March 9, 2012

The Ball And Chain

It’s Friday desk clearing time for this blogger. “Three hundred acres planned for 249 luxury-view homes high in the foothills of Corona were purchased in foreclosure for $3.5 million. Steve Cameron, president and founder of Foremost Communities, said the project was one of the most sought-after in the Inland Empire and was ‘well worth the wait.’ He said as recently as 2006 there were offers for the land in the range of $50 million to $70 million. Development of Sierra Bella will begin in about two years, Cameron said. The lots will be sold to builders for construction of single-family houses that are expected to sell for $700,000 to $800,000, he said.”

“Maricopa County, Ariz., which includes Phoenix and ritzy Scottsdale, was one of the hardest hit during the U.S. housing crisis with property prices plunging more than 55 per cent from their peak. And that’s got the attention of sun seekers, says Scottsdale realtor Diane Brennan, who specializes in selling homes to Canadians. ‘It’s been the second busiest year ever,’ says Brennan, who moved to the U.S. from Alberta a few years ago. ‘We are getting a lot of multiple offers and in one case 43 offers on one home.’”

“The hottest segment of the market is investor-buyers. Winnipeg residents John Erik and his wife Cheryl Albrechtsen, purchased a vacation home in Scottsdale last June. They paid $572,500 for their 3,700-square-foot home with five bedrooms and three bathrooms. Similar homes changed hands at the peak of the market for nearly twice that amount. ‘The economy will come back, so it was a good investment opportunity,’ said Erik about their decision to buy.”

“Owing more than a year’s rent and facing foreclosure sales of more than $4 million in property March 28, the developer of the University of Wyoming Plaza is in financial trouble. Owing more than a year’s rent and facing foreclosure sales of more than $4 million in property March 28, the developer of the University of Wyoming Plaza is in financial trouble.”

“For one tenant, the news came as no surprise. Grand Newsstand owner Mike Scott closed his plaza location in November, but continues to pay rent as he hasn’t found someone to sub-lease. He said GALP manager Fred Croci came to Laramie promising prosperity, but only delivered high rent. ‘He said it would be prosperous, that he’s going to finish the plaza within two years, is what he told me,’ Scott said. ‘Right across from my store where those foundations are (in the plaza), those condos were going to be started years ago. That meant everything to me, because those were going to be retail lofts, big city lofts with retail underneath and the condos above.’”

“In a 2009 interview with the Laramie Boomerang, Croci said the 16 loft apartments slated for development would be a ‘hot commodity’ done in time for part of the 2009 UW football season. But those ‘big city lofts’ never materialized.”

“Two out of every five houses, 75,000 properties, are vacant in Collier County. Florida’s 1.7 million empty houses are ball and chain for the state’s economy. Rep. Kathleen Passidomo, a Naples real estate attorney, said her bill, HB 213, will prod lenders to move ahead with cases and help lift 368,000 Florida foreclosures off dockets and onto the market.”

“Florida’s banking lobby fought the bill from the outset because of its biggest consumer protection: a provision that reduces from five years to one year the length of time lenders have to seek payment for the outstanding loan balance over the value of the home. Others say HB 213 will do nothing at all. The banks don’t want to move forward. Homeowners in default have often moved on or are content to live in the house for free.”

“‘It’s been a good thing, staying without paying,’ said Debbie Minick. In September 2009, her husband died and she stopped making payments. Finally, on Feb. 14, her foreclosure became final. She has until April to move out.”

“Roger Rinaldi said his troubles began when a mortgage loan officer falsified his application for a $164,000 loan on a three-bedroom home in Bristol in Kenosha County in 2005. Rinaldi said the loan officer listed a $15,630 bank account that didn’t exist, a college degree he didn’t earn and a job — sales manager — that he didn’t have. ‘I didn’t find out about that until two and a half years into the loan,’ Rinaldi said.”

“The lender’s actions allowed him and his wife to secure a $1,776-per-month loan the couple could not afford. Rinaldi also alleged the broker raised the interest rate to 8.5 percent from a promised rate ‘in the 7s’ just before the couple, who were moving from Illinois with their three children, closed on the mortgage. When the Rinaldis stopped paying, HSBC Bank, operating on behalf of Wells Fargo, sued for foreclosure in 2009. The lender then levied a series of fees totalling $4,500, he said.”

“In January 2010, a Kenosha County Circuit Court judge ruled for the banks, rejecting allegations about lender abuse. Wells Fargo spokesman James Hines said the Rinaldis’ arguments ‘were found to be without merit.’”

