Trying To Figure Out What Normal Looks Like
A report from the Idaho Statesman. “About 8,000 pages of personal financial information about Tamarack Resort partner Alfredo Miguel Afif have been sent to Bank of America, which is seeking $4.9 million to pay off a lease on two chair lifts. The submission should satisfy attorneys for Bank of America and end a judge’s plan to issue a civil warrant for Miguel’s arrest, said Miguel’s personal accountant, Leonard De Los Prados. The Valley County ski resort fell on hard times in 2008 and defaulted on a $250 million note. Tamarack owes money to Credit Suisse, its biggest lender, and a variety of other creditors.”
“Miguel invested $29.2 million of his personal money in Tamarack Resort, including $6 million spent in 1996 to repay all debts to local vendors left by a previous developer of the resort, which was then called Valbois, De Los Prados said. Miguel’s investment is now ‘all gone’ following the resort’s 2008 declaration of bankruptcy and default of a Credit Suisse Bank loan of $250 million, said De Los Prados, who is also treasurer of Tamarack Resort.”
The Oregonian. “Nearly one in five Oregon and Portland-area homeowners with a mortgage owe more on the loan than their home is worth CoreLogic reported. In the Portland area, 19.6 percent of homes were underwater in the fourth quarter of 2011, representing an increase of 10,000 homes from the previous three months. In all, the firm says, more than 93,000 Portland-area homeowners posted negative equity in their home for the quarter, and another 29,000 — 6 percent — were near negative equity.”
KGW in Oregon. “A bill dealing with homeowners in foreclosure in the Oregon Senate passed with strong bipartisan support. ‘If the laws had passed last year, we would have still been in this house today,’ Ex-Salem Homeowner Ginny Real said.”
“Speaking outside the home her and her husband owned for 24 years Real is angry at the way her bank foreclosed on their home. Real said her husband got seriously ill and it was tough making the $700-a month house payment. So when she heard about the new Home Modification program she contacted her bank and began the process to lower her payment to just under $400 a month.”
“‘I ended up applying three times. They (the bank) lost the paperwork twice. Third time they told me everything was going through and we got a knock on the door saying somebody bought the house and we were out in ten days.’ Now, Real and her husband live with their daughter and son-in-law and grandchildren. Her daughter Jami Real blames the bank for the foreclosure.”
“‘They didn’t play fair at all, they’re crooked. Something needs to be in place to protect the homeowner not just the bank,’ Real said.”
Komo News on Washington. “A local woman who’s been very vocal about her foreclosure fight with Bank of America is about to head to the other Washington, where she’ll be meeting with several groups, including the Obama task force. As Vera Johnson gets ready for her trip, she’s asking people here in the Puget Sound area to share their tales about how their lives have turned upside-down because of the mortgage crisis.”
“After a very public outcry, Johnson got a modification, helping her keep her home and business open. But she fears it may not help her in the long run. ‘My house is under water. It’s under water by 30 percent. They gave me a modification. They didn’t give me a principal reduction. I’m gonna be in the same situation in four years,’ she says.”
Seattle PI in Washington. “Seattle’s median house price in February posted its first year-to-year gain since October 2010, according to a report. The median price in February was $365,000, up 2.8 percent from February 2011 and 4.1 percent from January 2012, the Northwest Multiple Listing Service reported. King County’s median, $308,125, was down 7.75 percent from a year earlier and 2.2 percent from the prior month.”
“What can one read into Seattle’s increase, seeing as prices were down by 10.1 percent year-over-year in January? ‘I think it really is a market that’s trying to figure out exactly where it belongs, what normal looks like,’ said Glenn Crellin, associate director of the Runstad Center for Real Estate Studies at the University of Washington.”
The Columbian in Washington. “Homebuilders will showcase two concepts at this year’s 2012 Parade of Homes, a September showcase of spacious models overlooking the Columbia River and smaller abodes built with eco-friendly practices. Evergreen Pointe, the Vancouver subdivision includes seven lots ranging from 0.5 acre to 1.5 acres in size that were sold for $825,000 apiece in November. By contrast, the same lots were selling for $1.1 million each in 2005, 25 percent higher, during the height of the homebuilding and real estate boom.”
