The Market Struggles To Find Its Reality
The Denver Post reports from Colorado. “Denver heavyweight commercial-real-estate honcho Andrew Klein’s Cherry Hills mansion fell into foreclosure this year. According to public records, the Buell Mansion neighborhood home had an outstanding principal balance of $6.998 million on an original balance of $7 million. According to the property listing for the home, the asking price is $8.95 million for the 21,193- square-foot property, which was built in 2007. The home has eight bedrooms, nine bathrooms, a nine-car garage, five fireplaces, a professional-style home theater, an outside kitchen and dining area, a 2,500-bottle wine cellar and a separate wing with a boxing ring, a gym and a guest apartment.”
“‘It’s been a hard three years,’ Klein said. ‘I’m trying to work something out with the bank.’”
From KWGN in Colorado. “Bank of America held an outreach event at the Colorado Convention Center for customers on the verge of foreclosure. It invited 6,300 homeowners in default of their loans in metro Denver, but only about 400 showed up. ‘It’s embarrassing,’ says one woman from Colorado Springs who didn’t want to give her name. She remains hopeful. But says reality always sets in. ‘If they can’t help you with your mortgage, where are you going to live? I thought about, do I live in my car, do I live at a homeless shelter?’”
The Deseret News in Utah. “The National Association of Home Builders recently reported that Salt Lake City reached a seven-year high for home affordability. In the Salt Lake area, 79 percent of homes sold in the second quarter of this year were within reach to families that make median area wages. About two weeks ago, Kristen Nelson, 27, and her husband, Tyler, 23, and their two children moved into their house on Ogden’s east bench.”
“The Nelsons were able to purchase their 1,800 square foot three-bedroom, two-bath property for $150,000 through a short sale after looking at more than 500 properties online and at least 50 homes in-person. ‘I’m pretty picky,’ she said. ‘We came from 900 square feet and wanted something where we could open the fridge and open the dishwasher at the same time and not have the person sitting at the dining room table not have to ’suck it in.’”
“Veteran Realtor David Seiler with ReMax Associates said prices will likely continue to fall as ‘the market struggles to find its reality’ from the artificially high prices of a few years ago.”
From KTVN Channel 2 in Nevada. “Have a spare million? Realtor Donna Spear with Chase International has a house for you. We found her singing the praises of Reno’s ‘Holly House.’ The Holly House is southwest Reno history. But even for this classic, selling in Reno is still a challenge. New numbers show our foreclosure frustrations are far from over. Notices of default went up more than 50% last month. Another 641 Washoe County homeowners in August could not pay their mortgage, up from 427 in July. It’s the highest level of defaults in a year.”
“Donna says, ‘More sellers are realizing that they have to compete with bank-owned and short sales, and so they’re adjusting their prices accordingly if they want to sell.’”
“For a house you love, the time is now. As the co-owner of the Holly House, Larry Johnston told us, ‘The time to buy is when there’s blood in the streets, and nobody’s going to raise a red flag and say this is the absolute bottom. But I can assure you, if it’s not the low, it’s darn close.’”
The Arizona Daily Star. “When Caylin Barter, a second-year law student at the University of Arizona, talks to homeowners saddled with high mortgage payments, she has an idea about what they’re going through. Barter bought a home in Reno, Nev., in August 2005. She then watched as the market crumbled and the value of her house evaporated. In the end, she got rid of her house in a short sale, where a bank agrees to sell the property for less than is owed on the mortgage.”
“‘It was bewildering for me and I feel like I’m a relatively savvy buyer and a relatively savvy negotiator,’ she said.”
“Barter and other UA law students are participating in a new program that aims to help homeowners facing foreclosure. The students spend 12 hours a week providing assistance at Southern Arizona Legal Aid’s mortgage clinic. Andrew Vanell, another second-year law student, worked in bank training loan offices in the years leading up to the mortgage crisis. He said he clearly remembers the financial climate - where borrowers were encouraged to consolidate debt using the equity in their homes - that got many people into their current situation.”
