July 28, 2014

The Market Has Stalled Because Buyers Are Picky

The Philadelphia Post Gazette reports from Pennsylvania. “While Pittsburgh never had a housing price bubble, the region suffered a foreclosure crisis along with other major cities where real estate values did rise to a peak and then crash back down to earth. ‘What we saw was wealth stripped from people who had built it in their homes,’ said Ernie Hogan, executive director of the Pittsburgh Community Reinvestment Group. ‘We didn’t see the overexaggeration in price of houses, but we did see people who might have been in their homes for many years lose that wealth through the foreclosure process and subprime lending.’”

“Howard Hanna, CEO of Howard Hanna Real Estate Services, said the difficulty many working-class borrowers face now stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. One of the provisions prohibits banks from approving mortgages for anyone whose debt-to-income ratio is higher than 43 percent. Banks used to be able to approve borrowers with a ratio of around 50 percent or even higher. Credit score requirements also have gone from around 570-580 to around 640-650.”

“‘The provisions in the Act makes it very difficult for lenders to lend money to low- and moderate-income borrowers,’ Mr. Hanna said. ‘It hurts moderate-income borrowers because credit scores are not there and down payments are not there.’”

The Times Tribune in Pennsylvania. “First-half property seizures, mortgage-default notices and home auction warnings in the Scranton/Wilkes-Barre metro area were up 10 percent over the first six months of 2013, according to RealtyTrac. Foreclosure activity in the region was the most-active among Pennsylvania metro areas in 2013, advancing by 60 percent, RealtyTrac data indicate. ‘There is still above-average activity for us,” said Mike Elick, CEO at Consumer Credit Counseling Service of Northeastern Pennsylvania. ‘Some of this goes back 18 to 24 months.’”

“The area’s unemployment predicament continues to provide fuel for the foreclosure pipeline, said Austin Jaffe, Ph.D., chairman of the insurance and real estate department at Penn State University. The region has held the state’s highest jobless rate for more than four years. ‘In the northeast, housing is weak, but the jobs are weaker,’ he said. Housing has failed to contribute significantly to the choppy economic recovery nationally and probably will not become a major growth driver for years, Dr. Jaffe predicted. ‘It’s back to basics,’ he said. ‘You need strength in the fundamental economy.’”

The Watauga Democrat in North Carolina. “After four years of incremental sales growth, the High Country real estate market is showing signs of slowing. Median sold prices are down 5 percent from the first half of 2013, and 10 percent from that span in 2012, according to the High Country Association of Realtors. Those declines are occurring as supply is expanding. There are currently more than 3,240 homes for sale within the High Country MLS, which records Realtor activity in Ashe, Avery and Watauga counties. That’s a 26 percent increase compared to the 2,571 listings active last August, according to the group’s report.”

“‘With the current high inventory, our Realtor association has teamed up with the High Country Host to reach potential buyers interested in coming to our area,’ said Laurie Phillips, executive officer of High Country Association of Realtors. ‘This campaign will encourage residents from surrounding states to visit the High Country by highlighting our unique natural beauty.’”

The Loudoun Times in Virginia. “For the third month in a row, Loudoun’s housing market has hit a snag. Second quarter reports released by Dulles Area Association of Realtors for April, May and June 2014 showed a 6.7 percent drop in home sales compared to the second quarter of 2013. The number of houses on the market has grown, however, with a 21.1 percent increase in new listings since last quarter, showing a buyer’s market this season.”

“Sue Smith, associate broker with Remax Premier and The Sue Smith Team owner, said the market has stalled because buyers are picky. The surplus of listings means buyers can afford to take their time. ‘It is a great time to buy,’ Smith said. ‘You have a lot of options right now. You have a lot of homes to choose from and you possibly could have a little more negotiation power if you’re a buyer, depending on the situation. I expect to see that role into the fall.’”

The Virginian Pilot. “The story of Hampton Roads’ real estate market in 2013 was one of slow and steady growth. This year, the tale has taken a turn. Hampton Roads has shown signs of retreating. ‘We’re just not as healthy as we should be, due to the hangover with the downturn,’ said Terry Gearhart, a sales manager with Rose & Womble Realty Co.”

