A Price War And A Beauty Contest
A report from the Capital. “In the past several years, the luster has been lost on the concept that real estate is a great way to make money. Once thought to be invulnerable to declines in value, real estate has now been brought down to earth. Nevertheless, there are some examples out there that show how a piece of property has the potential to appreciate in ways that would make getting in on the ground floor of Google or Apple pale in comparison.”
“For example, on the outskirts of Annapolis, there’s a beautiful waterfront community called Fishing Creek Farm. Last week, a new listing popped up in Fishing Creek. With an asking price of $15 million, it’s the second most expensive property currently on the market in all of Maryland. Just off the South River, you get a cozy 12,000 square-foot house on over six acres of primo waterfront, an eight-car garage for your land toys and a 196-foot pier with two boat barns.”
“We came across the original contract of sale for the land that ultimately became this enclave of exclusive homes, dated Aug. 13, 1941. So, in a place where you can now pay $15 million for a 6 acre estate, what did the whole 250 acre shootin’ match cost back in 1941? The contract sales price was $30,000!”
“Even though the housing market has taken its lumps in the last several years, real estate will always be a good long-term investment. Like they say, God ain’t makin’ no more dirt, and a couple hundred years from now, people will be saying, ‘Can you imagine that house in Fishing Creek was selling for only $15 million back in 2011?’”
From Consumer Affairs. “What’s most needed to get the economy moving again is consumer confidence, according to Mortgage Bankers Association President David Stevens, who blames the media for a relentless drumbeat of negative headlines. ‘You don’t see stories about good buying opportunities out there. You only see stories about foreclosures,’ Stevens said at a recent economic conference sponsored by the Northern Virginia Association of Realtors.”
“‘The Echo Boom, born from 1981 to 1991, is going to cause an extraordinary demand for homes. They will be more urban, more Latino and will marry later but it is a huge generation and its impact with be huge,’ Stevens predicted. Whether that generation winds up renting or buying will be a major factor in the nation’s future economic well-being, he said.”
“If government regulations or onerous lending standards result in homebuyers needing a 20% down payment, ‘That’s nothing more than saying you can buy a home if you’re rich. If you’re not, you’re going to (be) a renter for life,’ Stevens said.”
The Sun Gazette in Virginia. “Nearly one in four homes in Virginia with a mortgage attached to it is ‘under water.’ Virginia’s rate of 23.3 percent is nearly a full percentage point higher than the national average, according to new statistics released by CoreLogic. In addition to the homeowners in Virginia whose mortgages exceed the current value of their properties, an additional 6.1 percent are in the ‘near-negative’ category, where property values are within 5 percent of the amount owed on the mortgage. That rate, too, is higher than the national average.”
“The situation was worse in the Washington metropolitan area: Counting the District of Columbia and Maryland suburbs in addition to Northern Virginia, nearly 290,000 residential properties with a mortgage – 28.3 percent – were in a negative-equity condition in the second quarter, with an additional 5.5 percent approaching that situation.”
“In Virginia, homeowners with mortgages own a collective $426.8 billion in residential real estate, and owe just under $305 billion to lenders – a ratio of 71.7 percent. Nationally, the rate is 69.8 percent, representing $12.6 trillion in property value and $8.8 trillion in mortgage debt.”
The Virginian Pilot. “Alan Turissini of the Hampton Roads Real Estate Group of Keller Williams Elite Realtors has been listing bank-owned property for more than six years. Based on his research for broker price opinions, he said, the foreclosure rate in Hampton Roads ‘appears to have peaked, as there are less bank-owned listings in the last two months.’ Some areas, including downtown Newport News and Portsmouth, ‘were hit much harder by the foreclosure rate,’ Turissini said. Some local bank-owned houses have sold for less than $10,000.”
“Dirghayu Desai and his wife had searched for more than two years. He’d be hard-pressed to have found anything better than 6,300 square feet of brick-, mural- and granite-clad luxury within a budget that would have bought half the house only six years earlier. In fact, this home had been listed this year for $1.2 million - about $100,000 more than its 2004 purchase price. A bidding war ended at $625,000, a victory for the Desai family.”
“As a buyer, Desai recognizes his good fortune. As a seller, he realizes that his competition now includes banks. ‘So what I gain here I should be ready to lose’ on the other side, he noted.”
