The Housing Bubble

It’s Friday desk clearing time for this blogger. “Foreclosure activity in Manatee County skyrocketed by more than 103 percent from June to July. The increased foreclosure activity also may be a sign, according to another local attorney, that banks are returning to a less sympathetic — and less realistic — means of handling the legions of distressed homeowners. ‘We’re just not seeing the banks changing their mindsets,’ said Dawn Bates-Buchanan, an attorney who represents homeowners facing foreclosure. ‘The mindset is still, ‘Let’s push these through as fast as we can.’ Houses are still just sitting empty.’”

“Overall, the pick-up in foreclosure activity signals that the cycle set in motion at the start of the recession is proceeding and not stuck indefinitely, said real estate attorney Bob Hoonhout. ‘Some people take the position that if we’re ever to get back to the norm, these foreclosures have to be cleared up in one way or another,’ he said. ‘In that sense, I wouldn’t use the adjective ‘good.’ But this is a sign that the system is beginning to move a little cleaner and a little faster.’”

“Foreclosures in the Northstate are on the rise. Curt Largent, owner of Sheldon Largent Realty in Redding says there are currently almost 700 properties in default in Shasta County. That means homeowners have missed two months of mortgage payments. And there are almost 300 homes that have received a notice of sale, which usually leads to foreclosure.”

“Largent says more and more people are making a strategic choice to walk away from their homes, rather than it being a financial hardship. ‘The only reason why it hasn’t gotten worse faster is because they [the banks] are regulating the flow of foreclosures coming to market,’ says Largent. ‘If they were to dump everything that’s out there it would absolutely devastate the market.’”

“Foreclosure activity in the Bay State keeps rising. ‘Right now Springfield is in very serious danger. The whole neighborhoods, we have so many abandoned houses, people are getting ready to lose their houses. And then of course now we have the tornados, so Springfield, as far as its homes, we are just in a lot of danger right now,’ said Deborah Broaden, director of the Western MA Foreclosure Center.”

“The HUD agency reports that just in Hampden County there are more than 280 foreclosed properties. And that’s not including the glut of houses where foreclosure petitions have been stalled by big banks. ‘They are a little bit slower in filing the petitions. But the crisis is still here they are just tearing it, so it looks like, you hear people saying ‘oh the foreclosure numbers have gone down’ they really haven’t,’ said Broaden.”

“The Gem State’s foreclosure numbers are decreasing but a local expert warns this might not be a sign we are recovering. Tim Bundgard, a local real estate expert and CEO of Pioneer Title Company, says the decline is because of a foreclosure processing slowdown by the banks. Bundgard says 35 percent is misleading. While it may sound good, it is not a sign that the housing crisis is healing but really just a postponement.”

“In the Treasure Valley, the slowing of foreclosures has helped people trying to sell their homes. ‘If you had a big flood of foreclosures it would dampen the price of the existing market for housing. What we’ve seen is that actually a reprieve on that because it has allowed it to gain some feet underneath it. So, that has actually been a good thing for us,’ said Bundgard.”

“As a senior information specialist working for the Department of Health and Human Services, Christina Bradshaw has what a housing official called a ‘good job.’ Yet, Bradshaw said after a divorce she faced the choice of living in a community she could afford or one that was a good environment for her three kids. In the Washington, D.C., metropolitan area, which includes the suburbs, the U.S. Department of Housing and Urban Development’s calculations show renters in many nearby counties also need to make about $28 per hour to afford a two-bedroom apartment.”

“‘I was juggling,’ she said. ‘One month I could pay the rent on time, and one month I could pay the utilities on time.’”

“If Bradshaw, with her good job, was having trouble, imagine what faces Maryland’s lowest-paid workers. Affordability is based on the assumption, used by most federal housing programs, that no more than 30 percent of income should be spent on shelter. With housing costs increasing faster than wages for many workers in Maryland, more are seeking assistance, including some unexpected applicants, like Bradshaw.”

“A row of new townhomes is setting the stage to create a vibrant community in the heart of Downtown Covina. Having already sold five homes, Olson Communities president Bill Holford said young professionals and first-time buyers who are looking for something new, fresh and innovative have been attracted to the affordable home prices, which start in the mid $300,000s. ‘For the first-time buyer, rather than buying a resale home or foreclosure home, you have a new townhome with a 10-year warranty,’ Holford said.”