“In The Pilot’s comparison of metro areas in the first quarters of 2013 and 2014, the three lowest performers were, starting from the bottom, Hampton Roads, Baltimore and Washington, D.C. Vinod Agarwal, an economics professor (at) Old Dominion University, said the three metro areas are heavily reliant on federal spending. Hampton Roads’ dependence on the military, in particular, has kept the percentage of distressed sales – foreclosures and short sales – much higher than before the housing crisis.”

“‘If you are in the military and you get reassigned, you have to go – even if you are underwater,’ Gearhart said. Many of the homebuyers in the region qualify for Department of Veterans Affairs loans, which require no down payment. ‘If housing prices don’t appreciate, when you go to sell a house, many homeowners are underwater the day they buy their house,’ Agarwal said. ‘This economy is basically crawling,’ Agarwal said. ‘If you look at the amount of jobs we’re creating, it is pitiful.’”

From WBAL TV 11. “Thousands of Maryland families have lost their homes to foreclosure or short sales, but many don’t know that third-party debt collectors can still come after them for money they may not have known they owed. In 2005, Miranda Cisneros Bell and her husband, Ed Bell, bought a house in Emmitsburg for $535,000. They still had the house they are living in currently in Frederick County. ‘We could not sell this house. We were stuck between two mortgages,’ Cisneros Bell said.”

‘They were forced to let the Emmitsburg house go into foreclosure in 2009. Thinking that the case was over, they moved on with their lives, but then a third-party debt collector out of Texas started calling. ‘The debt collector was saying I owed $51,000,’ Cisneros Bell said.”

“Avy Mallik, an attorney with the group Civil Justice said if the bank does file a deficiency judgment, they can go after a person’s assets and garnish their wages, and they may wait a while to do so. ‘The banks may wait a couple of years until you are employed and have some assets, and they will go after that balance,’ Mallik said.”

“As for Cisneros Bell, her case remains mired in litigation. ‘I’ve tried to see about refinancing my house now, but I can’t because I have had a foreclosure. It’s very stressful. It’s very upsetting,’ she said. ‘It’s going to take me years of getting these things turned around.’”

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Comment by Housing Analyst
2014-07-28 03:42:11

Great round of articles from the entire mid-atlantic area. They accurately summarize what we’ve know all along. Paying 2x-4x for housing on a wide geographic scale for 20 years (and still doing it) tends to crash the economy for a generation or more.

Borrowing multiples of annual salary for a depreciating asset when one can substitute the asset using a fraction of annual salary is a financial death sentence.

Comment by Housing Analyst
2014-07-28 03:50:14

Reston, VA Housing Prices Sink 6% YoY; Sellers Slash Prices As Inventory Explodes 148%


Comment by Housing Analyst
2014-07-28 03:52:55

Chantilly, VA Housing Prices Plummet 18% YoY; Housing Inventory Doubles As Sellers Seek Post Peak Exit


Comment by Housing Analyst
2014-07-28 03:56:32

Annapolis, MD Housing Prices Plunge 9% YoY As Buyers Disappear


Comment by Housing Analyst
2014-07-28 03:58:02

Manassa, VA Housing Prices Crater 10% YoY As Excess Inventory Skyrockets 90% And Sellers Panic


Comment by Housing Analyst
2014-07-28 04:02:07

Takoma Park, MD (DC Suburb) Housing Prices Crater 8% YoY As Underwater Sellers Seek Fast Exit


Comment by Housing Analyst
2014-07-28 04:04:11

Annandale, VA Housing Prices Plummet 10% YoY At Height Of Selling Season


Comment by Housing Analyst
Comment by Housing Analyst
2014-07-28 04:09:08

Virginia Housing Demand Collapses 27% YoY; Hits Fresh 10 Year Low As A Result Of Grossly Inflated Prices


Comment by Housing Analyst
2014-07-28 04:11:50
Comment by Delaware Luker
2014-07-28 08:32:20

Delaware certainly looks bad! One factor is that people in the beach areas of Sussex County are petrified about the possible increases in flood insurance. I have not heard much discussion on that - are other coastal areas seeing big impacts?

