The local newspapers provided extensive coverage of mortgage crisis and the proposed intervention in the Treasury Secretary Paulson. The Sun-Sentinel reports:
“The chief executive officer of the country's biggest mortgage lender says greater government intervention is needed to rescue the U.S. housing market as his peers warn the worst is yet to come.”
“Daniel Mudd, chief executive of government-backed mortgage finance company Fannie Mae, called intervention a "positive step," saying that many borrowers will be able to avoid foreclosure if they are given more time. "Largely, the industry is beginning to reconstruct itself," Mudd said.”
“The gloomy assessments of the housing market were made Monday at a conference sponsored by the Office of Thrift Supervision, where Treasury Secretary Henry Paulson said an agreement is imminent to temporarily freeze interest rates on thousands of mortgages at risk of default.”
“Mark Zandi, chief economist at Moody's Economy.com, predicted that, if the economy slips into recession or if efforts to modify home loans don't pick up substantially, the housing market downturn could last through the end of the decade.”
“‘This is the most serious housing downturn since the Great Depression,’ Zandi said.”
“In South Florida and across the nation, mortgage defaults are rising, and experts warn that more people will lose their homes to lenders in 2008.’
The Miami Herald reports:
“Revealing more details about a national mortgage-rescue plan that's still in the works, Treasury Secretary Henry Paulson proposed Monday to help state and local governments issue tax-exempt bonds to pay for mortgage refinancing and confirmed that he seeks to temporarily freeze the rates of tens of thousands of home loans that are about to adjust to higher rates.”
“Paulson told a national housing forum that Congress should authorize state and local governments to broaden their tax-exempt bond programs temporarily. Currently, states have authorization to issue tax-exempt bonds only to aid first-time home buyers in designated distress zones. Paulson proposed to expand this to allow state and local governments to issue tax-free bonds to help in mortgage refinancing.”
“He also confirmed that he is trying to craft a plan that would prevent massive foreclosures when roughly 1.5 million adjustable-rate mortgages, or ARMs, reset to higher monthly rates next year. The affected ARMs involve subprime loans -- those given to borrowers with weak credit histories.”
“‘'As volume increases, we will need an aggressive systematic approach to fast-track able borrowers into a refinance or mortgage modification,'' Paulson said. He stressed that there would be no government subsidy to borrowers or lenders.”
Finally, the Palm Beach Post adds:
“Until now, President Bush favored government restraint. But with investors losing millions as Wall Street banks write down billions of dollars in bad home-loan investments amid mounting concerns about economic stability, the White House is pressuring the mortgage industry to offer a sweeping fix for the problem.”
“The Bush administration is "willing to consider action that would have been inconceivable just weeks ago," mortgage industry consultant Howard Glaser wrote in a research note.”
“That doesn't mean the rate-freeze approach being promoted by Treasury Secretary Henry Paulson won't face resistance from mortgage industry executives. And some on Wall Street warn of a flood of lawsuits if the government tries to coerce the owners of loans held in complex mortgage securities to focus on long-term rather than short-term returns.”
“‘I don't think (the Treasury plan is) being very well-received at all," said Bert Ely, a banking consultant based in Alexandria, Va. ‘There are lots of legal issues here that they are not addressing that are in the minds of everybody who works on this stuff.’”
“Details of the Treasury plan, which could be formally unveiled later this week, stops short of a taxpayer-funded bailout for borrowers, an idea rejected by both Democrats and Republicans. Some specifics of the plan have trickled out, such as homeowners being given a break of two to five years if they are currently making payments on time but wouldn't be able to do so when their mortgages adjust to higher rates.”
While the following story has absolutely nothing to do with the local market, I believe that the exact same situation exists here locally. It also shows why I believe Paulson efforts will have little effect. The Nevada Appeal reports on foreclosures in Las Vegas:
“The head of an independent Southern Nevada research firm told lawmakers Monday nearly 60 percent of homes in foreclosure there are not occupied by their owners.”
“That means they are either rentals or homes purchased by speculators during the housing boom of the past couple of years.”
“Jeremy Aguero, of Applied Analysis in Las Vegas, said of the nearly 30,000 unsold homes on the market, 42 percent are vacant and another 11 percent occupied by renters.”
“Duncan said Nevada, California, Arizona and Florida are in the same situation and the cause is a mix of over-development and speculative investment.”
“‘Housing construction should be in proportion to population growth but there's been a dramatic increase in housing construction compared to population growth," he said. ‘That probably indicates over-building. There's a massive supply of houses on the market.’”
“But the market has effectively collapsed, not just in Nevada but nationwide. Homes are now on the market for months, selling sporadically when owners agree to drop prices. And with adjustable-rate mortgages beginning to trigger, many homeowners and investors are finding they can't afford their new, higher payments.”
“He said large numbers of those speculators who see their investment dropping in value and the market stalled ‘will simply turn in the keys and walk away.’ When they do that, he said, the house doesn't show as delinquent.”
“Aguero said there are more than 6,000 foreclosures in Nevada ‘in the pipe’ today. And Duncan said the situation won't turn around soon.”
“‘We expect sales will continue to fall for some time," he said.”
The International Herald Tribune reports on the run on the state-run investment account:
“Florida schools and towns with money frozen in a state-run investment account are unlikely to get their cash back Tuesday when officials are scheduled to meet to discuss a crisis prompted by withdrawals that drained almost half of the fund's $27 billion in assets, a policy officer said.”
“‘If we reopen the window without limitations on Tuesday, and we see behavior like we've seen up to now, there's simply no way to meet that demand without having a fire sale on assets,’ said the policy officer, James Francis, who works at the State Board of Administration, the manager of the Local Government Investment Pool.”
“In a conference call Friday, a day after withdrawals were frozen, officials raised the possibility of paying less than 100 cents on the dollar to governments seeking cash. The board also hired BlackRock, the largest U.S. publicly traded money manager, as an adviser.”
“Florida counties and schools pulled out $13 billion in assets last month after learning that the pool, described by state officials as a money market fund, held $1.5 billion of downgraded and defaulted debt tainted by the subprime mortgage market collapse. The crisis shows the far-ranging effects of the housing slump, as complex investments once sold as high-yielding havens are now backed by collateral that investors do not want.”
The Sun-Sentinel reports on asset liquidations by local-builder Lennar Corp.:
“Home builder Lennar Corp. formed a land investment venture with Morgan Stanley Real Estate to acquire, develop, manage and sell residential real estate, with Miami-based Lennar selling properties valued at $1.3 billion to the venture for $525 million.”
“The acquired properties include about 11,000 home sites in 32 communities throughout the country, consisting of raw land as well as partially and fully developed home sites in Florida, California, Colorado, Illinois, Maryland, Massachusetts, Nevada and New Jersey.”
“As of Sept. 30, the acquired properties had a book value of about $1.3 billion for one of the nation's largest home builders.”
“The deal generates immediate cash for Miami-based Lennar and is a continuation of the company's strategy of seeking to become a "near assetless home builder," Wachovia Capital Markets analyst Carl Reichardt wrote in a Monday report.”
“JP Morgan research analyst Michael Rehaut wrote that the $775 million loss on the deal as a "net negative" for Lennar and the home-building industry because it points to more impairment charges on assets.”
“‘We believe the loss on the sale is a major negative, as it shows charges are far from over,’ Rehaut wrote.”
The Sun-Sentinel reports on the proposed “Save our Homes” portability amendment:
“This so-called portability is one part of a new tax plan that also would increase the existing $25,000 homestead exemption to about $40,000 and cap taxes for businesses and second-home owners. The package needs the approval of at least 60 percent of voters on Jan. 29 to take effect.”
“While portability would reward longtime residents, it would do nothing for first-time home buyers or retirees from out of state and may not immediately help people who bought at the peak of the housing boom in 2005.”
“‘It's far from perfect,’ said Lori Parrish, Broward County's property appraiser. ‘But it's something. It's another tool in the toolbox for home buyers and sellers.’”
“Many South Florida homeowners are staying put to avoid those huge tax increases, and that has contributed to the housing market's malaise. Home sales across the region have declined for at least two years, in part because of the property tax implications people face when they move.”
The Sun-Sentinel reports on efforts to build affordable housing in Delray Beach:
“Improvements on a run-down apartment building in Delray Beach are progressing, and the contractor plans to finish the affordable-housing project by the end of the year.”
“Once completed, the Delray Beach Community Land Trust will administer the property. Rentals will range from $301 to $724 a month, depending on income.”
“The building is part of the city's $40 million effort to improve the West Settlers Historic District, a historically black neighborhood attracting some white residents. The building is down the street from the rear of the former LaFrance Hotel, which was reopened in November after it was made into affordable housing for low-income seniors.”
Showing posts with label News. Show all posts
Showing posts with label News. Show all posts
Tuesday, December 4, 2007
Saturday, November 24, 2007
Today's Local Real Estate News: "We're nowhere close to the end of the collapse."
The Sun-Sentinel printed one of its most forthright articles on the mortgage crisis:
“When Domenico Colombo saw that his monthly mortgage payment was about to balloon by 30 percent, he had a clear picture of how bad it could get.”
“His payment was scheduled to surge by an extra $1,500 in December. With his daughter headed to college next fall and tuition to be paid, he feared ending up like so many neighbors in Broward County who defaulted on their mortgages and whose homes are now in foreclosure and sporting ‘For Sale’ signs.”
“Colombo did manage to renegotiate a new fixed interest rate loan with his bank, and now believes he'll be OK — but the future is less certain for the rest of us.”
“In the months ahead, millions of other adjustable-rate mortgages like Colombo's will reset, giving them a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Soaring mortgage default rates this year already have shaken major financial institutions and the fallout from more of them, some experts say, could spread from those already battered banks into the general economy.”
“When home prices kept rising, these were lucrative assets to own. But the ongoing collapse in housing prices has set off a chain reaction: Lenders are tightening their standards, borrowers are having a harder time refinancing loans and the securities that underpin them are in jeopardy.”
“This has resulted in more than $500 billion of potentially worthless paper on the balance sheets of the biggest global banks — losses that could spill into the huge pension and mutual funds that also invest in these securities and that the average worker or investor expects to depend on.”
“There's more pain left for Wall Street: ‘We're nowhere close to the end of the collapse,’ said Mark Patterson, chairman and co-founder of MatlinPatterson Global Advisors, a hedge fund that specializes in distressed funds.”
The Palm Beach Post ran an editorial discussing the housing bubble (of course they included the myth of the rich foreign investors coming to the rescue):
“There's little doubt that, outside of the high-end market, this area is in a real-estate recession. There's also little doubt that few in the industry raised warnings as the housing bubble got bigger and bigger. Too many people were making lots of money. Those Realtors who blame The Post and other news organizations for reporting the current bad news didn't object when The Post ran its ‘Mapping the Boom’ series.”
“If rising prices fueled the boom, however, falling prices will fuel the recovery. And a look back shows that prices aren't collapsing; they're settling back to traditional levels.”
“From its peak of $400,000 in 2005, the median home price in Palm Beach County is down to about $355,000. In the Treasure Coast, the median price is at $214,200 from a high of $269,400 two years ago. But for Palm Beach County, that still is 40 percent higher than the median home price in 2003. If home prices had risen by a steady 10 percent over those four years, most people would have been happy. Between August 2000 and August 2001, home prices went up just 3 percent. In the Treasure Coast, prices remain about 35 percent higher than in 2003.”
“Lower prices in South Florida will make more homes affordable. Lower prices might help bring down the cost of insurance and taxes. A tax system that doesn't penalize first-time home buyers also would help. The lower dollar will continue to attract foreign buyers. Florida will recover. But the going up won't have been worth the coming down.”
RisMedia discusses mortgage fraud in South Florida:
“In his article ‘Miami condo at ground zero in mortgage fraud,’ Tom Brown highlights the fact that foreclosures follow fast on the heals of mortgage and real estate fraud. As he points out, “fraud accounts for a sizable share of the bad bets on mortgages,” which often result in foreclosures. Lenders get stuck holding the bag, but as we have seen recently, problems in the mortgage industry affect the entire national economy and can even destabilize the global economy.”
“Brown focuses his article on a 643-unit condo known as the Club at Brickell in Miami’s international banking district. Con artists and other opportunists used this building as a vehicle to commit rampant fraud in what are commonly known as cash-back-at-closing deals. With cash back at closing, buyers, sellers, appraisers, real estate agents, and other real estate professionals often conspire to inflate the value of a property to fool a lender into approving a loan that grossly exceeds the true market value of the property.”
“The buyer receives the excess proceeds, the sellers are able to sell their property for close to their asking price, the real estate agent receives a higher commission based on the inflated price tag, and the appraiser is rewarded with another satisfied customer.”
“These cash back at closing schemes have become very popular during the latest housing boom, because they seem like “everybody wins” deals. On the surface, even the lender seems to win-loaning more money and earning more interest over the life of the loan. Unfortunately, however, when the housing bubble bursts, someone gets stuck holding the bag-the lender. And when enough lenders get stuck holding the bag, they simply pass the costs on to investors, homeowners, and taxpayers. The only winners are the con artists who rake in the cash at the closing table.”
The St. Petersburg Time questions how the housing downturn will affect the holiday season’s retail sales:
“Whether Friday's discount-induced buying binge will last remains the big question as merchants fret a weakening economy will slow down their tepid forecast for a 3 percent retail sales gain in Florida.”
“‘We've all got our fingers crossed,’ said Rick McAllister, president of the Florida Retail Federation. His worry? That the housing slump, deteriorating dollar and subprime mortgage crisis will keep the Sunshine State from doing even as well as the national forecast of a modest 4 percent gain in general merchandise sales to $474.5-billion. That would be the worst holiday season nationally in five years.”
“There was little sign shoppers were holding back Friday. In fact, Black Friday - so named for the first day retailers typically become profitable for whole year - is rarely the biggest shopping day of the year. But some experts predict it may be this year, because Hanukkah comes early and Christmas lands on a Tuesday. That means the big finish will be spread over four days.”
“When Domenico Colombo saw that his monthly mortgage payment was about to balloon by 30 percent, he had a clear picture of how bad it could get.”
“His payment was scheduled to surge by an extra $1,500 in December. With his daughter headed to college next fall and tuition to be paid, he feared ending up like so many neighbors in Broward County who defaulted on their mortgages and whose homes are now in foreclosure and sporting ‘For Sale’ signs.”
“Colombo did manage to renegotiate a new fixed interest rate loan with his bank, and now believes he'll be OK — but the future is less certain for the rest of us.”
“In the months ahead, millions of other adjustable-rate mortgages like Colombo's will reset, giving them a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Soaring mortgage default rates this year already have shaken major financial institutions and the fallout from more of them, some experts say, could spread from those already battered banks into the general economy.”
“When home prices kept rising, these were lucrative assets to own. But the ongoing collapse in housing prices has set off a chain reaction: Lenders are tightening their standards, borrowers are having a harder time refinancing loans and the securities that underpin them are in jeopardy.”