“Homes within the high-end market, priced at $800,000 and up, can take as long as 36 months to move, said Brenda Rawls, a Realtor with Rose & Womble Realty in Virginia Beach. She presents figures and facts, based on analysis of current absorption rates, and the seller must decide whether to price it to sell or to sit. ‘We are in a price war and a beauty contest,’ she opined.”
The Gazette in Maryland. “Existing-home sales rose last month by 4 percent in Maryland, as the median price declined by 6 percent to $241,564. Baltimore and Prince George’s counties saw the biggest jumps of 106 and 43 more sales, respectively. In Prince George’s, where sales rose by 6.4 percent over August 2010, the median sales price last month was $160,000, down 14 percent from a year ago. The median price in Baltimore County declined by 3 percent to $210,000, while sales jumped by 21.5 percent.”
“‘It’s a good time to buy with the low interest rates and prices,’ said Joanne Darling, president of the Prince George’s County Association of Realtors. ‘Many counties around us are seeing prices rise, while they continue to go down in Prince George’s. We are seeing a lot more buyers than a year ago, and ultimately that competition will drive prices higher.’”
From WBTV in North Carolina. “Tensions boiled over at homeowner’s association meeting in one east Charlotte neighborhood Tuesday night, prompting the president to quit mid-meeting. Neighbors gathered in the Boulder Creek community to angrily express their frustration over having to pay extra HOA fees to make up for a budget shortfall.”
“The board’s president came under fire repeatedly and at one point in the meeting he angrily said, ‘I’ve given up so much of my life to this HOA and all you people are looking at me like I’m the devil.’”
“After the outburst, he walked away fuming but eventually came back and continued the meeting. Boulder Creek’s board has been under fire for sending out a letter requiring homeowners to pay an extra $100 dollars in addition to the annual $230 annual HOA fee. The added assessment is to cover the thousands of dollars the budget is in the red over because dozens of homeowners are behind on their fees.”
“Several residents questioned why they had to pay extra. ‘I don’t have it,’ said one homeowner. ‘And that’s the bottom line.’ Wanda Hampton, another homeowner agreed and said, ‘I don’t owe y’all nothing and you will not get it.’”
“Fairness aside, the Boulder Creek HOA has the law on its side. North Carolina law gives HOA wide latitude allowing them to take the necessary steps to collect the fees — even threatening foreclosure. But Hampton said she isn’t backing down. ‘Like I told them, I’m not paying mine so they do whatever they have to do,’ she said. ‘Because I paid my $230 already and I refuse to pay another $100 for somebody else’s mistakes.’”
The Gaston Gazette in North Carolina. “Community One Bank foreclosed this month on every unsold home and piece of land in Gastonia’s Village at the Mountain subdivision. The neighborhood is home to upscale townhomes, which I understand developers wanted to call unpaired villas.”
“County records show homes in the area sold for as much as $285,000 in 2007. The most recent townhome – or villa – to sell went for $215,000 in August 2009. The last land to sell was a 0.09-acre parcel that went for $29,000 in December.”
The Charlotte Observer in North Carolina. “A former loan officer at the troubled Beazer Homes USA Inc. has agreed to plead guilty to criminal fraud charges filed Monday in federal court, the U.S. Attorney’s Office said. Authorities charged Janette Parker, who oversaw Beazer Mortgage Corp. branches in the Carolinas and Tennessee, with three counts of mortgage fraud.”
“Court documents say she inflated the price of Beazer homes to account for buyers’ down-payment assistance - justifying the increases through false ‘upgrades’ and revised sales contracts - causing the properties to be overvalued when submitted to the Federal Housing Administration for insurance.”
“She will appear in court to enter her guilty plea and faces a maximum sentence of two years in prison for each charge, plus a fine of up to $250,000. ‘The prosecution of Ms. Parker turns the page on another chapter in the Beazer investigation,’ said U.S. Attorney David Brown of the Western District of North Carolina. ‘Ms. Parker is taking responsibility for her part in the mortgage fraud scandal caused in this district by the illegal business practices of some former Beazer Mortgage employees.’”
“The charges are the latest in a string of civil and criminal actions against the Atlanta homebuilder and its employees. The investigations followed a 2007 Observer series that found that Beazer, then a major Charlotte-area homebuilder, arranged larger loans than some customers could afford and violated federal lending rules.”
