The Equity Has Disappeared And The Bills Are Due
A report from the Florida Times Union. “The four-bedroom house on the bank of the St. Johns River was nice. Built in 1990, it sold for $715,000 at the height of the real estate bubble in 2006. Since then, the home was partially burned in a mysterious fire, a next-door neighbor said. Then it was abandoned and subsequently condemned, according to city records. The house’s story is one of more than 10,200 Duval County single-family home foreclosures in 2008, 2009 and 2010. Of those foreclosures, most — possibly more than two-thirds — were investor-owned when the bank took them, a Times-Union review has found.”
“The difference casts a new light on Jacksonville’s ongoing foreclosure crisis: The vast majority of foreclosed homes were owned by people who did not live in them. They were mostly investors who purchased those homes to rent or resell. ‘Money was easy come, easy go in the mid-2000s,’ said Jacksonville foreclosure attorney Chip Parker. ‘There were a lot of middle-class families taking their savings out, figuring they could make more money in the real estate market than on the stock market.’”
“Many did, until the real estate bubble burst and the market reversed. That was when some people began to choose to walk away from mortgages on homes that were losing value, Parker said. That decision is a lot easier to make when it comes to an investment property, Parker said, because there’s less sentimentality for those than there is for family homes. ‘Once you take the emotion part away, you see more walkaways. That is an absolute certainty,’ he said.”
“As for the Wayland Street house that was bought in 2006 for $715,000, the former owners did not respond to messages left at a telephone number listed for them in city documents. But according to the Property Appraiser’s Office, that home’s removal resulted in an assessed value loss of $209,000. The 1.2-acre lot was advertised for sale at the auction.com website with a starting price of $59,000 in an auction that ended June 13, The site indicates a bid is pending confirmation.”
“If the property sells at the starting price of $59,000, that would be 8 percent of its 2006 purchase price.”
From Hernando Today. “There were half as many foreclosures filings in Hernando County during the second quarter of this year compared to the same period last year. Local builder Dudley Hampton Jr. agreed the ‘precipitous drop’ in foreclosures can be attributed to better bank oversight. Hamilton alluded to the recent ‘robo-signer’ controversy. Banks are moving on the foreclosed homes and that is one positive sign, said Hampton, a member of the Hernando Builders Association.’
“Between January 2005 and December 2010, Hernando County has lost 2,531 positions in construction, representing 60 percent of that industry’s labor force, said Hamilton. ‘It’s not pretty,’ Hampton said. ‘There’s just a glut of houses on the market right now and until that inventory goes away I don’t see much of an uptick in the new housing market.’”
The News Press. “Demand for homes in Lee County is brisk and prices are headed up — that’s usually the sign of a healthy market. But hovering over that cheerful landscape is a cloud of houses that, while they aren’t officially for sale, are headed that way. It’s called ’shadow inventory’ and experts say it could hold down prices for years before it goes away.”
“5,000 to 7,000 foreclosures in the county have been pulled back by lenders unsure their cases are sound. The cases generally were dismissed without prejudice, meaning they could be refiled when paperwork and ownership issues are resolved. About 6,000 more properties are working their way through the county court system. Thousands of houses are owned by people who haven’t yet been foreclosed on but are far behind on their mortgages and have no prospects of catching up.”
“‘I’d make a case there could be as many as a million that haven’t made their way through the system but will sometime in the next 12-18 months,’ said Jack McCabe, a Deerfield Beach-based real estate consultant who tracks home markets on both coasts of Florida. When that happens, McCabe said, ‘It’s going to make it very difficult for people trying to sell.’”
The Orlando Sentinel. “Banks doing business in Florida are getting healthier, but many still remain troubled, according to the rating agency Bauer Financial. In Central Florida, a dozen banks (37.5percent) received ratings of problematic or worse, including CNLBank, the region’s largest locally based financial institution, which had a rating of one. That was four fewer banks with low ratings than at the end of the fourth quarter — but only because of the four bank failures.”
