The Housing Bubble

It’s Friday desk clearing time for this blogger. “Terrell Owens will have two of his Dallas condominiums auctioned off in early March. While he earned around $80 million during his NFL career, Owens is now making a more pedestrian wage with the Wranglers and is facing foreclosure on two of his properties. Owens owns two homes within three miles of each other in Dallas that are under water. Owens told GQ that he is broke due to misguided financial investments. ‘I hate myself for letting this happen,’ he said. ‘I believed that [my advisors] had my back when they said, ‘You take care of the football, and we’ll do the rest.’ And in the end, they just basically stole from me.’”

“GQ’s feature on Owens also included the news that his Atlanta home is for sale and he sold a residence in New Jersey for less than half what he paid.”

“‘Anybody who’s not paying their mortgage can’t afford to,’ said Ron LeVine, a bankruptcy lawyer in Hackensack, N.J. In interviews recently, five New Jersey homeowners said they are not trying to game the system, but rather just working with the situation they’ve got. In that state, homeowners in distress have more than 21/2 years, on average, from the time the lender first initiates the process to the time they are forced out of the home.”

“Sal Poliandro, a Re/Max agent in Saddle River, N.J., who specializes in short sales, said a number of homeowners in trouble have told him they’ll wait for foreclosure rather than try for a short sale because they know they have time. ‘There are people who are just waiting it out,’ he said. ‘I decided to stay in the house until the bank takes it away,’ said a Clifton, N.J., homeowner who bought his house about six years ago but can’t pay the mortgage because his trucking business failed.”

“Monique White faces an eviction hearing on her North Minneapolis home. Laid off from her job as a counselor, she now works two part-time jobs to try to stay afloat. She too can’t get a loan modification from her bank despite multiple attempts. She has piles of paperwork showcasing her fruitless efforts. ‘They just need to come to the table, reassess my situation and make it affordable,’ she said. ‘Because it’s not like I’m asking for anything for free.’”

“Occupy D.C. was back protesting Monday, but this time to prevent a Prince George’s County woman from being evicted from her home after it was foreclosed upon by the federally backed mortgage giant Freddie Mac. Empowered by her newfound activism, Jones, 73, added her situation wasn’t free of embarrassment. ‘For them to steal $100,000 in equity, I was ashamed,’ she said. ‘Other homeowners need to come down here, especially from the P.G.’”

“Jones said she’s continuing on with Occupy Our Homes not just for her own cause but for her neighbors’, too. ‘I’m not [Mitt] Romney with a bag of money,’ she said.”

“Housing activists say, soaring property values, Ellis Act evictions and the current foreclosure rip-offs by banks and lenders target diverse citywide homeowner populations — Hispanic, Asian, elders, women and the poor. Specifically, San Francisco’s African-Americans have been ethnically cleansed from 13.4 percent in 1970 to to 3.9 percent today. RealtyTrak, and ACCE, the Association of Californians for Community Empowerment headquartered in Los Angeles, both claim that more than 1,400 homes in the 94124 ZIP code will be foreclosed by 2012.”

“Eleven homes on Quesada, the block shared by Vivian and Carolyn Gage, either have been, or are being, foreclosed upon. Carolyn has been an established community member for over 50 years. When high interest rates on a $250,000 loan became inflated to $525,000, a Bayview Mortgage Capital foreclosure drove her from her home. But, ACCE helped her re-occupy it. Following Carolyn’s re-occupation, the mortgage company committed to re-opening her case and cooperating with her to keep her residence.”

“A former Deputy Sheriff, soft-spoken and dignified, she is equally determined. ‘We are union members and home owners,’ she observes. ‘We have been financially assaulted.’”

“California’s attorney general has pressed the regulator of Fannie Mae and Freddie Mac to halt foreclosures until principal writedowns are given a fair look as a way to help borrowers with delinquent loans owned by the mortgage enterprises. How did housing finance director Edward DeMarco respond to Kamala Harris’s letter? ‘Numerous foreclosure slowdowns and moratoria have already taken place, each adding to the losses shifted to American taxpayers and further destabilizing neighborhoods,’ said DeMarco in a Feb. 27 letter to Harris.”

“DeMarco firmly holds his position on principal writedowns: ‘There is no question that underwater borrowers in California would benefit from other taxpayers across the United States paying off the underwater portion of their mortgage debt. My obligation to those taxpayers, including those living in California, is to ensure that the assistance offered to borrowers facing difficulty in making their mortgage payments maximizes the opportunity to assist those borrowers at minimum cost to taxpayers.’”

“‘The numerous foreclosure avoidance options offered to borrowers whose loans are owned by Fannie Mae or Freddie Mac, including multiple loan modification options, do just that. We will continue to consider alternatives as they are proposed, but I will not further delay foreclosures provided those borrowers have been given a meaningful opportunity to avail themselves of a loan modification or some other suitable foreclosure avoidance alternative.’”

