Zombie Developments Populated By Weeds
The News Journal reports on Delaware. “They came from all over Delaware, four other states and the District of Columbia — all hoping to land a piece of an $11 million construction job at Delaware Technical & Community College. The crowd reflected the still dire state of the local construction sector, eager for a lifeline from public works projects. In the boom years, firms that may have passed on certain projects because of slim profit margins or the type of work are fighting hard to win any bids these days.”
“‘We will go farther and go after smaller projects. There is no project too small,’ said Gregory Moore, a principal at architecture firm Becker Morgan Group, which has offices in Dover and Salisbury, Md. ‘We would do house renovations, house additions now. There are more people and firms than there are projects to keep them busy.’”
The Star News in North Carolina. “The real estate bust altered the Wilmington-area landscape from an area crawling with workers erecting half-million-dollar houses to one littered with zombie developments populated by weeds rather than people. The home-building meltdown took with it long-time builders who could not adjust to the new market conditions. They bought their land at the height of the property boom and couldn’t afford to build for a market beset by high unemployment, tougher mortgage standards and recessionary personal budgets.”
“But others held on and now are building for a new, austere market. Welcome to the era of the $100,000 house.”
“‘Builders are now walking a tightrope as far as being profitable or not,’ said Buddy Blake, who owns Re/Max Essential in Wilmington. ‘It’s not a matter of making a good living; it’s a matter of survival.’ Margins are ’staggeringly low,’ he added.”
“‘In some cases, your $99,900 product may not have any margin but may be a loss leader,’ said Chris Stevens of Pyramid Builders, which is constructing such homes at Windsor Park in Leland.”
“Many retirees ‘were going to buy a $400,000 house when they sold their $800,000 house in New Jersey,’ Blake said. ‘Now they sell at $500,000 and buy a $100,000 house and wait to see.’ Rather than speculate on an economic turnaround, Blake was philosophical. ‘It’s just the world we’re in. We have to go down in price,’ he said. ‘The market we’ve got is the market we’re going to have for a while. We can’t keep waiting for it to get better.’”
The Winston Salem Journal in North Carolina. “Triad Guaranty Inc. reported Friday a slightly lower loss in the second quarter as the number of new mortgage defaults decreased. However, despite the foreclosure moratorium conducted by some mortgage lenders, more Triad customers fell behind on their mortgage-insurance payments.”
“Ken Jones, the company’s CEO, said high unemployment and decreasing housing values continue to affect the company’s revenues. ‘The benefit from the decline in new defaults was offset by lower cures and lower rescissions during the quarter,’ Jones said.”
“Triad was one of the first victims of the financial crisis that began in late 2007. It said in June 2008 it would discontinue writing new mortgage-insurance business and would conduct ‘an orderly transition of its business to runoff.’”
“The housing and financial crises may claim a second Winston-Salem mortgage insurance company as a victim. Republic Mortgage Insurance Co. has told policyholders and investors that it will stop writing new policies, effective Aug. 31.”
“A private mortgage insurer offers its products to residential mortgage lenders, such as banks, credit unions and mortgage brokers. Most mortgage insurers have been slammed financially as more homeowners have not been able to pay their mortgages. As of June 30, Republic was the fifth-largest U.S. mortgage insurer with $17 billion of risk-in-force, or on its books.”
“On July 29, Fannie Mae suspended Republic and its N.C. affiliate as approved mortgage insurers. It cited in its decision that the N.C. Insurance Department has given ‘no indication that any further extensions will be granted under Republic’s current circumstances.’”
The Virginian Pilot. “Commonwealth Bankshares Inc., blaming the damage inflicted by past lending procedures, said Monday that its second-quarter loss ballooned to $26.22 million from a $2.54 million loss in the year-earlier period. The Norfolk-based parent of Bank of the Commonwealth also reported that its shareholders’ equity had been wiped out during the recent quarter.”