“‘The real-estate sector is still the cause of the problems that so many banks are struggling with,’ said Rod Jones, an Orlando lawyer and former state banking regulator.”
“A more growth-friendly Orange County Commission plans to consider whether to revive two massive development proposals in the sensitive Econlockhatchee River region, both of which were voted down last year. One is Innovation Way East, a 6,343-home project. The other, Rybolt Park, is a 5,000-unit proposal.”
“Commissioner Fred Brummer voted against Rybolt but said recently that he didn’t feel it got a fair hearing. ‘They are certainly savvy enough to count noses,’ Brummer said. ‘They didn’t just fall off a turnip truck.’”
The Palm Beach Post. “During the height of the boom, new home prices at Azura, a luxury home community outside Boca Raton, were pegged at between $1.6 million and $3 million. But after the property fell into foreclosure, Toll Brothers scooped up the unfinished project and dropped the homes’ prices to the $900,000 range.”
“Now, after selling only three homes in 18 months, Toll Brothers has taken a chain saw to its pricing. Earlier this year, the company slashed prices nearly $200,000 per unit. For instance, at the end of March, prices on one model plunged to $790,995 from $975,995. ‘There’s no doubt we’re reducing pricing to be where the market is today,’ said Jim McDade, Toll Brothers’ vice president. ‘Once you’re open for a year, you get a flavor for where things are.’”
The Naples News. “One of Southwest Florida’s heavyweight developers is seeking an extension on its plans to build a massive residential and golf course community at the eastern end of Bonita Beach Road. The Ronto Group filed for the extension with the city of Bonita Springs for two projects well east of Interstate 75 that are permitted for nearly 2,000 housing units as well as a golf course and retirement community.”
“‘Everything’s there (ready to finish development),’ Ronto Group Executive Vice President Anthony Solomon said after the meeting. ‘There just aren’t any new homes there now.’”
“Mayor Ben Nelson said the extension request could be a sign that the housing market is recovering in Bonita. ‘It’s a good sign that someone is moving forward with a development,’ Nelson said. ‘People realize now that their paychecks and pocket books are tied to their community.’”
The Tampa Tribune. “Credit scores in Florida have dropped at triple the rate of credit scores in other states since the recession started, in part because of Floridians’ heavy reliance on home equity, according to the Experian credit bureau. That means Floridians may find it harder to get new car and home loans, or at least pay higher interest rates.”
“Some people in Florida, Las Vegas and other once-hot housing markets treated their homes as ATMs and used their home equity to pay bills, said Michele Raneri, a vice president of decision analytics for Experian. Now, their home equity has disappeared and the bills are due.”
“‘It was an artificial cash flow from their house and when the cash flow stopped, they weren’t able to afford some of the things they had already bought, including the house,’ Raneri said.”
The St Petersburg Times. “Starting Oct. 1, home buyers seeking government-insured mortgages will have to pick lower-priced houses if they want the federal government to back the loans. Freddie Mac, Fannie Mae and the Federal Housing Administration are lowering the maximum loan amounts that the agencies will guarantee in more than 850 counties in the United States.”
“The new limits were supposed to take effect in January 2009, but the economic downturn led Congress to delay the implementation. In the Tampa Bay area, the FHA is reducing the maximum insured loan for single-family homes from $292,500 to $271,050.”
“‘I believe this will cause widespread defaults and foreclosures,’ said Andy Wood of American Mortgage Services in Tampa. ‘If this is not stopped, it will be the thing we look back on as the straw that broke the housing market’s back.’”
The Largs and Millport News. “A couple who live much of the year in sunny Florida, USA have warned that Largs is building too many houses. Mr and Mrs Brian Forbes who have a home in Acre Avenue, Largs have read the controversy over plans for hundreds of new houses around the Brisbane Glen area.”
