Like A Winter Coat In June
The Grand Rapids Press reports from Michigan. “Architects and home designers headed into a national convention at the Amway Grand Plaza Hotel on Tuesday predicted a ‘new normal’ for economic activity in their industry, rather than a return to the housing boom. Wayne Visbeen, of Visbeen Associates Inc., in Kentwood, said his business fell by as much as 50 percent but is climbing again slowly. He used to design million-dollar homes along Lake Michigan. He’s doing $300,000 homes now. ‘The level of luxury is definitely more conservative. Even people with money are more conservative,’ he said.”
The Detroit Free Press in Michigan. “In metro Detroit, short sales jumped 85% last year from 2009 and are up nearly 20% so far this year, according to Realcomp. Homes with more than one mortgage and mortgage insurance tend to take the longest, said Ellen Mahoney, president of Complete Title Services’ loss mitigation division in Birmingham. A growing reason short sale deals fall through or take longer is because of mortgage insurance purchased after the homeowner closes on the deal and the loan is later sold to other lenders and investors.”
“Unlike private mortgage insurance required for sellers who put less than 20% down, these lenders and investors buy insurance to minimize risk. It is known in the real estate industry as pool insurance because it covers a group of loans that have been purchased. Premiums are paid by the lender or investor and the homeowner isn’t aware of it. When the loan defaults, such as in a short sale, the mortgage company may demand that the seller pay part of what is owed to minimize its losses.”
“‘That’s a mess. They are the worst,’ Mahoney said. ‘It is usually the lender mortgage insurance that nobody knew about, and it is usually on the second mortgage. It is real disruptive.’”
“Evelyn Sokol has an offer on her 1,000-square-foot Shelby Township home, but will likely lose the home to foreclosure even though she never knew her lender had purchased mortgage insurance on her loan. The home is priced at $75,000. Sokol, who bought the home in 2001 for $146,000, put more than 20% down and did not need the mortgage insurance. At some point, her lender pooled her loan with others to sell to investors and purchased the mortgage insurance.”
“‘This is absolutely ridiculous, and expecting a woman who is surviving on Social Security and a small pension to pay this? I’ve never heard of this,’ McGuire said. ‘How do they make a homeowner responsible for something they didn’t even sign on to?’”
“The government’s Home Affordable Foreclosure Alternatives program was meant to give homeowners an alternative if they don’t qualify for a loan modification. But most banks are unwilling to go along with HAFA short sales, in part, because the program forgives the homeowner’s loan balance. Lenders, in some circumstances, would much rather try to recoup their money.”
“Laurie Maggiano, director of policy for U.S. Department of the Treasury’s Homeownership Preservation Office, said that while the first mortgage holder receives 65 to 80 cents on the dollar after the property is sold, the second and other lien holders get less than 6%, and they want to retain the rights to go after homeowners for more. But the change is not likely to happen, she said. ‘We don’t want taxpayer dollars going to a transaction where a borrower still has contingent liability,’ Maggiano said.”
“Celso Martinez would have been happy to benefit from a program like HAFA. The 44-year-old bought a Royal Oak bungalow in 2008 for $164,000, then lost his job and moved to Collierville, Tenn., for a new one last fall. He spent almost 10 years in Michigan, working at the General Motors Tech Center in Warren. Laid off, Martinez exhausted his savings and unemployment benefits trying to keep up with the mortgage, but he fell behind. He got a short sale offer of $80,000 this spring, but his bank rejected it. He got another offer in June for $104,500, but that didn’t go through, either.”
“The house is now for sale at $102,500, but as a foreclosure. ‘It was my first time buying a home, living the American dream,’ said the native of El Salvador. ‘But it isn’t as good as it sounds. Now I am kind of messed up with bad credit for seven years.’”
The Chicago Tribune in Illinois. “Minnesota-based TCF Financial said the Chicago area is its weakest market in terms of the quality of its loans and other assets on its books. It’s ‘even weaker than Michigan,’ the bank said. TCF, which has 201 TCF Bank branches in Illinois, partly blames the prolonged foreclosure process in the Chicago area, making it difficult to get bad loans tied to commercial and residential properties off of its books.”
“‘They think they are doing a good thing, but they’re not,’ Chief Executive William Cooper said of the legal process that banks must go through to dispose of foreclosed property in the Chicago area. ‘It takes us longer to get a house through the system (in Chicago), and to get it sold takes us longer there than anywhere else.’”