“Tom Wuensch of Onalaska, said he doesn’t dispute he owes money on his four-bedroom home. The balance on his loan was $360,000 when he stopped paying. The house is now worth no more than $250,000, he said. His case is pending. ‘The negative perception seems to be ‘You’re trying to get a free house,’ said Wuensch, who has staved off foreclosure for four years by challenging the efforts by a series of lenders to seize his home. ‘Really what this is about is, we shouldn’t be letting banks take free houses. We bailed them out once already.’”

“Mike Hilla of Chicago is among those who used the ’show-me-the-note’ defense. In an interview, Hilla said he stopped paying for the rental home he owns in Fitchburg when his monthly mortgage payment ballooned by more than $800 a month to $2,280 in 2009. But Hilla, whose job was to bundle and sell mortgages to Wall Street, saw his income plummet as the housing market collapsed.”

‘Late last month, he lost his bid in Dane County Circuit Court after Wells Fargo brought in one of its top officials, along with what it said was the original mortgage note from a company vault in Texas. Judge Richard Niess seemed particularly bothered that Hilla — who has failed to pay his mortgage, property taxes or insurance for more than two years — would get the Fitchburg rental home free and clear.”

“There’s house trouble on the East End of Long Island. The number of unsold Hamptons homes has hit a 30-year high while prices have plummeted. Some industry authorities blame the Hamptons market on homeowners pushing up prices unrealistically, as they did in other distressed housing markets. ‘It doesn’t matter if it’s Las Vegas, Arizona or the Hamptons when a home is overleveraged,’ said Corcoran Group CEO Pam Liebman. ‘It doesn’t help that there are currently too many homes in the Hamptons that are still on the market because the owners have unrealistic price expectations.’”

“Dottie Herman, CEO of Prudential Douglas Elliman, looked on the bright side. ‘Just because homes are listed in foreclosure doesn’t mean much. It just means that someone misses three payments,’ she said.”

“North Miami’s embattled mayor, Andre Pierre’s once again got some ’splainin to do this morning as Bank of America has moved in to foreclose on the $230,000 home he owns on NE 121st Street. He bought the 11,945-square foot property in the Sans Souci Estates development in 2003, the booming days of the housing bubble, for a tidy $353,000. That’s since ballooned into a $432,538 mortgage as of last July, the Business Journal reports. The house, meanwhile, is worth just $230,000.”

“Pierre claims the bank foreclosed too soon and that he was still negotiating a loan modification to keep the residence. ‘I’m not sure it’s legal for them to file it when we have been talking back and forth,’ he tells the South Florida Business Review. ‘The left hand doesn’t know what the right hand is doing.’”

“David and Odessa of Oregon lost their home to foreclosure in 2009 after David was downsized out of his studio production job. He did eventually find work in Madison, just as retired parents Lauralyn and Jim, discovered much of their retirement money was lost in the stock market. They then decided to become a multi-generational family, all living under one roof.”

“As the family continues to adjust to their new reality, they said they hope politicians learn the same hard lessons they have. ‘We can’t afford the seven bedroom house that we’d all enjoy to have our own space,’ said Odessa. ‘Right now, we’re all living on top of each other, and that’s what we do. We have to simplify.’”

“Kyle Saavedra, 26, is part of the trend the Urban Land Institute is seeing in California; he doesn’t want to own a house, an indication that perhaps the foreclosure crisis has changed attitudes. ‘Definitely not my number one priority,’ Apartment renter Saavedra said. ‘I’d rather go out and see the world and do whatever. Have fun. Not be tied down.’”

“And if you think the housing attitudes are just a Gen X or Y mindset, think again. The California Association of Realtors said only one-third of homeowners who’ve sold their home are purchasing another one, the vast majority is opting to rent instead. Senate Committee Chairman Mark DeSaulnier, D-Concord, is disturbed by the trend and still sees homeownership as a model for community. ‘If everyone in the community has bought into it, they’ve bought into the larger community,’ DeSaulnier said. ‘They come out for politics. They’re more engaged.’”

“‘The suburban housing market just isn’t there anymore,’ Urban Law Institute researcher Arthur Nelson said. ‘It used to be there.’”