“This has resulted in more than $500 billion of potentially worthless paper on the balance sheets of the biggest global banks — losses that could spill into the huge pension and mutual funds that also invest in these securities and that the average worker or investor expects to depend on.”
“There's more pain left for Wall Street: ‘We're nowhere close to the end of the collapse,’ said Mark Patterson, chairman and co-founder of MatlinPatterson Global Advisors, a hedge fund that specializes in distressed funds.”
The Palm Beach Post ran an editorial discussing the housing bubble (of course they included the myth of the rich foreign investors coming to the rescue):
“There's little doubt that, outside of the high-end market, this area is in a real-estate recession. There's also little doubt that few in the industry raised warnings as the housing bubble got bigger and bigger. Too many people were making lots of money. Those Realtors who blame The Post and other news organizations for reporting the current bad news didn't object when The Post ran its ‘Mapping the Boom’ series.”
“If rising prices fueled the boom, however, falling prices will fuel the recovery. And a look back shows that prices aren't collapsing; they're settling back to traditional levels.”
“From its peak of $400,000 in 2005, the median home price in Palm Beach County is down to about $355,000. In the Treasure Coast, the median price is at $214,200 from a high of $269,400 two years ago. But for Palm Beach County, that still is 40 percent higher than the median home price in 2003. If home prices had risen by a steady 10 percent over those four years, most people would have been happy. Between August 2000 and August 2001, home prices went up just 3 percent. In the Treasure Coast, prices remain about 35 percent higher than in 2003.”
“Lower prices in South Florida will make more homes affordable. Lower prices might help bring down the cost of insurance and taxes. A tax system that doesn't penalize first-time home buyers also would help. The lower dollar will continue to attract foreign buyers. Florida will recover. But the going up won't have been worth the coming down.”
RisMedia discusses mortgage fraud in South Florida:
“In his article ‘Miami condo at ground zero in mortgage fraud,’ Tom Brown highlights the fact that foreclosures follow fast on the heals of mortgage and real estate fraud. As he points out, “fraud accounts for a sizable share of the bad bets on mortgages,” which often result in foreclosures. Lenders get stuck holding the bag, but as we have seen recently, problems in the mortgage industry affect the entire national economy and can even destabilize the global economy.”
“Brown focuses his article on a 643-unit condo known as the Club at Brickell in Miami’s international banking district. Con artists and other opportunists used this building as a vehicle to commit rampant fraud in what are commonly known as cash-back-at-closing deals. With cash back at closing, buyers, sellers, appraisers, real estate agents, and other real estate professionals often conspire to inflate the value of a property to fool a lender into approving a loan that grossly exceeds the true market value of the property.”
“The buyer receives the excess proceeds, the sellers are able to sell their property for close to their asking price, the real estate agent receives a higher commission based on the inflated price tag, and the appraiser is rewarded with another satisfied customer.”
“These cash back at closing schemes have become very popular during the latest housing boom, because they seem like “everybody wins” deals. On the surface, even the lender seems to win-loaning more money and earning more interest over the life of the loan. Unfortunately, however, when the housing bubble bursts, someone gets stuck holding the bag-the lender. And when enough lenders get stuck holding the bag, they simply pass the costs on to investors, homeowners, and taxpayers. The only winners are the con artists who rake in the cash at the closing table.”
The St. Petersburg Time questions how the housing downturn will affect the holiday season’s retail sales:
“Whether Friday's discount-induced buying binge will last remains the big question as merchants fret a weakening economy will slow down their tepid forecast for a 3 percent retail sales gain in Florida.”
“‘We've all got our fingers crossed,’ said Rick McAllister, president of the Florida Retail Federation. His worry? That the housing slump, deteriorating dollar and subprime mortgage crisis will keep the Sunshine State from doing even as well as the national forecast of a modest 4 percent gain in general merchandise sales to $474.5-billion. That would be the worst holiday season nationally in five years.”
“There was little sign shoppers were holding back Friday. In fact, Black Friday - so named for the first day retailers typically become profitable for whole year - is rarely the biggest shopping day of the year. But some experts predict it may be this year, because Hanukkah comes early and Christmas lands on a Tuesday. That means the big finish will be spread over four days.”
Thursday, November 22, 2007
Today's Local Real Estate News: "Trapped, unable to move because they can't sell unless they significantly drop their price."
The Chicago Tribune hints at why the Mainstream Media has been so biased in their reporting of the housing bubble:
“Real estate is the newspaper industry's largest source of classified ads, accounting for $5.16 billion, or 11 percent, of publishers' total ad revenue last year, according to the Newspaper Association of America. The real estate industry spent $2.05 billion advertising online at sites such as Realtor.com and Zillow.com in 2006, Borrell said.”
“Newspapers' print real estate advertising will drop to $3.19 billion a year by 2011, said Borrell, which advises the publishing industry. Newspaper Web sites brought in about $380 million in real estate ads last year, the firm said.”
“‘If the newspapers' share of online advertising remains static or declines, the net loss will be huge, over $860 million in lost advertising from this category alone,’ the report said. Every $1 of lost advertising translates into a 75-cent drop in profit, Martin said.”
“Newspapers believe they will regain much of the real estate advertising they lost this year when the housing market improves, said Charlie Diederich, marketing director for the newspaper association, based in Arlington, Va.”
Forbes explains how the parent company of the Miami Herald relies on real estate advertising:
“The downturn in the housing market is likely to threaten ad sales at newspaper publisher McClatchy, an analyst warned Wednesday.”
“Shares of McClatchy (nyse: MNI - news - people ) fell 21 cents, or 1.4%, to $14.53 at the close, after Bear Stearns analyst Alexia S. Quadrani initiated coverage of the company with an ‘underperform’ rating. Quadrani pointed to strains from the downturn in the U.S. housing market.”
“‘McClatchy’s relatively high concentration in markets that are most exposed to the housing downturn will likely continue to depress overall results and deliver another year of industry-leading declines in newspaper advertising growth," said Quadrani.”
“Home sales have drastically slowed in many regions. Demand has waned as access to mortgages tightens. This hurts McClatchy because home sales are often advertised in local papers.”
“Over a third of McClatchy's advertising revenue comes from Florida and California. The real estate markets in both states have seen a particularly sharp downturn.”
“McClatchy is headquartered in Sacramento. The company is the third-largest newspaper publisher by circulation. Its papers include the Miami Herald and the Sacramento Bee.”
Florida Today reveals how even biased statistics like median sale price are manipulated by the Florida Association of Realtors®:
“Brevard County had the largest percentage drop in housing prices in the last quarter of any major market in the United States, the National Association of Realtors reported Wednesday.”
“In what some experts are calling the nation's worst housing slump in decades, the quarterly sales report showed housing values fell in many of the 156 major markets around the nation, but none by more than the 12.4 percent drop on the Space Coast.”
“The median resale price of single-family homes in Brevard fell to $182,400 in the third quarter, down from $208,200 in the third quarter last year, according to the report.”
“Meanwhile, the Florida Association of Realtors, which uses a different method of compiling sales data, reported Wednesday the median home resale price in Brevard fell 9 percent in the third quarter to $196,500, down from $215,400 in the third quarter of 2006.”
“Some market observers thought the local market would have been stronger by now.”
“‘I'm surprised that it's still continuing. You keep thinking it's going to turn around,’ Space Coast Association of Realtors President Lance Vandeberg said, referring to about slumping sales and prices”
In more interesting spin, the Orlando Sentinel tries to boast their horrible real estate market by showing that it still not as bad as South Florida’s. It also shows the silliness of the median price statistic by claiming that Miami’s market did not see a decline:
“Sales in Orlando's four-county metro area were still down 39 percent from a year ago, when the market was cooling but still far hotter than it is now, the Florida Association of Realtors reported. But the 4,005 homes sold by Realtors in Metro Orlando bested all other metro areas except Tampa-St. Petersburg, which recorded 5,913 resales of single-family homes.”
“Miami-Dade County, the state's largest metro area, has nearly twice as many people as Metro Orlando, yet Orlando Realtors sold more than three times as many single-family homes as their Miami counterparts. Miami's third-quarter total -- 1,250 -- was down 42 percent from the same period a year earlier, the biggest percentage decline of any of the state's large metro areas.”
“Statewide, 31,910 single-family homes were sold through Realtors, down 29 percent from the third quarter of 2006. Homes sold by individuals are not counted in the report, but they constitute a much smaller share of the overall market.”
“The state's median sales price continued to slip in the third quarter from a year earlier, down 6 percent to $232,100.”
“Every metro market posted a price decline except Miami, which was essentially flat with a 1 percent increase to $380,400. Orlando's price dip matched the state average of 6 percent, but the $247,700 figure was still 7 percent higher than the statewide median.”
The Palm Beach post details dropping median sales prices in Palm Beach County:
“Palm Beach County single-family home prices in the third quarter declined 4 percent compared with the same quarter of 2006, and in the Treasure Coast prices fell 13 percent compared with the year-ago period, FAR said.”
“The region's housing market slump is clearly worsening. And frustrated home sellers arguably are feeling most of the sting.”
“According to FAR, the median price of a Palm Beach County existing single-family home was $365,400, down from $380,900 in the third quarter of last year. Meanwhile, in the Treasure Coast - which includes Martin and St. Lucie counties - the median price fell to $218,300, FAR said. The median is the midpoint where half the homes sold for more and half sold for less.”
“While the third-quarter figures offer few surprises, experts say they are a sobering reminder of the ongoing hangover from the region's real estate boom. Home prices in Palm Beach County reached a high of $421,500 in November of 2005, FAR records show. As of September, area prices have declined for 16 straight months.”
“Both the state and national Realtors associations release their October sales reports next week, and more disappointing news is expected.”
“‘What goes unexplained is how so many people got caught up in this real estate fantasy after losing money in the tech-wreck bear market of 2000-2002,’ said John Pankauski of the Pankauski Law Firm in West Palm Beach. ‘It seems that as history repeats itself, it costs more each time.’”
The Sun-Sentinel reports on seniors that are “trapped” in their homes because they refuse to lower their prices:
“Alice Gordon was getting ready to put her villa up for sale in Palm Isles, but she's decided to wait.”
“After two falls, she uses a walker, and an aide helps her and does the grocery shopping. She wants to move into independent living, but Alice is putting her move on hold because of the flat real estate market.”
“How long was she told it would take to sell her place? ‘Forever,’ she said, laughing.”
“Alice's scenario is played out across the swath of retirement communities, especially in western Delray Beach, where people bought condos decades ago. Now many of them are trapped, unable to move because they can't sell unless they significantly drop their price. ‘The real estate market is making it extremely difficult for residents who want to go into assisted living or go up to be by their children,’ said Bob Schulbaum, longtime president of the Alliance of Delray Residential Associations, which has 65 members in the city and western suburbs that he estimates house about 70,000 people. ‘They're tapping their savings to bring in aides.’”
“Real estate is the newspaper industry's largest source of classified ads, accounting for $5.16 billion, or 11 percent, of publishers' total ad revenue last year, according to the Newspaper Association of America. The real estate industry spent $2.05 billion advertising online at sites such as Realtor.com and Zillow.com in 2006, Borrell said.”
“Newspapers' print real estate advertising will drop to $3.19 billion a year by 2011, said Borrell, which advises the publishing industry. Newspaper Web sites brought in about $380 million in real estate ads last year, the firm said.”
“‘If the newspapers' share of online advertising remains static or declines, the net loss will be huge, over $860 million in lost advertising from this category alone,’ the report said. Every $1 of lost advertising translates into a 75-cent drop in profit, Martin said.”
“Newspapers believe they will regain much of the real estate advertising they lost this year when the housing market improves, said Charlie Diederich, marketing director for the newspaper association, based in Arlington, Va.”
Forbes explains how the parent company of the Miami Herald relies on real estate advertising:
“The downturn in the housing market is likely to threaten ad sales at newspaper publisher McClatchy, an analyst warned Wednesday.”
“Shares of McClatchy (nyse: MNI - news - people ) fell 21 cents, or 1.4%, to $14.53 at the close, after Bear Stearns analyst Alexia S. Quadrani initiated coverage of the company with an ‘underperform’ rating. Quadrani pointed to strains from the downturn in the U.S. housing market.”
“‘McClatchy’s relatively high concentration in markets that are most exposed to the housing downturn will likely continue to depress overall results and deliver another year of industry-leading declines in newspaper advertising growth," said Quadrani.”
“Home sales have drastically slowed in many regions. Demand has waned as access to mortgages tightens. This hurts McClatchy because home sales are often advertised in local papers.”
“Over a third of McClatchy's advertising revenue comes from Florida and California. The real estate markets in both states have seen a particularly sharp downturn.”
“McClatchy is headquartered in Sacramento. The company is the third-largest newspaper publisher by circulation. Its papers include the Miami Herald and the Sacramento Bee.”
Florida Today reveals how even biased statistics like median sale price are manipulated by the Florida Association of Realtors®:
“Brevard County had the largest percentage drop in housing prices in the last quarter of any major market in the United States, the National Association of Realtors reported Wednesday.”
“In what some experts are calling the nation's worst housing slump in decades, the quarterly sales report showed housing values fell in many of the 156 major markets around the nation, but none by more than the 12.4 percent drop on the Space Coast.”
“The median resale price of single-family homes in Brevard fell to $182,400 in the third quarter, down from $208,200 in the third quarter last year, according to the report.”
“Meanwhile, the Florida Association of Realtors, which uses a different method of compiling sales data, reported Wednesday the median home resale price in Brevard fell 9 percent in the third quarter to $196,500, down from $215,400 in the third quarter of 2006.”
“Some market observers thought the local market would have been stronger by now.”
“‘I'm surprised that it's still continuing. You keep thinking it's going to turn around,’ Space Coast Association of Realtors President Lance Vandeberg said, referring to about slumping sales and prices”
In more interesting spin, the Orlando Sentinel tries to boast their horrible real estate market by showing that it still not as bad as South Florida’s. It also shows the silliness of the median price statistic by claiming that Miami’s market did not see a decline:
“Sales in Orlando's four-county metro area were still down 39 percent from a year ago, when the market was cooling but still far hotter than it is now, the Florida Association of Realtors reported. But the 4,005 homes sold by Realtors in Metro Orlando bested all other metro areas except Tampa-St. Petersburg, which recorded 5,913 resales of single-family homes.”
“Miami-Dade County, the state's largest metro area, has nearly twice as many people as Metro Orlando, yet Orlando Realtors sold more than three times as many single-family homes as their Miami counterparts. Miami's third-quarter total -- 1,250 -- was down 42 percent from the same period a year earlier, the biggest percentage decline of any of the state's large metro areas.”
“Statewide, 31,910 single-family homes were sold through Realtors, down 29 percent from the third quarter of 2006. Homes sold by individuals are not counted in the report, but they constitute a much smaller share of the overall market.”
“The state's median sales price continued to slip in the third quarter from a year earlier, down 6 percent to $232,100.”