“The biggest contributor to Commonwealth’s loss for the April-through-June quarter was a $22.5 million provision for loan losses. That was more than four times its $5 million provision a year earlier. Chris Beisel, who took over as Commonwealth’s CEO in December, said in a statement that management has completely revamped the bank’s credit-risk management process. However, economic uncertainty continued to cause difficulties for its loan portfolio, especially for those loans secured by real estate, Commonwealth said. Its nonperforming loans at the end of June swelled to $197.9 million, or 20 percent of total assets.”
The Gazette in Maryland. “Portions of Hyattsville’s University Town Center complex sold for $25.1 million under foreclosure and a second auction for a 302,798-square-foot office building is scheduled for Wednesday outside of the Upper Marlboro courthouse. The foreclosure marks a low point for developer Herschel Blumberg. The Metro I building was turned over for sale by CWCapital Asset Management last year after default on a $37.6 million loan.’
“Wells Fargo Bank, which held the debt on the other properties, placed the winning bid for 227,000 feet of retail space, including a 14-screen movie theater, as well as condominiums and office space in the complex. The center has struggled for years in the economic downturn and faced foreclosure for more than a year. Two condo towers at the site, One Independent Plaza, with 112 units, and Plaza Lofts 22, with 22 units, remain largely vacant.”
“The Washington, D.C., area’s reputed immunity from recession has not protected its office market from the worldwide economic chill, nor have local real estate companies escaped the ongoing spasms on Wall Street. Panic selling has hurt the stock prices of the handful of real estate investment trusts in Maryland, but some were in a tailspin even before the wild swings in financial markets began Aug. 4.”
“Developers that grew spoiled on record federal hiring in recent years will have to adjust to steep drop in agency growth implicit in the debt ceiling deal, according to a report by Delta Associates, a real estate research firm in Alexandria, Va. ‘Federal budget austerity measures, no matter how they play out for 2012 and beyond, will impact Federal hiring in the Washington metro area,’ the study said.”
The Fredrick News Post in Maryland. “July’s home sales stalled in Frederick County, even before the downgrade of the nation’s credit rating, according to Realestate Business Intelligence. William Armstrong, treasurer of the National Association of Realtors and a Frederick resident, said Sunday that he blamed Standard & Poor’s and other financial firms for not downgrading the U.S. credit rating before last Friday. ”
“Armstrong said those firms were giving the U.S. an AAA rating when many of the mortgage loans were subprime. Standard & Poor’s downgraded the credit rating to AA+ last Friday. ‘Economic policy over the past several years coming from inside the Beltway has actually worked against a housing market recovery,’ Miller said.”
“Armstrong said banks, cautioned by the national credit downgrade and which used to lend ‘to anyone who was breathing,’ have now tightened credit to the degree that even those who would normally qualify for a loan are turned down.”
“In July, 221 homes were sold in Frederick County, a 14 percent decline from June, though up less than 1 percent from July 2010, according to RBI. There were 1,240 active listings on the Frederick market in July, and the median price of a home sold last in the county was $235,000, nearly 7 percent higher than June, but 41 percent less than July 2010.”
The Times Tribune in Pennsylvania. “Since the start of the recession, the jobless picture in the Scranton/Wilkes-Barre/Hazleton metro area went from bad to the worst in the state as the region got whacked by declines in the manufacturing and construction sectors. Mark Price, Ph.D., a labor market economist with the Keystone Research Foundation, said declines in manufacturing and construction employment accounted for much of the unemployment rate increase.”
“‘The rest of the state took a hit in those sectors,’ Dr. Price said. ‘Scranton/ Wilkes-Barre got clobbered.’ The recession and housing crisis put households on austerity plans, unable to replace their appliances, cars and others durable goods. The banking and financial crisis prevented consumers from tapping into home equity to bolster consumption.”
“While the local metro area, which includes Lackawanna, Luzerne and Wyoming counties, didn’t see the construction boom or housing bubble of other parts of the country, many residents worked in construction, building in the red hot Pocono counties of Pike, Wayne and Monroe. When those markets crashed, that idled Northeast Pennsylvania tradespeople, who show up on the residential unemployment rate.”
“Frank Corcione, Ph.D., retired professor of economics and finance at the University of Scranton, called the joblessness in the U.S. today as ’structural’ and predicted that high unemployment would be part of the landscape for the near future. Jobs at Bethlehem Steel have been replaced with jobs at McDonalds, he said.”