Comment by oxide
2014-07-28 05:15:58

From the MD article: “Up until recently, [banks] could pursue that debt for up to 12 years, but as of July 1, the law in Maryland changed to three years.”
According to NOLO, I think “pursue” just means they need to file a motion within three years. So I guess there is some time after that collect. The Bells are hosed for $51K, and they are probably lucky that the amount is that low.

That said, Emmitsburg, MD is podunk. It’s on the Mason-Dixon line, about 40 miles from Harrisburg or Baltimore. Nothing should cost $535K there, even during a bubble.

Just to liven up your Monday, here is an example of an Emmitsburg house for sale. It’s worth a look just for the wallpaper, kitchen(?) with the rug, and the flooring in the bathroom. (judging from the closed-off window in the dining(?) room and sloped ceiling in the bath, looks like the baths were added as a lean-to later.)


Comment by iftheshoefits
2014-07-28 07:47:41

You really need to get out more. As someone who grew up in Baltimore, lived in Westminster for 6 years, and who also has lived in rural UT for a decade before moving back to SLC, I can tell you that if you think Emmitsburg is podunk, you ain’t never seen podunk. People commute to the DC area from Emmitsburg, and have for a quite a while. Geez, 30 years ago there was a daily charter commuter bus running from Hanover PA to DC. I used to pass it on my way into work in Hunt Valley from Westminster.

Houses are wildly overpriced there, just like everywhere else that’s within 3 driving hours of DC. Of course the immediate DC area is the worst for overpricing.

Central MD is really some beautiful farm country; alas, we’ll never live there again because of the taxes and also the way that the state is run in general.

Comment by Blue Skye
2014-07-28 05:20:16

“”The debt collector was saying I owed $51,000,” Cisneros Bell said.

“It’s like jumping out of the bushes. You’ve got a person who has moved on with their lives, and they’re walking down the street and someone jumps out of the bushes and says, ‘Got you,’”

Runaway debt slave…

Comment by Whac-A-Bubble™
2014-07-28 05:30:07

Is there an Underground Railroad for debt slaves? If so, I’m thinking that perhaps it leads to Costa Rica.

Comment by Whac-A-Bubble™
2014-07-28 05:28:45

“‘The provisions in the Act makes it very difficult for lenders to lend money to low- and moderate-income borrowers,’ Mr. Hanna said. ‘It hurts moderate-income borrowers because credit scores are not there and down payments are not there.’”

It sounds like the Fed’s housing market price reflation program is not working out very well for low- and moderate-income borrowers. Because if home prices were reasonably in line with incomes and rents, there would be no need to choose between renting or paying 50% of your income on a mortgage to own comparable housing.

Comment by Whac-A-Bubble™
2014-07-28 05:37:10

For clarification, I am talking about the Fed’s housing market reflation program justified by this white paper, which assumes the form of QE3 purchases of mortgage-backed securities.

Comment by Whac-A-Bubble™
2014-07-28 05:33:23

“In The Pilot’s comparison of metro areas in the first quarters of 2013 and 2014, the three lowest performers were, starting from the bottom, Hampton Roads, Baltimore and Washington, D.C. Vinod Agarwal, an economics professor (at) Old Dominion University, said the three metro areas are heavily reliant on federal spending. Hampton Roads’ dependence on the military, in particular, has kept the percentage of distressed sales – foreclosures and short sales – much higher than before the housing crisis.”

I thought DC housing always went up, just like California housing. Go figure.

Comment by Ben Jones
2014-07-28 05:51:17

It’s funny to me that people in this area get all excited about a new way to get to work. That sums up their priorities, IMO. And now all those high paying jobs don’t look so secure. I wonder who’s going to buy these expensive houses?

‘Not only is the building the first of its kind within close proximity of a new Silver Line station, but it is a test case for one of the most central questions about the future of Tysons: Now that the area has Metro, will people choose to live there? Tysons already has a city’s worth of office space, shopping and jobs. But it has hardly any people.’