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36 Comments »

Comment by Erik
2012-03-09 08:54:27

“Sierra Bella”…another “planned community” on a dessicated hillside in far away commuter land…. Wonder how much the new owners of that white elephant are going to spend on BS ads trying to convince the credulous to pay those types of coins to move in there? I suppose the themes of “they’re not making any more land” coupled with appeals for “exclusivity” , etc. will be what they’ll hit on. That’s what always worked in the past, didn’t it.
The actuality is that sort of land has a future for use as lots to park RVs on or construct little dumpy outback houses like you find in parts of east County San Diego.
Meanwhile the rest of the Inland Empire along with places like Adelanto and Hesperia have completely cratered and these people think the economy will “come back” to support $700-800K “luxury homes” out in that particular part of BFE? What are they smoking? But wait..this may be another variant on the oldest California Con of all, getting outsiders to invest in mining ventures…

Comment by Montana
2012-03-09 10:13:42

Adelanto and Hesperia

LOL

 
Comment by In Colorado
2012-03-09 13:59:36

Whoever owned that land and turned down the $70 million offer must be kicking hismelf.

This reminds me of the infamous “strawberry field” in Anaheim, just blocks away from Disneyland. Disney paid $100 million dollars for this property (55 acres) in 1999, a staggering 2 million per acre. I wonder what that property (which today basically serves as an overflow parking lot) would fetch if offered for sale today?

 
 
Comment by Carl Morris
2012-03-09 09:16:55

Thanks for the Laramie story. I love that place, but “big city lofts” really makes me laugh. You’d have to see the place to understand.

The comments below the story help flesh it out a bit more. I especially liked the phrase “unicorn rental store”.

Comment by michael
2012-03-09 14:25:21

Do they have one of the candy crapping variety?

 
Comment by AmazingRuss
2012-03-10 00:59:14

Maybe the lofts are trailers on stilts. That would fit in just fine.

 
 
Comment by Diogenes (Tampa, Fl)
2012-03-09 09:19:28

“As the family continues to adjust to their new reality, they said they hope politicians learn the same hard lessons they have.”

Hope springs eternal. Unfortunately, we now live in a country where votes are purchased, depending upon the amount of “benefits” the politicians are perceived to bestow upon their constituents.
Since we are no longer concerned with government as a rule-enforcing body, but a giver of benefits, such as free medical care and housing, there is no incentive to restrain the spending.
The beneficiaries will vote themselves more stuff, while crying about how they are “underserved”.
What I find most disturbing is the lastest media frenzy about the 99%. It’s not really about the 99%. It’s about the 49% supporting the 51% of parasites. It’s gridlock. The 1% sell the political class to the 51% to trickle down “benefits”, while keeping the money printing and asset accumulation to themselves.
The 1% have been unaffected by the economic turmoil, except to get an even greater share of all classes of assets. Meanwhile the taxpayers are lining up to do war with the tax-takers….unfortunately, not Wallstreet traders, but welfare queens.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 23:13:48

“The 1% have been unaffected by the economic turmoil, except to get an even greater share of all classes of assets.”

It helps A LOT when members of your group (the 1%) include those with access to Fed-funded ZIRP loans.

 
 
Comment by Erik
2012-03-09 09:38:16

I was in Laramie for 2 days in January…Pretty poor market for upscale projects like that..But that sort of craziness went viral all over the country during the boom and the landscape is peppered with still-born wretched excess projects, commercial and residential. I like driving through the hinterlands and seeing the faded signs advertising this or that pretentious project, many now just weed and trash strewn empty spaces, others half finished, full of vacancies and headed for repurposing or the wrecking ball.
Jim Kunstler called a lot of this back in 93 with his “Geography of Nowhere”.

Comment by Carl Morris
2012-03-09 09:50:12

I think it’s due to pretty much the whole town being within walking distance of the football stadium. It makes people think they can create the atmosphere of a miniature downtown Denver or something. But it seems to me everyone overestimates the number of well heeled alumni wanting to come into town and drop big bucks for a few weekends in the fall. I never went to a single game voluntarily when I could go for free…

Comment by X-GSfixr
2012-03-09 10:02:48

Weren’t “trendy lofts” originally inexpensive warehouse space, converted into a combination shop and living space for artists/techies?

The ones around here aren’t cheap, and they don’t have enough room to do any work in them, other than set up a computer workstation.

Comment by polly
2012-03-09 10:18:00

Loft living is great for a single person. For anyone who wants even a little possibility of privacy with more than one person at home, not so great.

