The Housing Bubble

It’s Friday desk clearing time for this blogger. “A group of activists from MassUniting came to a home on Clinton Street here owned by Bank of America after a foreclosure, collecting several bags of trash and debris and then bringing it to the BofA branch downtown, telling the bank it was their trash they owned and should have taken in earlier. Dale Averill of Malden, who said he was foreclosed on himself after bad experiences investing in real estate, said, ‘You can’t walk up and down the street anywhere without seeing an abandoned property nowadays.’”

“From Averill’s standpoint, banks seem to be hoarding and hiding properties that have lost hundreds of thousands of dollars in value, rather than facing up to losses that could take a big hit on their balance sheets and stock prices. From the bankers’ perspective, Averill said, ‘It’s better to leave them abandoned than to sell them for what they’re really worth and take the loss.’”

“One more indication that the glut of ‘zombie properties’ appears to be growing: The Warren Group said in July, borrowers initiated 1,400 foreclosures, which was fewer than July 2010 but the most of any month so far in 2011. At the same time, auctions of foreclosed properties were in the first seven months of this year down 45 percent from last year, setting up a situation where there may be more and more homes going into foreclosure each month, but fewer and fewer coming back out.”

“In the Montclare neighborhood on the city’s Northwest Side, a home that neighbors say has been vacant for the better part of a decade is an eyesore. A foreclosure complaint was filed against the property in October 2008, and six months later the homeowner filed an appearance with the court and argued that the lender, GMAC Mortgage LLC, did not have the legal right to pursue the foreclosure. Eventually, the court ruled in GMAC’s favor, and three months ago the property was sold back to GMAC in a court-ordered auction and became bank-owned. Altogether, the foreclosure action took 979 days.”

“Meanwhile, in Cicero, Theresa Herdzina, who has lived in her home for 52 years, worries about the fate of her block. The house across the street has been boarded up for more than a year. One down the block just became bank-owned after a 998-day foreclosure process, records show. She’s staring at a raised ranch next door that sold for $132,000 in 2000, records show. In September 2008, it went into foreclosure, and 19 months later it became owned by the U.S. Department of Housing and Urban Development. First listed for sale at $88,000, it is now priced at $43,467.”

“‘I’m worried about this house, that gangs don’t go in there,’ said Herdzina. ‘It upsets me to see all of these boarded-up houses. Banks should be able to try and sell them right away.’”

“A new study says the cost of rental housing has risen faster here than any other community in the Blackstone Valley. The HousingWorksRI 2011 Fact Book says the average two-bedroom rent in the city during the second quarter of the year reached $993, almost 75 percent higher than it was a decade ago. The main culprit behind skyrocketing rents is the continuing wave of foreclosures, the agency said.”

“‘Foreclosures in Rhode Island have exacerbated our overall housing affordability crisis,’ the study says. ‘The increased demand for rental homes coupled with a decreased supply has made affording a quality, rental home much harder for Rhode Islanders.’”

“Credit counselors continue to see a steady stream of people straining under the pressure of high mortgage payments, said Monica Villaverde, a staff attorney at Legal Aid of Manasota. Last Friday, Villaverde’s agency held its monthly clinic on dealing with foreclosure. ‘It was double the numbers we usually have,’ she said. The surprise: Many of the foreclosure victims ‘had great jobs and were making significant amounts of money,’ she said.”

“The Gate City wants to help people get into affordable housing, and just got hundreds of thousands of dollars to make it happen. The city is taking public comment on how to spend the federal dollars. The plan shows that, in the last 10 years, the median housing cost in Pocatello has gone up by $43,000. To match that, median income would have to have gone up by $14,000. Unfortunately, median income has only increased by $8,000.”

“‘It’s an important part of why we need the money and why we use it in that regard, because that means that many more people can’t afford a house without a little assistance,’ said Neighborhood and Community Services Director Melanie Gygli. ‘It probably gets people in a house that might not otherwise be able to at all.’”

“Fannie Mae lists 560 distressed Idaho homes for sale on its website HomePath.com, including 256 in Ada and Canyon counties. That doesn’t include homes that need work before they go to market and those the mortgage-backed securities company is still taking back from homeowners, spokesman Andrew Wilson said. ”There’s still tons of loans that need to come through the system,’ said Charlie Nate, president of IdahoDataProviders.com, which tracks local foreclosure filings.”

“Former state economist Mike Ferguson says sellers should not hold their breath. He points to data showing that prices in the first half of the last price appreciation were closer to the rate of inflation. ‘Those (2006) peak levels were so unrealistic,’ Ferguson said. ‘They’re just coming back to normal.’”