“According to court filings, Parker - who served as branch manager in Charlotte and Columbia, S.C., and later oversaw mortgage offices in Raleigh and Nashville, Tenn. - communicated with appraisers to influence them to report increased values for some homes. Parker also had Beazer sales agents add false upgrades to justify price increases, and revised sales contracts to increase sales prices and loan amounts to account for down-payment assistance, the court filing said.”
Ben’s little joke today is the first story. When you get to the bottom of it you find this byline.
Bob and Donna McWilliams are practicing real estate agents with more than 20 years of combined experience in the Annapolis area.
In other words, 10 years each.
Here’s the listing page.
http://priceypads.com/42323/fishing-creek-farm-estate-15000000/
The McWilliams confuse “wishing price” with “actual sales price”.
And if Al Gore is right, that place will be underwater soon. A flat parcel on the shore.
Hmm….Zillow says it’s worth $1,758,300 - a far cry from $15 million. Local assessor valued it at $3,859,860. I wonder what the realtor is smoking?
http://www.zillow.com/homedetails/1234-Cherry-Tree-Ln-Annapolis-MD-21403/36007302_zpid/
I wonder what the realtor is smoking?
Yeah, me too. And can that realtor share a puff with the rest of us? Just one little puff?
I think this was really an ad in disguise.
I always chuckle whenever I see a sign that boasts of a company’s employees’ “combined experience.” I guess a the employees of a RE company whose 20 employees only have one year experience each, have a “combined experience” of twenty years!
The real issue is more than just the sometimes useless “combined experience”, but what has been learned and applied based on that experience. Otherwise, “experience” is little more than being around a long time.
And still practicing. Maybe someday in the future they’ll actually perform! -
“Just off the South River, you get a cozy 12,000 square-foot house on over six acres of primo waterfront, an eight-car garage for your land toys and a 196-foot pier with two boat barns.”
___________________________/
I can tell I’m not the intended audience for this publication.
An eight-car garage… In case Jay Leno ever decides to move to Maryland.
Whatever happened to the army of posters that used to show up on the HBB to assure all that “Real estate always goes up”? I sure do miss their company these days.
ECONOMY
SEPTEMBER 21, 2011
Home Forecast Calls for Pain
Prices to Stumble Through 2015, Economists Say, Weighing Down
BY NICK TIMIRAOS
Economists, builders and mortgage analysts are predicting the weakened U.S. economy will depress housing prices for years, restraining consumer spending, pushing more homeowners into foreclosure and clouding prospects for a sustained recovery.
Home prices are expected to drop 2.5% this year and rise just 1.1% annually through 2015, according to a recent survey of more than 100 economists to be released Wednesday. Prices have already fallen 31.6% from their 2005 peak, as measured by the Standard & Poor’s Case-Shiller 20-city index.
…
‘Economists, builders and mortgage analysts are predicting the weakened U.S. economy will depress housing prices for years, restraining consumer spending, pushing more homeowners into foreclosure and clouding prospects for a sustained recovery’
So much of how we view things are determined by how the discussion is framed. This paragraph doesn’t mention how prices exploded, year after year, and doesn’t touch on the idea that the resulting distortion of the economy is at the root of the current recession. ‘Economists, builders and mortgage analysts’ are then freed of their past mistakes to urge the govt to ‘do something’ so we’ll start buying houses again. Yesterday we learned housing starts are at multi-decade lows. Here’s a news flash; these guys built enough houses for 15 years in five years. How do you get around that?
You want a recovery? How about jobs, sustainable, non-housing related jobs, which people on this blog saw as the crucial element to recovery years ago! The govt has wasted years and trillions of dollars beating the dead horse that is housing.
‘Prices have already fallen 31.6% from their 2005 peak’ Here’s another news flash; it’s gonna fall a lot more, and if you were paying attention to how far prices ran up, you’d know that Wall Street Journal.
In the summer of 2007 a reporter at the WSJ contacted me about an interview. Turned out she was doing a story on second homes. It became clear it was a puff piece she was writing for the ‘lifestyle’ section. I gave her an earful for an hour and a half about speculation, McMansions, leverage, everything. She admitted she had never thought about the stuff I was saying. Not surprisingly, when the article ran, the things I brought up were never mentioned.
these guys built enough houses for 15 years in five years. How do you get around that ??