“Every metro market posted a price decline except Miami, which was essentially flat with a 1 percent increase to $380,400. Orlando's price dip matched the state average of 6 percent, but the $247,700 figure was still 7 percent higher than the statewide median.”
The Palm Beach post details dropping median sales prices in Palm Beach County:
“Palm Beach County single-family home prices in the third quarter declined 4 percent compared with the same quarter of 2006, and in the Treasure Coast prices fell 13 percent compared with the year-ago period, FAR said.”
“The region's housing market slump is clearly worsening. And frustrated home sellers arguably are feeling most of the sting.”
“According to FAR, the median price of a Palm Beach County existing single-family home was $365,400, down from $380,900 in the third quarter of last year. Meanwhile, in the Treasure Coast - which includes Martin and St. Lucie counties - the median price fell to $218,300, FAR said. The median is the midpoint where half the homes sold for more and half sold for less.”
“While the third-quarter figures offer few surprises, experts say they are a sobering reminder of the ongoing hangover from the region's real estate boom. Home prices in Palm Beach County reached a high of $421,500 in November of 2005, FAR records show. As of September, area prices have declined for 16 straight months.”
“Both the state and national Realtors associations release their October sales reports next week, and more disappointing news is expected.”
“‘What goes unexplained is how so many people got caught up in this real estate fantasy after losing money in the tech-wreck bear market of 2000-2002,’ said John Pankauski of the Pankauski Law Firm in West Palm Beach. ‘It seems that as history repeats itself, it costs more each time.’”
The Sun-Sentinel reports on seniors that are “trapped” in their homes because they refuse to lower their prices:
“Alice Gordon was getting ready to put her villa up for sale in Palm Isles, but she's decided to wait.”
“After two falls, she uses a walker, and an aide helps her and does the grocery shopping. She wants to move into independent living, but Alice is putting her move on hold because of the flat real estate market.”
“How long was she told it would take to sell her place? ‘Forever,’ she said, laughing.”
“Alice's scenario is played out across the swath of retirement communities, especially in western Delray Beach, where people bought condos decades ago. Now many of them are trapped, unable to move because they can't sell unless they significantly drop their price. ‘The real estate market is making it extremely difficult for residents who want to go into assisted living or go up to be by their children,’ said Bob Schulbaum, longtime president of the Alliance of Delray Residential Associations, which has 65 members in the city and western suburbs that he estimates house about 70,000 people. ‘They're tapping their savings to bring in aides.’”
Wednesday, November 21, 2007
Today's Local Real Estate News: "This housing market is killing, killing small business in Florida and California."
The Sun-Sentinel reports on slowing new residential construction:
“Construction of single-family homes in October skidded to the lowest level in 16 years, although the slide was cushioned somewhat by a rebound in apartment building.”
“The Commerce Department reported Tuesday that total housing construction rose by 3 percent in October to a seasonally adjusted annual rate of 1.229 million units. But all the strength occurred in a hefty rebound in apartment construction, which is extremely volatile.”
“The bigger single-family sector actually fell by 7.3 percent to an annual rate of 884,000 units, the slowest pace since October 1991, when housing was going through another steep downturn. In another worrisome sign, applications for building permits fell for a fifth consecutive month.”
“The housing slump is expected to worsen in 2008. Builders are cutting jobs, selling land and slashing prices to weather the downturn. Bonita Springs-based WCI Communities Inc., which builds in South Florida, recently cut 575 jobs. Meanwhile, Fort Lauderdale-based builder Levitt and Sons filed for Chapter 11 bankruptcy this month after defaulting on more than $300 million in loans. In the past two months, the builder laid off most of its 412 workers and stopped construction of homes.”
“Hollywood-based builder TOUSA Inc. also is considering bankruptcy and said it has serious doubts about whether it can remain in business.”
In very troubling national news that shows that the credit crisis is not limited to subprime, Freddie Mac announced ballooning losses:
“The mortgage crisis intensified Tuesday as Freddie Mac, the nation's No. 2 buyer and guarantor of home loans, posted its largest quarterly loss ever and warned that it may need to curtail its business unless it can raise fresh capital.”
“Freddie Mac lost $2 billion in the third quarter, much more than Wall Street was expecting, primarily because it needed to set aside $1.2 billion to account for bad home loans. Freddie Mac also said it may slice in half its quarterly dividend of 50 cents per share — which would be its first dividend cut since becoming a public company in 1989.”
“That double dose of bad news sent Freddie Mac's shares skidding 28.7 percent, the largest decline in the two decades its shares have traded in public markets.”
The Sun-Sentinel reports on development in Plantation:
“When the city decided to redevelop 860 acres in the Midtown district five years ago, officials estimated it would take until 2025 to complete the job.”
“Builders, eager to profit from the housing boom, drew up elaborate plans for large buildings that would combine retail and residences, flanked by fountains and lush parks. But the housing slump threatens to delay the project's completion by five years, City Councilwoman Diane Veltri Bendekovic said.”
“Already, a growing number of jittery buyers are looking to bail out of their condominium contracts, and some major developers are slowing plans for new housing. The convergence of these factors may mean the city's tax base will suffer, forcing cuts to staff or services to make up the difference as operating costs continue to rise, City Councilman Jerry Fadgen said.”
Local office supply giant, Office Depot, announced reduced earning due to the housing slump:
“Office Depot Inc., the world's second-largest office supply retailer, unveiled a turnaround strategy Tuesday after announcing that its third-quarter profit dropped about 9 percent compared with the same period last year.”
“Third-quarter 2007 net earnings were $117 million compared with $129 million in the same period last year. Revenue increased 2 percent to $3.9 billion. Sales at North American stores open at least one year were down 5 percent.”
“Company officials pegged North American sales declines to a soft housing market in Florida and California, where consumers and small businesses have curtailed spending and face a credit crunch. About 25 percent of Office Depot's retail business and 30 percent of its business sales are concentrated in Florida and California.”
“‘This [housing market] is killing, killing small business in Florida and California,’ Odland said.”
Not that we should trust their data at all, Zillow reports that many homeowners in the past year now have negative equity. In their report, they rank the major Metropolitan Statistical Areas (MSAs). The Miami-Ft. Lauderdale MSA ranks second worst only behind Los Angeles with 30% of all homeowner who purchase in the past year with negative equity:
“Home values nationwide declined for the fourth consecutive quarter, down 5.7 percent year-over-year -- the largest year-over-year decline in more than a decade, according to Zillow's Q3 2007 Home Value Report (1) released today. This brings the U.S. Zindex(R) home value indicator (2) to $244,000, down 2.8 percent from the second quarter. The Zindex is the median Zestimate(R) valuation and measures all homes in an area, not just those that have sold during the quarter.”
“For many homeowners who bought during the last two years when most local markets reached their peak, subsequent declines in value have left them with negative home equity, owing more than the home is currently worth. As of September 30, nearly 16 percent (15.6%) of homeowners nationwide who bought in the last year (3) and 17.5 percent of those who purchased two years ago have current home values that are less than the original mortgage amount. By comparison, less than 2 percent (1.8%) of those who purchased a home five years ago have seen their equity slide into the negative.”
“Not surprisingly, markets with the greatest proportion of homes with negative equity were those hit hardest by declining values. For example, people who purchased homes in California's Central Valley, parts of Florida and Las Vegas during the past year have seen double-digit depreciation and negative equity rates reach up to five times the national median.”
“Construction of single-family homes in October skidded to the lowest level in 16 years, although the slide was cushioned somewhat by a rebound in apartment building.”
“The Commerce Department reported Tuesday that total housing construction rose by 3 percent in October to a seasonally adjusted annual rate of 1.229 million units. But all the strength occurred in a hefty rebound in apartment construction, which is extremely volatile.”
“The bigger single-family sector actually fell by 7.3 percent to an annual rate of 884,000 units, the slowest pace since October 1991, when housing was going through another steep downturn. In another worrisome sign, applications for building permits fell for a fifth consecutive month.”
“The housing slump is expected to worsen in 2008. Builders are cutting jobs, selling land and slashing prices to weather the downturn. Bonita Springs-based WCI Communities Inc., which builds in South Florida, recently cut 575 jobs. Meanwhile, Fort Lauderdale-based builder Levitt and Sons filed for Chapter 11 bankruptcy this month after defaulting on more than $300 million in loans. In the past two months, the builder laid off most of its 412 workers and stopped construction of homes.”
“Hollywood-based builder TOUSA Inc. also is considering bankruptcy and said it has serious doubts about whether it can remain in business.”
In very troubling national news that shows that the credit crisis is not limited to subprime, Freddie Mac announced ballooning losses:
“The mortgage crisis intensified Tuesday as Freddie Mac, the nation's No. 2 buyer and guarantor of home loans, posted its largest quarterly loss ever and warned that it may need to curtail its business unless it can raise fresh capital.”
“Freddie Mac lost $2 billion in the third quarter, much more than Wall Street was expecting, primarily because it needed to set aside $1.2 billion to account for bad home loans. Freddie Mac also said it may slice in half its quarterly dividend of 50 cents per share — which would be its first dividend cut since becoming a public company in 1989.”
“That double dose of bad news sent Freddie Mac's shares skidding 28.7 percent, the largest decline in the two decades its shares have traded in public markets.”
The Sun-Sentinel reports on development in Plantation:
“When the city decided to redevelop 860 acres in the Midtown district five years ago, officials estimated it would take until 2025 to complete the job.”
“Builders, eager to profit from the housing boom, drew up elaborate plans for large buildings that would combine retail and residences, flanked by fountains and lush parks. But the housing slump threatens to delay the project's completion by five years, City Councilwoman Diane Veltri Bendekovic said.”
“Already, a growing number of jittery buyers are looking to bail out of their condominium contracts, and some major developers are slowing plans for new housing. The convergence of these factors may mean the city's tax base will suffer, forcing cuts to staff or services to make up the difference as operating costs continue to rise, City Councilman Jerry Fadgen said.”
Local office supply giant, Office Depot, announced reduced earning due to the housing slump:
“Office Depot Inc., the world's second-largest office supply retailer, unveiled a turnaround strategy Tuesday after announcing that its third-quarter profit dropped about 9 percent compared with the same period last year.”
“Third-quarter 2007 net earnings were $117 million compared with $129 million in the same period last year. Revenue increased 2 percent to $3.9 billion. Sales at North American stores open at least one year were down 5 percent.”
“Company officials pegged North American sales declines to a soft housing market in Florida and California, where consumers and small businesses have curtailed spending and face a credit crunch. About 25 percent of Office Depot's retail business and 30 percent of its business sales are concentrated in Florida and California.”
“‘This [housing market] is killing, killing small business in Florida and California,’ Odland said.”
Not that we should trust their data at all, Zillow reports that many homeowners in the past year now have negative equity. In their report, they rank the major Metropolitan Statistical Areas (MSAs). The Miami-Ft. Lauderdale MSA ranks second worst only behind Los Angeles with 30% of all homeowner who purchase in the past year with negative equity:
“Home values nationwide declined for the fourth consecutive quarter, down 5.7 percent year-over-year -- the largest year-over-year decline in more than a decade, according to Zillow's Q3 2007 Home Value Report (1) released today. This brings the U.S. Zindex(R) home value indicator (2) to $244,000, down 2.8 percent from the second quarter. The Zindex is the median Zestimate(R) valuation and measures all homes in an area, not just those that have sold during the quarter.”
“For many homeowners who bought during the last two years when most local markets reached their peak, subsequent declines in value have left them with negative home equity, owing more than the home is currently worth. As of September 30, nearly 16 percent (15.6%) of homeowners nationwide who bought in the last year (3) and 17.5 percent of those who purchased two years ago have current home values that are less than the original mortgage amount. By comparison, less than 2 percent (1.8%) of those who purchased a home five years ago have seen their equity slide into the negative.”
“Not surprisingly, markets with the greatest proportion of homes with negative equity were those hit hardest by declining values. For example, people who purchased homes in California's Central Valley, parts of Florida and Las Vegas during the past year have seen double-digit depreciation and negative equity rates reach up to five times the national median.”
Monday, November 19, 2007
Today's Local Real Estate News: "The renters are collateral damage in the mortgage crisis."
The Miami Herald reports on problem that will only get worse in 2008, tax deliquencies:
"The property-tax bill was the final blow for Astride Hercule -- $5,400 due April 1, on top of mortgage payments that were set to soar on her Miami duplex."
'''I absolutely could not pay it,' said Hercule, a mental-health technician at North Shore Medical Center."
"So, she didn't."
"Unpaid property taxes in Miami-Dade and Broward counties reached new highs this year, as thousands of homeowners tumbled into foreclosure, shrugged off bills on investment properties they couldn't unload, or, like Hercule, found it impossible to make lump-sum tax payments that their boom-era mortgages didn't require them to put in escrow. Total unpaid amount: $365 million."
"In Miami-Dade County, 41,544 residential property owners -- one of every 16 households -- failed to pay their 2006 property-tax bills. That's an increase of 41 percent from the year before, according to an analysis of county tax data. In Broward, the number grew 54 percent to 29,962 -- about one per 21 households."
"In both counties, roughly 65 percent of unpaid accounts were from investors, second-home owners, and others with no homestead exemption, the analysis showed."
The Palm Beach Post reports on a study of ARM resets:
“First American CoreLogic of Santa Ana, Calif., says this question is ‘probably the most important issue in the analysis of real estate today.’”
“Christopher Cagan, the company's director of research and analytics, wrote the report.”
“It looked at 26 million first mortgages throughout the country originated between 2004 and 2006 - and worth nearly $5.4 trillion in debt.”
“The study focuses on the 8.37 million adjustable-rate mortgages due to reset in the next five to seven years.”
“(Obviously, the mortgage meltdown mess is not going to be over anytime soon.)”
“‘Mortgage payment reset is expected to have its impact into the early years of the next decade," the report says.”
“The study predicts an estimated 1.1 million mortgage foreclosures spread out over the next seven years - about 13 percent of the ARMs originated through purchase or refinance from 2004 to 2006, representing $326 billion of debt.”
“‘After foreclosure and resale, it is projected that about $112 billion will be lost to remaining equity, lenders and investors over several years," the report says.”
The Sun-Sentinel reports on North Lauderdale’s efforts to avert foreclosures:
“With so many homes in North Lauderdale in foreclosure, city leaders are seeking to help financially troubled homeowners.”
“They plan to create a new staff position, Neighborhood Improvement Coordinator, who will advise residents how to avoid foreclosure, guide those about to lose their homes and deal with the rash of abandoned properties in the city.”
“‘If we take a proactive approach, we might be able to head it off at the pass,’ said Jesus Valdes, assistant director of community development.”
“Lenders have repossessed at least 57 homes, the owners of 90 foreclosed homes are trying to sell them and at least 325 additional homeowners are in danger of losing their homes, he said.”
Miramar is taking similar steps to assist troubled borrowers according to the Sun-Sentinel:
“The city is seeing an increase in homeowners applying for help with late mortgage payments through its foreclosure prevention program.”