“Some are giving up rather than struggling to make payments. ‘There’s still a lot of people who are making the decision to let their house go because they are so upside down on the value,’ said Blake Mayes, owner of Blake Mayes Team at RE/Max Capital City in Boise. ‘There’s no way of knowing how much is out there.’”

“Rose Park resident Jahn Curran has a Master’s degree in International Banking Management. He’s been out of work for over two years. ‘I live in a house. I have a roof over my head for the time being. But I still have clothes on, and I’m showered and I’m clean,’ he said. ‘But it’s not what you think. I mean there are a lot of neighbors. This street right here, there are three houses that are in foreclosure. I’m likely going to lose my house. I’m 90 days out past paying my mortgage.’”

“Bank of America increased foreclosures by nearly 200 percent in California between July and August. ‘This is the rip-the-band-aid-off policy here,’ said John Karevoll, an analyst with DataQuick. ‘It’s basically just to go out there and plough through it and get rid of it.’”

“Dan Frahm, the senior VP of Bank of America Home Loans, says the recent upswing in foreclosures is due to a massive backlog. ‘Those foreclosures that have been on hold for quote some time are now moving through the process. 1.2 million of our customers are about 60 days delinquent or more, and of that population about 40 percent haven’t made a payment in about two years,’ he said.”

“The housing industry’s recent triumphs could be threatened by a second wave of foreclosures. There are more than 75,000 cases stuck in South Florida courts, and hundreds of thousands more defaulting mortgages waiting to enter the state’s judicial foreclosure process. In Florida, it takes an average of 638 days for a lender to repossess a home, according to LPS.”

“‘These foreclosures aren’t going to go away — they’re going to be settled one way or the other,’ said Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach. ‘By delaying the pain the banks have worsened the pain. We’re going to eventually see all those cases hit the market.’”

“While Maui County’s economy has been lifted by the strong performance of its visitor industry, other sectors, particularly construction, continue to weigh against a full recovery from the recession that began three years ago, economist Leroy Laney said Friday. ‘A major missing link is construction,’ he said, blaming its weakness as a major reason Maui lags in job creation.”

“Maui continues to see construction job losses; residential building is weak, just as it is nearly everywhere, with short sales and foreclosures continuing to depress home prices, he said. ‘It is simply cheaper to buy an existing home than a new one, or perhaps just rent until prices fall further,’ Laney said. ‘So developers simply aren’t building.’”

“Also speaking during the forum was Jack Suyderhoud, professor of business economics at the University of Hawaii’s Shidler College of Business. He provided an overview of the U.S. and global economies, saying that the ‘Great Recession of 2007-09 will not be regarded so much as a painful transitory period, but rather as the moment when the long-term weaknesses of the U.S. economy became glaringly exposed.’”

“‘In that sense, the recession served to pull the scab off the long-term wound of our economy. That wound is debt,’ he said, explaining how heavy amounts of debt by individuals and governments have hindered economic recovery.”

“Books at the county clerk’s office are fat with notices of foreclosures sales. Most are records of personal misfortune — families that can’t keep up the payments on modest houses, an investor caught holding six condominiums when the red-hot real estate market went cold.”

“But one stack of papers in the book labeled ‘October’ marks a reversal in what began as one of the largest land deals in the island’s long history and later sparked a battle over development and preservation of coastal prairie. Various tracts totaling about 1,038 acres of undeveloped pastureland meant for a master-planned community dubbed The Preserve at West Beach are scheduled for a mortgage delinquency foreclosure sale.”

“When the acquisition, which was two years in the making, began the island’s West End was booming and investors saw the Texas Coast as the place to be. David Boatner helped broker the deal and at one time had a partial ownership through a limited partnership. He said the land was so coveted that as he and his partners were raising money, competitors were offering substantially larger amounts, sometimes in cash.”

“Marquette Land Investments bought 1,050 acres, about 30 percent of which is wetlands, ecosystems essential to marine life and protected by state and federal regulations. In December 2007, the city council voted to approve plans for the project, despite a 1,329-signature petition produced by the opposition.”

“The city council’s decision spawned groups devoted to preserving coastal prairie and wetlands on the West End. It also proved politically damaging to council member Dianna Puccetti. West End voters replaced Puccetti in May 2008 with Karen Mahoney. Mahoney joined three other council members whose victories were at least partially fueled by anger over the Marquette vote and other clashes over proposed developments across the island.”

“While Marquette’s plans survived the island fight, the market crash and Hurricane Ike, which struck more than three years ago, were another story. The foreclosure sale will occur between 10 a.m. and 4 p.m. Oct. 4 in the Galveston County Commissioners courtroom.”