Today's Local Real Estate News

The Palm Beach Post reports on the high rate of foreclosures in Palm Beach County:

“Debt-burdened homeowners in Palm Beach County and the Treasure Coast defaulted on their mortgages last month at more than triple the pace of July 2006. In Palm Beach County, 1,142 homeowners lost their bid for the American dream - or their investment flip - compared with 370 foreclosures in the same month a year ago, the Palm Beach County clerk's office said Tuesday.”

“Indeed, as the mortgage crisis spreads from subprime borrowers to those with good credit - but bad investment decisions - home prices are poised to fall because fewer buyers are qualified for loans with the tightened lending standards.”

“In this environment, a record number of homeowners sought financial counseling from a national hot line operated by the nonprofit Homeownership Preservation Foundation.”

“‘Homeowners are entering delinquency at record pace, putting them at serious risk for losing their homes,’ said Colleen Hernandez, president of the group.”

“More than 150,000 troubled homeowners facing foreclosure called the hot line in the second quarter of this year, up from 7,000 in the first quarter, Hernandez said.”

Joseph Stiglitz, a Nobel laureate in economics, writes on the source of housing bubble in the Miami Herald:

“The pessimists who have long forecasted that America's economy was in for trouble are coming into their own. Of course, there is no glee in seeing stock prices tumble as a result of soaring mortgage defaults. But it was largely predictable, as are the likely consequences for both the millions of Americans who will be facing financial distress and the global economy.”

“The story goes back to the recession of 2001. With the support of Federal Reserve Chairman Alan Greenspan, President Bush pushed through a tax cut designed to benefit the richest Americans but not to lift the economy out of the recession that followed the collapse of the Internet bubble. Given that mistake, the Fed had little choice if it was to fulfill its mandate to maintain growth and employment: It had to lower interest rates, which it did in an unprecedented way -- all the way down to 1 percent.”

“The housing price bubble eventually broke, and, with prices declining, some have found that their mortgages are larger than the value of their houses. As interest rates rose, others found they could not make their payments. Too many Americans built no cushion into their budgets, and mortgage companies, focusing on the fees generated by new mortgages, did not encourage them to do so.”

“Just as the collapse of the real-estate bubble was predictable, so are its consequences: Housing starts and sales of existing homes are down, and housing inventories are up. By some reckonings, more than two-thirds of the increase in output and employment over the past six years has been real estate-related, reflecting both new housing and households borrowing against their homes to support a consumption binge.”

“The housing bubble induced Americans to live beyond their means -- net savings has been negative for the past couple of years. With this engine of growth turned off, it is hard to see how the American economy will not suffer from a slowdown. A return to fiscal sanity will be good in the long run, but it will reduce aggregate demand in the short run.”

I recently included links to a PBS documentary on corruption in the Miami-Dade Housing Agency (click her for the link). Thankfully, the Feds have stepped in and have taken over the agency. The Miami Herald reports:

“The federal government's plan to take over the Miami-Dade Housing Agency played out in demonizing statements and angry speeches Tuesday, suggesting the long-term rebuilding of the county's affordable-housing program will be trapped in a legal and political power struggle.”

“The two sides cannot even agree on the Housing Agency's current condition -- local leaders said it's on the mend, while Washington officials said it may be worse than ever -- much less on how it should change.”

“At stake is about $275 million in federal funds, which Miami-Dade uses to house about 25,000 families in one of the least affordable counties in the nation. Unless blocked by a judge, a HUD-appointed administrator plans to arrive in Miami on Aug. 20 with broad authority to replace staff, spend money and change programs.”

“Alvarez, County Manager George Burgess and the County Commission would lose all control of the agency -- a devastating blow to their credibility, as well as their power to guide where, when and how public housing is built and renovated.”

The Sun-Sentinel reports on another trend that is hampering sales at some South Florida condos:

“Boards statewide have begun toughening their standards because of concerns about applicants' ability to pay monthly maintenance fees. In the late 1990s and early 2000s, buyers were qualifying for low adjustable-rate mortgages with little or no money down. Unable to pay both their mortgage and association obligations, the new owners ignored their maintenance and special assessment obligations.”

“Boards were stuck. They couldn't foreclose because the new owners had no equity. That forced all other owners to pick up the unpaid share of the common expenses, such as water, insurance, pest control, pool maintenance and landscaping.”

“Boards have almost unlimited power to reject buyers and renters as long as their governing documents allow it and no illegal discrimination is involved, according to Randall K. Roger, whose Boca Raton-based law firm represents 600 associations in South Florida. State law recognizes the right of associations to determine who can buy and rent but doesn't set standards for boards to follow.”

“Roger said associations must use objective guidelines, such as a test to determine if the applicant is able "to meet the expectations of unit or homeownership" and the association must not deviate from them.”

“However, sellers lament that in today's real estate market, they face a lot of competition for buyers. According to Miami-based Keyes Co., about 47,000 houses and condos were for sale in Broward and 37,000 in Palm Beach County at the end of June.”