets at a loss, however unfair you think it might be to potential buyers.
A more likely way to encourage bank sales would be for communities to strictly enforce tax collection and property maintanence standards. No reason that towns, cities and townships cannot pass laws requiing certain health and safety standards. Be a good source of revenue.
Will
“…homeowners who fall behind on their mortgages or simply stop paying can spend years living in their home, albeit under the constant threat of foreclosure. In both New York and New Jersey, the average foreclosure now takes more than 2 ½ years from start to finish.”
Rent-free / payment-free living is starting to look like a very good financial move! I have read recently that it was taking 330 days, on average, to process a foreclosure, but 2 1/2 years!? Doing the arithmetic shows this would amount to 2.5*365 = 912.5 days with no house payments! At that rate, homes going into default today in Jersey or NY won’t hit the market until year-end 2013 at the earliest, and this will only add to the massive foreclosure inventory already being held off the market.
I predict there will be a high inventory of foreclosure homes to choose from for years to come (and that is what is known as a “no-brainer” prediction).
Even in the early days of the bust, before TSHTF, Illinois was taking about two years (more or less) to process a foreclosure (mostly because the FBs were simultaneously declaring bankruptcy to get out of paying the deficiency judgement).
No idea what that time frame looks like now. But hearing 2.5 years doesn’t surprise me.
“Everyone’s looking for a bargain price right now. . .” It’s about time people start questioning the price and running the numbers.
If Zandi sez it, then it must be so (but I suspect the magnitude of his price decline estimate will prove overly conservative…).
What I don’t get is, why are MSM-favored ‘economics experts’ worried about falling home prices? Are they concerned that the laws of supply and demand, which they presumably studied at length during their training, actually work as advertised? Why is the operation of basic economic principles so scary to so many?
As Lenders Hold Homes in Foreclosure, Sales Are Hurt
Joshua Lott for The New York Times
Jayson Meyerovitz, a broker in the Phoenix area, is concerned about bank-owned foreclosures: “If so many houses hit the market, what is going to happen then?”
By ERIC DASH
Published: May 22, 2011
EL MIRAGE, Ariz. — The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.
All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.
Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months.
“It remains a heavy weight on the banking system,” said Mark Zandi, the chief economist of Moody’s Analytics. “Housing prices are falling, and they are going to fall some more.”
…
“The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.”
This gets straight to the problem with the Fed’s discriminatory lending policy of giving Megabank, Inc zero percent interest rate discount window loans while leaving America’s households and small businesses (quite literally) out in the cold. Megabank, Inc now has unearned monopoly rights to sell homes in their possession whenever they get around to it. If the zero-percent loans had been instead handed to households, at least the homes would be in current use, instead of physically wasting away. The homeless guys living under bridges around San Diego might even be able to afford living in homes if they didn’t have to pay those pesky ‘market rates’ of interest to Megabank, Inc.
market pulse
May 24, 2011, 10:01 a.m. EDT
U.S. April new home sales up 7.3%
By Greg Robb
WASHINGTON (MarketWatch) -
… New-home sales are down 23.1% compared with a year ago. The supply of new homes fell 2.8% to a record low 175,000. The supply in relation to sales fell to 6.5 months in April from 7.2 months in March. Median sales prices have risen 4.6% in the past year to $217,900.
“U.S. April new home sales up 7.3%
… New-home sales are down 23.1% compared with a year ago.”
Looks like yet another one of those “MOM is up! But YOY is Down!” stories.
“‘There is a correlation between unemployment and foreclosure,’ said Nicolas P. Retsinas, director emeritus of Harvard University’s Joint Center for Housing Studies.
Oh really? This bit of news from a director emeritus of Harvard? Geez, I’m willing to bet even the most clueless J6P could figure that one out.
The clueless J6P probably knows it firsthand.
It may be true but they’re attributing the collapse of the Great Housing Fraud to unemployment. It’s truly a strawman.
My hypothesis is that people associated with real estate generally are frightened to say the obvious, because that detracts from permanent optimistic sales mode. This guy is protected by the imprimatur of the country’s allegedy leading university, and even he hedged by saying “correlation” rather than “causation.”