“In September 2006, Miramar joined a growing number of cities setting aside state housing funds to help residents get caught up on their house payments.”
“Under the program, the city offers some homeowners a deferred loan of up to $10,000 to get current on their mortgages and cover interest, taxes and insurance fees.”
“But funding is limited. So far, 24 homeowners have applied for assistance, said Gus Zambrano, the city's director of economic development and revitalization. Of those, one was granted a $10,000 loan, the maximum allowed, and four applications are pending.”
“But Zambrano said not all homeowners will qualify for assistance. Zambrano said homeowners have to be able to show that with the assistance they would be able to afford their mortgage.”
“‘We find that there are a lot of bad loans that people could never really afford,’ he said. ‘We can't help those people because they can't pay the loan back. With our program you have to be able to get out of your situation. It has to be temporary.’”
The Herald Tribune reports on how foreclosures are affecting some renters:
“There are no exact figures for how many renters have been evicted because of foreclosures, but a survey taken this year by the Mortgage Bankers Association found that one in eight foreclosures was non-owner-occupied. This figure probably underestimates the problem, according to the association, because buildings receive tax benefits if they are registered as owner-occupied. More than one million properties are expected to enter foreclosure this year.”
“Many renters say they never even knew their buildings were heading for foreclosure.”
“‘This is an explosion,’ said Judith Liben, a lawyer at the Massachusetts Law Reform Institute. ‘This isn’t business as usual. These are investors that overleveraged themselves, and the renters are collateral damage in the mortgage crisis.’”
“Foreclosing lenders typically evict tenants in order to sell the property, said Vicki Vidal, senior director of loan administration and government affairs at the Mortgage Bankers Association.”
“Banks don’t want to be landlords,” Ms. Vidal said. “They’re in the business of making mortgages. You need to recoup the money to keep the process moving.’”
“Unlike owners who lose their houses, renters do not stand to forfeit years of equity. And many can find comparable rentals.”
"The property-tax bill was the final blow for Astride Hercule -- $5,400 due April 1, on top of mortgage payments that were set to soar on her Miami duplex."
'''I absolutely could not pay it,' said Hercule, a mental-health technician at North Shore Medical Center."
"So, she didn't."
"Unpaid property taxes in Miami-Dade and Broward counties reached new highs this year, as thousands of homeowners tumbled into foreclosure, shrugged off bills on investment properties they couldn't unload, or, like Hercule, found it impossible to make lump-sum tax payments that their boom-era mortgages didn't require them to put in escrow. Total unpaid amount: $365 million."
"In Miami-Dade County, 41,544 residential property owners -- one of every 16 households -- failed to pay their 2006 property-tax bills. That's an increase of 41 percent from the year before, according to an analysis of county tax data. In Broward, the number grew 54 percent to 29,962 -- about one per 21 households."
"In both counties, roughly 65 percent of unpaid accounts were from investors, second-home owners, and others with no homestead exemption, the analysis showed."
The Palm Beach Post reports on a study of ARM resets:
“First American CoreLogic of Santa Ana, Calif., says this question is ‘probably the most important issue in the analysis of real estate today.’”
“Christopher Cagan, the company's director of research and analytics, wrote the report.”
“It looked at 26 million first mortgages throughout the country originated between 2004 and 2006 - and worth nearly $5.4 trillion in debt.”
“The study focuses on the 8.37 million adjustable-rate mortgages due to reset in the next five to seven years.”
“(Obviously, the mortgage meltdown mess is not going to be over anytime soon.)”
“‘Mortgage payment reset is expected to have its impact into the early years of the next decade," the report says.”
“The study predicts an estimated 1.1 million mortgage foreclosures spread out over the next seven years - about 13 percent of the ARMs originated through purchase or refinance from 2004 to 2006, representing $326 billion of debt.”
“‘After foreclosure and resale, it is projected that about $112 billion will be lost to remaining equity, lenders and investors over several years," the report says.”
The Sun-Sentinel reports on North Lauderdale’s efforts to avert foreclosures:
“With so many homes in North Lauderdale in foreclosure, city leaders are seeking to help financially troubled homeowners.”
“They plan to create a new staff position, Neighborhood Improvement Coordinator, who will advise residents how to avoid foreclosure, guide those about to lose their homes and deal with the rash of abandoned properties in the city.”
“‘If we take a proactive approach, we might be able to head it off at the pass,’ said Jesus Valdes, assistant director of community development.”
“Lenders have repossessed at least 57 homes, the owners of 90 foreclosed homes are trying to sell them and at least 325 additional homeowners are in danger of losing their homes, he said.”
Miramar is taking similar steps to assist troubled borrowers according to the Sun-Sentinel:
“The city is seeing an increase in homeowners applying for help with late mortgage payments through its foreclosure prevention program.”
“In September 2006, Miramar joined a growing number of cities setting aside state housing funds to help residents get caught up on their house payments.”
“Under the program, the city offers some homeowners a deferred loan of up to $10,000 to get current on their mortgages and cover interest, taxes and insurance fees.”
“But funding is limited. So far, 24 homeowners have applied for assistance, said Gus Zambrano, the city's director of economic development and revitalization. Of those, one was granted a $10,000 loan, the maximum allowed, and four applications are pending.”
“But Zambrano said not all homeowners will qualify for assistance. Zambrano said homeowners have to be able to show that with the assistance they would be able to afford their mortgage.”
“‘We find that there are a lot of bad loans that people could never really afford,’ he said. ‘We can't help those people because they can't pay the loan back. With our program you have to be able to get out of your situation. It has to be temporary.’”
The Herald Tribune reports on how foreclosures are affecting some renters:
“There are no exact figures for how many renters have been evicted because of foreclosures, but a survey taken this year by the Mortgage Bankers Association found that one in eight foreclosures was non-owner-occupied. This figure probably underestimates the problem, according to the association, because buildings receive tax benefits if they are registered as owner-occupied. More than one million properties are expected to enter foreclosure this year.”
“Many renters say they never even knew their buildings were heading for foreclosure.”
“‘This is an explosion,’ said Judith Liben, a lawyer at the Massachusetts Law Reform Institute. ‘This isn’t business as usual. These are investors that overleveraged themselves, and the renters are collateral damage in the mortgage crisis.’”
“Foreclosing lenders typically evict tenants in order to sell the property, said Vicki Vidal, senior director of loan administration and government affairs at the Mortgage Bankers Association.”
“Banks don’t want to be landlords,” Ms. Vidal said. “They’re in the business of making mortgages. You need to recoup the money to keep the process moving.’”
“Unlike owners who lose their houses, renters do not stand to forfeit years of equity. And many can find comparable rentals.”
Thursday, November 15, 2007
Today's Local Real Estate News: "I think you will find Canadians who want to buy now are going to be looking elsewhere."
The Miami Herald reports that the state budget shortfall is accelerating:
“Florida's economy, which forced a $1 billion cut in the state budget just weeks ago, is sputtering so badly economists gave lawmakers more grim news Wednesday: Prepare to lose another $2.5 billion over the next 18 months.”
“For Gov. Charlie Crist and the Republican-controlled Legislature, the forecast promises a financial and political headache as they figure out painful new spending cuts in a crucial election year.”
“The economic prediction marks the first time since Florida began keeping close track of tax collections in the early 1970s that the state will record two consecutive years of declining income.”
“Economists blame the continuing downturn on a weak housing market, slowing population growth, rising fuel prices and consumers holding off on big-ticket purchases.”
At the same time, the State recently disclosed that the have significant exposure to subprime investments. Bloomberg.com reports:
“The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt that was cut below investment grade.”
“The downgrades affect more than 4 percent of what the Florida State Board of Administration has purchased for the funds, according to a report by the agency's director, Coleman Stipanovich, that was delivered at a cabinet meeting of Republican Governor Charlie Crist today. Some $3.6 billion, or 7.3 percent, of the securities may be downgraded by credit- rating companies, according to the document, provided to Bloomberg by the state board.”
“The disclosure, which follows a month of inquiries by Bloomberg News to Florida officials brings the subprime crisis that has afflicted banks, hedge funds and chief executive officers to the public finances of the fourth-largest U.S. state.”
“Florida's state funds were affected by bad investments in asset-backed commercial paper, short-term debt sold by financial institutions that is secured by collateral such as mortgage securities and credit-card receivables. As the value of that collateral dropped, investors were unwilling to reinvest their money when the short-term debt matured, creating a liquidity crisis for the financial institutions.”
“‘It's really disgraceful,’' Levitt said. ‘I think what's really bad about this is that the state has called for investments to be prudent and careful but clearly the custodians of this fund were reaching, they were trying to get maximum yield.’”
The Sun-Sentinel reports on the continued woes faced by homebuilders:
“Home builders such as WCI Communities Inc. and Pulte Homes Inc. aim to survive an industrywide unraveling by selling houses at bargain prices, slashing jobs and scrapping growth plans.”
“Bonita Springs-based WCI, which builds in South Florida, recently cut 575 jobs. Pulte of Bloomfield Hills, Mich., also has been reducing payroll by laying off more than 300 workers this year from its DiVosta Building Corp. of Palm Beach Gardens.”
“As the housing downturn worsens, experts say at least a few major U.S. home builders may end up bankrupt.”
“On Friday, Fort Lauderdale-based Levitt and Sons became the largest builder to file for Chapter 11 bankruptcy protection from its creditors. In the past two months, the company defaulted on more than $300 million in loans, laid off most of its 412 workers and stopped building houses.”
“Developers are reeling from sharp increases in loan defaults, which force lenders to be far more cautious about new mortgages. The result: sinking home prices, surpluses of unsold homes and a spike in canceled orders.”
“Even speculators who snatched up new homes during the bubble years hoping to turn a quick profit can't sell, meaning more properties compete for a limited pool of buyers.”
Jeff Ostrowski, a real estate writer for the Palm Beach Post, has been a typical Mainstream-Media (MSM) cheerleader for Realtors®. Perhaps, he’s starting to see the light because his tone has started to change lately. Here’s an example:
“Gotta love those spinmeisters at the National Association of Realtors. They put out a release yesterday touting 2007 as ‘the fifth-best year on record.’”
“That’s based on national home sales of 5.5 million units, which, while way off from the boom of 2004 and 2005, are about equal to 2002 sales.”
“‘All real estate is local - conditions vary greatly from one city to the next,’ says NAR Chief Economist Lawrence Yun.”
“So you can imagine that Yun didn’t mention Palm Beach County as an example of a market where everything is just fine. You have to go back to the early ’90s to find a similarly moribund year here.”
“Based on the 5,595 sales of existing single-family homes through the first nine months of 2007, we’ll be lucky to hit 7,500 sales this year. The Florida Association of Realtors’ online database of housing stats goes back to only 1993, a year when Realtors sold 8,123 homes in Palm Beach County and the slowest year from 1993 through 2006.”
Similarly, Pat Beall, also of the Palm Beach Post, seems to reject the Realtor® claim that droves of rich foreigners are going to save the market:
“It's more than ruffled feathers: Canadian snowbirds are rethinking Florida.”
“‘I haven't met one person this year that wants to stay in Florida,’ said Boynton Beach resident Dory Kilburn, who heads the Boynton Intracoastal Group, a Canadian advocacy organization. ‘They all say they are getting out.’”
“Lopsided property taxes favoring year-round residents are a major culprit, and proposed property tax cuts are getting a cool reception north of the border. Still, talk of leaving might be saber rattling - except that it comes as Arizona, the Carolinas and other states are stepping up efforts to lure the flock.”
“The most powerful marketing tool of all is turning out to be free: Florida's two-tiered property tax system. In his Arizona Real Estate Notebook, blogger and broker John Wake sums up the message: ‘Arizona property taxes don't discriminate. Canadian owners are charged the same very low property tax as their American neighbors.’”
“‘I think you will find Canadians who want to buy now are going to be looking elsewhere,’ Benedek said. ‘I certainly don't encourage anyone to buy.’ He said his neighbors in Canada recently bought a home in Costa Rica.”
Still, not all the MSM are questioning Realtor® propaganda. Instead of reporting on the woes faced by the droves of homeowners facing foreclosure, Channel 10 News is trying to spin the foreclosure crisis into a buying opportunity (or course with the help of a Realtor®):
“There are more than double the amounts of foreclosed properties than this time last year. While the crisis is painful to many, foreclosures can hold the prospect of profit for others. Experts advise caution, however, because foreclosures draw a fine line between big bucks and a big bus”t.
“‘You really have to know what you're doing,’ said David Dabby, a South Florida real estate analyst.”
“To find a foreclosure, buyers should contact banks or realtors. There are also foreclosure auctions, Summers reported.”
“Experts said it's no longer necessary to purchase a foreclosure list because there are plenty of ways to find distressed properties for free”.
“Buyers should also consider hiring a reputable realtor to assist in the purchase of a foreclosure. For a buyer the services of a realtor are free.”
“‘The buyer doesn't pay a cent. The seller, or in the case of foreclosure, the bank, is paying the commission,’ said realtor Dan Kelley”
Likewise, the New York Post quotes a real estate professor that thinks that prices are not going to drop below 2004 levels (our daily F@cked Buyer post already proves him dead wrong on this issue):
“Miami's once-sizzling realestate market has certainly cooled off, but perhaps not by as much as redicted. In a city oozing with the vested interests of owners, renters, potential buyers, investors, brokers and developers, it's diffi cult to get an honest assessment of the market. Brokers and developers want to sell, so most play the “Florida-has-sunand- sand-and-thus-is-immune-to-thereal- estate-bubble" card. Would-be buyers want a deal, so they're hoping media sensationalism coupled with reality - a lot of new product - will bring prices crumbling down to pre-2000 levels. The truth seems to lie somewhere in the middle.”
“‘I think that you'll see prices coming down to the 2004 level, but not much below that,’ says Dr. William Hardin, a real-estate professor at Miami's Florida International University. ‘We're going to have to forget 2006 and part of 2005. I would try to make a transaction at 2004 or 2005 price points - they would be a good starting point for negotiations.’”
“Florida's economy, which forced a $1 billion cut in the state budget just weeks ago, is sputtering so badly economists gave lawmakers more grim news Wednesday: Prepare to lose another $2.5 billion over the next 18 months.”
“For Gov. Charlie Crist and the Republican-controlled Legislature, the forecast promises a financial and political headache as they figure out painful new spending cuts in a crucial election year.”
“The economic prediction marks the first time since Florida began keeping close track of tax collections in the early 1970s that the state will record two consecutive years of declining income.”
“Economists blame the continuing downturn on a weak housing market, slowing population growth, rising fuel prices and consumers holding off on big-ticket purchases.”
At the same time, the State recently disclosed that the have significant exposure to subprime investments. Bloomberg.com reports:
“The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt that was cut below investment grade.”