The Journal Star in Illinois. “Richard Canges can only think of the good old days when reminiscing about a nearby Central Peoria house he visited as a kid. The house was a nice, brick family-owned residence with a warming fireplace inside. ‘That is a shame,” Canges said, as he glanced across the street recently at the now vacated house, which one neighbor said is an attraction for raccoons and rodents. The two-story house is one of about 30 houses awaiting the wrecking ball, if the funding for city-wide demolitions exists by the end of the year.”
“The funds are being stretched to their limit. The city budgeted $300,000 for demolitions in 2011, and has spent $258,208 already to tear down 39 properties. Pending the results of court cases, the city could have 66 properties potentially scheduled for demolition - and no money to do them. ‘It does get overwhelming with the number of properties we see that are vacant and being abandoned and just neglected and are falling into disrepair,’ said John Kunski, the city’s director of code enforcement. ‘The numbers are on the rise.’”
Bloomberg on Ohio. “Bank of America Corp, faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer. The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are either conducting or considering their own programs.”
“‘There is way too much supply,’ said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. ‘The best thing we can do to stabilize the market is to get the garbage off.’”
The Plain Dealer in Ohio. “Foreclosed homes in Cuyahoga County are more likely to remain vacant up to five years after they’re sold compared with homes sold by traditional means, a new study by the Federal Reserve Bank of Cleveland has found. In one key finding, he looked at homes that were sold or foreclosed on in January 2006 and whether they were vacant in December 2010. His calculations involved 85,000 properties and 130,000 sales.”
“‘The data reveal that foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure,’ wrote Fed researcher Stephan Whitaker. Among foreclosed homes, 22 percent are vacant five years after their last sale, compared with 10 percent of homes sold not through foreclosure, the study found.”
The Des Moines Register in Iowa. “During the past year or so, nearly 300 new downtown apartments were completed by several developers. Most filled up almost immediately, and more than 300 additional units are now under construction or in the planning stage. It’s a much better situation than existed as recently as five years ago when downtown developers were building more for-sale than for-rent housing and occupancy rates were dismal.”
“Builders misjudged the market, said Rick Tollakson, chief executive of Hubbell Realty, which has proved to be one of downtown’s most persistent and most successful housing developers. ‘We thought the price point was $200 a square foot,’ which translates to $300,000 to $400,000 per unit, ‘but it’s really $125 a square foot,’ or $200,000 for a 1,600-square-foot unit, Tollakson said.”
The Wichita Business Journal in Kansas. “The former Real Development Corp. office condos in downtown Wichita are sinking to new lows in their prices. A unit at the Orpheum Office Building sold this month for $80,000, down from more than $400,000 five years ago. All of them are owned by US Bank after the investors — most of them from California — sank into foreclosure after purchasing them about five years ago.”
The Duluth News Tribune in Minnesota. “Pending home sales in Minnesota were up 41 percent in June compared to June 2010. Still, it would take 18 months to sell all of the approximately 2,750 Duluth area homes on the market at the current sales rate. That’s the longest stretch of time in more than seven years, the data shows. ‘There’s tons of foreclosures, abandoned, distressed house in the 13-county metro area, bringing the price down,’ said Christopher Galler, Duluth Area Association of Realtors CEO.”
“The region between North Branch and Forest Lake also is having inventory problems with foreclosures and multi-unit housing complexes sitting empty, he said. He likened those distressed properties to a winter coat on the store rack in June. ‘Is it priced higher than in November or lower?’ he asked. ‘Right now, the housing stock is like a winter coat in June.’”
The Star Tribune in Minnesota. “The most frustrating aspect of the state’s three-week government shutdown was that Minnesota’s future seemed to hinge on one of two choices: Cut spending or raise taxes. What we desperately needed was a third option, an ambitious, long-term vision to restore economic growth.”
“Minnesota’s job numbers are a stark example of how swiftly expectations can go from great to greatly diminished. Between January 1990 and December 1999, the state added 530,000 net jobs. In the following decade, we experienced a net loss of 22,000 jobs. Naturally, a lot of those jobs were lost during the Great Recession, so it’s inevitable that many of them will come back, right? Not necessarily.”
“First, many midsize and large American companies are doing most of their hiring abroad. Second, new research suggests that the country faces a far more fundamental employment challenge that predates the recession by many years: a decline in the number of jobs being created by new businesses.”
“The Kauffman Foundation research focuses on businesses that employ others besides the owners. Those businesses are hiring fewer people. In the 1990s new businesses opened their doors with about 7.5 jobs on average, compared with 4.9 jobs today. The paper’s authors don’t spend much time discussing the possible causes for these declines, such as financing, free trade or the consequences of shipping jobs overseas.”