“Mr Forbes told the ‘News’: ‘When the economic environment there is tight, just like it is here, who is going to live in all these new ‘homes’ or are they to stay empty and then look like “%#%&^^$” after a couple of years? That is what has happened here in Florida. All these ‘new’ homes, yet no one to live in them as there is no money, jobs, etc. so they stay empty and no revenue comes in; just an eyesore and destruction of the local enviroment.’”
‘I believe this will cause widespread defaults and foreclosures’
You may be right Andy, but here’s the thing; the govt can’t be the lending arm for high end houses indefinitely. And some of us have suggested that all these programs have accomplished is to make it possible for many thousands more people to pay too much for houses. Which would, as you say, “cause widespread defaults and foreclosures.”
No mention of the next generation who might like to own a house, but have no chance until prices tumble.
‘but have no chance until prices tumble’
Yes, affordable housing. How many decades were we told we had to have HUD/FHA and the GSEs or there wouldn’t be affordable housing? Then when it all unravels, we’re told we have to have these organizations or house prices will fall.
How can the media not notice this absurd shift in policy?
“How can the media not notice…”
It appears HBB posters will have to continue doing their jobs for them so long as the current MSM regime continues.
Back in 2009, I was a volunteer photographer for a Habitat for Humanity event here in Tucson.
After the photo shoot was over, I got to talking to one of the Habitat staffers. She asked me if I knew of anyone who was interested in becoming a Habitat homeowner.
I was floored.
Why? Because it wasn’t too long ago that the demand for Habitat homes far exceeded the supply. Oh, yes, you could apply. But that didn’t mean that you got accepted into the program. Getting accepted was pretty tough.
Well, there we were, talking in September 2009. According to this staff member, house prices had come down so much that a lot of would-be Habitat homeowners could just go out into the market and buy.
Then there was the jobs situation here in Tucson. That was taking another big chunk of people out of the potential Habitat homeowner pool. After all, people who don’t feel too secure in their jobs aren’t going to be too interested in taking on a house payment. Even at the screaming-deal Habitat level.
“…house prices had come down so much that a lot of would-be Habitat homeowners could just go out into the market and buy.”
It took the collapse of the agencies whose very mission was to provide affordable housing (Fannie and Freddie) in order for affordable housing to finally materialize.
How can any journalist who is paying attention resist the urge to write about the bizarre irony of this situation?
‘but have no chance until prices tumble’
This should read…
The event is sponsored by the Obama Administration’s Keeping Homes Unaffordable Program. But it doesn’t.
Free government workshop for troubled homeowners Monday in Hollywood
By Jeff Ostrowski Palm Beach Post Staff Writer
Posted: 11:50 a.m. Thursday, July 7, 2011
A free Help for Homeowners workshop is scheduled for 11 a.m. to 7:30 p.m. Monday at the Westin Diplomat Resort in Hollywood, 3555 S. Ocean Drive.
The event is sponsored by the Obama Administration’s Making Home Affordable Program, HOPE NOW Alliance and NeighborWorks America. Troubled borrowers can meet with mortgage companies and federally approved counseling agents to work on a solution to help them stay in their home.
For more information, go to http://www.MakingHomeAffordable.gov.
http://www.palmbeachpost.com/money/foreclosures/free-government-workshop-for-troubled-homeowners-monday-in-1589073.html - -
“…next generation who might like to own a house…”
= Generation Screwed, on both the jobs and the housing fronts
Of course there isn’t. We can’t imagine a future that doesn’t depend on people overpaying for things using borrowed money.
I have been harping on this for some time now. The same is true of medical costs and college costs. The government makes large amounts of money available so folks can afford these services and costs go out of control.
I believe the problem they have is more of a tail wagging the dog issue in that rather than set spending and lending limits that make sense because they make sense, they allow the market to set the lending and spending limits. The market will always see deep pockets and go in for the kill.
Thus had lending limits not raised in response to rising home prices, that would have been the end of rising home prices. Same is true of medical costs, college costs and other areas where government intervention has had the unintended consequence of substantially allowing costs to rise beyond where they would have been otherwise.