“The downgrades affect more than 4 percent of what the Florida State Board of Administration has purchased for the funds, according to a report by the agency's director, Coleman Stipanovich, that was delivered at a cabinet meeting of Republican Governor Charlie Crist today. Some $3.6 billion, or 7.3 percent, of the securities may be downgraded by credit- rating companies, according to the document, provided to Bloomberg by the state board.”
“The disclosure, which follows a month of inquiries by Bloomberg News to Florida officials brings the subprime crisis that has afflicted banks, hedge funds and chief executive officers to the public finances of the fourth-largest U.S. state.”
“Florida's state funds were affected by bad investments in asset-backed commercial paper, short-term debt sold by financial institutions that is secured by collateral such as mortgage securities and credit-card receivables. As the value of that collateral dropped, investors were unwilling to reinvest their money when the short-term debt matured, creating a liquidity crisis for the financial institutions.”
“‘It's really disgraceful,’' Levitt said. ‘I think what's really bad about this is that the state has called for investments to be prudent and careful but clearly the custodians of this fund were reaching, they were trying to get maximum yield.’”
The Sun-Sentinel reports on the continued woes faced by homebuilders:
“Home builders such as WCI Communities Inc. and Pulte Homes Inc. aim to survive an industrywide unraveling by selling houses at bargain prices, slashing jobs and scrapping growth plans.”
“Bonita Springs-based WCI, which builds in South Florida, recently cut 575 jobs. Pulte of Bloomfield Hills, Mich., also has been reducing payroll by laying off more than 300 workers this year from its DiVosta Building Corp. of Palm Beach Gardens.”
“As the housing downturn worsens, experts say at least a few major U.S. home builders may end up bankrupt.”
“On Friday, Fort Lauderdale-based Levitt and Sons became the largest builder to file for Chapter 11 bankruptcy protection from its creditors. In the past two months, the company defaulted on more than $300 million in loans, laid off most of its 412 workers and stopped building houses.”
“Developers are reeling from sharp increases in loan defaults, which force lenders to be far more cautious about new mortgages. The result: sinking home prices, surpluses of unsold homes and a spike in canceled orders.”
“Even speculators who snatched up new homes during the bubble years hoping to turn a quick profit can't sell, meaning more properties compete for a limited pool of buyers.”
Jeff Ostrowski, a real estate writer for the Palm Beach Post, has been a typical Mainstream-Media (MSM) cheerleader for Realtors®. Perhaps, he’s starting to see the light because his tone has started to change lately. Here’s an example:
“Gotta love those spinmeisters at the National Association of Realtors. They put out a release yesterday touting 2007 as ‘the fifth-best year on record.’”
“That’s based on national home sales of 5.5 million units, which, while way off from the boom of 2004 and 2005, are about equal to 2002 sales.”
“‘All real estate is local - conditions vary greatly from one city to the next,’ says NAR Chief Economist Lawrence Yun.”
“So you can imagine that Yun didn’t mention Palm Beach County as an example of a market where everything is just fine. You have to go back to the early ’90s to find a similarly moribund year here.”
“Based on the 5,595 sales of existing single-family homes through the first nine months of 2007, we’ll be lucky to hit 7,500 sales this year. The Florida Association of Realtors’ online database of housing stats goes back to only 1993, a year when Realtors sold 8,123 homes in Palm Beach County and the slowest year from 1993 through 2006.”
Similarly, Pat Beall, also of the Palm Beach Post, seems to reject the Realtor® claim that droves of rich foreigners are going to save the market:
“It's more than ruffled feathers: Canadian snowbirds are rethinking Florida.”
“‘I haven't met one person this year that wants to stay in Florida,’ said Boynton Beach resident Dory Kilburn, who heads the Boynton Intracoastal Group, a Canadian advocacy organization. ‘They all say they are getting out.’”
“Lopsided property taxes favoring year-round residents are a major culprit, and proposed property tax cuts are getting a cool reception north of the border. Still, talk of leaving might be saber rattling - except that it comes as Arizona, the Carolinas and other states are stepping up efforts to lure the flock.”
“The most powerful marketing tool of all is turning out to be free: Florida's two-tiered property tax system. In his Arizona Real Estate Notebook, blogger and broker John Wake sums up the message: ‘Arizona property taxes don't discriminate. Canadian owners are charged the same very low property tax as their American neighbors.’”
“‘I think you will find Canadians who want to buy now are going to be looking elsewhere,’ Benedek said. ‘I certainly don't encourage anyone to buy.’ He said his neighbors in Canada recently bought a home in Costa Rica.”
Still, not all the MSM are questioning Realtor® propaganda. Instead of reporting on the woes faced by the droves of homeowners facing foreclosure, Channel 10 News is trying to spin the foreclosure crisis into a buying opportunity (or course with the help of a Realtor®):
“There are more than double the amounts of foreclosed properties than this time last year. While the crisis is painful to many, foreclosures can hold the prospect of profit for others. Experts advise caution, however, because foreclosures draw a fine line between big bucks and a big bus”t.
“‘You really have to know what you're doing,’ said David Dabby, a South Florida real estate analyst.”
“To find a foreclosure, buyers should contact banks or realtors. There are also foreclosure auctions, Summers reported.”
“Experts said it's no longer necessary to purchase a foreclosure list because there are plenty of ways to find distressed properties for free”.
“Buyers should also consider hiring a reputable realtor to assist in the purchase of a foreclosure. For a buyer the services of a realtor are free.”
“‘The buyer doesn't pay a cent. The seller, or in the case of foreclosure, the bank, is paying the commission,’ said realtor Dan Kelley”
Likewise, the New York Post quotes a real estate professor that thinks that prices are not going to drop below 2004 levels (our daily F@cked Buyer post already proves him dead wrong on this issue):
“Miami's once-sizzling realestate market has certainly cooled off, but perhaps not by as much as redicted. In a city oozing with the vested interests of owners, renters, potential buyers, investors, brokers and developers, it's diffi cult to get an honest assessment of the market. Brokers and developers want to sell, so most play the “Florida-has-sunand- sand-and-thus-is-immune-to-thereal- estate-bubble" card. Would-be buyers want a deal, so they're hoping media sensationalism coupled with reality - a lot of new product - will bring prices crumbling down to pre-2000 levels. The truth seems to lie somewhere in the middle.”
“‘I think that you'll see prices coming down to the 2004 level, but not much below that,’ says Dr. William Hardin, a real-estate professor at Miami's Florida International University. ‘We're going to have to forget 2006 and part of 2005. I would try to make a transaction at 2004 or 2005 price points - they would be a good starting point for negotiations.’”
Wednesday, November 14, 2007
Today's Local Real Estate News: "These foreclosures are wiping out wealth that people often took a lifetime to build."
Reuters reports that Miami is ground zero for mortgage fraud:
“America's subprime mortgage crisis is partly due to predatory, or aggressive, lenders, hard-sell tactics by mortgage brokers and an easing of underwriting standards in the $10 trillion home-loan industry.”
“But fraud accounts for a sizable share of the bad bets on mortgages, according to many industry experts, and lenders may have been victimized as much as anyone else.”
“‘The lenders are holding the bag now, that's what we're finding out,’ said Glenn Theobald, head of a mortgage fraud task force formed in south Florida's Miami-Dade County in September.”
“Florida leads the nation when it comes to mortgage fraud, according to the Virginia-based Mortgage Asset Research Institute, a group that works closely with the U.S. Mortgage Bankers Association.”
“Ken Thomas, a Miami-based banking expert and lecturer at the Wharton School at the University of Pennsylvania in Philadelphia, said there was little surprise Florida led the country in mortgage fraud.”
“It stems, at least in part, in the way lenders plowed ‘easy money’ into the local condo market before Florida's recent housing boom turned to bust, Thomas told Reuters.
“‘We're going to see a lot more of this fraud being exposed, especially as these units go into foreclosure,’ Thomas said.”
“‘We were the poster child of the housing bubble ... maybe we should have expected more of this.’”
Based on this article, it is not surprising that our local markets are being swamped by foreclosures. The Miami Herald reports on foreclosures in South Florida:
“A wave of foreclosures in South Florida among borrowers with shaky credit will cause the property values of nearly 1.7 million homeowners to sink an average $13,000 in Miami-Dade County, and $6,400 in Broward, a new report says.”
“The report released Tuesday by the Center for Responsible Lending estimates the two counties will lose more than $17.2 billion in their tax base in the coming years resulting from some 35,000 expected foreclosures among subprime borrowers.”
“The state of Florida could lose $23.5 billion from its tax base, the economic spillover of an expected 98,000 foreclosures coming from subprime mortgages made in 2005 and 2006. Most of those loans came with adjustable interest rates that are now resetting, accelerating foreclosures, the center said.”
“Fort Lauderdale and Miami ranked fourth and eighth, respectively, among the metropolitan areas with the highest foreclosure rates in the nation, according to a separate report Tuesday by RealtyTrac, a foreclosure tracking firm.”
“One of every 48 homes in Broward and one of every 60 homes in Miami-Dade were in some stage of foreclosure on Sept. 30, the report said. The Center for Responsible Lending's property value analysis was based on academic research indicating that a foreclosure lowers the price of properties within an eight of a mile by 0.9 percent on average.”
“‘These foreclosures are wiping out wealth that people often took a lifetime to build,’ said Martin Eakes, the Center's chief executive. ‘Many families will never achieve homeownership again.’”
The Palm Beach Post added the following:
“Faced with adjustable mortgage payments resetting at double and sometimes triple the original percentage rate, local homeowners threw away their keys three times faster in October than they did in the same month last year, studies released Tuesday show.”
“A deluge of factors working against cash-strapped homeowners in Palm Beach County and the Treasure Coast came together last month as the worst housing crisis in nearly two decades continued to wreak havoc on U.S. homeowners.”
“The factors are becoming well known: falling home sales, rising inventories, tightened lending standards, a high percentage of homes owned by investors and adjustable rate mortgages resetting. Combined, they took their toll on area homeowners, who saw triple the number of mortgages sink into default as in October 2006, according to the clerks' offices in Palm Beach, Martin and St. Lucie counties.”
“In Palm Beach County, 1,620 homeowners received mortgage default notices, according to the clerk's office, compared with 541 in October 2006, a rise of 199 percent year over year and triple the tally a year ago.”
“In Martin County, there were 95 foreclosures last month, up 217 percent from October 2006, when there were only 30.”
“And in St. Lucie County, where the sound of hammers all day long signified one of the hottest real estate markets in the nation, until the bubble burst, 610 homeowners could not afford their mortgage payments. That compared with 193 foreclosures a year ago, an increase of 216 percent.”
“‘These figures are a stark reminder of just how much the Florida real estate market has soured in the last two years,’ said Mike Larson, an analyst with Weiss Group. ‘Foreclosures are surging because the housing market is still struggling to find a bottom. Home prices are slumping and lending standards are tightening - a nasty one-two punch for borrowers who are having trouble paying their mortgages. We'll be coping with a high level’ of adjustable-rate mortgages until the end of 2008.”
With all this foreclosures and fraud, the National Association of Realtors® aren’t worried. If fact, they saying we’re at a bottom and could be saved shortly by droves of rich foreign investors. The Palm Beach Post provides the details:
“The market for existing homes is ‘hitting the low right now’ and heading for a ‘modest recovery’ next year, the chief economist for the National Association of Realtors said at the group's annual convention Tuesday.”
“Existing home sales will be ‘much softer’ this quarter compared with the same period last year, the economist, Lawrence Yun, said at a news conference. He said that for all of 2007, sales nationwide would fall to 5.67 million, compared to 6.48 million in 2006.”
“NAR expects the national median price of existing homes to decline 1.7 percent to $218,200 for this year, and hold steady at about that level in 2008.”
“The number of sales will rise to 5.69 million next year, Yun said. But the housing recovery will be very uneven, with some markets bouncing back more quickly than others, Yun predicted.”
“But Miami may rebound faster because foreign investors like the city, especially now that the U.S. dollar is so weak, he said.”
“‘There is a big incentive for foreign buyers’ to come into Miami, he said.”
“At the moment, the housing market is stalled because those would-be buyers are holding out for lower prices, while sellers are waiting for prices to rebound. ‘This is a battle between buyers and sellers,’ he said.”
“If buyers blink first, ‘it is possible for even higher home sales activity than we're forecasting,’ he said.”
“America's subprime mortgage crisis is partly due to predatory, or aggressive, lenders, hard-sell tactics by mortgage brokers and an easing of underwriting standards in the $10 trillion home-loan industry.”
“But fraud accounts for a sizable share of the bad bets on mortgages, according to many industry experts, and lenders may have been victimized as much as anyone else.”
“‘The lenders are holding the bag now, that's what we're finding out,’ said Glenn Theobald, head of a mortgage fraud task force formed in south Florida's Miami-Dade County in September.”
“Florida leads the nation when it comes to mortgage fraud, according to the Virginia-based Mortgage Asset Research Institute, a group that works closely with the U.S. Mortgage Bankers Association.”
“Ken Thomas, a Miami-based banking expert and lecturer at the Wharton School at the University of Pennsylvania in Philadelphia, said there was little surprise Florida led the country in mortgage fraud.”
“It stems, at least in part, in the way lenders plowed ‘easy money’ into the local condo market before Florida's recent housing boom turned to bust, Thomas told Reuters.
“‘We're going to see a lot more of this fraud being exposed, especially as these units go into foreclosure,’ Thomas said.”
“‘We were the poster child of the housing bubble ... maybe we should have expected more of this.’”
Based on this article, it is not surprising that our local markets are being swamped by foreclosures. The Miami Herald reports on foreclosures in South Florida:
“A wave of foreclosures in South Florida among borrowers with shaky credit will cause the property values of nearly 1.7 million homeowners to sink an average $13,000 in Miami-Dade County, and $6,400 in Broward, a new report says.”
“The report released Tuesday by the Center for Responsible Lending estimates the two counties will lose more than $17.2 billion in their tax base in the coming years resulting from some 35,000 expected foreclosures among subprime borrowers.”
“The state of Florida could lose $23.5 billion from its tax base, the economic spillover of an expected 98,000 foreclosures coming from subprime mortgages made in 2005 and 2006. Most of those loans came with adjustable interest rates that are now resetting, accelerating foreclosures, the center said.”
“Fort Lauderdale and Miami ranked fourth and eighth, respectively, among the metropolitan areas with the highest foreclosure rates in the nation, according to a separate report Tuesday by RealtyTrac, a foreclosure tracking firm.”
“One of every 48 homes in Broward and one of every 60 homes in Miami-Dade were in some stage of foreclosure on Sept. 30, the report said. The Center for Responsible Lending's property value analysis was based on academic research indicating that a foreclosure lowers the price of properties within an eight of a mile by 0.9 percent on average.”
“‘These foreclosures are wiping out wealth that people often took a lifetime to build,’ said Martin Eakes, the Center's chief executive. ‘Many families will never achieve homeownership again.’”
The Palm Beach Post added the following:
“Faced with adjustable mortgage payments resetting at double and sometimes triple the original percentage rate, local homeowners threw away their keys three times faster in October than they did in the same month last year, studies released Tuesday show.”