“Jim Beriault, a promoter of the annual event, organized by the 800-member Building Industry Association of Clark County, said all of the houses will be pre-sold before the show, as homebuilders continue to shy away from the risk of building houses ‘on spec’ during the still somewhat stagnant market for new homes. Spec, or speculative, houses are constructed by a builder with the belief that a buyer will eventually come along.”
“Pre-selling the houses ‘is really the only way you can make it work these days,’ Beriault said.”
The Kitsap Sun in Washington. “Home prices in Kitsap County continued to tumble in February, down 11 percent from a year ago, and close to where the price stood in 2005. The price jetted downward most steeply for condos. February’s price of $215,550 was a 39 percent free fall from February 2011. For single-family homes, the price fell 10 percent to $225,900.”
“The median home price stood at $218,944 for the entire Western Washington region, down 9 percent from last year. The median closing price for homes in Mason County in February was $95,800, down 40 percent from a year ago. In Jefferson County, the price was $203,500, down 34 percent.”
“Frank Wilson, managing broker at John L. Scott Real Estate in Poulsbo and a member of the Multiple Listing Service’s board, said the shrinking inventory of homes for sale in Kitsap County now has tipped the scales to a seller’s market. ‘We continue to see more multiple offer situations on homes that come on the market correctly priced,’ he said.”
Long time reader, figured this is as good a time as any to post my first thoughts, given the subject is NW real estate.
I bought a a house in E. WA - Spokane area - about 4 months ago. It was a foreclosure, custom built house on acreage. Overall really good share, a couple of minor things needed repair. But we did extensive renovations just to change things around, like paint, floors, carpet, tile, bathroom fixtures, etc. Not things that needed repair, just not our style.
We paid about 35% less than what the house was valued at when it was first occupied by the original owners in early 2008. On a $/sq ft measure, it’s about 10% lower than comps at the time. Since it is custom built, it’s hard to compare apples to apples since the houses within 1-2 miles vary from $200K to $1.5M and everything in between on 1/4 acre lots to 25 acres lots. It’s not a cookie cutter subdivision where there are 40 identical houses to look at.
Last time I owned a house was ironically enough, right when this house started construction, summer 2007. I saw what was coming and sold for a nice profit and rented since. Starting around this time last year, mrs and I decided it was time to buy again. But there was no rush. We looked at several houses. We looked at land to custom build, we looked at subdivision houses, we looked at downtown (100+ year old) houses. We looked in the city, in the suburbs, in the country. We also looked in Idaho and found some good stuff there. But, Idaho has a 6% state income tax, while WA has a 0% state income tax. And although property tax is higher in WA, with my income, it is a better deal to live on the WA side. Sales tax is higher as well in WA (8.7% vs 6%), but we’re only 5-6 miles from the state line and go into Idaho to shop on a regular basis to pay the lower state tax.
We made a few offers, which either were rejected outright or on 2 occasions we were outbid by someone else. Then with this house, we saw it the day after it was listed. Made an offer on it that day. It had everything we were looking for, size, location, views, you name it, it was like we had drawn up the plans for it ourselves. Turns out someone else had an offer on it as well the next day. So we upped the offer by $5K and got it. It was a Fannie owned house and Fannie paid 3.5% of closing. We took that 3.5% and used it to buy down the mortgage, in addition to all the other standard costs. So essentially our closing cots were $0 and we got 0.5% off a mortgage rate, thank to our good friends in the federal govt. Plus there was no appraisal fee required, so that saved another $400. All in, on a 15 year fixed, tax, insurance, etc we’re paying $3000 a month, of which ~$1500 is principal, ~$1000 is interest, ~$450 is tax, ~$50 insurance. Tax deduction of interest and tax is ~$350/month which makes the effective payment $2650. We were renting a house of not quite as good quality, but close, for $2200 prior.