“If nationwide stats are any prediction, said Hank Hogue, VP with Crye-Leike Realtors Inc. and manager of the Cordova office, the foreclosure market doesn’t appear to be losing steam anytime soon. ‘I have read several articles through RISmedia, Inman News and Realtor.org that indicate there are 1 million homes nationwide that have not been processed for foreclosure yet,’ he said. ‘These homes should hit the market in 2012 and 2013. At present sales levels, it will be months before these properties are absorbed by the market.’”

“‘We have spent an inordinate amount of time trying to educate people that your market is local,’ said Sue Stinson Turner, broker and sales manager with Crye-Leike’s Forest Hill-Irene office. ‘For example, we had 11 ZIP codes that had higher sales prices in the first six months of 2011 versus 2010. Well, that’s good news. And are there ZIP codes that had less, yes. Let’s get the good news out instead of CNN saying, ‘Oh, the whole world’s falling down.’ What does the market mean to you here, not in Nevada or California.’”

“Local Realtors are hoping for a buying frenzy in light of the recent U.S. credit rating cut by Standard & Poor’s. In Lee County, the median home price has increased 30 percent since Jan. 1. ‘Our fire is not out,’ said Denny Grimes, a Realtor with Denny Grimes and Co. at Royal Shell Real Estate in Fort Myers. ‘We’re not ready to cook s’mores yet. But our fire is still building. We need ‘s’more’ good news.’”

“Fear and uncertainty over the wildly fluctuating stock market are having a positive affect on the housing market. But falling home prices may hurt people wanting to refinance or get a second mortgage. Gloria Morris, mortgage lending manager at Tennessee Valley Federal Credit Union, said ’sometimes the values are not coming in quite as high as they might expect but as long as they intend to live in their home, they’re not planning to sell it and if it’s enough to do, or the equity is enough of what they want to do then they should be fine with it and not worry about the value of their homes going down.’”

“Morris said the housing market is flooded with foreclosures and properties that aren’t selling so don’t expect home values to rise much in the next few years.”

“It’s hard to believe that it’s been 46 years since August 11, 1965, the day the Watts uprising began. I’ll never forget the fear that I felt watching the chaos unfold. I was shocked but not surprised: you could feel the anger and frustration building up during that hot summer. Over the following two years there were a number of additional riots in Chicago, Newark, Detroit and elsewhere. Today in Watts and across California people are feeling that familiar angry bubbling stirring up as the gap between rich and poor grows ever wider.”

“I knew something was wrong a decade ago when my mailbox began to get filled on a daily basis with offers that seemed too good to be true. The pamphlets were from realtors, brokers and lenders that were selling predatory loans. These subprime loans were designed to be more expensive products for high risk borrowers, but turned out to be a chance for loan sharks to make a buck by pushing them on my elderly and minority neighbors, whether they needed them or not. One Wells Fargo loan officer recently testified publicly to the widespread practice of steering subprime loans, cynically referred to as ‘ghetto loans,’ to borrowers with good credit.[1]”

“A plan for Fannie Mae and Freddie Mac to subsidize investors who buy foreclosures is among foreclosure-reduction strategies that have been considered by the Obama administration, according to a former White House economist. Also last week, a bill was introduced in Congress that would permit Fannie Mae, Freddie Mac and banks to rent out foreclosed houses for up to five years.”

“Economist Chris Thornberg says he does not believe involvement by the federal government in the single-family home rental market will be any more successful than other federal interventions such as loan modification programs and homebuyer tax credits. ‘Just stop already,’ said Thornberg. ‘It is ridiculous. Everything they have done … has been pointless. The only thing that is going to eliminate the overhang (of foreclosures) is time.’”

“Why is everyone still referring to the recent financial crisis as the ‘Great Recession’? The term, after all, is predicated on a dangerous misdiagnosis of the problems that confront the United States and other countries, leading to bad forecasts and bad policy.”

“Too many policymakers have relied on the belief that, at the end of the day, this is just a deep recession that can be subdued by a generous helping of conventional policy tools, whether fiscal policy or massive bailouts. But the real problem is that the global economy is badly overleveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression or inflation.”

“Acknowledging that we have been using the wrong framework is the first step toward finding a solution. It is too late to undo the bad forecasts and mistaken policies that have marked the aftermath of the financial crisis, but it is not too late to do better.”