“Dane Stangler, the Kauffman Foundation’s director of research, cites another possibility: How much the housing bubble influenced or distorted job creation during the first part of the decade. ‘On the whole, a lot of those housing-related categories create fewer jobs,’ he said.”
Bulldozing houses in Cleveland: As someone who lived in NE Ohio for several years, this is a good idea. I know someone living in a different area may think otherwise, saying “Why cant they just give that house away to someone who needs it” - but it needs to be done.
Anything and everything of value has been taken from the house (Aluminum siding, pipes, fixtures) and the house is in complete disrepair. These houses are anywhere from 70-100 years old and don’t have much life left, unless you want to do a complete overhaul, which in a bad area in a bad school district with no job prospects doesnt make sense.
I’d even go a step further and offer the land at cost to the adjacent home owner. They could have an extra yard, operate a small farm and it would help increase the value of their house. The banks have to recognize that no one is going to build on that land, and the city doesnt have a budget to upkeep the newly empty parcel. Give it at a fair price to the neighbor. IMO this would help beautify the area and help turn it around.
Sounds like issues similar to Detroit
Heck, the city I live in is doing well, but still has plenty of half abandoned strip malls with parking lots and I’d love it if they would bulldoze those too.
I also just took a trip across the western 2/3 of the US, and along the way, there wasn’t a single city I passed through where that wasn’t true.
Bulldozing and demolition are underrated in my book.
Bulldozing and demolition are underrated in my book.
Except when it didn’t have to happen and the property had value until it was allowed to fall into disrepair but was never sold because they refused to “give it away” and the bank preferred to keep it on their books because they never had to mark to market.
“Anything and everything of value has been taken from the house (Aluminum siding, pipes, fixtures) and the house is in complete disrepair.”
In this case I agree with you, but I get nervous when bulldozing is offered up as a solution to ’stabilize prices,’ especially when (presumably) government funds are going to be used to pay for operating the bulldozers that are used to destroy usable houses.
I’d even go a step further and offer the land at cost to the adjacent home owner. They could have an extra yard, operate a small farm and it would help increase the value of their house. The banks have to recognize that no one is going to build on that land, and the city doesnt have a budget to upkeep the newly empty parcel. Give it at a fair price to the neighbor. IMO this would help beautify the area and help turn it around.
If the city offered me the vacant parcel that it owns next door, I’d jump on it. I’ve already created a guerrilla garden with desert plants. Having it under my control would provide more opportunity to expand and enhance the garden.
Cleveland is such a sad basket case (insert ‘blame the union goons’ quip here) that seems to have no economic fundamentals upon which to base its ‘recovery’. When I was there from 2006-2009 during and after grad school I enjoyed cheap rent, almost zero traffic (largely a result of existing infrastructure built to support a 1,000,000 population that has dropped to 400,000), and a non-existent job market.
At one time, it was a major shipping port. Not to mention a manufacturing hub. Just like Buffalo. And Detroit.
Nowadays, it doesn’t seem like Cleveland has a solid reason for existing. At least as a large city.
‘It takes us longer to get a house through the system (in Chicago), and to get it sold takes us longer there than anywhere else.’
One of the direct comps we’re going up against in my sale is a bank owned unit with a MT of some 500 days. Add that to the time it probably took them just to get it to market (1 year min.) and that’s a heckuva long time!
“‘There is way too much supply,’ said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. ‘The best thing we can do to stabilize the market is to get the garbage off.’”
There is a much better solution, which would neither waste the embodied labor and materials in these structures nor the expenditures needed to demolish them, and would also help restore housing prices which young families could afford, and that is to let the market absorb these units at whatever prices it will bear. This would enable the vacant homes to be salvaged without destroying them.
“first, many midsize and large American companies are doing most of their hiring abroad”
Any company that looks first to overseas hiring should lose all tax breaks, it is crazy to think that with a workforce of 155 million these corp’s can’t find American workers.
Oh I forgot overseas people work for cheaper pay? I bet you offer any American the same pay and in this economy they would take the job.
‘The data reveal that foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure,’
This problem could be easily resolved by legally requiring the foreclosing lender to dispose of the vacant homes within some fixed time period, or forfeit them to the local government. This would also enable cash-strapped local governments to sell homes at prices which would both serve to fund budget gaps, attract a young, vibrant workforce, and avoid the neighborhood blight which comes with vacant foreclosure homes.
Where is the downside?