‘The same is true of medical costs and college costs’
I won’t disagree, but will point out some differences. What if we had doctors all over the media crying that by cutting some program, medical prices would fall? What if professors were telling reporters that we can’t allow the price of college to drop?
These people are getting away with this outrage shamelessly. Come on media, can’t you see what is going on? And we are talking about a basic need, shelter, and the govt is backing 90% of the loans. These are $trillions we are talking about. All the while going on about foreclosures, when they are creating foreclosures!
“What if we had doctors all over the media crying that by cutting some program, medical prices would fall? What if professors were telling reporters that we can’t allow the price of college to drop?”
Those cases are indeed different, as the masses are not counting on accumulated medical or college equity wealth gains to make them rich, the way they are counting on home equity wealth gains.
“…when they are creating foreclosures!”
It seems to me like there are enough real problems our politicians could be addressing without adding to them by artificially creating new ones.
But I’m no expert on the filthy business of politics.
My son doesn’t think the colleges he has attended are too overpriced, but he does think that a lot of degrees cost more than they are worth. He did take a couple of summer courses at the local technical college and did not think they were very good. I’m not sure about costs except that they have gone up a lot in the last few years. I do remember all of the students at the private college I attending in 1970 resenets landscaping because it would raise the cost.
I do remember all of the students at the private college I attending in 1970 resenets landscaping because it would raise the cost.
I’m of the mind that more schools should adopt the Ozark University model.
This school is known as Hard Work U because of the role that students play in running the place. They do just about every job that needs doing on campus — even to the point of staffing the school’s fire department.
If I had things to do over, there is only one reason I would attend that school=I met my husband there. But academically a state school would have been a better fit.
“This school is known as Hard Work U because of the role that students play in running the place.”
Here’s another:
Berea College
From Wikipedia, the free encyclopedia
www dot berea dot edu
Berea College is a liberal arts work college in Berea, Kentucky (south of Lexington), founded in 1855. Current full-time enrollment is 1,514 students.[3] Berea College is distinctive among post-secondary institutions for providing low-cost education to students from low-income families and for having been the first college in the Southern United States to be coeducational and racially integrated.[4] Berea College charges no tuition; every admitted student is provided the equivalent of a four-year, full-tuition scholarship (currently worth $102,000; $25,500 per year).[5]
Berea offers undergraduate academic programs in 28 different fields.[6] Berea College has a full-participation work-study program where students are required to work at least 10 hours per week in campus and service jobs in over 130 departments. Berea’s primary service region is Southern Appalachia, but students come from all states in the United States and more than 60 other countries. Approximately one in three students represents an ethnic minority.[7]
Speaking of Berea college, a couple of week ago, I came home to the sound of bluegrass music. A bunch of Berea college students were having an impromptu concert in our living room to thank my wife and me for letting them spend a couple of nights at the house while they attended MerleFest near here. It was great!
Speaking of Berea college, a couple of week ago, I came home to the sound of bluegrass music. A bunch of Berea college students were having an impromptu concert in our living room to thank my wife and me for letting them spend a couple of nights at the house while they attended MerleFest near here. It was great!
Now, those are the kind of house guests you want to have! Thanks for sharing the story, Doug.
Yeah, I was on a canoe trip and some locals started serenading me with banjo music. I paddled really fast.
Whether the characterization is fair or not fair, that book (I haven’t seen the movie) is one reason I laughed when I read on this blog that the bubble had come to north Georgia. I happen to know someone who bought property up there, probably thinking it was the next Asheville. He better hope so.
“The government makes large amounts of money available so folks can afford these services and costs go out of control.”
It looks like demand stimulus has quite a tendency to push prices to unaffordable heights. But I suppose that is good, as unaffordable prices make it readily clear why government subsidies are needed. (Pardon me while I go try to uncross my eyes…)
“…they allow the market to set the lending and spending limits.”
What does dumping in massive demand-side subsidies have to do with allowing the market to work? These policies are highly distortionary, and clearly result in unaffordable prices relative to household budgets, especially those households that aren’t in the group favored by subsidies.