‘The rapid construction of new housing surprised Stuart Mendelsohn, a real estate attorney and former member of the board of supervisors who helped shaped the Tysons plan.’

“If you had told me even a year ago to see nine high-rise buildings under construction in Tysons, I would have told you you’re crazy,” he said, referring to the office, hotel and apartments already being built. “I expected people to have rail come and then it would slowly build but people have really jumped in and gotten ahead.”

‘Metrorail’s Silver Line will boost Northern Virginia’s economy, real estate market, vitality and status, local business and political leaders say.’

‘Fairfax County leaders have approved several major Tysons redevelopment projects, including a 20-story office tower at 7900 Tysons One Place that overlooks Tysons Corner Station.’

‘Realtor Casey Margenau of Casey Margenau Fine Homes said the Silver Line generally will be good for the local real estate market, but those hoping to make a killing by flipping properties may have missed the boat. “I believe that [the Silver Line’s value] is baked into prices already,” he said. “People already anticipate it being open. Houses near Metro already have had their appreciation.”

‘New housing in Tysons largely will be condominiums, which will appeal to first-time homebuyers and older people looking to downsize, Margenau said. Developers in Tysons have been “very patient” in bringing housing inventory online and will continue that practice so as not to flood the market, he said.’

Comment by oxide
2014-07-28 10:01:09

Check out the image on the Silver Line website. (Don’t click on the video unless you want to see some really bad propaganda dancing. :shock: ) In the background you can see the giant bridges that span the roads just to get to the platform. That’s the kind of road system NoVA has to deal with.


Comment by Ben Jones
2014-07-28 05:57:01

‘According to RealtyTrac in the Philadelphia region there are 6,101 of these so-called zombies - houses on which the foreclosure process was begun but never completed, yet they were vacated by the homeowners early on.’

‘Although 6,101 zombies look like a lot, the numbers have declined, RealtyTrac told Spadaccini, “because homeowners now know it takes the banks years for them to be removed once a mortgage default notice is served.”

‘So these homeowners know that as long as they pay for their water and sewer and electric service, “they can work the system and stay as long as they can until they are physically forced out, all the while for free,” she was told.’

“You do not automatically lose your home,” Colmar bankruptcy lawyer William D. Schroeder Jr. advises his clients.’

‘The city’s vacant-house problem is perennial. A Temple University study in 1995 put the number at close to 30,000, many created, it said, when homeowners die and their suburban-dwelling children won’t deal with the properties.’

‘No matter how many there are, the fact is some neighborhoods that took a big equity hit when the housing bubble burst have one or two zombies bringing down the values of those homes for which mortgages are being paid.’

‘David Lauder inspects Philadelphia-area zombie houses for banks. “I could give you horror stories about the condition of some of them,” he said.’

‘Schroeder cited one in Dresher, “an extremely nice neighborhood, and [the house] has been sitting vacant for over two years, deteriorating.” “A travesty,” he said.’

Did you notice that “zombie” property was quickly and widely accepted by the media, while shadow inventory is a conspiracy theory?

Comment by Ben Jones
2014-07-28 06:33:14

‘After Wilmington Trust’s stunning announcement in 2010 that it would be taken over by M&T Bank Corp. at a deep discount, shareholder Carolyn Humes met others who dumped their shares because they knew there was trouble.’

‘Humes, of Milford, who inherited a significant amount of stock from her father and grandfather, said she had faith in the people who ran Wilmington Trust. But with the slow, steady stream of recent prosecutions over 18 months, Humes feels betrayed. “I would like to see justice,” she said.’

‘Now, Humes is following closely the continued fallout from Delaware’s biggest banking scandal since the 1970s. Not only is M&T dealing with a criminal investigation by the U.S. Department of Justice that has led to six prosecutions in 18 months, but M&T is grappling with an inquiry by the U.S. Securities and Exchange Commission. Angry shareholders also are pursuing a federal civil lawsuit brought last year against some Wilmington Trust directors and officers, with a possible trial by next summer.’

‘Helen Bowers, chair of the Finance Department at the University of Delaware, said the government investigations reflect an attempt to satisfy the general public’s need for justice. The legal actions also help to restore faith and confidence in the country’s financial system, she said.’