“‘Everybody was sort of caught up in the moment,’ he said.”
The Tucson Citizen in Arizona. “During the 1992 presidential election, James Carville coined the now-cliched phrase ‘It’s the economy, stupid’ to sum up what the election was all about. This go round, the phrase is back, though it’s been modified to ‘It’s about jobs, stupid.”
“But high unemployment and a sputtering economy are not what it’s all about. It’s about homes, stupid.”
“The burst housing bubble is what got us into this mess and it will be the recovery of the housing market that gets us out. America has a consumer-driven economy and the engine powering that car is the housing market. And for the past four years, the engine has been out of gas.”
“We have more wealth in our homes than in any other sector of the economy. At the height of the hyper-inflated housing bubble in 2007 American homes were worth an estimated $66 trillion. Two years later, they were worth $49 trillion (It’s back up to about $56 trillion now). That $17 trillion kick to the groin is what doubled over the American economy. And as any man can tell you, if you take a shot to the nards, it takes a while to recover.”
“The question for the President and the Congress is: Can they do anything to help speed the recovery?”
From InMaricopa in Arizona. “Last month I spent some time talking about the three ‘Game Changers” for Pinal County. Here are some more thoughts on one of those projects — Union Pacific Railroad’s Classification Yard proposal for the Red Rock area. The site they would like to acquire from the Arizona State Land Department (ASLD) is a little under 1,000 acres. As I said last month, Union Pacific has been working with ASLD staff since 2007 to acquire this site.”
‘ASLD holds the land in trust for public education and is required see that any sales of those lands (through a public auction process) go for ‘highest and best uses’ — presumably meaning residential rooftops. In light of today’s surplus supply of housing units, I personally think ‘highest and best use’ means bringing jobs to Arizona so folks can afford to buy some of those empty houses.”
“In the midst of the hyper-growth of the last decade or in a ‘normal’ economy that rooftop market goal probably made sense. But in today’s recessionary economy, we desperately need jobs, jobs, jobs to grow our way back to prosperity. So here we have a major employer with a sizeable budgeted sum of money to purchase land, a construction estimate for the project in the hundreds of millions of dollars, the very real prospect of a couple of hundred new Arizona jobs, and empirical evidence pointing to the ripple effect a yard like this has as a catalyst for transportation-related businesses.”
“Where do we go from here? You tell me. The challenge seems to be how to provide ASLD with enough information so they can see their way clear to letting the market speak by putting the land up for public auction as required by law.”
“‘It’s been a hard three years,’ Klein said.
oh, my heart goes out..
You’d think that a “heavyweight commercial-real-estate honcho” would have some cash saved up. Good luck unloading that monster.
“The home has eight bedrooms, nine bathrooms, a nine-car garage, five fireplaces, a professional-style home theater, an outside kitchen and dining area, a 2,500-bottle wine cellar and a separate wing with a boxing ring, a gym and a guest apartment.”
MAYBE PUT GLOVES ON THE OWNER & THE BANKER….. & GET SOME GOOD USE OUT OF THAT BOXING RING
*ding*ding*
Sell the house to Mike Tyson. Oh that’s right, he’s broke too. I recall one article reporting that during his career he’d bought Bentleys for upwards of a dozen women, many of whom had stripper names like “Destiny.”
Heck, I bet the boxing ring could easily be turned into a “media” room.
He’ll still belabor his “loss” when he’s in adult diapers.
He has a balance of $6.998M on a $7.000M loan?
Is my calculator wrong when it tells me that he has all of $2,000 of equity?
Of course not…he had instant equity and large amounts of it.
He’d only paid 2k in principal so far…
But at least he wasn’t throwing his money away on rent!
“Veteran Realtor David Seiler with ReMax Associates said prices will likely continue to fall as ‘the market struggles to find its reality’ from the artificially high prices of a few years ago.”
Awesome quote!