You don’t…On top of that is maybe hundreds of thousands, maybe more like millions of fully developed lots…
I’ve always said that when someone takes out a mortgage to buy a property, there are TWO buyers. The occupant, and the bank. What happened is that banks bought a huge number of overpriced houses and are stuck with them as inventory. Banks will be the warehouse of slowly depreciating properties for years to come.
And if those properties are unoccupied, expect that depreciation to happen a lot faster.
But not on paper…so why sell them?
“these guys built enough houses for 15 years in five years. How do you get around that ??”
Or that more than a few of these houses were of the wrong types and wrong locations for the future. Growth, if it happens, won’t eat into some of that surplus. Some of those houses are just going to rot.
Speaking of rotting houses recently constructed, Ben put up a very good photo album from his 2010 U.S. tour. It’s truly something to behold, especially the FL houses that were never occupied. Some of them are retreating back into the jungle.
“This house is not secure.”
“It’s truly something to behold, especially the FL houses that were never occupied. Some of them are retreating back into the jungle.”
Here’s one of those in Lehigh Acres:
http://picasaweb.google.com/116501766248277767563/TheHousingBubbleBlogGoesToCapitolHill#5485397050764265842
It looks like the driveway was never built.
To admit the stage for the bust was already set by 2005 would be a tacit admission of policy failure by the Fed and other housing market stimulators.
Ben, for our entertainment can you link to that 2007 article? I can imagine how the interview went; during that era, every time I went off on the subject of the ridiculous real estate situation I drew the same patronizing looks and responses typically reserved for a senile relative. I bet the reporter was playing “Minesweeper” while you were talking.
I wouldn’t know where to start, as I didn’t make note of the date or who the reporter was. It was really disappointing though.
I did a similar interview with The Real Deal in NY once with the same outcome. Time Magazine too. Once I was interviewed by a writer for the NAR website about blogging. I don’t think she knew anything about the HBB, and we ended up talking about blog software, search engine optimization, hardware, etc. That one never showed up either.
“I can imagine how the interview went; during that era, every time I went off on the subject of the ridiculous real estate situation I drew the same patronizing looks and responses typically reserved for a senile relative.”
And it mostly hasn’t changed. I’m not going to waste my time trying to convince new coworkers it might not be a good idea to rush out and buy a house. They seem oblivious to how close they are to pay checks being delayed or wages declining much less housing prices declining much further. How smart will stretching to make that housing payment look in a few years?
“They seem oblivious to how close they are to pay checks being delayed or wages declining much less housing prices declining much further.”
It’s always a great time to buy a house!
In the summer of 2007 a reporter at the WSJ contacted me about an interview. Turned out she was doing a story on second homes. It became clear it was a puff piece she was writing for the ‘lifestyle’ section. I gave her an earful for an hour and a half about speculation, McMansions, leverage, everything. She admitted she had never thought about the stuff I was saying. Not surprisingly, when the article ran, the things I brought up were never mentioned.
Funny you should mention MSM interviews, Ben. Because I’m gonna confess something here. (The entire HBB gasps.)
My confession is that I first heard about this site back in the spring of 2006. It was while I was reading an online article in the MSM. ISTR that the article was in the LA Times.
So, every once in a great while, the MSM is good for something.
‘the MSM is good for something’
A prefect example is referenced in this post:
‘The charges are the latest in a string of civil and criminal actions against the Atlanta homebuilder and its employees. The investigations followed a 2007 Observer series that found that Beazer, then a major Charlotte-area homebuilder, arranged larger loans than some customers could afford and violated federal lending rules’
This was ground breaking stuff at the time, because the Observer followed the trail from an unusual number of foreclosures right into Beazers subdivisions. They discovered that they were writing a lot of subprime loans with fraud involved to boot. This was long before the rest of the media even knew about subprime. (BTW as I recall they were onto Beazer before 2007.)
This brings up an important point; I’m sure the Charlotte Observer takes ad revenue from RE interests, but that didn’t lead them to turn a blind eye to what was going on. Once they saw what was happening, they dug in with real investigative reporting. How would this have all played out if more of the media had done this sort of reporting? I’d bet the prosecutors would admit that if it weren’t for the CO’s reporting, some of these people facing trial may have gotten away with it.
“Whatever happened to the army of posters that used to show up on the HBB to assure all that “Real estate always goes up”? I sure do miss their company these days.”