‘Prince George’s County hopes mixed-use development will generate tax revenue that will reduce the county’s dependence on the property tax on homes. But recent commercial foreclosures throw doubt on those plans. The residential real estate market is troubled, too; in the second quarter of this year, one of every three foreclosures in Maryland was in Prince George’s County.’
“Many retirees ‘were going to buy a $400,000 house when they sold their $800,000 house in New Jersey,’ Blake said. ‘Now they sell at $500,000 and buy a $100,000 house and wait to see.’ Rather than speculate on an economic turnaround, Blake was philosophical.
An $800,000 NJ house with a $750,000 NJ home equity loan against it…
Plus $15,000/year in property taxes.
“Many retirees ‘were going to buy a $400,000 house when they sold their $800,000 house in New Jersey,’ Blake said. ‘Now they sell at $500,000 and buy a $100,000 house and wait to see.’”
That’s the difference between the housing bubble in places like the Northeast and places like Texas or Arizona.
In Texas and Arizona, the $800,000 and $400,000 houses were much larger and fancier than the $500,000 and $100,000 houses, and all were new.
In the Northeast, they were the very same buildings, and most were pre-existing. Only the price changed.
I don’t get the downside in the second scenario. In both cases the “downsizer” walks away with $400K.
Now selling the $800K house may leave them with a capital gains tax if they bought a long time ago. So the second scenario is even BETTER for many couples.
Similarly the second scenario may most likely give them a smaller property tax bill.
So who did inflated house prices really benefit?
Exactly. If you’re “trading down” in the housing market, the bubble was a great thing for you. Sell at 1M, buy a new house at 350K. Sure, the 350K house is probably only worth 200K now (lost 150K from your purchase price), but the 1M dollar house you sold is now worth 600K, and you’ve still got 650K in the bank from the sale (even after you paid too much for your new home).
Trading up during the bubble worked opposite; the more you invested in the 2nd home, the more beat up you are today.
But.. For the baby boomers? Selling/buying at the peak wasn’t really a bad thing. They lost far less on their new “downsized” home than they would have had they kept their bigger family property.
“Frank Corcione, Ph.D., retired professor of economics and finance at the University of Scranton, called the joblessness in the U.S. today as ’structural’ and predicted that high unemployment would be part of the landscape for the near future. Jobs at Bethlehem Steel have been replaced with jobs at McDonalds, he said.”
Eight years of democrat control in Pennsylvania gave the state that.
It also gave its citizens:
A massive 50% increase in the state income tax
Doubling of the tolls on state roads
Record hiring of state employees
Massive increase in the gasoline tax (even NJ is much cheaper and they pump your gas)
etc.
Pennsylvania state and local tax revenues are not high as a share of PA residents’ personal income, according to Census of Governments data. Particularly given its large senior population.
I don’t see much correlation between the level of taxes and the level of whining about taxes. By rights NY should be whining most of all.
Pennsylvania state and local tax revenues are not high as a share of PA residents’ personal income, according to Census of Governments data. Particularly given its large senior population.
Speaking as someone who has two elderly relatives in PA, I have a dog in this fight.
As much as I’d love to have my parents living here in Tucson with me, they are much better off in PA. Why? Because that state has a large senior population, as noted above.
And PA’s powers-that-be recognize that seniors need services, and they’re provided.
I’ve also noticed small things when I’m out and about with my father. To put it politely, he ain’t all there anymore. In PA, people see us and they do things like offer help, even if it’s as simple as opening a door.
I wouldn’t expect such things to happen here in AZ.
Bethlehem Steel left in the 80s. Billy Joel wrote a song about it then.
“… zombie developments populated by weeds rather than people”
I suppose it’s different everywhere, but this sadly resonates with me. You can see these sorts of developments all over town here in AZ. A couple people living on a block of empty homes, it all feels so empty…
I have a different problem near my current home. My 2 year old has nobody to play with. The reason? Everybody living here bought their home prior to 2002-2003.
