The Housing Bubble

It’s Friday desk clearing time for this blogger. “According to LPS Applied Analytics, a real estate data firm, clearing the pipeline of cases in Massachusetts would take a decade. That’s nothing compared to the estimated 49 years it would take in New Jersey, according to LPS. ‘There are thousands of foreclosures that just haven’t been touched at this point,’ said Moss Sidell, an attorney who specializes in foreclosure cases. ‘Some people haven’t paid for three years and they’re still in their homes. There’s no rhyme or reason on how it works,’ he said.”

“Cheryl’s fought for two years to prevent foreclosure. ‘I expect one of these days, regardless of whether we make the payments, there’s going to be a foreclosure notice there. But we don’t know when,’ said Cheryl. ‘It’s a constant stress. You never know what’s coming the next day. There’s no way out. We can’t sell it because the mortgage is upside down. There’s nowhere to go. There’s nothing we can do.’”

“Foreclosures have tapered off but will linger for years. With inventory high and demand low, prices are likely to continue to decline, local economists said. The number of Peninsula-area properties receiving foreclosure filings have let up, easing to 1,422 for the first half of the year, compared to 1,939 for the first half of 2010, according to RealtyTrac. But the wave of foreclosures isn’t over yet.”

“The Hampton Roads Planning District Commission released a report in May showing roughly 19,000 homes are delinquent and likely to enter the market in the next year or two. If new home construction and household formation hold steady, it will take 3.3 years to clear an excess supply of about 24,000 homes, assuming home sales maintain a 10,500-a-year pace, the report said.”

“‘The reality is foreclosures are still looming,’ said Greg Grootendorst, chief economist for the Hampton Roads Planning District Commission”

“Bank repossessions, mortgage default notices and property auction warnings from January to June decreased by 35.4 percent in the Scranton/Wilkes-Barre/Hazleton metro area from the first six months of 2010, according to RealtyTrac. First-half foreclosures declined 29.2 percent nationally and 31 percent in Pennsylvania, according to RealtyTrac, but the company estimates up to 1 million foreclosures this year may be delayed because of procedural issues.”

“‘It’s clear that banks are slowing foreclosure work,’ said Susan Wachter, Ph.D., a professor of real estate and finance at the University of Pennsylvania. ‘I think people are quite aware that the foreclosure pipeline extension is postponing inevitability and adding uncertainty’.”

“‘Who knows if and how much the banks are holding back from the market?’ said Joe Donato, broker/owner at Vision Realty, a Clarks Summit agency dealing exclusively in foreclosed properties. ‘They haven’t been flooding the market because all it does is devalue their current properties on the market. It’s a backlogged process. We’ve seen this for the last two years.’”

“‘The uncertainty continues and that is the major problem right now,’ Dr. Wachter said. ‘People don’t invest in an uncertain, risky market.’”

“Foreclosure activity between January and June is down almost 30 percent nationwide and 37 percent in New York from the same six-month period last year. Foreclosures during the first half of 2011 in Warren and Washington counties fell more than 80 percent from a year ago; Saratoga County was down about 55 percent.”

“John Belanger, of Royalview Realty, which specializes in distressed properties in the Capital Region, suspects a concerted effort by banks to hold back foreclosures from the market is to blame. Belanger said the ’shadow market’ - bank-owned, vacated properties that have not been listed for sale - grew last year when mortgage companies came under fire for hasty and sometimes deceptive foreclosure procedures.”

“He believes delays from bank-imposed moratoriums have since cleared up. Instead, banks are now holding back their foreclosures in an attempt to stabilize the general housing market, which has been struggling ever since the government’s homebuyer tax credit expired, he said. ‘There is some kind of effort to purposely hold them back,’ he added.”

“Lindsay and Dave Libhart shut down their pool business when orders for new pools dried up. They declared bankruptcy to protect the assets they had left, and they tried to save their home. But they couldn’t. ‘We were paying everything with credit cards,’ Lindsay Libhart said, and she still gets teary when she talks about the Atlantic Beach home she hoped her family would stay in for decades.”

“But almost a year after they’d been told they’d lost the home to foreclosure, almost a year after they’d moved out, they still own the home. It sits empty. Transients have broken into the garage and lived there. And Libhart said she’s worried about the liability, but still can’t get an answer from her lender, Chase Home Financial, about what’s going on.”

“The Libharts paid $142,500 in 2001 for the house. The Libharts’ home is on three lots, and they’d remodeled it. But they’d also refinanced and owe $290,000 on it. Now she can’t bear going back to look at it. A friend checked on it in January and found the back door broken in. Neighbors called her when transients had moved into the detached garage. She called the police. Kids have tried to drain the pool to skateboard in, she said.”

“‘Our beautiful house is vacated, it looks dilapidated,’ she said. ‘Neighbors call all the time. They’re nice, but they want to know how long this will go on. But I can’t tell them.’”