Did he mention years ago to his clients about “artificially high prices” ?
That Tucson Citizen piece is disturbing to me. Building more houses or propping up the value of existing ones isn’t going to rescue us. Especially when said houses are located in the middle of the desert.
That’s what you get when you ignore global warming.
I’m thinking more about water. One little known fact about Florida is that there isn’t enough freshwater here to support population growth combined with agriculture as presently practiced. Thus Tampa’s desalination plant.
Speaking as someone who’s lived in Tucson for almost 25 years, I’m not surprised by what was said in the articles mentioned above.
Why? Because the level of real estate development obsession in this area is something to behold. We may not have much of a job base. Or a health care or educational system that’s worth a hoot.
But building houses? Hey, we gotta do that! More of it! Build those houses 24/7/365!
“‘It was bewildering for me and I feel like I’m a relatively savvy buyer and a relatively savvy negotiator,’ she said.”
…. and this doozy:
“‘It’s been a hard three years,’ Klein said. ‘I’m trying to work something out with the bank.’”
——————————————————
Statements like these stun me in light of everything that’s happened since the bubble peak. These people are *still* worshipping at the Housing Is Valuable Altar. The first quote is from the idiot who demonstrated poor judgement and bought a dump in Vegas in 2005. If you’re so @#$%ing slick and savvy, what is your excuse for your decision in 2005? Just how smart are you? Or was it you just didn’t have the intestinal fortitude to defend yourself and depart from the Housing Mania herd in 2005? There’s some serious psychological mal-function with these people.
And of course, Mr. Klein is so blinded by his need to appear wealthy that he’ll sacrifice all in his desperate bid to hold onto it.
Let go or be dragged Mr. Klein.
“‘It was bewildering for me and I feel like I’m a relatively savvy buyer and a relatively savvy negotiator,’ she said.”
The problem is that she is one of the PC crowd. The key word in her statement is “feel”. Instead of helping people with underwater mortgages she should spend her time parsing Emerson’s essay on Self-Reliance.
Oh, Ron, you’ve hit another one of my Tucson hot buttons. Hope you didn’t burn yourself too badly.
Anyway, it’s that word “feel.” That one is in heavy rotation around these parts.
And, if you’re talking to one of the “feelers,” don’t you dare use that mean word. You know the one. It’s spelled like this:
T-H-I-N-K
Because they don’t like to be told that there’s an alternative to feeling their way through life. And that it’s a path that requires logic. Seeking of data from neutral sources. Making rational decisions based on what the data is telling them.
It’s enough to make them run straight to their therapists.
Correct. The word should be “think” or “believe”.
She feels that she is smarter than everyone else, a better negotiator that everyone else, and morally superior to everyone else.
I think that is the definition of a fool.
I am sure she “feels” pretty savvy taking on $100K in student loans to get a law degree even though the numbers indicate there are already WAY, WAY too many people with law degrees.
Best data I could find was an article from a year ago. It said there are 1.5 million people with law degrees, 43,500 more graduated in 2009… But total lawyer jobs fell from 1.2 million to 1.1 million from 2007 to 2009.
Based on increased enrollment between 2005 and 2009 it is expected that in 2013-2014 we’ll be graduating more than 50K new lawyers a year.
There is something missing in this story that they usually put in here.
It states that she got into an agreement to buy a home and the value went down (in Reno of all places). Then it says that in the end she got rid of the house in a short sale.
I have the following questions.
1) What happened that you could not or would not honor your debt on your home? (did you lose your job? is that why you decided to go back to school like a lot of younger people these days?)
2) Why if after you realized you were in over your head did you decide to take out another loan to go to law school? This is assuming that you didn’t have the cash to go to law school.
Oh and kudos to your unfortunate fellow law school student Andrew who admits to working to build the bubble up all those years ago.
People were caught up indeed!
We have more [pretend] wealth in our homes than in any other sector of the economy.