Weekend topic idea: finding the best of the best of the 2005/6/7 real-estate booster troll comments! That would be awesome…
Forecast calls for pain?
Hmmm, that’s the title of one of my all-time favorite Robert Cray songs. Lyrics here. Anyone care to HBB-ize them?
WARNING:
The lyrics site indicated above is infected. Crashed me Mac, had to scrub. DO NOT CLICK!
There is nothing but gloom and doom in the MSM any more. If only they were more upbeat in their reporting, maybe Americans would start flipping houses again.
BUSINESS
SEPTEMBER 21, 2011
Joyless Holiday Retail Forecast
BY DANA MATTIOLI
Christmas is already shaping up to be a struggle for the nation’s retailers.
It isn’t even fall yet, but the first forecasts of the all-important year-end period are out, and they’re pointing to more muted gains than last year. Shoppers are expected to make fewer trips to stores and, when they do show up, to head straight for bargains they’ve researched in advance.
Retailers, meanwhile, have been working down inventory where possible, hoping to avoid the markdowns that eat into their profit margins. The result is likely to be a tense standoff over prices at a time when persistently high…
“What’s most needed to get the economy moving again is consumer confidence, according to Mortgage Bankers Association President David Stevens, who blames the media for a relentless drumbeat of negative headlines.”
Actually it isn’t confidence, it’s capacity. Most American consumers haven’t started saving for the future because they are worried about it. They’re so lacking confidence that they are partying like it’s 1999, and spending every dime anyone will give them, because they have no future. It’s just that they can’t get the money anymore.
I love the way they blame The Almighty Consumer for not being confident. Yeah, well, if these yokels read stories about more and more layoffs every day, they’d lack confidence too.
I’ve got plenty of confidence.
I’m confident that the self proclaimed leadership in this country are a bunch of idiots, that the Main Street economy is going to remain screwed for the next 10 years, and that buying a house at this point in time is to be collared to a giant financial and professional anchor, vastly limiting all of your options.
In my case it’s less a lack of confidence in the economy as a lack of need/desire for most of the stuff I see in stores. And I have little confidence in our having a strengthening economy.
Confidence starts with a con…
“What’s most needed to get the economy moving again is consumer confidence, according to Mortgage Bankers Association President David Stevens, who blames the media for a relentless drumbeat of negative headlines.”
Stop referring to people as consumers. People have little confidence in the future because economic conditions have been declining for most of them for a decade of longer and most see little indication of solutions from our “leaders”. People’s circumstances are what matters most, not headlines. Propaganda only goes so far.
“‘The Echo Boom, born from 1981 to 1991, is going to cause an extraordinary demand for homes. They will be more urban, more Latino and will marry later but it is a huge generation and its impact with be huge,’ Stevens predicted. Whether that generation winds up renting or buying will be a major factor in the nation’s future economic well-being, he said.”
Buying versus renting isn’t the issue. If the broader economy remains comatose, whatever happens in housing will reflect that.
I’m planning on heading Back East to visit the family.
Rather than burdening them with even more stuff, I’m going to give of myself. My folks’ place needs a fixup here and a repair there. Not to mention a good cleaning. So, I’m going to put myself to work around the house.
That’s excellent. Many people have more stuff than they will ever need. But a few repairs and some cleaning go a long way toward making a place a lot more livable. De-cluttering is sometimes good too, but they have to want that.
De-cluttering is sometimes good too, but they have to want that.
No kidding, Greg.
Last holiday, I went to clutter war against my father’s den. After demolishing the clutter on his desk and in his bookshelf, I attacked the area around his favorite living room chair. Dang, I was on a roll.
When I set my sights on the living room bookshelf, my mother stopped me cold. She was quite happy with that shelf the way it was, TYVM.
In short, they gotta wanna.
It is gift card time once again this year. Kids get to buy what they want at discounted after Xmas pricing. I save on gift wrappings, mailing, etc. Win-win.
Like they say, God ain’t makin’ no more dirt, and a couple hundred years from now, people will be saying, ‘Can you imagine that house in Fishing Creek was selling for only $15 million back in 2011?’”
Now I can buy it for only 70,000 yuans…
“Many counties around us are seeing prices rise, while they continue to go down in Prince George’s. ”
PG county is where many of the *ahem* displaced folks go when their neighborhood is gentrified. And many of the Fed HQ buildings are either halfway around the Beltway, or a drive-and-metro commute from these low-cost houses.