“A deluge of factors working against cash-strapped homeowners in Palm Beach County and the Treasure Coast came together last month as the worst housing crisis in nearly two decades continued to wreak havoc on U.S. homeowners.”
“The factors are becoming well known: falling home sales, rising inventories, tightened lending standards, a high percentage of homes owned by investors and adjustable rate mortgages resetting. Combined, they took their toll on area homeowners, who saw triple the number of mortgages sink into default as in October 2006, according to the clerks' offices in Palm Beach, Martin and St. Lucie counties.”
“In Palm Beach County, 1,620 homeowners received mortgage default notices, according to the clerk's office, compared with 541 in October 2006, a rise of 199 percent year over year and triple the tally a year ago.”
“In Martin County, there were 95 foreclosures last month, up 217 percent from October 2006, when there were only 30.”
“And in St. Lucie County, where the sound of hammers all day long signified one of the hottest real estate markets in the nation, until the bubble burst, 610 homeowners could not afford their mortgage payments. That compared with 193 foreclosures a year ago, an increase of 216 percent.”
“‘These figures are a stark reminder of just how much the Florida real estate market has soured in the last two years,’ said Mike Larson, an analyst with Weiss Group. ‘Foreclosures are surging because the housing market is still struggling to find a bottom. Home prices are slumping and lending standards are tightening - a nasty one-two punch for borrowers who are having trouble paying their mortgages. We'll be coping with a high level’ of adjustable-rate mortgages until the end of 2008.”
With all this foreclosures and fraud, the National Association of Realtors® aren’t worried. If fact, they saying we’re at a bottom and could be saved shortly by droves of rich foreign investors. The Palm Beach Post provides the details:
“The market for existing homes is ‘hitting the low right now’ and heading for a ‘modest recovery’ next year, the chief economist for the National Association of Realtors said at the group's annual convention Tuesday.”
“Existing home sales will be ‘much softer’ this quarter compared with the same period last year, the economist, Lawrence Yun, said at a news conference. He said that for all of 2007, sales nationwide would fall to 5.67 million, compared to 6.48 million in 2006.”
“NAR expects the national median price of existing homes to decline 1.7 percent to $218,200 for this year, and hold steady at about that level in 2008.”
“The number of sales will rise to 5.69 million next year, Yun said. But the housing recovery will be very uneven, with some markets bouncing back more quickly than others, Yun predicted.”
“But Miami may rebound faster because foreign investors like the city, especially now that the U.S. dollar is so weak, he said.”
“‘There is a big incentive for foreign buyers’ to come into Miami, he said.”
“At the moment, the housing market is stalled because those would-be buyers are holding out for lower prices, while sellers are waiting for prices to rebound. ‘This is a battle between buyers and sellers,’ he said.”
“If buyers blink first, ‘it is possible for even higher home sales activity than we're forecasting,’ he said.”
Friday, October 26, 2007
Today's Local Real Estate News: "We are headed for billions in lost wealth."
The Congress, which once touted record homeownership as a great achievement during the boom, is now suddenly concerned with the aftermath of those records. The L.A. Times reports:
“About 2 million sub-prime borrowers could lose their homes to foreclosure through 2009, costing them $71 billion in housing wealth, a congressional report said Thursday.”
“Sub-prime foreclosure rates will increase as housing prices stagnate or decline, and the effects of the sub-prime mortgage crisis may spill over to the broader economy, according to a report by the Joint Economic Committee released in Washington.”
“‘State by state, the economic costs from the sub-prime debacle are shockingly high,’ said Sen. Charles E. Schumer (D-N.Y.), who heads the committee. ‘From New York to California, we are headed for billions in lost wealth, property values and tax revenues.’”
“The report spotlights the foreclosure threat facing borrowers with poor credit as interest rates on adjustable loans reset to higher levels. Sub-prime foreclosures will total about 2 million between 2007 and 2009 if housing prices drop 20% over those three years, the report said.”
“About 1.3 million of the nation's 7.4 million sub-prime borrowers will face foreclosure between this year's third quarter and the fourth quarter of 2009, the report said.”
“California, Florida, Ohio, New York and Texas will be among the hardest-hit states. Sub-prime loans represented 14% of all outstanding U.S. mortgages as of the second quarter of 2007, the report said.”
Following this report, MSNBC got the views of Congressional Democrats on the developing crisis:
“Congressional Democrats are pressing for Fannie Mae and Freddie Mac, the government-sponsored mortgage companies, to be given a bigger role in helping struggling borrowers refinance mortgages. However, the proposal is opposed by the administration, which advocates a more limited government response to the crisis.”
“‘If there was a less ideological president, the business community would be happier because there would be much more confidence that somebody was dealing with this,’ said Mr Schumer. A Treasury spokesman dismissed Mr Schumer's criticisms as ‘ridiculous’, saying: ‘The secretary and the president have both called on the senate to take up legislation to help struggling homeowners - it's the Senate that seems to be handcuffed.’”
“Democratic calls for greater intervention in the mortgage markets fit the party's push for government-led solutions to ease the growing sense of economic insecurity in middle class America.”
The Sun-Sentinel gave further details on the boating industry’s troubles in the wake of the housing downturn:
“There will probably be fewer boat builders and brokers around for next year's Fort Lauderdale International Boat Show.”
“‘We're going to see this industry ... shrink, with fewer manufacturers and dealers,’ particularly in the small to mid-size markets, said Irwin Jacobs, chief executive officer of Minneapolis-based Genmar Holdings Inc., one of the globe's biggest recreational boat builders.”
“The dried-up housing market, soaring gasoline prices and the credit crunch are keeping boat buyers at bay, with analysts reporting drops in sales by as much as 15 percent. Several large manufacturers and dealers, including Brunswick Corp. and Marine Max, have cut production and laid off workers.”
“About 2 million sub-prime borrowers could lose their homes to foreclosure through 2009, costing them $71 billion in housing wealth, a congressional report said Thursday.”
“Sub-prime foreclosure rates will increase as housing prices stagnate or decline, and the effects of the sub-prime mortgage crisis may spill over to the broader economy, according to a report by the Joint Economic Committee released in Washington.”
“‘State by state, the economic costs from the sub-prime debacle are shockingly high,’ said Sen. Charles E. Schumer (D-N.Y.), who heads the committee. ‘From New York to California, we are headed for billions in lost wealth, property values and tax revenues.’”
“The report spotlights the foreclosure threat facing borrowers with poor credit as interest rates on adjustable loans reset to higher levels. Sub-prime foreclosures will total about 2 million between 2007 and 2009 if housing prices drop 20% over those three years, the report said.”
“About 1.3 million of the nation's 7.4 million sub-prime borrowers will face foreclosure between this year's third quarter and the fourth quarter of 2009, the report said.”
“California, Florida, Ohio, New York and Texas will be among the hardest-hit states. Sub-prime loans represented 14% of all outstanding U.S. mortgages as of the second quarter of 2007, the report said.”
Following this report, MSNBC got the views of Congressional Democrats on the developing crisis:
“Congressional Democrats are pressing for Fannie Mae and Freddie Mac, the government-sponsored mortgage companies, to be given a bigger role in helping struggling borrowers refinance mortgages. However, the proposal is opposed by the administration, which advocates a more limited government response to the crisis.”
“‘If there was a less ideological president, the business community would be happier because there would be much more confidence that somebody was dealing with this,’ said Mr Schumer. A Treasury spokesman dismissed Mr Schumer's criticisms as ‘ridiculous’, saying: ‘The secretary and the president have both called on the senate to take up legislation to help struggling homeowners - it's the Senate that seems to be handcuffed.’”
“Democratic calls for greater intervention in the mortgage markets fit the party's push for government-led solutions to ease the growing sense of economic insecurity in middle class America.”
The Sun-Sentinel gave further details on the boating industry’s troubles in the wake of the housing downturn:
“There will probably be fewer boat builders and brokers around for next year's Fort Lauderdale International Boat Show.”
“‘We're going to see this industry ... shrink, with fewer manufacturers and dealers,’ particularly in the small to mid-size markets, said Irwin Jacobs, chief executive officer of Minneapolis-based Genmar Holdings Inc., one of the globe's biggest recreational boat builders.”
“The dried-up housing market, soaring gasoline prices and the credit crunch are keeping boat buyers at bay, with analysts reporting drops in sales by as much as 15 percent. Several large manufacturers and dealers, including Brunswick Corp. and Marine Max, have cut production and laid off workers.”
Thursday, October 25, 2007
Today's Local Real Estate News: "In the coming weeks and months, buyers should expect sellers to keep dropping home prices."
Housing data came out yesterday and the three major South Florida new papers reported on the situation. The Miami Herald explained:
“Prices of homes and condos in Broward County dropped in September compared with a year ago, a sign that stubborn sellers may finally be accepting the reality that they are no longer able to get the sky-high prices of the boom years.”
“Broward's single-family home sales were off last year's number by 46 percent; condo sales declined 39 percent. But prices also fell -- the median home price down 7 percent year-over-year to $345,200 while condo prices slipped 15 percent to $174,600.”
“In Miami-Dade, single-family home sales were more than cut in half for the month, dropping 53 percent from September 2006. Condo sales were similarly off 47 percent. Home prices were mostly flat at $372,300, and median condo prices rose 2 percent to $275,000.”
“Gabriella Berenyi, a seller in Oakland Park, said she will not budge further on her price.”
“Nearly a year ago she put her three-bedroom lakefront condo up for sale, asking $289,000. She found few interested buyers, and the ones she found couldn't qualify for a mortgage. So she dropped her price to $279,000.”
“‘This has been the worst experience,’ she said.”
“‘But I don't believe in going down too low [on the price] because I invested so much remodeling it. If I go down too low, I can't get any money out of it. So I am trying to rent it out now; people say prices will go up in six months or a year.’”
The Palm Beach Post reported the following:
“The housing decline has been under way for more than a year, and analysts say it could be at least another year before the market plateaus, based on September existing-home sales reports.”
“The median price for an existing single-family home in Palm Beach County dipped to $355,300 in September, down 3 percent from $365,500 in September 2006, as sellers continued to hold out for their asking prices despite heavy market pressures. The number of homes sold in the county fell 17 percent, to 471 from the 566 homes sold in the same month one year ago.”
“In Martin and St. Lucie counties, the news was even worse. The Treasure Coast posted the second-steepest home-price decline in the state. The median price plunged to $202,000, off 17 percent from a year earlier, when the median was $244,300, the Florida Association of Realtors said Wednesday.”
“‘Mortgage money is very tight now,’ said housing analyst Jack McCabe, chief executive of McCabe Research and Consulting in Deerfield Beach. ‘Prices are going to continue to drop. From 2007 to the end of 2009, you're going to see a 35 to 40 percent drop off the market peak.’”
The Miami Herald reports that the housing downturn is not just a local phenomena; it’s a national problem:
“Sales of existing homes had a record decline in September while median home prices fell by the largest amount in nearly a year, reflecting deepening problems in the troubled housing market.”
“Analysts said the current downturn is already more severe than the housing slump of the 1990s. They predicted that before it is resolved, it will rival the 1980-82 housing slump. Back then, the industry was battered by double-digit mortgage rates and the economy was in a steep recession.”
“The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September. It was the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was the slowest pace on record.”
The Sun-Sentinel reports similarly and even used the “C” word (capitulation):
“September's home sales plunged in Broward County, and real estate experts say fewer sales and declining housing prices reflect the continuing trend in South Florida, the state and the nation.”
“Buyers are deterred by the state's property tax and insurance crisis, stiffer mortgage financing requirements owing to credit turmoil, and home prices that many still can't afford. September marks month No. 21 of the region's housing slump.”
“‘The investors are gone. You have the average person trying to put a roof over his head, and prices are still unaffordable,’ said Mike Larson, an analyst with Weiss Research in Jupiter.”
“In the coming weeks and months, buyers should expect sellers to keep dropping home prices, experts said.”
“‘In last 60 days, anecdotally we're hearing about a lot more capitulations on the part of sellers,’ said Brad Hunter, a housing analyst with Metrostudy in West Palm Beach.”
“In September, sales of existing homes in Broward County declined 46 percent to 401 from 741 a year ago, the Florida Association of Realtors said Wednesday. Statewide, home sales fell even further in other cities: in Miami, 53 percent; in Orlando, 48 percent, and Fort Myers, 53 percent.”
“‘Sellers need to get a grip,’ said David Dweck, head of the Boca Real Estate Investment Club. Homeowners are not likely to sell their homes if they're not ‘priced slightly below the market and your property is not beautiful,’ he said. ‘Buyers have their pick of the litter.’”
In an amusing article, The Sun-Sentinel reported on bitter flippers who making legal moves to try and recover their pre-construction deposits now that the housing market has tumbled:
“When Jennifer Wigand put down a deposit in 2005 for a condominium in a multi-use development called Veranda at Plantation, she hoped to quickly sell it and use the profits to help pay her law school loans.”
“Then the housing market plunged. Wigand said she wasn't worried because the developer had promised she could back out any time and her money would be returned. But in July, when she asked to take part in that program, Wigand said she was told it had been canceled.”
“Like an increasing number of buyers in South Florida, Wigand last month filed a lawsuit to get out of the deal. Last week, 20 other buyers in Veranda joined her suit.”
“‘I was disappointed that the developers and their agents went back on their word,’ said the 24-year-old Fort Lauderdale resident. ‘I just want my [$39,200] deposit back.’”
“Wigand's two-bedroom, $392,000 condo is scheduled to close on Oct. 30. She said she will forfeit her deposit if the court does not grant her relief.”
“Ori Onn, a real estate agent, signed a contract in 2005 to buy a one-bedroom Phase One condo for $295,000. He put down $59,000 and like Wigand, he planned to flip it.”
“‘They told me they would put it on a resale program if I didn't go through with the deal,’ Onn said, adding he tried but was unable to reach Veranda representatives four times in the last few months to take them up on the offer.”
In an effort to avert foreclosures, Countrywide is starting to deal with some troubled borrowers:
“Countrywide Financial, the nation's largest mortgage lender, said Tuesday it will begin calling borrowers to offer refinancing or modifications on $16 billion in loans with interest rates set to adjust by the end of 2008.”
“But as defaults and foreclosures snowball, the mortgage industry is under increasing pressure to do even more to help financially strapped borrowers hang on to their homes.”
“‘People are talking about it, saying it might be necessary, but there's not a lot of it going on,’ said Guy Cecala, publisher of Inside Mortgage Finance, an independent trade publication.”
“So far this year, Calabasas, Calif.-based Countrywide said it has completed about 20,000 loan modifications -- a figure that represents less than 5 percent of the more than 500,000 loans the lender reports were behind in payments as of last month.”
“The figure amounts to about 24 percent of the roughly 82,000 loans the company said were in foreclosure.”