My experience as a house buyer over this past year can be summed up as follows: the good houses - in good shape, priced well - sell and fast. Like I said, we were outbid twice and someone else was outbid by us. I also had a few experiences where I’d see a house online, call up a real estate agent to inquire and the house was already pending or had an offer (or 2 or 3) on it. On the other hand, there are houses that have been for sale for 1, 2, 3+ years at ridiculous asking prices. These people still think it’s 2006 and in 5 years from now they’ll still be for sale.
It IS nice to be back in the owning business so to speak. My landlords over the past 5 years were decent enough. But it is cool to be the master of your own domain, do what you want to the house. I know it’s cliche about painting, but we painted virtually every sq ft of the house and it looks damn good. Yes, you can paint a rental as well, but that’s a lot of money/effort to put into someone else’s house.
Anyway, that’s a perspective from the Spokane area. Begin “you’re crazy for buying now” comments in 5…4…3….
‘you’re crazy for buying now’
I don’t know why posters “come out” about buying a house like they “switched sides” or something. It doesn’t change a thing in my world.
‘It IS nice to be back in the owning business so to speak…it is cool to be the master of your own domain, do what you want to the house. I know it’s cliche’
Yes, it is. I got a call last night from the fellow I’ve mentioned here before. He got in the “business” of owning a Flagstaff house about a year and a half ago with a VA loan and little down. It was a foreclosure, slide down in price since, he’s paid twice what he would have renting the same house. Suddenly, a house nearby sold for enough that he thinks he can get out with not much of a loss. So he’s asking me for contractor input on fixing it up to sell it. Needs new appliances, etc. And he’s planning on renting if he can can sell.
Ben, does the rent go up in your world?
does the rent go up in your world?
Sure rents go up over time; in general, they should go up at roughly the rate of inflation.
Whoops, I meant to say that they should go up at roughly the rate that the Fed devalues our currency.
Sounds like you need to get the “painting” bug out of your system.
Come on out here to BFE, and paint my daughter’s house in 100 degree weather this summer. Guaranteed to kill or cure.
the good houses - in good shape, priced well - sell and fast. Like I said, we were outbid twice and someone else was outbid by us. I also had a few experiences where I’d see a house online, call up a real estate agent to inquire and the house was already pending or had an offer (or 2 or 3) on it. On the other hand, there are houses that have been for sale for 1, 2, 3+ years at ridiculous asking prices. These people still think it’s 2006 and in 5 years from now they’ll still be for sale.
I’m seeing the exact thing in my area (Portland suburbs). Stuff getting offers on the same day as listing, or as near as I can tell even before it’s listed. I suspect in the latter case the realtor is seeing a deal too good to be true and is finding a way to lock the property up. Very frustrating.
“Long time reader, figured this is as good a time as any to post my first thoughts, given the subject is NW real estate.”
Realtors Are Liars. Your losses are growing by the day.
Enjoy the ride down.
No right or wrong to the house purchase in the opening comment. Simply there is… economics… to this.
Nothing wrong with having mortgage, if one recognizes the risks. Nothing wrong with being renter, if recognizes the risks.
If one is to be in same house for *many* years, believes he can makes payments, believes he’ll have job stability, doesn’t care if retail price of the place drops, doesn’t consider “under water” to have any impact on his contentment (”under water” indeed should not impact contentment. It doesn’t for mine regarding my car), then all is well.
It’s the folk cited in the column itself, “need principal reduction even more, because I’m gonna be in same situation (not making payments) in few years” who are the problem. No mods ever should be needed just because someone is “under water”. If they could make the payments, the retail price of the house is irrelevant, and they claimed they could make the payments when they bought house. Go figure
Bankers are crooks and not really interested in reducing the mortgage or taking a “loss”. When the sleeping public finally wakes up and realize the money for their loans were “printed up out of thin air, one key stoke” made up from the private federal reserve, then reality will hit only when the mass majority says, ” I’m made as hell and am not gong to take this anymore”. But the damage has already happened,banks won, home buyers paying on underwater houses for years to come.
It was a set- up in the first place and guess who got stung?