The ones who purchased later almost universally let the house go by now. You can easily pick them out just by visual drive-by. Take a spin through the neighborhood and you’ll see the gaping holes where the “young people” lived. Rotten yards, dead grass, peeling paint. Some for sale, some still in some oddball lost stage of the foreclosure process. One look on zillow or google maps tells you the rest of the story, playforts in the back yard, happy families and green lawns, a modest car in the driveway.
All gone now. With luck, they’ll start filling back in now that the home prices have dropped so significantly in the area. My son might just get some friends to play with soon.
On an offside note - I’ve seen some interesting things happening round here.
The most recent sale was a home up the street from me that went to an investor. It was a little beat up, a room smaller than my place (3 bedroom, but mine has an extra room/den), but otherwise mostly identical to the home I bought several months ago. The “investor” home backs up to a main road, while mine is the corner unit on a protected culdesac, so I’ve got a larger lot/better space/no road sound). The buyer “renovated” the place (new tile floors throughout, spiffed up the exterior with some landscaping, new appliances and window dressings), then flipped it. I’m guessing less than 10,000$ went into the repairs having seen the before/after, but he did a good job dressing the house up and put in some significant sweat equity. He owned it 3 months and went from their 70,000$ purchase price (similar to the price I paid for mine), to selling it for 136,000$ last month (they listed it at 141k but sold for 136k). I have no idea who would pay 136k for the home seeing as other homes in the area have went -recently- for significantly less, but I guess it is what it is. It left me wondering if it actually appraised for that (when I bought mine the appraiser hit it at 102k), or if the man simply found a huge idiot with lots of cash to spend…
My wife loves our house, it’s near some of the best schools in the state, and it really is a nice place. Nice neighbors, near work, near school, near everything. We bought it to live in it and it really is the ideal home for our family for the foreseeable future. Nevertheless, I’ve found myself deliberately spiffing up the curb appeal (inside is already -perfect-), and now I’m sitting on my hands biting my tongue and trying really hard not to sell the damn thing. The grass has filled out, the bougainvilleas along the front face are blooming like crazy, the white roof shines, and I’ve taken time to help the neighbors across the street spiff up and paint their trim etc. The house looks amazing and I could even take it further - for example I could easily punch a door in my “den” from the hallway, add a closet, a door to the bathroom, and box it in with 5′ of wall at the existing entrance off the living room to create a second master bedroom… A day or two worth of work at most at next to no cost without changing the interior feel of the house (living room/dining/kitchen are all large and open, the den currently is off in the direction of the bedrooms and is being used as my 2 year old’s “toy pit”).
Selling it for the kind of cash the home up the street brought would be a reasonably significant windfall……
Course, therein lies the rub, as it took us almost a year of searching to find one that my wife, myself, AND our wallet loved. The wife isn’t too keen on letting it go :). Advice?
Selling it for the kind of cash the home up the street brought would be a reasonably significant windfall……
Course, therein lies the rub, as it took us almost a year of searching to find one that my wife, myself, AND our wallet loved. The wife isn’t too keen on letting it go :). Advice?
Okay, you have a two-year-old without playmates. At least for now. And the house is near some of the best schools in the state.
Can you hold on for at least as long as it would take for your son to start school? Is your job situation secure? Likewise, your marriage?
In short, I’d advise staying put. You may find that your neighborhood will start to fill up again.
Thanks for the response.
I’m certainly hoping the neighborhood will fill back in with families. There are plenty of families here now, it’s just that their children are in the 8-18 range now and they aren’t making any new ones - lots of people who live here bought back in the 90’s-early 2000’s. The few homes that have popped up on the market have sold rather quickly, but so far to flippers and a couple of elderly couples. There is still a number of vacant “shadow” homes sitting around, but they haven’t hit listings just yet.
I intend to stay put for now. Wife’s job is as secure as it can be in today’s world. They killed tenure to help hit budgets, so it’s as secure as next years state budget I suppose. Last year they eliminated an entire middle school in her district - nothing is guaranteed. I’m entering the teaching program myself in a few days, so I’ll finish up before the little man starts kindergarten (my “second life” career).