“‘In contrast to most states that employ abbreviated processes for deeding the mortgaged property back to the lender, every foreclosure action in Florida is a lawsuit governed by the same rules for pleadings and court hearings that apply to other civil litigation,’ said Kendall Coffey, a legal expert and author, who added the average foreclosure in Florida takes 806 days. ‘We’re not just going to hand it over to the lender.’”

“There are 368,000 pending home foreclosures in the state, and that number could double by 2016, Coffey said. Coffey is partner in the Coffey Burlington law firm in Miami. His latest book, ‘Spinning the Law,’ looks at the art of trying cases in the court of public opinion.The state’s real estate driven economy is generating floodtides of litigation and has spawned an industry of foreclosure defense lawyers who rely on overwhelmed court dockets to stave off foreclosure and keep clients in their homes, Coffey said.”

“How will the consumer fare? ‘Ultimately,’ Coffey said, ‘homeowners will lose a contested foreclosure in the overwhelming majority of cases.’”

“Take note, Southern Nevadans: If you own one of the estimated 100,000 homes that experts predict will be lost to foreclosure before the protracted housing crisis comes to an end, you may see a massive tax hike this time next year. ‘Even the uncertainty related to passage of the bill can quickly hold back economic recovery,’ said Lawrence Yun, chief economist for the National Association of Realtors, which strongly backs an extension of the tax relief for forgiven mortgage debt.”

“A worst-case scenario could also be a modest run on the housing market in the next 10 months as owners of distressed properties try to dump them before the end of the year. ‘If, say, there’s an added rush to bring properties onto the market(for example, speeding along a short sale), added supply always means lower prices, so the lower prices would hamper this housing recovery,’ Yun added.”

“John Conn, associate of Conn Realty, agrees sellers have to be more realistic about the market. ‘It’s not true of all neighborhoods, but values are very stable and holding,’ Conn said. ‘But from a sellers’ perspective they have to get in their mindset, ‘If I just get out of this (home), I can make it up on the buy somewhere else because the buys are so good.’”

“For example, he said, if a seller owed $100,000 on their home and it’s worth $120,000, if they can sell it for $100,000, then they might be able to buy a house valued at $150,000 that they can get it for $120,000. So they didn’t lose $20,000 when they sold their home, they made $30,000 when they bought their next home.”

“Dale Washburn said business is off from where those in the industry want it to be and that most brokers are still struggling. He is on the speaker’s bureau for the Georgia Association of Realtors. ‘The problem continues to be a log jam,’ he said. ‘People can’t buy because they can’t sell the house they have.’”

“In years past, most agents would tell buyers that they could expect about a 3 percent appreciation a year of their home, Washburn and other real estate agent said. That’s not true anymore, he said. ‘I think the trend is, from what we hear from the national (Realtors) association, is people are buying houses now, not focusing on investment, but they are focusing on the use of the property, the enjoyment of the property. Now having said that, nobody is saying that buying a house is not a good investment, it is still a good investment.’”

“Neither numbers nor percentage of sales put this region on the list of ‘top metro areas to buy bank-owned properties’ in the fourth quarter - it was the size of the price discount, an average of 52.5 percent, which dropped the sale price of a bank-owned house to $109,878. Only Milwaukee’s discount of 57.9 percent was higher than Philadelphia’s on the list of the 10 metro areas.”

“The increase in bank-owned sales here in the fourth quarter appears related to policy changes by some lenders. ‘What I have noticed is that many of these lenders have put a better and more realistic system in place to manage these listings,’ especially being reasonable about the price, said Noelle M. Barbone, office manager of Weichert Realtors in Media.”

“If there’s bad news in the numbers, it’s that new home sales remain stagnant and that many of the current sales are to investors. For January 2012, only one new home sold in Casa Grande and just 71 in Pinal County. That compares with nine in Casa Grande in January 2011 and 66 in all of Pinal County. Lending, which experts say in retrospect was much too loose in the years leading up to the market’s collapse in 2008, is a factor in sales now.”

“‘Normal homebuyers generally have to finance and investors often pay cash,’ said Mike Orr, Director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at Arizona State University. ‘Lenders have gone from completely abdicating responsibility six years ago to not taking hardly any risks in making loans.’”

“Neal Buckner, broker/owner of Elite Real Estate Pros in Casa Grande, said that doesn’t mean people can’t get loans, however. ‘It’s not difficult to get a loan these days,’ Buckner said. ‘It’s just that the requirements are where they should be. It isn’t like five or six years ago, when they opened it up to almost anybody. If their debt ratio is right and they’re putting down 10 or 20 percent, they have no difficulty getting loans.’”

“For now, the market continues to improve and everyone involved has learned lessons from the boom-and-bust cycle that led to the collapse. ‘I think everybody has [learned something],’ Orr said. ‘These kind of crashes don’t happen every generation. I don’t think anyone anticipated quite the devastation we saw here. Now prices have over-corrected.’”

“The wild card in the supply picture is whether another wave of foreclosures will occur. The answer is anybody’s guess. ‘We just don’t know what is being held back,’ Buckner agreed. ‘I have no idea what HUD and Fannie Mae and Freddie Mac have. I hope when they decide to put more on the market that they do it in a gradual fashion so it doesn’t affect the market.’”