“Chip Parker, who specializes in foreclosure defense, has filed a motion to force a sale date. He said he has other clients where the banks have taken a ‘hurry-up-and-wait approach.’ ‘I have a client who was kicked out of his house in December 2009, two days before Christmas, and it’s still empty.’”

“On just one block on Charles Avenue a bit east of Dale Street, 16 houses on a single block have been through foreclosure since 2006, according to Sam Buffington, a community organizer at Frogtown Neighborhood Association. Seven of those homes remain vacant, and two of these are slated for demolition. Six houses have been turned into rentals, and only 3 of the 16 have become owner-occupied again after foreclosure.”

“Personal stories are exactly what the group went to Charles Avenue on a hot summer evening to collect - the stories from people about what happened on their block over the last several years - and to document ‘what they would like to say to the banks that foreclosed on these homes or to the people who own them now and are letting them just sit there,’ said Buffington.”

“Residents came out, and they talked. Some were photographed with signs made to express their feelings. ‘Vacant houses are scary,’ read a sign held by two children. Resident Wendy Simon’s said she notices an unusual quiet on the block where she and her family have lived for 17 years. She talked of past summers filled with the voices of neighbors in their yards and the sounds of children playing and riding bikes in the street. ‘This summer is different,’ she said.”

“She noticed the difference last winter, too, as she sang with the local caroling group that has been gracing their neighbors with song at Christmas-time for the last 15 years. ‘It’s amazing how much that touches people,’ she said. But lately, they had to walk by so many houses that were dark.”

“The scenery on a walk through the neighborhoods surrounding Illinois’ Capitol building is filled with signs of a sagging housing market. On nearly every block, a house has a ‘For Sale’ sign, weathered and worn from the long period of time it’s been in the elements, or a house has deteriorated, because the homeowner, unable to make their mortgage payment, abandoned it.”

“The Illinois Housing Development Authority, a self-sustaining entity that runs off tax-exempt bonds, announced this week that it will offer up to $200 million in low-interest rate mortgages to about 1,300 low- to moderate-income homebuyers. The homebuyers’ payments on these mortgages are used to pay for the bonds. In addition to the 30-year mortgage, some people could qualify for up to $6,000 to help with a down payment on their new home in the form of a zero-interest, 10-year loan.”

“Geoffrey Hewings, a professor of economics and urban and regional planning at University of Illinois at Urbana, said no matter what, risks are associated with this and other similar programs. ‘These folks may not have the capacity even with these incentives … to sustain their payments,’ Hewings said.”

“Idaho’s Tamarack Resort is once again alive with skiers and snowboarders. But the happy scene didn’t come easy. Tamarack is one of the most glaring casualties in the region from the bursting of the real estate bubble. Homeowners at the bankrupt resort are bootstrapping the once heralded ski area back into business.”

“Margo Flaherty says she and her husband were the first resort employees to buy a house here. But when real estate went from boom to bust, so too did the resort. Flaherty was laid off with many others. She was just recently rehired to sell lift tickets. Flaherty says her house might be worth half what she paid for it, though her optimism is not as far underwater as her investment. Margo Flaherty: ‘I always thought of Tamarack as sleeping beauty. The prince isn’t here yet, but she’s starting to wake up.’”

“Barring last-minute action by Congress, many Bay Area home shoppers will soon find it harder to buy more expensive homes because of changes in eligibility requirements for a popular type of mortgage. Starting Oct. 1, interest rates on loans between $625,500 and $729,750 will increase, potentially raising monthly mortgage payments by hundreds of dollars. Before the change, loans up to $729,750 qualified for a reduced interest rate.”

“Real estate professionals are afraid that higher interest rates and down payments will make buying a home more difficult at a time when the market is still weak. ‘It’s a big mistake,’ said Ken Rosen, chairman of Rosen Consulting Group, a real estate market research firm in Berkeley. ‘It’s the right policy in the long run but the wrong time to do this. If there was one single smart person in Washington they would say we want to encourage lending at the bottom of the cycle. Let’s get prices up 5 or 10 percent first.’”

“Nine years ago, Gabby Creery moved into a three-story brick home in Downtown Jersey City with her husband and their two sets of twins. They purchased the house for around $300,000, and watched the value rise to $650,000 during the height of the housing bubble, she said. ‘It was always tight, and we were always a little house poor,’ Creery said. ‘(But) we could afford it.’”

“But then her husband, who worked for a Japanese banking firm, lost his job at the end of 2007. They both worked odd jobs, but fell behind on mortgage payments. Having taken out a second loan when the home’s value was high, the couple now owes about $580,000 on the property, nearly double its $320,000 worth. They received foreclosure papers last fall. Nearly one year later, they’re still fighting to stay in the house.”

“‘You keep thinking that this is a bump in the road,’ said Creery. ‘It’s denial.’”

“Creery blogs about her life in foreclosure, partly to help others who feel shame than they are in the same predicament. Though her husband is fighting to keep the house, she’d prefer to ‘move out and move on,’ she said. ‘I would love to rent again,’ Creery said.”