Excellent idea Bear but that is the problem any good solutions like yours are shot down by the powers to be.
Since the banks are in bed with politicians on all levels of government, common sense solutions cannot prevail.
Downside: Lower property taxes.
Local governments have long term budget projections dependent on bubble prices. After long term vacancy the properties local governments receive may be practically worthless. Selling them will lower values in the neighborhood. The costs to administer a program to sell them might be a lot of trouble. And the vibrant workforce you’re trying to attract still needs jobs.
If you really think local governments are willing to sell these homes at prices that won’t bankrupt people then I’m willing to try it. But I bet they just unload it for nothing onto friends and cronies for more house flipping fun.
If you read into the one article, they point out that a lot of the dilapidated houses are owned by some LLC or investor out of state; not the lender.
Also, from Bloomberg: ‘No one needs these homes, no one is going to buy them,” said Christopher Thornberg, founding partner at the Los Angeles office of Beacon Economics LLC, a forecasting firm. “Bank of America is not going to be able to cover its losses, so it might as well give them away and get a little write-off and some nice public relations.’
‘It’s an economically justifiable transaction,” McCarthy said. “Holding on to a property that might sell for $1,000 or $2,000 or $5,000 for several hundred days is not in anybody’s best interest’
So lets just tear it down? It might be in the best interest of somebody to get a house for a thousand bucks, but not the people making the decisions. This looks a lot like pouring milk out on the ground to keep prices up.
“Downside: Lower property taxes.”
I guess taxes will have to be raised somewhere else. I suggest the top 1%ers — you know, the primary beneficiaries of the largest 1-time lump sum tax payment in U.S. history (aka the TARP) plus myriad other corporate bailouts that were summarily levied against the U.S. tax/monetary base back in Fall 2008.
I’m going to go out on a limb and say that developing $400,000 condos in Des Moines and Wichita was a really, really bad idea.
I can top ya, Steve.
Here in Tucson, a developer bought the Christian education building from a Baptist church. The idea was to re-develop it into condos with $600k price tags.
The now abandoned project is at the corner of 5th Street and 6th Avenue. A neighborhood where houses couldn’t fetch $600k unless they wished real hard.
I can’t believe you guys are jumping on the bulldoze bandwagon. Isn’t it just more price fixing only from the bottom end? Not just for housing but for all the materials involved.
A Person does not “need” indoor wiring, indoor plumbing and all the rest of the fancy requirements mandated by the state.
Poor People could live in these homes while they better themselves and it might beat living in a tent or a car.
It might spur more to learn how to live “off the grid”
If no one moves into the houses other People could dismantle the 2×4’s and siding for other endeavors if they weren’t bulldozed and hauled away.
Remove laws against having livestock in city limits and these houses might make good barns and feeder pens, or greenhouses.
I don’t think destruction by the state is ever a good idea.
I’m not sure half abandoned housing is good for neighborhood social stability, in terms of crime, in terms of safety, in terms of access to food, water, and medical care, in terms of making the neighborhood more dangerous for those already living there, close access to jobs for those without transportation, and plenty of other reasons that I can’t think of off the top of my head.
How are you going to turn a busted house with no water into a greenhouse? I’m not sure drywall is an appropriate material to spray with water on a daily basis. Sounds like a great way to create an animal infestation and black mold.
Who wants to live next to a barn where no one has the cash to pay to remove the waste? Also a fence to trap those animals costs thousands to install.
In short, I think you are creating more problems than you are solving by allowing abandoned properties to be used as-is.
with vegetable gardens, there’s no manure problems, a couple goats and a few chickens, it’s still not a problem. I don’t see any downside to city farms…
Interesting concept, but I disagree. I think once the house has gone down the tubes and there is nothing left, its time to pull the plug.
BTW: Its these houses that are facing demolition:
http://www.realtor.com/realestateandhomes-detail/5025-E-110th-St_Cleveland_OH_44125_M39694-35071
And we arent talking about a house that ‘just needs a gallon of paint’. Id say this house is destroyed and unable to be brought up to code.
Really? That house doesn’t look so bad at all. I see occupied houses and apartments in much worse condition on my rides to and from work each day.
When I clicked that link I was expecting to see houses like I saw in Gary, Indiana and throughout the rural midwest ten years ago - houses that were barely standing - but no one bulldozed them.
I posted something longer, and it hasn’t appeared yet, but if you don’t see that the downsides of random people moving into abandoned homes without water and electricity, or turning those abandoned homes into farming property, then you aren’t thinking about the problem very hard.