Now that homeowners no longer own homes that they can use as ATMs, the automobile and boating industries are suffering. Yesterday, local auto dealer giant, AutoNation, reported:
“The slumping housing market continues to leave vehicle sales in the slow lane at Fort Lauderdale's AutoNation.”
“AutoNation sold 9,632 fewer new vehicles in the quarter ended Sept. 30 compared to a year ago, a decline of almost 10 percent.”
“That drop was driven by softness in Florida and California, which account for half of AutoNation's new-vehicle business and where the housing slump has been most severe. Sales were down 11 percent in those two states.”
“Falling home values mean consumers can't as easily tap the equity to buy vehicles. And the construction slowdown has spilled over to light-truck sales.”
“‘Things will be difficult for at least [another] year,’ said Mike Jackson, AutoNation's chairman and chief executive. ‘There is no shortcut to better days, but the stabilization process has begun,’ because of last month's interest rate cut by the Federal Reserve. Still, he said further cuts are needed.”
Sales in the boating industry show which financial classes are being affected by the housing downturn. The Miami Herald reports:
“As the housing slump and the sputtering U.S. economy spur consumers to cut back, much of the boating industry is in the doldrums. The number of powerboats sold is expected to plunge about 10 percent this year, and many exhibitors at the show, which opens Thursday, are cautious about prospects.”
“Yet builders of superyachts -- boats 80 feet or longer -- have full order books with delivery dates well into the next decade.”
“‘The megayacht market is very resilient,’ says Frank Herhold, executive director of the Marine Industries Association of South Florida, which owns the Fort Lauderdale show, the world's largest in terms of exhibition space. ‘It looks like full speed ahead.’”
“Prices of homes and condos in Broward County dropped in September compared with a year ago, a sign that stubborn sellers may finally be accepting the reality that they are no longer able to get the sky-high prices of the boom years.”
“Broward's single-family home sales were off last year's number by 46 percent; condo sales declined 39 percent. But prices also fell -- the median home price down 7 percent year-over-year to $345,200 while condo prices slipped 15 percent to $174,600.”
“In Miami-Dade, single-family home sales were more than cut in half for the month, dropping 53 percent from September 2006. Condo sales were similarly off 47 percent. Home prices were mostly flat at $372,300, and median condo prices rose 2 percent to $275,000.”
“Gabriella Berenyi, a seller in Oakland Park, said she will not budge further on her price.”
“Nearly a year ago she put her three-bedroom lakefront condo up for sale, asking $289,000. She found few interested buyers, and the ones she found couldn't qualify for a mortgage. So she dropped her price to $279,000.”
“‘This has been the worst experience,’ she said.”
“‘But I don't believe in going down too low [on the price] because I invested so much remodeling it. If I go down too low, I can't get any money out of it. So I am trying to rent it out now; people say prices will go up in six months or a year.’”
The Palm Beach Post reported the following:
“The housing decline has been under way for more than a year, and analysts say it could be at least another year before the market plateaus, based on September existing-home sales reports.”
“The median price for an existing single-family home in Palm Beach County dipped to $355,300 in September, down 3 percent from $365,500 in September 2006, as sellers continued to hold out for their asking prices despite heavy market pressures. The number of homes sold in the county fell 17 percent, to 471 from the 566 homes sold in the same month one year ago.”
“In Martin and St. Lucie counties, the news was even worse. The Treasure Coast posted the second-steepest home-price decline in the state. The median price plunged to $202,000, off 17 percent from a year earlier, when the median was $244,300, the Florida Association of Realtors said Wednesday.”
“‘Mortgage money is very tight now,’ said housing analyst Jack McCabe, chief executive of McCabe Research and Consulting in Deerfield Beach. ‘Prices are going to continue to drop. From 2007 to the end of 2009, you're going to see a 35 to 40 percent drop off the market peak.’”
The Miami Herald reports that the housing downturn is not just a local phenomena; it’s a national problem:
“Sales of existing homes had a record decline in September while median home prices fell by the largest amount in nearly a year, reflecting deepening problems in the troubled housing market.”
“Analysts said the current downturn is already more severe than the housing slump of the 1990s. They predicted that before it is resolved, it will rival the 1980-82 housing slump. Back then, the industry was battered by double-digit mortgage rates and the economy was in a steep recession.”
“The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September. It was the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was the slowest pace on record.”
The Sun-Sentinel reports similarly and even used the “C” word (capitulation):
“September's home sales plunged in Broward County, and real estate experts say fewer sales and declining housing prices reflect the continuing trend in South Florida, the state and the nation.”
“Buyers are deterred by the state's property tax and insurance crisis, stiffer mortgage financing requirements owing to credit turmoil, and home prices that many still can't afford. September marks month No. 21 of the region's housing slump.”
“‘The investors are gone. You have the average person trying to put a roof over his head, and prices are still unaffordable,’ said Mike Larson, an analyst with Weiss Research in Jupiter.”
“In the coming weeks and months, buyers should expect sellers to keep dropping home prices, experts said.”
“‘In last 60 days, anecdotally we're hearing about a lot more capitulations on the part of sellers,’ said Brad Hunter, a housing analyst with Metrostudy in West Palm Beach.”
“In September, sales of existing homes in Broward County declined 46 percent to 401 from 741 a year ago, the Florida Association of Realtors said Wednesday. Statewide, home sales fell even further in other cities: in Miami, 53 percent; in Orlando, 48 percent, and Fort Myers, 53 percent.”
“‘Sellers need to get a grip,’ said David Dweck, head of the Boca Real Estate Investment Club. Homeowners are not likely to sell their homes if they're not ‘priced slightly below the market and your property is not beautiful,’ he said. ‘Buyers have their pick of the litter.’”
In an amusing article, The Sun-Sentinel reported on bitter flippers who making legal moves to try and recover their pre-construction deposits now that the housing market has tumbled:
“When Jennifer Wigand put down a deposit in 2005 for a condominium in a multi-use development called Veranda at Plantation, she hoped to quickly sell it and use the profits to help pay her law school loans.”
“Then the housing market plunged. Wigand said she wasn't worried because the developer had promised she could back out any time and her money would be returned. But in July, when she asked to take part in that program, Wigand said she was told it had been canceled.”
“Like an increasing number of buyers in South Florida, Wigand last month filed a lawsuit to get out of the deal. Last week, 20 other buyers in Veranda joined her suit.”
“‘I was disappointed that the developers and their agents went back on their word,’ said the 24-year-old Fort Lauderdale resident. ‘I just want my [$39,200] deposit back.’”
“Wigand's two-bedroom, $392,000 condo is scheduled to close on Oct. 30. She said she will forfeit her deposit if the court does not grant her relief.”
“Ori Onn, a real estate agent, signed a contract in 2005 to buy a one-bedroom Phase One condo for $295,000. He put down $59,000 and like Wigand, he planned to flip it.”
“‘They told me they would put it on a resale program if I didn't go through with the deal,’ Onn said, adding he tried but was unable to reach Veranda representatives four times in the last few months to take them up on the offer.”
In an effort to avert foreclosures, Countrywide is starting to deal with some troubled borrowers:
“Countrywide Financial, the nation's largest mortgage lender, said Tuesday it will begin calling borrowers to offer refinancing or modifications on $16 billion in loans with interest rates set to adjust by the end of 2008.”
“But as defaults and foreclosures snowball, the mortgage industry is under increasing pressure to do even more to help financially strapped borrowers hang on to their homes.”
“‘People are talking about it, saying it might be necessary, but there's not a lot of it going on,’ said Guy Cecala, publisher of Inside Mortgage Finance, an independent trade publication.”
“So far this year, Calabasas, Calif.-based Countrywide said it has completed about 20,000 loan modifications -- a figure that represents less than 5 percent of the more than 500,000 loans the lender reports were behind in payments as of last month.”
“The figure amounts to about 24 percent of the roughly 82,000 loans the company said were in foreclosure.”
Now that homeowners no longer own homes that they can use as ATMs, the automobile and boating industries are suffering. Yesterday, local auto dealer giant, AutoNation, reported:
“The slumping housing market continues to leave vehicle sales in the slow lane at Fort Lauderdale's AutoNation.”
“AutoNation sold 9,632 fewer new vehicles in the quarter ended Sept. 30 compared to a year ago, a decline of almost 10 percent.”
“That drop was driven by softness in Florida and California, which account for half of AutoNation's new-vehicle business and where the housing slump has been most severe. Sales were down 11 percent in those two states.”
“Falling home values mean consumers can't as easily tap the equity to buy vehicles. And the construction slowdown has spilled over to light-truck sales.”
“‘Things will be difficult for at least [another] year,’ said Mike Jackson, AutoNation's chairman and chief executive. ‘There is no shortcut to better days, but the stabilization process has begun,’ because of last month's interest rate cut by the Federal Reserve. Still, he said further cuts are needed.”
Sales in the boating industry show which financial classes are being affected by the housing downturn. The Miami Herald reports:
“As the housing slump and the sputtering U.S. economy spur consumers to cut back, much of the boating industry is in the doldrums. The number of powerboats sold is expected to plunge about 10 percent this year, and many exhibitors at the show, which opens Thursday, are cautious about prospects.”
“Yet builders of superyachts -- boats 80 feet or longer -- have full order books with delivery dates well into the next decade.”
“‘The megayacht market is very resilient,’ says Frank Herhold, executive director of the Marine Industries Association of South Florida, which owns the Fort Lauderdale show, the world's largest in terms of exhibition space. ‘It looks like full speed ahead.’”
Monday, October 22, 2007
Today's Local Real Estate News: "There's no shortage of culprits."
In a cent article, The Palm Beach Post tried to answer the blame game question:
“‘The thing we have the most difficulty doing nowadays is figuring out who has legitimately been taken advantage of, as opposed to who went into the transaction with their eyes open,’ says Mr. Sichenzia, now lead investigator for the Deerfield Beach law firm of Glinn Somera & Silva, which handles foreclosure cases.”
“That's because so many had something to gain from the mortgage bubble, says Bill Davis, president of Private Funding Specialists and past president of the Florida Association of Mortgage Brokers' Palm Beach County region — and many of those people went about their business winking and nodding. ‘It's everybody,’ he says. ‘The Federal Reserve participated, the big lenders played a part, the credit ratings agencies had a part, so did hedge funds and borrowers, appraisers.’”
“The local results: In the six months ending July 1 of this year alone, more than $1 billion in mortgages defaulted in Palm Beach County and along the Treasure Coast. Not every borrower, though, was seeking shelter. And not everyone was duped into an onerous deal.”
“‘I had a guy who called me who owns 70 homes,’ says Stuart broker Michael Morgan. ‘I know a lady who owns 16. It's the room of 1,000 doughnuts. How many can you eat? Two? Three? Well, how many houses can you live in?’”
“‘We were going through my mother's financials and found out she had refinanced through the same broker eight times,’ says Lance Cassal, a Maryland man who once handled mortgage loans — and who has since cofounded a Web site offering licensing and general background information on brokers.”
“There's no shortage of culprits, says Mr. Sichenzia: ‘Everyone who had their little finger on the loan paper.’ Collecting from them could be harder, he says. ‘Most of them are running to the hills and seeking cover under deep rocks.’”
Meanwhile, the mainstream media continues to run stories where mortgage-industry officials try to talk troubled homeowners out of allowing their home to fall into foreclosure. The Miami Herald ran an article written by George Joseph, the president and CEO of the Dade County Federal Credit Union, where he encourages trouble homeowners to keep paying those mortgages:
“South Floridians who are facing foreclosure in the wake of the mortgage boom meltdown are not without hope.”
“They can expect to encounter significant difficulties, but many will find that they will not lose their home or ruin their credit if they take a proactive and determined approach in negotiating a ''workout'' with their loan servicing company and their lender.”
“Foreclosure filings nationwide in August soared to nearly 244,000, up 36 percent from the previous month and more than double the number in August 2006, according to home loan database RealtyTrac. The company reports that the filings in Miami-Dade and Broward counties totaled 12,441 in August, which is up from 8,625 in August 2006, an increase of more than 44 percent. Experts predict that the foreclosures will continue to rise, as many adjustable rate mortgages will reset to higher rates in the near future.”
“Foreclosures also take a significant toll on the individual borrowers as well as the region's economy and property values. Foreclosures damage borrowers' credit scores, making it more costly, if not impossible, for them to secure other loans. Ultimately, these borrowers reduce their purchases of goods and services, which has a negative impact on local businesses. The foreclosed homes that become owned by lenders are usually sold below market value, which impacts property values for all surrounding homes. In addition, local governments lose property taxes as the foreclosed properties sit idle.”
Many bloggers, including yours truly, have been talking about affordability for years. Now, a few mainstream media folks are finally seeing the light (even thoug it was a blazing spotlight shining right in their faces). Linda Rawls, a reporter with The Palm Beach Post explains the painfully obvious:
“Our take: Home sales have fallen because people can't afford to buy them anymore. Home prices have far outpaced income.”
“The ratio of home prices to income should be about 3-to-1, federal guidelines say.” [Actually, the federal guidelines say that 3-to-1 should be the MAXIMUM]
“In Palm Beach County, the ratio was 7-to-1 in last year's study by Housing Leadership of Palm Beach County. This year's report, we are told, should be out soon.”
“The new-home market is faring even worse than the resale.”
“‘For all practical purposes,’ Moody's Economy.com declared this month, the new-home market is ‘dead.’”
“Home builder sentiment has fallen to its lowest rating in the history of the National Association of Home Builders' index. The oft-quoted index was launched in 1985.”
“‘The seasonally adjusted numbers are the lowest on record in October for every subcategory, as they have been every month since spring began,’ economist Patrick McPherron noted in his eulogy. ‘The bottom of this market will not be reached until there is another significant decline in the cost to prospective buyers, both in house prices and mortgage rates.’”
The Palm Beach Post reports on the mortgage industry’s return to basics:
“An abrupt shift back to the basics of mortgage lending has many house hunters nervous because several once-popular types of loans are disappearing.”
“With urging from regulators, lenders faced with growing piles of bad loans have clamped down on the kinds of mortgages they are willing to offer. That is most strongly affecting people who lack proof of income, cash reserves or good credit. But others should still be able to find a home loan.”
“Most house hunters must once again bring money to the table because the no-down-payment loans that four out of 10 first-time home buyers used during the boom years are hard to come by. Many lenders now want at least 5 percent down, and the more, the better.”
“Many lenders have stopped making piggyback loans because the second loan poses more risk than they are willing to take. If a homeowner loses a house, proceeds from its sale would go toward paying off the first mortgage. Usually, there would be little, if any, money left to cover the second.”
“Also out of favor, and nearly impossible to find, are low- or no-documentation loans, which had been devised for people who were unwilling or unable to verify their incomes.”
The Miami Herald discussed the falling stock price of a local bank:
“As housing market losses pile up, Florida's largest locally headquartered home lender finds itself in the center of the storm.”
“Amid South Florida's housing meltdown, share prices at even highly capitalized BankUnited have taken it on the chin.”
