The Housing Bubble

The Portland Daily Sun reports from Maine. “The US Department of Housing and Urban Development (HUD) feels your pain, Maine, and has decided to pony up some checks. The program is named the ‘Emergency Homeowners Loan Program’ is set up for people that have fallen behind in their mortgage payments due to unemployment, reduction in hours, or medical issues. The program is a ‘bridge’ loan for those who are in foreclosure, pre-forclosure, and in some cases can range from $35K to $50K for a zero-interest two-year ‘loan.’ Ah, but the crafty reader will notice that I put the word ‘loan’ in quotes. It is specifically mentioned that ‘in some cases, the loan would not need to be paid back.’”

“Since the money is supposed to be used to pay a ‘portion’ of your past due loans, and legal fees, and interest, it might be important to know how much you are getting on the hook for, even if ‘it might not need to be paid back.’ Then, there is the ‘chance’ aspect of this program. No idea of how many folks qualify, no picture of how the money is going to be split up, and a make-it-up-as-you-go-along approach has led to a decision. The ‘Pre-app’ folks who get approved will be entered into a “Lottery” system, and the winners of that lottery will be the ones to get a loan.”

“Makes that childhood game of ‘Monopoly’ with the ‘Chance’ card seem simple by comparison. At some point, national housing policy has to go beyond ‘Monopoly’ and into a game with a little bit more deductive reason to it … like ‘Clue.’”

The Enterprise Record in Massachusetts. “Alfred Smith found himself without a job last December and trying to keep up with his home mortgage and daily expenses. Smith is hoping – praying even – that he will still qualify for the $1 billion Emergency Homeowners’ Loan Program, which was set up in last year’s Dodd-Frank bank reform bill and was a program that Brockton residents asked for in a 2009 meeting in the city with U.S. Rep. Barney Frank.”

“It comes just in time for Smith, a 57-year-old father of two whose new job pays less than what he received as unemployment compensation. ‘That would mean everything. It would be a brand new start in life at this point,’ he said. ‘That’s how serious it is.’”

“NeighborWorks spokesman Douglas Robinson said the program will direct $61 million in loans to Massachusetts residents. With an average loan of approximately $35,000, that would cover only 1,740 people statewide.”

The Daily Hampshire Gazette in Massachusetts. “Tini Sawicki, who owns Prudential Sawicki Real Estate in Amherst and is the western region VP for the Massachusetts Association of Realtors, described the market as ‘in limbo’ right now. ‘It’s hard right now to anticipate the market,’ said Sawicki. ‘We’re busy, but we should be busy at this time of year. There are more people out there looking, but some are a little hesitant to pull the trigger.’”

“Homes in Hampshire County are selling and many agents believe now is a good time to buy. Interest rates are low and home prices, after a several-year decline, will likely begin to go up again. ‘If I could, I’d be buying up property right now,’ said Linda Rotti, sales manager of the Jones Group Realtors office in Amherst.”

“Selling a house in Hampshire County is taking longer. Selling prices, meanwhile, are relatively stable in Hampshire County through the first four months of the year, though they are down considerably since the recession began a few years ago.”

“Though those numbers paint a stable picture, there are homeowners attempting to sell who end up taking a hit. Some people who have owned their homes for some time are selling for less than they hoped for, while relatively new homeowners are finding it hard to sell their house and cover the loan and an agent’s commission. ‘If you bought a house two, three, four years ago, you’re probably going to have a hard time selling it and covering a commission,’ said Sawicki. ‘Buyers are looking for quite a while, going to open houses and are very educated. Sellers have taken a bigger hit than they’d like.’”

The Providence Journal in Rhode Island. “May sales statistics from the Rhode Island Association of Realtors show a 5.26-percent increase in the median house price, to $210,000, but the number of houses sold fell 10 percent, compared with a year ago. Stephen Antoni, president of the state Realtors’ group, said he was glad to see a median price increase occur without the support of the tax credit.”

“The Realtors’ association also reported that the number of houses available for sale was at a high of 6,602 in May, up 12 percent from May 2010. The inventory has not surpassed that number since August 2008. Distressed properties — foreclosures and short sales — accounted for nearly 27 percent of house sales statewide in May. But in some urban areas, such as Woonsocket, Pawtucket and Providence (not including the East Side), the distressed segment accounted for closer to 50 percent of sales.”

“Antoni said that ‘overly stringent’ lending requirements continue to hamper sales. ‘If we want to see more sales, lenders will need to begin setting reasonable qualifying standards so that credit-worthy people can buy homes.’”

“Antoni said that during the housing boom, some lenders were qualifying people ‘by taking a pulse,’ but now, ‘that pendulum has swung a little too far in the other direction.’”

The Hartford Courant in Connecticut. “Pending sales of single-family houses in Greater Hartford rose by 41 percent in May compared with a year ago. ‘The jump in pending sales may be a signal that the market has finally corrected itself a year after the expiration of the housing tax credit,’ Greater Hartford Association of Realtors President and CEO Jeff Arakelian said. ‘Affordability and an abundant inventory make this market a great time to buy.’”

“Pending sales are a widely watched indicator of sales that might close in the next 45 to 90 days. The region’s housing market still suffers from other problems. Sales of single-family houses dropped by 28 percent in May compared with May 2010 in the 57-town area tracked by the association.”