I guess the question is, do you let centralized positions of authority make the decisions, or do you let the free market clear the mess?
Do you let individuals try to make a go of things, or do you continue to vainly try to maintain things as they are?
Neighborhood social stability? As if the poor housing quality for the last several thousand years determined social stability. There seems to be plenty of social stability in the neighborhoods of the world mad of nothing but mud huts. I’m not sure that housing quality determines social stability.
How are you going to turn a busted house with no water into a greenhouse?
Dig a well, haul the water in by cart or truck, capture it from the air with rain barrels and such.
Dry wall is easy enough to remove and the studs of the structures are often still in good condition.
Who wants to live next to a barn where no one has the cash to pay to remove the waste?
It’s not about what People want, it’s what they can afford. People live next to barns just fine today, and waste can be turned into valuable compost or treated in other ways.
Fences could be constructed from the materials from the next house over or other ingenious ways.
Paying a Code Enforcement Officer over $30,000 a year to run around condemning everything is a big part of the problems many communities face. Eliminating code enforcement might go a long ways to restoring stability and eliminating the local price fixing support?
The link Sean gave is a prime example of a perfectly good chicken coop or vegetable greenhouse, the building looks quite useful and many People would find it to be a much better alternative than a tent or a car.
Take a vacation to Juarez Mexico to see such a free market paradise in real life. You don’t even have to actually go there. You can see the reclaimed fences, bombed out houses, hear the gunfire, and see the lack of code enforcement from the freeway on the US side.
You can see the reclaimed fences, bombed out houses, hear the gunfire, and see the lack of code enforcement from the freeway on the US side.
You can also do the same thing if you take I-19 south from Tucson to Nogales, Arizona.
That big hill north of Nogales provides quite a view of Nogales, Sonora. It’s like a hard collision between the First World and the Third World.
I’m of the mind that urban farming could be the solution. The Genius Grant people seem to think so.
Key point from the link:
At 6 feet 7 inches tall of urban Farmer Will Allen commands attention when he speaks. “The next generation of farmers aren’t going to come from rural family farms because those farms don’t exist anymore. The next generation of farmers are going to come from the cities,” states Allen. When we think of the current economic crisis and the “fact” that jobs aren’t coming back the way they used to be before the housing bubble burst, one is faced with the frightening dilemma of actually being free.
“Stop looking for a job and MAKE a job for yourself. That means doing what you love most … and what better cause than to “feed my sheep” or teach others how to create healthy food for themselves, how to commune cooperatively with greater quality of life.
For what it’s worth, I completely agree with urban farming, but simply feel that appropriate structures should be built to support it, rather than struggling to repurpose existing homes in the name of the free market.
What if the people most willing and able to do it have no money to build “appropriate structures”, but are willing to do the work to repurpose what’s already there?
I know we think of that as “third world” methodology, but that comes from lack of capital, which is where we’re headed. Not that it won’t exist…it just won’t be available to the people trying to produce.
“appropriate structures”, and who determines what is appropriate?
What works is what’s appropriate.
That whole, The Genius Grant people is exactly what I’m talking about.
Eliminate the minimum wage and there could be jobs where currently there are None. Underline the word None.
There could be agricultural educational opportunities too. Better than the nothing they have now and exactly what People had available to them in the past to help lift them out of poverty.
Because there’s no code enforcement is Not why things are bad in places such as in Juarez Mexico - and it is certainly Not a free market paradise - it is the result of Socialism plain and simple.
There’s No code enforcement in many places in the Midwest and the Northwest and you have None to very little of that bad stuff. There’s plenty of places where there is code enforcement and you still have the things that make Juarez Mexico unpleasant.
I notice No one has touched the idea that there is social stability in places that have only mud huts.
More than ever i think the quality of neighborhoods does Not determine social stability no matter how much of a stereotype this idea has become.
I guess it does not matter, the state will destroy and the People will cheer. Price fixing for all - hurrah!
Ick,… like a Winter jacket in July,… or the Cargo Cult on steroids?
‘What works is what’s appropriate’
I agree. FWIW, I work with foreclosed houses everyday, and I’ve never seen a lender tear down a dwelling. I’ve seen 30 plus year old mobile homes that are falling apart AND were trashed by the FBs, yet the lender markets and sells them.
Note this quote: ‘The best thing we can do to stabilize the market ‘
Stabilize which market? The market for people buying or selling? It’s pretty obvious that when the govt gets involved, who’s getting their bread buttered. For instance, there was this from the Federal Reverse report:
‘The Fed said policymakers should work toward keeping homes out of foreclosure’