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Comment by X-GSfixr
2012-03-09 10:08:24

I’m becoming convinced that, collectively, the country will be giving CPR, AED shocks, and Haitian voodoo treatments to the house market until they manage to resurrect the dead.

After all, what are the people in the business going to do, if not sell/build/finance/repossess houses, or the crap packed within?

 
Comment by X-GSfixr
2012-03-09 10:14:38

“….hottest segment is investor-buyers…..”

Yeah, America’s future……….home to the world’s oligarchs/robber barons/bankster class, where they can get away from the dirty water and air they have poisoned at home, and legions of highly schooled but under-employed locals can “service” their every need at minimal cost.

Not a whole lot of Gulfstream and Lamborghini repairmen in BFE.

 
Comment by snake charmer
2012-03-09 10:48:13

Interesting statistic on Naples. I am there about every two years or so, and every single time I feel revulsion for what that town has become. I mean, really, how many out-of-scale apartment towers and suburban wastelands can we build? But I’ve come to the conclusion that we just can’t do any better.

 
Comment by The_Overdog
2012-03-09 11:17:11

…bought the 11,945-square foot property in the Sans Souci Estates development in 2003, the booming days of the housing bubble, for a tidy $353,000. That’s since ballooned into a $432,538 mortgage as of last July, the Business Journal reports. The house, meanwhile, is worth just $230,000.”
——————-
An 12,000 sq ft house for $353k or $230k or $432k all sound outrageous. I wonder if the inside was just a blank warehouseish space? At $353k, that’s $29 a sq ft somewhere inside a major metropolitan area.

Comment by Ben Jones
2012-03-09 11:47:20

Maybe the land sq ft?

Comment by The_Overdog
2012-03-09 12:22:21

I think that makes more sense; I guess the secondary article didn’t make it clear but there was a link back to an older story:

foreclosure…targeting their 2,495-square-foot home at 2125 N.E. 121st St….

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 13:09:03

“Three hundred acres planned for 249 luxury-view homes high in the foothills of Corona were purchased in foreclosure for $3.5 million…as recently as 2006 there were offers for the land in the range of $50 million to $70 million.”

Sounds like there truly has never been a better time to buy!

Comment by Ben Jones
2012-03-09 13:18:25

Yeah even with a huge haircut they still feel like they can find buyers above $700k. Talk about greedy.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 23:15:53

That thinking goes beyond greedy, to the verge of crazy.

Comment by AmazingRuss
2012-03-10 01:01:45

Morons tend to be the greediest of all.

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Comment by BetterRenter
2012-03-09 20:58:25

It’s a good example to people to explain how, since it was all based on monetization lending, not asset or even reserve lending, the scale of the money creation during the bubble was truly catastrophic. Trying to hang the taxpayers on covering all these faux losses has literally hammered in the final nail on the coffin of the middle class. They will be taxed into the working poor, at best.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 23:17:32

“…the scale of the money creation during the bubble was truly catastrophic.”

And yet, quite remarkably, the Fed (aka printing press central) assumes no culpability.

Comment by rms
2012-03-10 01:35:20

And yet, quite remarkably, the Fed (aka printing press central) assumes no culpability.

Especially that Magoo.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-10 04:44:54

Isn’t it curious, in light of the greatest runup of U.S. housing prices in U.S. history (roughly 1990-2006) occurring right under his supersized proboscis?

 
 
 
 
 
Comment by Doug in Boone, NC
2012-03-09 14:59:33

“The lots will be sold to builders for construction of single-family houses that are expected to sell for $700,000 to $800,000, he said.”
Deja vu all over again.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 23:32:20

Turns out the folks whose work product was one of the primary drivers in creating the bubble think those who called it just got lucky.

This sounds to me like sorry suckers crying over sour grapes. We called it, and you dummies missed it.

Economic Crisis, The Audit — August 17, 2010 08:08 PM
The Fed’s Bubble Brains
False equivalence on the housing crash prognosticators
By Ryan Chittum

The Financial Times’s Alphaville and Reuters’s Felix Salmon take down both sides of a Boston Federal Reserve paper finding that economists who called the housing bubble were basically just lucky—“That Reasonable People Did Disagree” on whether there was one, and the bulls had a reasonable case.

Yikes:

…we review the arguments of a prominent pessimist, Paul Krugman. Although his arguments were made in his widely read New York Times column rather than in a formal academic paper, Krugman, now a Nobel Prize-winning economist, has substantial credibility. He argued that because it is difficult to build in coastal areas of the United States, those areas are more “bubble-prone.” Consequently, the rapid price increases on the coasts but not elsewhere were prima facie evidence that there was a bubble and that prices would eventually collapse.