“Throughout the nation, stringent mortgage underwriting also is holding back the market, said Lawrence Yun, chief economist for the National Association of Realtors. ‘Lenders and bank regulators need to be mindful of the historically low default rates among mortgage borrowers of the past two years,’ Yun said.”

New Hampshire Public Radio. “About 900 acres surrounding the Mount Washington resort in Bretton Woods have been sold at a foreclosure auction. NHPR’s Chris Jensen reports. The foreclosure was the end of a grand plan launched in 2008. The developers promised a huge resort community with 900 homes. But the economy ended that.”

“Charles Adams headed up that development group. In 2008 Adams headed up the developers who promised a resort community with hundreds of new homes and a shopping area tucked around the Mount Washington Hotel. ‘It has definitely been a long three to four years as we’ve watched everything just plummet, but real estate in particular is way beyond the great recession, I think it has definitely been a depression for real estate.’”

“Adams estimated his group owed Wells Fargo about $38 million. There were only two bidders. The selling price was $10.5 million dollars.”

The Union Leader in New Hampshire. “The number of building permits issued in the Lakes Region took a nosedive between 2005 and 2009, according to the Lakes Region Planning Commission’s 2010 annual report on development activity. Russ Thibeault of Applied Economic Research of Laconia has been providing research since 1976. High priced residential properties have sold, but overall the residential market is soft and prices are down, he said.”

“The LRPC report reflects the state of the market several years ago. ‘Where we are now is bouncing off the bottom. The current state of the market is depressed, but stable,’ he said, adding the consumer confidence has to go up for the housing market to improve. ‘It takes awhile for housing markets to recover. I don’t think we’ll ever see one like this again — it’s going to be a long recovery — but things aren’t falling apart anymore,’ he said.”

“He said the report reflects market conditions, but is not a negative mark on the appeal of the Lakes Region. ‘This is a matter of market conditions. The housing market continues to be in the doldrums. It’s difficult to get financing today, and on the other hand, the housing market is soft. Last year was the softest year ever for permits in New Hampshire, and we felt it,’ said Thibeault. ‘People shouldn’t think the Lakes Region turned into New Jersey,’ he said.”

The Montclaire Times in New Jersey. “What will it take to jump-start redevelopment along the stretch of Bloomfield Avenue east of Elm Street? That ailing segment of Montclair’s main street is home to a vacant multistory condominium complex where construction has stopped. Officials adopted a redevelopment plan for the area in September 2007, and ‘there has been no activity since then,’ Township Planner Janice Talley told The Times.”

“Anchored around the Bay Street Train Station, the neighborhood has ‘all these amenities nearby’ and is expected to draw developers and capital. There has already been a residential boom around the train station, with the Montclair Mews townhouses and the new Montclair Residences at Bay Street Station cropping up close by. ‘What we haven’t seen is new commercial development,’ Talley said.”

The Wall Street Journal. “New York state homeowners whose properties are worth less than their mortgage balances tend to be more underwater than borrowers in any other state, a reflection of high home prices and high leverage. Price declines, the primary culprit for negative equity, were less pernicious in New York than in the hardest hit states.”

“But because New York home prices are higher than in most other states—driven partly by the multimillion-dollar price tags in parts of Manhattan, Westchester and Long Island—even a small percentage price decline can result in a substantial level of negative equity. ‘Generally speaking, if you’re upside down, the higher the value of the geography, the deeper underwater you are,’ says Sam Khater, an economist with CoreLogic. ‘When someone’s upside down, they’re upside down by a lot—they tended to over-leverage.’”

“Homeowners in Connecticut had a similarly high level of negative equity in the first quarter, with an average of $111,430. In New Jersey, the average level of negative equity was $77,474. When breaking down the data for the tri-state region by county, owners of Manhattan condominiums and single-family homes had the largest average amount of negative equity—a whopping $1.35 million, according to CoreLogic.”

“In the wealthy town of Chappaqua in Westchester County, median values have fallen to $764,250 as of Monday from $1.12 million at the top of the market in 2007, according to Houlihan Lawrence, a Westchester-based brokerage. After Manhattan, Brooklyn’s underwater borrowers are the deepest in the hole, with an average negative equity of $202,404. In Fairfield County, Conn., the average difference between mortgage debt and property value is $176,038. In Bergen County, N.J., it’s $120,740.”

“‘It just shows even though we’re a market with very little foreclosure activity, there’s clearly a lot of exposure to default,’ says Jonathan Miller, the chief executive of Miller Samuel Inc., a New York-based appraisal and consulting firm.”

The New York Observer. “The Observer recently reported that the first 10 apartment tenants had signed at 25 Broad, bringing the failed condo conversion back to life as a rental—and Lehman Brothers, twitching, back with it. Not even three years after the bank’s collapse took the economy with it, Lehman, through its holding company, lives on, a rosy zombie quietly looking to make a small fortune off prime New York properties, and maybe—just maybe—pay off some creditors.”

“In other cases, Lehman is poised to stick it out a few more years. The garish former condo at 25 Broad is currently in receivership, but Lehman Holdings could take control as early as the fall. In a little-known plan, Lehman is in the final stages of foreclosing on a failed condo conversion at 325 West Broadway that it may renovate.”

“In the end, Lehman hopes to liquidate its New York assets by September 2013, though the effort has proved to be a struggle as creditors are busy fighting over the last valuable vestiges of the once-great investment bank. Said one source familiar with the liquidation: ‘It’s a shit show.’”