I’ve been “made as hell” a time or two myself. It can be a wild ride!
Money may have been printed in a keystroke, as you have been told, but not by the entity that loaned it to you. The debt is real. The bank has to pay the money back at interest and you are the source of that. It’s completely fair, you gave your legal pledge and the property as collateral.
—It was a set- up in the first place and guess who got stung?—
Well, not me at least.
‘there is… economics… to this’
That’s primarily what I’m interested in. We have this:
‘In the Portland area, 19.6 percent of homes were underwater in the fourth quarter of 2011, representing an increase of 10,000 homes from the previous three months.’
‘condos..February’s price of $215,550 was a 39 percent free fall…The median closing price for homes in Mason County in February was $95,800, down 40 percent from a year ago. In Jefferson County, the price was $203,500, down 34 percent’
‘the Vancouver subdivision includes seven lots ranging from 0.5 acre to 1.5 acres in size that were sold for $825,000 apiece in November. By contrast, the same lots were selling for $1.1 million each in 2005′
Lots of things going on in the PNW.
All “buyers” are different.
To many, a house id more than a roof over the head. If they want to pay a premium for the privlege, and can afford it, doesn’t bother me.
I’d like a house, but not enough to pay a premium to own, even if I could afford it. Can’t afford to be “underwater” on a house again. There’s a better than 50% chance my job will go bye-bye within the next five years. As I found out during my 6 month stint of unemployment in 2009, unemployment is a lot easier to handle, if you aren’t sweating a house payment.
If the kids come and visit, it’s cheaper to pay for a nice hotel room, than it is to keep a room vacant 98% of the time at “Hotel Dad”.
As long as Bernanke has paper, ink, printing presses, and helicopters to dump money on Wall Street, there’s a decent chance that Uncle Sugar pulls a rabbit out of his azz, and keep house prices inflated. Too many people’s solvency depend on it.
If this is the case, I guess I’ll be renting from now on. I can live with that. I’ve always got the “refrigerator box under the overpass” plan if it doesn’t.
I have the van and gym membership as plan B.
I’ve always got the “refrigerator box under the overpass” plan if it doesn’t.
For those situations, I recommend an old VW bus instead. For a few thousand bucks, you can have way more comfort and way more physical security than the refrigerator box.
Don’t ask me how I know.
Aah, but the old VW buses are a collectors item, and especially desired by wannabe rock bands…
Bought condo in 2005 for 208k, sold it in 2006 for 365k, bought another of the same model (but with better views) in 2007 for 400k (hey it “appraised” for 440k but that was a hoax we wanted to believe).
Now it is sitting empty, owned by Fannie since October, and it is at 189k, 10% lower than it would have been in 2004, but still not selling. Overcorrection, or never worth 200k in the first place??
In my world, the equivalent of a condo is the narrow empty space betwen two docks. You drop whatever you want in there and live in it. You pay fees to have the commons mowed, cable service, electric and to stoke the bar and grill at the periodic association meetings. There are rules like speed limits and butt disposal and where you can pitch a tent for visiting rug rats. If you move, you can only sell your space to an approved applicant.
I bought mine in 2005 too! Price was about 1% though. Cannot comment on the “worth” of a condo in the air. It’s not like you could fly it around or anything, you have to stay at the dock, right?
I bought mine in 2005 too!
Hey Blue Skye, I didn’t realize that you owned your own slip! And here I thought you were the foot-loose un-anchored sort!
I am most of the time. The weekend “cottage” boaters hate me.
Cruising season is fast approaching and I am anxious as hell.
LOL, censored.
Well, I don’t have a mortgage or a lawn mower, so I am as free as can be. It is convenient to have a home port for purposes of making preparations and doing projects.
Lots of things going on in the PNW.
Still going WAY too slowly here, IMHO.
It’s like watching paint dry. You know how it ends, but it sure does seem to take its time and it is hard to see the progress within a short time-horizon.
And yet somehow I can’t look away.