“And many of the Fed HQ buildings are either halfway around the Beltway, or a drive-and-metro commute from these low-cost houses.”
Not all of them. I remember the time I had to go to the DOC “compound” in Suitland. It had guarded entrances and razor ribbon on top of the fences. This was way before 9-11. Some of those areas in PG County inside the beltway weren’t so nice.
This reminds me of the time that Lawrence Yun came to Fort Myers and suggested during a speech to local real estate agents that the average Lee County house would be worth several million dollars by 2040.
Yup, God ain’t makin’ no more dirt, but if you fly over the country you get a quick lesson in how much of that dirt is just sitting there and how the truth is the “shortage” of land is and always has been one of the standard realtor lies told to the credulous. Now it is true that certain jurisdictions have put together restrictions that make for localized APPARENT shortages of land, but aside from that…just saying..
On Another note, I know that Annapolis property; used to go to parties there back in the seventies when I believe it belonged to one of the local judges. As for what people will say in a few hundred years, that’s known but to God as they say, but I’d bet that house won’t be there.
Last time I took Amtrak to DC, I was amazed at how many waterfront properties there were in MD. These were along the Bay, and I couldn’t help thinking of the damage that a major storm surge would do.
To clarify, the current house wasn’t there in the seventies, but an older and less tacky one was, set on a plateau with a fine view over the river.
Somebody got rid of that to build the overpriced POS that occupies the land now.
$15M…people don’t get it even now that there are thousands, maybe millions of “extra special places” all over the country that a “reasonably prudent buyer” won’t go near with an eleven foot pole, cuz they don’t want to get stuck with it unless they can borrow 100% of the money and be totally risk free, free to walk away if the market sours up. Try getting some bank to finance that one…
Three of my kids are Echo Boomers. They are not going to cause the next land rush. Aside from the fact that life’s finances are very challenging for them, they all have friends whose parents self destructed financially in the Housing Bubble. There will not be another one in their lifetime.
Rinse and repeat.
“We came across the original contract of sale for the land that ultimately became this enclave of exclusive homes, dated Aug. 13, 1941. So, in a place where you can now pay $15 million for a 6 acre estate, what did the whole 250 acre shootin’ match cost back in 1941? The contract sales price was $30,000!”
The comparison is bogus because a dollar in 1941 was worth a log more than a dollar in 2011, seventy years later.
Next..
There’s a website that can make that calculation for you. Thirty thousand dollars in 1941 would be worth about $439,000.00 in 2010. My grandfather had just graduated college at a large state university in the Midwest. Tuition was $50.00 a semester.
http://www.westegg.com/inflation/
Serial bottom callers are back in the game again — just in time for a (likely) Greek debt default!
SMARTMONEY MAGAZINE
SEPTEMBER 21, 2011, 4:04 P.M. ET
Has Housing Finally Hit Bottom?
After yet another summer of bad news, an intrepid few think it might be a good time to buy real estate.
By ALYSSA ABKOWITZ
Prices are bouncing along the bottom, down 24 percent from their 2006 peak. Banks are stubborn as ever about credit, on track to make 2011 the slowest year for loan originations in more than a decade. And construction continues to limp along at half its healthy rate. That’s right: Just like Wall Street, the housing market didn’t exactly shine this summer. And many economists think a national rebound is still out of sight — if not out of mind. “It’s not on the horizon,” says Peter Muoio, a principal at real estate consulting firm Maximus Advisors.
…there’s opportunity to be found. With the Federal Reserve all but guaranteeing low interest rates for the next two years, more homeowners will be able to refinance and lock in lower mortgage payments (as long as they don’t owe more than their house is worth). And buyers who qualify for a home loan (hint: It helps to have impeccable credit and a 20 percent down payment) will reap the benefits of record-low mortgage rates and still-depressed prices. Housing bulls think those forces will juice the market regardless of what stocks do. Says Redfin CEO Glenn Kelman, who watched business at his online brokerage fall after the 2008 meltdown: “The first time the financial markets crash, it’s tragedy. The second time, it’s farce.”