‘Since January 2013, the federal government has prosecuted six criminal cases involving Wilmington Trust that focus on accusations of bank fraud or conspiracy to commit bank fraud. All involve schemes related to real estate development or investment in Delaware.’

“The backlash from the public is exactly what this is about. The public thinks it’s very unfair that their tax dollars were used to bail out the banks and to bail the individuals that contributed to the severity of the recession and the weak recovery,” Bowers said. “They see people who were able to keep their bonuses that were given to them almost under false pretenses. The electorate is angry.”

“I think there’s a recognition by regulators that the economy could not absorb another crisis of the magnitude of 2008,” Bowers said. “By not doing anything, it’s quite likely this sort of crisis could happen again.”

Comment by Ben Jones
2014-07-28 06:36:06

From the NC article:

‘Nationally, some analysts are expecting the housing market to slow. Wells Fargo released a report July 10 which stated that, despite a strong May, home sales for the year are trailing the pace in 2013. “Even with the recent stronger data, the housing recovery remains well short of where it was expected to be,” the report said.’

‘Federal Reserve Chairman Janet Yellen, speaking to the Senate Banking Committee July 15, said, “We see in the housing market where we had some progress, but it now looks like it’s stalled.”

‘Lawrence Yun, chief economist with the National Association of Realtors, made similar comments in late June. While noting a surge in Realtor sales in May, he cautioned, “Second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”

Comment by Ben Jones
2014-07-28 06:42:53

‘During his third deployment in Afghanistan, Air Force Staff Sgt. Claude Hunter was so eager to return to the United States and buy a house that he signed a contract for a property that his agent showed him over Skype.’

‘Hunter got back in time to close the deal, paying $219,000 in May for the four-bedroom Waldorf, Maryland, house that he financed with a Department of Veterans Affairs mortgage. It didn’t require a down payment.’

“On Facebook, my friends have started posting: ‘I got my VA loan, I got my house,’ ” said Hunter, 31. “Everybody is just ready. A lot of them have done their jobs overseas and are coming home.”

‘Reynaldo Diaz, 35, retired from the Marines a year ago after five deployments to Iraq and one to Afghanistan. He dreams of buying a three-family brownstone in New York City where he plans to remake his life. He’s working to raise his credit score, damaged during his divorce, complete his degree in business administration, and get a job.’

‘Diaz, who struggles with nightmares caused by post- traumatic stress disorder, said he lost three close friends to combat in Iraq, and one who committed suicide. Buying a house “is part of the healing process,” he said.’

“It’s part of the reason we were fighting and the reason we lost so many people out there,” he said. “We were fighting for the American Dream.”

Comment by Whac-A-Bubble™
2014-07-28 07:10:12

“‘Diaz, who struggles with nightmares caused by post- traumatic stress disorder, said he lost three close friends to combat in Iraq, and one who committed suicide. Buying a house “is part of the healing process,” he said.’”

Hopefully his version of the American Dream won’t morph into the American Nightmare so many other U.S. home buyers have endured over the past decade.

Comment by Housing Analyst
2014-07-28 07:05:06

China Steel, Iron Or Futures Dip On Slowing Demand


Looks like I can strip out steel price escalation clause language from our contracts.

Comment by Captain Credit Crunch
2014-07-28 15:12:05

On the contrary, change it to lock in today’s low prices (and then capture the difference)!

Comment by Housing Analyst
2014-07-28 18:14:09

Why bother when prices are falling?

Comment by doom
2014-07-28 08:00:34

“Buyers are picky”? I rather think buyers better improve their credit ratings and cash on hand and forget if the lawn in the backyard is brown and dry?

PS Zillow buys Trulia oh great news?

Even more computers and data for Zillow, now they can now be off 50% in values of homes up or down?

Comment by Housing Analyst
2014-07-28 08:04:59

Pick yourself up off the floor and cheer up. Zillow transaction data is very accurate. Besides, falling housing prices to dramatically lower and more affordable levels is positively bullish and good for the economy.

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