‘hard to see the progress within a short time-horizon’
‘February’s price of $215,550 was a 39 percent free fall…The median closing price for homes in Mason County in February was $95,800, down 40 percent from a year ago. In Jefferson County, the price was $203,500, down 34 percent’
You were hoping for 60%?
You were hoping for 60%?
Actually, that’s about what would be required to get back to reasonable pricing here.
But really, I just don’t consider “median closing price” to mean much of anything, since it is so significantly affected by mix-shift.
I trust C-S data a lot more, and it is still just drip-drip-dripping away in this area…
These high-end homes in Vancouver, WA often sell to Portland-area business owners and professionals who are basically tax exiles who work in Portland but live in WA to avoid state incomes taxes.
There are also many commercial airline pilots who do the same thing, and just zip across the Columbia River to get to the Portland Airport to commute to their bases. My husband, who flies for American (don’t get me started on that-bankcruptcy- subject…!), is in this group, and has a lot of company in Vancouver.
There is not a very big job base here, and 30,000 workers commute from Vancouver every day to work in Portland. We have become basically a bedroom community of Portland, but don’t tell the old-timers that!!!
As one such WA to OR commuter, I shop in Portland (no sales tax), but still get nicked for Oregon income taxes on my income. Property taxes, alot more house/land for the $$$ and crazy water-sewer bills in Portland make it a no-brainer to live on the north side of the Columbia River. Of course, Vancouver does not have the cache of Portlandia!
As one such WA to OR commuter, I shop in Portland (no sales tax), but still get nicked for Oregon income taxes on my income.
How do you get “nicked for OR income taxes” if you live in WA??
I thought that was the whole point of the cross-border commute!
Because you have to pay OR state income tax on the income earned in that state, even if you choose to live in WA.
19.6 percent of homes were underwater in the fourth quarter of 2011, representing an increase of 10,000 homes from the previous three months
In other words, prices finally dropped to late 2004 vintage, trapping the 2006 buyers underwater. What about people who buy a now, at the equivalent of a 2004 price? Prices will have to drop again, to 2003 prices, for them to be underwater.
And that becomes the economic question: will prices drop below 2003 prices?* More importantly, how much and WHEN? If Smithers’ anecdote and others are correct, good houses at those 2003 prices are selling, meaning that prices will be VERY sticky below the 2003 price point. If it takes, say, 2-3 years to get to a lower price, that’s right about when the buy curve crosses the rental curve, where you’ll spend the same amount as the house prices drop, no matter what interest rates do. And in those 2-3 years, will there be good inventory left? Good stuff will already have been bought, bad stuff will bought up in bulk for slums by Goldman Sachs, and any newer builds will give a margin of deminishing returns because of the longer commutes.
————-
*figuring in cost of inflation, the absolute sale price in 2003 is the equivalent of a 2001 price.
“Real is angry at the way her bank foreclosed on their home.”
A large part of the current crop have no clue what the meaning or consequence of default is. Real was outbid on a house that she no longer owned.
It is unfortunate that her husband fell ill without means. It is unfortunate that she is naive. It is unfortunate that banks are sharks. I would bet that if the law passes that bars banks from negotiating with home debtors while offering the property for sale in another office, they will cease to negotiate with the debtor.
A 30 year mortgage is like a very long night at the roulette wheel.
“A 30 year mortgage is like a very long night at the roulette wheel.”
Sweet. I like it and will use it.
“Because we are not just numbers on a piece of paper. We’re actual families. We are the economy. We are the people. We are the ones paying for things,”
Just not your mortgages, apparently…
Here is food for thought:
157 West 57 Street in Manhattan is listing its top apartment for 110 million…. Can you say bifurcated market?
Is this todays bits bucket?
lol. I’m sure Ben is a bit overwhelmed right now. I admire him for getting up at the crack of dawn or earlier to provide a forum where we can go at it with each other (lately, anyway). It’s all I can do to drag myself from the crib some days.
PS, RAL, sorry for misinterpreting you the other day. I’ve been a tad crotchety these days. Carrie Ann nailed it about natives being restless in the calm before the storm. That’s how I feel.