It is tempting to call Krugman prescient because beginning in late 2006 prices did indeed crash. But his arguments were problematic both ex ante and ex post. Ex ante, it is unclear why Krugman thinks the coasts are more “bubble-prone.” The models we have of asset-price bubbles do a reasonable job explaining why they can persist but have little to say about where we might expect them to start. As one prominent researcher in the field writes, “we do not have many convincing models that explain when and why bubbles start.” Krugman’s thesis seems to hinge on the idea that scarce coastal land is valuable and bubbles can only happen when assets are in short supply, but the whole point about bubbles is that the fundamentals of supply and demand do not matter. Thus, there is no reason why land in places where it is easy to build could not experience bubbles.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 23:34:47

Cue in Combotechie:

Occupy Wall Street in NYC low on cash
Updated 6m ago

NEW YORK (AP) – Occupy Wall Street in New York City could run out of cash in a matter of weeks.

A finance report shows the group that galvanized the nationwide movement against economic inequality six months ago had about $45,000 left in its main account. That’s for the week of March 2. Weekly donations plummeted to about $1,600.

The report on the group’s General Assembly website says at “the current rate of expenditure” the occupiers will be “out of money in THREE WEEKS.”

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 23:41:12

Student-loan delinquencies may be higher than previously thought
By Don Lee

March 5, 2012, 10:04 a.m.
Reporting from Washington—

Some have called the nation’s soaring college debt load a “ticking bomb” — a new bubble crisis threatening young adults, their families and the broader economy. Are those fears warranted?

A report Monday adds to the alarm bells. In it, the Federal Reserve Bank of New York says it’s likely that as many as one out of four borrowers are carrying a past-due student loan balance.

That’s a much higher rate of delinquency than previously thought. By the more conventional measure, the Fed report says, 5.4 million out of 37 million borrowers with student loan balances as of last summer had at least one past-due student loan account — a 14.4% rate. The sum of those past-due balances comes to $85 billion, or about 10% of the total. The same 10% rate applies on average to other types of consumer delinquent debt, such as mortgages and credit cards.

But Fed researchers say those delinquency figures for student loans understate the magnitude of the problem. That’s because the calculations don’t take into account that federally guaranteed loans, which make up the bulk of the student debt, typically don’t require repayment while borrowers are still in school and also are deferred for six months upon graduation. If those who are temporarily exempt from making payments are excluded, the report shows, the number of borrowers with past-due balances jumps to 27% of the total. And the outstanding balances that are late rises to 21%. Both figures are about double the unadjusted rates.

The New York Fed report concludes that “student loan debt is not just a concern for the young. Parents and the federal government shoulder a substantial part of the post-secondary education bill.”

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-09 23:43:10

“And if you think the housing attitudes are just a Gen X or Y mindset, think again. The California Association of Realtors said only one-third of homeowners who’ve sold their home are purchasing another one, the vast majority is opting to rent instead.”

Don’t buy until everyone else wants to rent and thinks you’d be crazy to buy.

 
Comment by rms
2012-03-10 01:13:29

“Winnipeg residents John Erik and his wife Cheryl Albrechtsen, purchased a vacation home in Scottsdale last June. They paid $572,500 for their 3,700-square-foot home with five bedrooms and three bathrooms.”

Nothing like a small vacation bungalow.

 
Comment by rms
2012-03-10 01:20:50

“Rinaldi said the loan officer listed a $15,630 bank account that didn’t exist, a college degree he didn’t earn and a job — sales manager — that he didn’t have.”

I hate it when that happens.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-10 04:45:53

:-)

 
Comment by JingleMale
2012-03-10 07:06:48

Really! How suprising he did not read his loan application! And somehow he failed to notice the payment of $1760/mon on a $164,000 loan. WTF? At 5% interest, the payment should be $496/mon. A fool and his money are soon parted. A fool and his house are soon parted….by a judge….

 
 
Comment by JingleMale
2012-03-10 07:10:44

“Mike Hilla of Chicago is among those who used the ’show-me-the-note’ defense.”

What a tool. His job securitzing crap mortgages vaporized, so he then claims the same process he fostered (MERS) can’t produce the original loan docs, so he should get the house for free.

Typical wall street scum.

Hey, Mikey….”show me the money” or GTF out!

 
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