When I bought this place I told the wife we weren’t buying it to “make” money, we need a place to live and raise a family. I explained it might even lose a bit of value as the market continued to diminish. That said, it was a good deal and sold on a cost/sq foot price similar to homes in the area sold for in the mid-late 1980’s or early 1990’s. Our whole intention here is to make ourselves a good home for our child/potential children and enjoy our lives. I’m being silly even -considering- selling it and I know this. There’s no guarantee that what happened a few homes down would happen again either. That may have been lightning striking with a poorly researched cash buyer. I doubt my home (or that home) has nearly doubled in value in the 6 months I’ve lived here.
I’m still a -little- envious of the 3 month profit Mr Investor pulled off a few houses down though :). I guess we’ll see what the market and area looks like when I get back to work in 2013.
Your “investor” sounds more like a “flipper” to me. Three month holding period and a lot of sweat equity is not exactly a retirement plan, but it might be a pretty good job.
The wife isn’t too keen on letting it go :). Advice?
Don’t apply a quantitive analysis to a qualitative situation.
You wrote, “My wife loves our house, it’s near some of the best schools in the state, and it really is a nice place. Nice neighbors, near work, near school, near everything. We bought it to live in it and it really is the ideal home for our family for the foreseeable future.”
I know I know I know.
I was more or less thinking out loud, spurred on by someone making a decent profit a few homes down.
It’s the salesman in me, my former life and personality peeking out. I see the potential for $$$ and I want to jump on it. It’s insanity and places like this help me suppress it.
I recognize it’s the wrong move, hence I haven’t even attempted to get the wife on board for selling. Hasn’t stopped me from weighing out the possibilities and “dolling” the house up for higher curb appeal - clearly there is a disconnect from what I say outwardly and what I do.
The house works too perfectly to sell, and if indeed this area has increased -that- much in value over the last 6 months, I’d be unable to “improve” my situation by selling it. I need to just enjoy my home, my neighborhood, and my stupidly-low mortgage.
Thanks for smacking me upside the head :).
To make a few bucks and jeoppardize your idyllic world doesn’t seem worth it, especially since it’s based upon transitory variables.
And the flipper down the street that made a few bucks on the property - I can only imagine the losses s/he incurred. When I used to work in the securities industry, people usesd to always tell you about the winners they invested in, and never the losers.
Stay put. Your needs are more than met. Sound like you have a good life. Be grateful. “The grass ain’t greener, the wine ain’t sweeter…”
Just my opinion.
The wife isn’t too keen on letting it go :). Advice?
Happy wife …. happy life
The Norfolk-based parent of Bank of the Commonwealth also reported that its shareholders’ equity had been wiped out during the recent quarter.”
From $27 to 17 cents
http://finance.yahoo.com/q?s=CWBS
Our hackerspace clubhouse in Norfolk is next door to that bank. A friend was eating at the greasy grill in our building and met the CEO the other day. I asked how if the guy seemed tired and my friend said, “No why?” He hasn’t been reading the local paper.
The building we’re in is owned by an ex-exec of the bank, and the bank occupies at least one floor of the building.
TANGERANG, Indonesia — Irzen Octa, a down-on-his-luck Indonesian businessman, suffered a torment familiar to millions of Americans struggling with debts racked up in better times: He feared losing his home.
In the end, he managed to keep the ramshackle two-story house where he and his wife raised their two now-teenage daughters. Instead, Octa, pursued by Citibank over a $5,700 debt on his platinum credit card, lost his life.
The 50-year-old businessman, invited to a Citibank office in Jakarta in late March, collapsed in a tiny room set aside by the U.S. bank for questioning of deadbeat debtors. He died shortly afterward — a casualty of a “harsh interrogation,” said Jakarta police spokesman Baharudin Djafar.
Can banksters use “extraordinary rendition” against American debtbeats?
“Wife’s job is as secure as it can be … as secure as next years state budget… I’m entering the teaching program myself in a few days”
Depending on state pay, scary.
When your pay gets cut in half or eliminated, and inflation causes prices of everything to go up, there won’t be as much wiggle room for spending.
Again I’m reminded of a blog post titled, “Why I Would Rather Shoot Myself In the Head Than Own a Home” a serious accounting/investing perspective.