The Housing Bubble

Readers suggested a topic on hurricanes and housing. “Hurricane Irene is going to slam into the bubble territories of NJ, NY, CT, RI and MA. These bubble states have barely come down (especially Long Island and NYC) since the pop of 2006.”

“How will the hurricane effect the decline? Empty houses rotting away quicker? Insurance money NOT going into rebuilding? Hidden inventory being brought into the daylight? Little money from the Feds for disaster relief? The excuse people need to just walk away? Hastening the pace of localities to declare bankruptcy to get away from insane public union contracts (as city in RI recently did just this)?”

A reply, “Barely come down? my house has come down 30%. Thankfully, I’m not near the water. Maybe, my house value will go up, since the shoreline properties are always the most pricey.”

Another said, “I spent the 2004 hurricane season in Gainesville, FL when Charlie, Frances, Jeanne, and Ivan all came through the state in a 6 or 7 week period. It was very draining mentally and the storms caused a lot of damage. For the record, I absolutely hate hurricanes.”

‘In 1985 hurricane Gloria got as high as a category 3 or 4 hurricane before making landfall on Long Island. The eye broke apart very quickly and the damage was much less than anticipated. That said, I suggest we wait until after the storm passes before taking on this topic.”

The Long Island Business News. “An estimated 387,813 residential and commercial properties on Long Island are situated in the projected path of Hurricane Irene, according to CoreLogic. Of the properties at risk in Long Island, roughly 66 percent are located outside a hazard flood zone as designated by the Federal Emergency Management Agency.”

“There are more than 1.8 million properties in 12 coastal major metropolitan areas at risk of potential damage from Irene, according to CoreLogic. The risk analysis, based on Irene becoming a Category 3 storm, found there were 127,357 properties on Long Island that are located in FEMA flood and surge zones. The next most prone area is Virginia Beach, with 107,814 properties in flood and surge zones.”

The Daily Times. “Weakening but still dangerous, Hurricane Irene sent hundreds of thousands of people fleeing across Delaware and neighboring states Friday. In coastal Sussex County, Denis and Cathy Casey were holding out Friday evening on whether to leave their oceanfront home that sits atop a dune in the Sussex Shores private subdivision north of Bethany Beach.”

“The Caseys were monitoring the storm closely, though, mostly concerned about Category 2 winds hitting their year-round house. The couple had put up wood panels to cover a stained glass window on the front of their house and aluminum panels on their windows that face the ocean. ‘We’re betting, or hoping, the wind is less of a factor,’ said Denis Casey, an attorney in Salisbury.”

The Christian Science Monitor. “Besides worrying about their homes and businesses, residents in the coastal town of Nags Head have an extra concern: their beach. For the first time in its history, the town decided this year to pump new sand onto a 10-mile stretch of its eroding beach. The $36 million beach nourishment project began in May and the majority of the work was done when the first hurricane Irene warnings began to trickle in.”

“Town fathers had hoped the new sand, provided at local taxpayer expense, would protect exposed local properties there for the next 10 years. Irene could sweep it out to sea in a matter of hours. Destruction of the new beach could be one of the single biggest economic losses that the area sees from hurricane Irene.”

The Brevard Times. “The prospect of billions of dollars in insurance claims on underwater homes could mean a financial and litigation windfall for the banks. Although mortgage documents and individual state laws vary, common language in mortgage documents requires that any insurance check be made out to both the bank and the homeowner. The homeowner is then contractually required to sign the insurance check over to the bank which is then held in escrow by the bank.”

“Banks can make many legal and equitable arguments as to why the property should not be rebuilt, but rather deemed a total loss. If deemed a total loss, the banks could then be able to claim that the insurance proceeds cover the outstanding mortgage balance.”

The South Town Star. “Orland Park officials say the proposed luxury apartment building, Ninety7Fifty on the Park, will boost the local economy and serve as an anchor to further development, but similar projects ­— albeit condominiums — by the hand-picked developer have flopped elsewhere. Flaherty and Collins also has troubled projects in North Carolina that ended up in bankruptcy — an ambitious 53-story condo tower in Charlotte that was never completed, and a 274-unit apartment complex in Raleigh, later sold to a Chicago investment firm, according to the Indianapolis Business Journal.”

“‘We’re apartment guys who dabbled in condos. We’re batting 1.000 in apartments and we’re 0-for-2 in condos,’ CEO Dan Flaherty told the SouthtownStar.”

“The 50 units at the Echelon are very attractive condos in a convenient location. But after the first phase of Flaherty and Collins’ proposed 168-unit development was complete, the condo market tanked and only one-third of the units were built. Current owners have a laundry list of issues that include leaking windows, leaking plumbing, mold, mismatched cabinets, buckling floors and no soundproofing. They also were promised a pool and clubhouse that never got built because not enough units were sold, they said.”

“Echelon resident Maxine Carr said every time it rains, water comes in her living room window, causing puddles on the window sill and wood laminate floor. She fears she will get mold, like another neighbor. Carr filed an insurance claim for damages to the new unit she bought one year ago, but her insurance company denied it. She provided the letter from the insurance company saying water damage was due to ‘faulty workmanship to the flashing and the installation of the deck above’ her unit.”

“When she called Flaherty and Collins, she said she was told her condo was no longer under warranty. Carr said she may have to sue for repairs and damages.”

“Barb Hollivay, who purchased her unit three years ago, has a hole in her garage ceiling from her upstairs neighbor’s leaking bathroom. Noise from adjoining units is so loud, ‘it feels like they are living in the house with me,’ she said. ‘There is no privacy.’”

“Residents said they can literally hear every move their neighbors make. Sometimes they can even see what others are doing through the vents in the walls, Taylor said.”

The Island Packet. “Beaufort County is warning municipal leaders that the next reassessment probably won’t be business as usual. New projections from the assessor’s office show the county’s tax base could shrink by 4.4 percent once property is revalued. Bluffton could be hit hardest and might see its tax base wither by nearly 10 percent.”

“The county is required by law to revalue property every five years. The next reassessment is based on property values as of Dec. 31, 2012. Those changes will show up in residents’ property-tax bills in November 2013. However, the unprecedented decline in property values complicates matters. State law provides a formula to roll back taxes when property values rise, so the county or municipality brings in the same amount of revenue.”

“But if property values fall, does the formula require taxes to be raised? The law is silent on the question. A recent opinion from the S.C. Attorney General’s office said ‘yes,’ the formula is to be followed no matter the result.