I guess the point is this :
Would college cost what it does today if Federally guaranteed loans were not available?
Would medical costs be the same if insurance and medicare were not in place?
Would house prices be so high if Federally guaranteed loans were not the standard in home lending?
In each case the answer is pretty obvious. Well intended ideas designed to help more folks afford high ticket and one could argue basic items like homes, health care and insurance all have made these items unnafordable to the point of crashing several nations economies around the world including ours.
We cannot go on forever basing our economies on debt and government handouts - can we?
“In each case the answer is pretty obvious.”
Demand-side stimulus drives prices to unaffordable heights. Any undergraduate who passed Microeconomics 01 can show this with a standard Marshallian supply and demand graph. Why is it so hard for PhD-eed government economists to get it?
We need to stop screwing the students with easy loans. The average student has no economic brains. Remember they were the voters that put Barack over the top !
Why is it shadow inventory is being mentioned in the media, but people seem to be ignoring it?
‘If this is not stopped, it will be the thing we look back on as the straw that broke the housing market’s back.’
The housing market’s back has been broken since 2006, Andy!
“The vast majority of foreclosed homes were owned by people who did not live in them. They were mostly investors who purchased those homes to rent or resell.”
Are these the poor victims the HAMP and other ‘Save Our Homes’ programs are supposed to protect from foreclosure?
“The vast majority of foreclosed homes were owned by people who did not live in them. They were mostly investors who purchased those homes to rent or resell.”
That’s exactly what’s happening here in Tucson. Matter of fact, I can point to four cases right here in this neighborhood.
One of these four whizbang investment properties has been unoccupied since 2009. And it’s not improving with age and vacancy, that’s for sure.
‘There’s no doubt we’re reducing pricing to be where the market is today,’ said Jim McDade, Toll Brothers’ vice president. ‘Once you’re open for a year, you get a flavor for where things are.’
Go Toll!! Chasing the McLuxury market down!
Toll brothers lowers the price to 790k from 1.6mil? This should tell all of us about the ponsi sceme and big lies none of these places were even close to being priced right in the first place.
The subdivision they’re talking about is on Jog Rd in Boca Raton. Five miles north homes command a staggering $150K. How did they ever get $1.6 million?
Maybe they were expecting financiers and Wall Street types facing civil litigation to move here and buy them, as has long been the trend in this state with homestead property. In addition to Paul Bilzerian, my favorite is the former WorldCom CFO; he was building an estate in Boca even before the accounting scandals broke in 2001.
http://tinyurl.com/4×9chlz
‘They are certainly savvy enough to count noses,’ Brummer said. ‘They didn’t just fall off a turnip truck.’”
Aw come on, Mr. Brunner.
One of the few Detroit assembly lines that’s never been idled is the one that builds turnip trucks which are shipped straight to Florida for people to fall off of.
One of the few Detroit assembly lines that’s never been idled is the one that builds turnip trucks which are shipped straight to Florida for people to fall off of.
Reminds me of that Saturday Night Live skit in which the auto executive says that his company has entire factories devoted to building lemons.
The Govt. might have to be involved in Europe style home ownership where the government partially owns the property until the homeowner builds enough equity to be able to get a conventional private financing. It is better than insuring high ratio mortgages.
I would prefer a model where I cannot afford a home until I can afford one, rather than government subsidized high prices.
All of these ideas are great IF the intention is to cause prices to rise!
Unfortunately due to the crazy increases in the value of real estate during the boom all this bad stuff in the economy was bound to happen. If home values didnt drop like this I couldnt see new generations being able to afford homes.
I think the plan is to hold home prices aloft and meanwhile inflate wages.
It’s kind of hard to do this when there are no new jobs, and the few jobs that are out there are compensated in competition with Third World pay rates.
Ah Ben such a subtle flair for shifting the terms of the debate and thus highlighting the absurdity we all know is there.