…
EDITORIAL: Housing market follies
American Dream killed by government meddling
By THE WASHINGTON TIMES
Wednesday, September 21, 2011
Illustration: Underwater housing by Alexander Hunter for The Washington Times
If there’s ever been a poster child for the folly of government intervention, it’s the housing market. Decades of political manipulation set the stage for the collapse that sunk the entire economy. It’s going to be a long time before the country gets back on its feet, unless we embrace reform.
Last month, new housing starts fell to 571,000, down from last year’s figure of 606,000 and about one-third of the 2006 peak. As the housing market goes, so too does the construction industry, which has shed more than 2.2 million jobs in just over five years.
More than 800,000 properties are now owned by lenders, a similar number are in the process of foreclosure and 3.5 million mortgages are delinquent. Some 11 million mortgages, a staggering 22.5 percent of all American homes, may be underwater - where the amount of debt exceeds the value of the house. Such dire statistics are examples of what follows when government meddles with the market. Congress and the White House promoted loans that should never have been made in the first place. When owners defaulted, government turned to taxpayers to pay the bills.
Instead of learning the lesson of what happens when risk is severed from reward, both the White House and Congress seem to think more interference is needed, not less distortion. Two weeks ago, the Obama administration floated the idea of letting anyone with a mortgage backed by Fannie Mae or Freddie Mac refinance to the current lower rate of around 4 percent, even if the mortgage was underwater. That would have saved the homeowners a lot of cash but would cost Fannie Mae and Freddie Mac hundreds of millions of dollars. Ultimately, the bill would be passed along to responsible taxpayers because all those mortgages are ultimately backed by the government, which means us.
President Obama’s latest deficit-reduction plan proposes that Fannie and Freddie reduce taxpayer risk by requiring more mortgage insurance and charging lenders higher fees. This will result in shifting costs from taxpayers to borrowers, and it’s a welcome step in the right direction. The problem is it still envisions a permanent role for Fannie and Freddie, the government-sponsored enterprises that are a disaster.
…
Housing is splitting between “haves” and “have nots” the same way the rest of America is coming apart at the seams.
Luxury properties are recovering. The rest of the housing market? A deep and long depression
( no / Associated Press ) - In this Aug. 23, 2011 photo, real estate agent Ronni Keating waits outside for a client to view a home in Bloomfield Hills, Mich. Think of this housing market as bipolar. In the luxury sector, the recession is a memory and sales and prices are rising. But everywhere else, the market is moving sideways or getting worse.
By Associated Press, Published: September 21
In America, it’s starting to feel as if there are two housing markets. One for the rich and one for everyone else.
Consider foreclosure-ravaged Detroit. In the historic Green Acres district, a haven for hipsters, a pristine, three-bedroom brick Tudor recently sold for $6,000 — about what a buyer would have paid during the Great Depression.
Yet just 15 miles away, in the posh suburban enclave of Birmingham, bidding wars are back. Multi-million-dollar mansions are selling quickly. Sales this August were up 21 percent from the previous year. The country club has ended its stealth discounts on new memberships. And Main Street’s retail storefronts are full.
“We’re getting more showings, more offers and more sales,” says Ronni Keating, a real estate agent with Sotheby’s International.
Think of this housing market as bipolar. In the luxury sector, the recession is a memory and sales and prices are rising. But everywhere else, the market is moving sideways or getting worse.
In the housing market inhabited by most Americans, prices have fallen 30 percent or more since the peak in 2007. That’s a steeper decline than during the Depression. Some people have had their homes on the market for a year without a single offer.
Almost a quarter of American homeowners owe more on their house than it’s worth. Another quarter have less than 20 percent equity. About half of homeowners couldn’t get a mortgage if they applied today, says Paul Dales, senior U.S. economist for Capital Economics.
But then there is the other housing market, occupied by 1.5 percent of the U.S. population, according to Zillow.com. The one with outdoor kitchens and in-home spas; with his-and-her boudoirs and closets the size of starter houses. The one that is not local but global, with international buyers bidding in all cash. And where the gyrations of the stock market are cause for conversation, not cutting expenses.
In this land of luxury properties, the Great Recession seems over. Prices of $1 million-plus properties have risen 0.7 percent since February, according to Zillow. Prices of houses under $1 million have fallen more than 1.5 percent.
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HOA meetings are downright dangerous in this housing bubble.
Who wants to hear from a underwater homeowner who hasn’t paid dues and most likley will default driving your value further down and they ask at he meeting “why the front entrance is poorly maintained?”