From the original post:
From KWGN in Colorado. “Bank of America held an outreach event at the Colorado Convention Center for customers on the verge of foreclosure. It invited 6,300 homeowners in default of their loans in metro Denver, but only about 400 showed up.”
To which I say:
So, BAC sends a boatload of invitations and only 6% of the invitees show up. IMHO, this is an indicator of what I’ll call the “Eff It” Index.
It reveals that 94% of the recipients figured that trying to deal with BAC was a waste of time. So, they said “Eff it!” and stayed home.
Really, am I the ONLY person who has heard of the 2.5 times gross income rule of thumb? That is how I was qualified last time I purchased property. Someone who really wanted to do something about the housing bubble would take out billboards.
And here’s a particularly interesting part from the law student article…
So, basically the banks settled up with the AZ AG for some large sum of money, and that money is spent to educate lawyers? That’s it?
Plus a third of the settlement went to lawyers who were friends of the AG and actually filed the lawsuit.
I can tell you that most of the banks and lending institutions (that I have contact with in my business) are still using a 3 to 4X household income for loans. Its absolutely amazing and it will only creating more bankrupties and foreclosures down the road.
For the heck of it, I found a website that would give me a ball-park pre-qaul, just to gauge what a bank may approve me for. They thought I could buy a house that was 4.5 times my income.
That’s largely because I have no debt, and can put every penny of that 28% gross income toward the PITI. No thanks. I think 3x is probably my limit.
You may claim that it’s amazing, but you’re fooling yourself slightly as a defensive technique to help keep yourself sane. Even HBB posters indulge in that, however slightly.
But it’s not amazing at all. The banks have no choice. They have to make SOME loans, and they are still dealing with prices that are too high, with falling wages amongst the borrowers. So they are forced to write mortgages at 3x and above. It’s a marginal problem; if they limited themselves to 2.5x and below, they would probably only write 50% of the mortgages, and then the mortgage-origination department would have its VP fired every 6 months to get replaced with another VP who is then only fired 6 months later. VPs know these things, hence they write at 3x and above.
I’m sure they are still securitizing, too. The insanity was like Florida Foreclosure Mold{tm}; it went everywhere in the American financial system. Something that pervasive will actually never be rooted out. After all, look at the entire 20th Century. As the century wore on, more and more people took on more and more mortgage debt, meaning that as time went on, Americans signed for longer mortgage terms, with smaller down payments. So it’s absurd from a rational and expansive economic view that a 20% down payment is “normal”. 50% should be the norm, but we passed that level almost a century ago.
Anyway, I don’t think it’s amazing, and with all due respect, you should drop that stance of yours. Demand that bankers start adopting rational economic standards before we end up harvesting neighborhood dogs for food.
” ‘If they can’t help you with your mortgage, where are you going to live? I thought about, do I live in my car, do I live at a homeless shelter?’ … This is the fifth time she’s tried to get Bank of America to lower the interest rate on her home of 20 years.”
I’m calling this BS right now. All right Ms. Colorado Springs, what did you do with the HELOC money???
To answer your question: you sell your stuff and rent a 1 bedroom apartment, like I did for 17 years. I guarantee the rent will not be much different from any modified payment that BoA would offer you.
So, it’s either a free house from the bank, or the homeless shelter for her? This sn@tch doesn’t think she should have to pay a mortgage or rent like regular people? Disgusting.
More red meat in Colorado: “You’re always threatened with foreclose even if you’re two months behind.”
I’m really glad that these folks aren’t renters…
I think Ben posts those with a certain and sick sense of glee, knowing full well our collective blood pressure goes up at least 15 points when we read that sort of crap. :^P
I’m certain he does, and he likes to see us call out the greedy FB’s for what they are.
“Barter bought a home in Reno, Nev., in August 2005. She then watched as the market crumbled and the value of her house evaporated.”
Barter bought a home in Reno
Just to watch it die.
(My apologies to Johnny Cash)
As a friend once told me, Reno is so close to hell, you can see Sparks.