“BankUnited Financial, the holding company for the bank, has seen its stock price drop from around $27 a share in January -- just before it announced record earnings but a spike in problem loans -- to below $11 this past week, after it forecast lower fourth-quarter earnings. Final results for the quarter that ended Sept. 30 will be announced on Tuesday.”
“This drop has frustrated management at BankUnited, the largest bank headquartered in Florida with $15 billion in assets. The institution says it has none of the problematic subprime loans that triggered the current mess, no piggyback loans, and even halted condo construction lending two years before the bottom fell out of the frothy housing market.”
“Ortiz and BankUnited Chairman and Chief Executive Alfred R. Camner are not denying that the current downturn is rough and that the lion's share of the bank's loans are home mortgages. Or even that more than half of its mortgages are option-ARM, adjustable rate mortgages, which allow the borrower to make full payment, pay only interest or even less than the full interest each month.”
“‘The thing we have the most difficulty doing nowadays is figuring out who has legitimately been taken advantage of, as opposed to who went into the transaction with their eyes open,’ says Mr. Sichenzia, now lead investigator for the Deerfield Beach law firm of Glinn Somera & Silva, which handles foreclosure cases.”
“That's because so many had something to gain from the mortgage bubble, says Bill Davis, president of Private Funding Specialists and past president of the Florida Association of Mortgage Brokers' Palm Beach County region — and many of those people went about their business winking and nodding. ‘It's everybody,’ he says. ‘The Federal Reserve participated, the big lenders played a part, the credit ratings agencies had a part, so did hedge funds and borrowers, appraisers.’”
“The local results: In the six months ending July 1 of this year alone, more than $1 billion in mortgages defaulted in Palm Beach County and along the Treasure Coast. Not every borrower, though, was seeking shelter. And not everyone was duped into an onerous deal.”
“‘I had a guy who called me who owns 70 homes,’ says Stuart broker Michael Morgan. ‘I know a lady who owns 16. It's the room of 1,000 doughnuts. How many can you eat? Two? Three? Well, how many houses can you live in?’”
“‘We were going through my mother's financials and found out she had refinanced through the same broker eight times,’ says Lance Cassal, a Maryland man who once handled mortgage loans — and who has since cofounded a Web site offering licensing and general background information on brokers.”
“There's no shortage of culprits, says Mr. Sichenzia: ‘Everyone who had their little finger on the loan paper.’ Collecting from them could be harder, he says. ‘Most of them are running to the hills and seeking cover under deep rocks.’”
Meanwhile, the mainstream media continues to run stories where mortgage-industry officials try to talk troubled homeowners out of allowing their home to fall into foreclosure. The Miami Herald ran an article written by George Joseph, the president and CEO of the Dade County Federal Credit Union, where he encourages trouble homeowners to keep paying those mortgages:
“South Floridians who are facing foreclosure in the wake of the mortgage boom meltdown are not without hope.”
“They can expect to encounter significant difficulties, but many will find that they will not lose their home or ruin their credit if they take a proactive and determined approach in negotiating a ''workout'' with their loan servicing company and their lender.”
“Foreclosure filings nationwide in August soared to nearly 244,000, up 36 percent from the previous month and more than double the number in August 2006, according to home loan database RealtyTrac. The company reports that the filings in Miami-Dade and Broward counties totaled 12,441 in August, which is up from 8,625 in August 2006, an increase of more than 44 percent. Experts predict that the foreclosures will continue to rise, as many adjustable rate mortgages will reset to higher rates in the near future.”
“Foreclosures also take a significant toll on the individual borrowers as well as the region's economy and property values. Foreclosures damage borrowers' credit scores, making it more costly, if not impossible, for them to secure other loans. Ultimately, these borrowers reduce their purchases of goods and services, which has a negative impact on local businesses. The foreclosed homes that become owned by lenders are usually sold below market value, which impacts property values for all surrounding homes. In addition, local governments lose property taxes as the foreclosed properties sit idle.”
Many bloggers, including yours truly, have been talking about affordability for years. Now, a few mainstream media folks are finally seeing the light (even thoug it was a blazing spotlight shining right in their faces). Linda Rawls, a reporter with The Palm Beach Post explains the painfully obvious:
“Our take: Home sales have fallen because people can't afford to buy them anymore. Home prices have far outpaced income.”
“The ratio of home prices to income should be about 3-to-1, federal guidelines say.” [Actually, the federal guidelines say that 3-to-1 should be the MAXIMUM]
“In Palm Beach County, the ratio was 7-to-1 in last year's study by Housing Leadership of Palm Beach County. This year's report, we are told, should be out soon.”
“The new-home market is faring even worse than the resale.”
“‘For all practical purposes,’ Moody's Economy.com declared this month, the new-home market is ‘dead.’”
“Home builder sentiment has fallen to its lowest rating in the history of the National Association of Home Builders' index. The oft-quoted index was launched in 1985.”
“‘The seasonally adjusted numbers are the lowest on record in October for every subcategory, as they have been every month since spring began,’ economist Patrick McPherron noted in his eulogy. ‘The bottom of this market will not be reached until there is another significant decline in the cost to prospective buyers, both in house prices and mortgage rates.’”
The Palm Beach Post reports on the mortgage industry’s return to basics:
“An abrupt shift back to the basics of mortgage lending has many house hunters nervous because several once-popular types of loans are disappearing.”
“With urging from regulators, lenders faced with growing piles of bad loans have clamped down on the kinds of mortgages they are willing to offer. That is most strongly affecting people who lack proof of income, cash reserves or good credit. But others should still be able to find a home loan.”
“Most house hunters must once again bring money to the table because the no-down-payment loans that four out of 10 first-time home buyers used during the boom years are hard to come by. Many lenders now want at least 5 percent down, and the more, the better.”
“Many lenders have stopped making piggyback loans because the second loan poses more risk than they are willing to take. If a homeowner loses a house, proceeds from its sale would go toward paying off the first mortgage. Usually, there would be little, if any, money left to cover the second.”
“Also out of favor, and nearly impossible to find, are low- or no-documentation loans, which had been devised for people who were unwilling or unable to verify their incomes.”
The Miami Herald discussed the falling stock price of a local bank:
“As housing market losses pile up, Florida's largest locally headquartered home lender finds itself in the center of the storm.”
“Amid South Florida's housing meltdown, share prices at even highly capitalized BankUnited have taken it on the chin.”
“BankUnited Financial, the holding company for the bank, has seen its stock price drop from around $27 a share in January -- just before it announced record earnings but a spike in problem loans -- to below $11 this past week, after it forecast lower fourth-quarter earnings. Final results for the quarter that ended Sept. 30 will be announced on Tuesday.”
“This drop has frustrated management at BankUnited, the largest bank headquartered in Florida with $15 billion in assets. The institution says it has none of the problematic subprime loans that triggered the current mess, no piggyback loans, and even halted condo construction lending two years before the bottom fell out of the frothy housing market.”
“Ortiz and BankUnited Chairman and Chief Executive Alfred R. Camner are not denying that the current downturn is rough and that the lion's share of the bank's loans are home mortgages. Or even that more than half of its mortgages are option-ARM, adjustable rate mortgages, which allow the borrower to make full payment, pay only interest or even less than the full interest each month.”
Friday, October 19, 2007
Today's Local Real Estate News: "I have never seen housing credit conditions change so significantly over such a short period of time."
Bank are starting disclose their losses associated with mortgage meltdown. The Palm Beach Post reports:
“Bank of America Corp., the nation's second-largest bank, said Thursday its profit fell 32 percent in the third quarter as trading losses and write-downs on a wide variety of loans offset solid revenue growth in most businesses.”
“Investment banking revenue fell 44 percent from a year ago as sales and trading-revenue declined. The bank wrote down $247 million for leveraged loans and other financing commitments, and suffered a $607 million trading loss.”
“It also had a $527 million loss related to structured products, including asset- and residential mortgage-backed securities and collateralized debt obligations.”
“‘Bank of America's trading losses in third quarter were significant and also worse than peers while marks taken on leverage loans and mortgage assets seem lower than others,’ wrote Goldman Sachs analyst Lori B. Appelbaum in a research note. ‘Lower marks potentially reflect Bank of America's lower risk exposure in these areas.’”
Capital One also saw large losses associated with the mortgage mess:
:Capital One Financial Corp. posted a third-quarter net loss Thursday, hurt by charges from shutting down its GreenPoint Mortgage business.”
“The McLean, Va.-based company, a credit card issuer that continues to expand into retail banking, said its third-quarter net loss totaled $81.6 million, or 21 cents per share, in the July-September period, compared with a profit of $587.8 million, or $1.89 per share, in the year-ago quarter.”
“Excluding the company's $898 million charge related to the shutdown of its troubled GreenPoint Mortgage unit, Capital One posted third-quarter earnings of $2.09 per share.”
“As the nation's housing market has cooled, the mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures. Many homebuyers have been forced into default or foreclose because they haven't been able to sell their homes or end up owing more than their home is worth.”
“As a result, it has become more difficult for lenders like GreenPoint to sell the mortgages they originate to investors.”
SunTrust wasn’t spared:
“SunTrust Banks Inc. said Thursday its profit fell 23 percent during the third quarter, as the Atlanta-based banking giant wrestled with rising mortgage-related losses and ongoing costs of work-force reductions and streamlining.”
“‘We are not immune to the deterioration in the housing market and related turmoil in the capital markets, and change in the credit cycle,’ James Wells, SunTrust's president and chief executive officer, said in a written statement.”
“SunTrust, already in the middle of a companywide downsizing and real estate sell-off, said it is considering even more restructuring in the months ahead.”
First Horizon also announced losses:
“First Horizon National Corp. posted a loss of $14.2 million in the third quarter as the mortgage banking business continued to be a drag on profits.”
“The company's mortgage banking division had a loss of $45.8 million for the quarter, hurt primarily by what the company was able to resell the mortgages for in the jittery secondary market.”
WaMu wasn’t left out:
“Washington Mutual Inc.'s third-quarter profit shrank 72 percent as sagging home prices made it harder for borrowers to pay their bills and hurt the value of the bank's portfolio of mortgage loans.”
“The third-biggest home lender on Wednesday reported quarterly profit of $210 million, or 23 cents per share, compared with profit of $748 million, or 77 cents per share, a year earlier.”
“Washington Mutual socked away $967 million in the third quarter to prepare for borrowers defaulting on their debt, mostly mortgages and credit card loans. The reserve is nearly six times bigger than the provision in the same quarter last year.”
“‘I have never seen housing credit conditions change so significantly over such a short period of time, nor can I remember a period when there was less clarity about near-term housing and credit trends,’ Chief Financial Officer Tom Casey told financial analysts.”
Meanwhile, local homebuilder, Levitt & Sons, seem to be clutching its last straws:
“Levitt & Sons, the home builder that invented suburbia when it developed Levittown, Long Island, 60 years ago, is in deep trouble.”
“The Fort Lauderdale-based company has stopped construction of homes in all its Florida subdivisions, including the Cascades at Sarasota, as it attempts to renegotiate its massive debt.”
“‘Levitt & Sons is currently in discussions with lenders and has told its subcontractors that at least for now they should stop work,’ said Michael Freitag, a spokesman for the home builder's parent, Levitt Corp.”
“Numerous big builders with a heavy Florida presence -- including Miami-based Lennar Corp., The St. Joe Co. in Jacksonville and WCI Communities in Bonita Springs -- have announced write-offs, red ink, layoffs, or a combination of the three.”
“‘Every builder is taking hits,’ said Jack McCabe, a Deerfield Beach consultant who advises developers and investors on Florida real estate trends. ‘It doesn't matter how big they are, how good they are. Everybody is taking hits, some worse that others.’”
Dade-County-based Watsco announced a loss:
“Shares in Watsco (WSO) fell 94 cents to $40.70 Thursday after the Coconut Grove-based distributor of heating and cooling equipment reported worse than expected profits.”
“Watsco reported that third-quarter earnings fell 13 percent, due in part to a slowdown in home building.”
“Watsco also reduced its fiscal year 2007 outlook on Thursday, as the housing slowdown and pricing pressures persist.”
With all this terrible earnings news, it’s not surprising that jobless claims are climbing:
“The number of newly laid off workers filing claims for unemployment benefits shot up by the largest amount since early February, a far bigger increase than had been expected.”
“The Labor Department reported Thursday that applications for jobless benefits hit 337,000 last week, an increase of 28,000 from the previous week. That was the biggest one-week surge since jobless claims jumped 42,000 the week of Feb. 10.”
“The increase was four times larger than the gain of 6,000 that economists had been expecting and could be a sign that the labor market is starting to weaken under the impact of a severe downturn in housing and the credit crisis that jolted financial markets in August.”
“Earlier this week, both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned that the housing crisis was likely to last longer than had been expected.”
“Construction of new homes and apartments plunged to a 14-year low in September while the National Association of Home Builders' survey of builder confidence plunged in early October to the lowest level ever recorded in the 22-year history of the survey.”
Finally, the Palm Beach Post is reporting that local rental prices are stagnant:
“Palm Beach County and the Treasure Coast - two of the hottest real estate markets in the nation during the housing boom - kept relatively high rental rates steady in the third quarter of this year, according to a RealFacts study of the nation's metropolitan areas released today.”
“The average rent for an apartment in Palm Beach County from July through September was $1,146, relatively unchanged from the same period a year ago, when it was $1,141, RealFacts said. The study averaged rents for all unit sizes for those figures. It also tracked rents by apartment size.”
“Declining occupancy is a trend that confuses Bates, given that other data-analysis companies have documented a tsunami of foreclosures in what has come to be known as the ‘mortgage meltdown.’”
“‘We cover nine of the 10 markets in those foreclosure reports,’ Bates said, ‘and we looked for an increase in rental occupancies after all those people lost their homes. We didn't find it.’”
“Then he realized that credit reports took a nosedive after foreclosure.”
“‘When they're foreclosed on, their FICO (credit) scores are screwed, and landlords take that seriously,’ Bates said, referring to investment-grade units. ‘They can't rent.’”
“Bank of America Corp., the nation's second-largest bank, said Thursday its profit fell 32 percent in the third quarter as trading losses and write-downs on a wide variety of loans offset solid revenue growth in most businesses.”
“Investment banking revenue fell 44 percent from a year ago as sales and trading-revenue declined. The bank wrote down $247 million for leveraged loans and other financing commitments, and suffered a $607 million trading loss.”
“It also had a $527 million loss related to structured products, including asset- and residential mortgage-backed securities and collateralized debt obligations.”
“‘Bank of America's trading losses in third quarter were significant and also worse than peers while marks taken on leverage loans and mortgage assets seem lower than others,’ wrote Goldman Sachs analyst Lori B. Appelbaum in a research note. ‘Lower marks potentially reflect Bank of America's lower risk exposure in these areas.’”
Capital One also saw large losses associated with the mortgage mess:
:Capital One Financial Corp. posted a third-quarter net loss Thursday, hurt by charges from shutting down its GreenPoint Mortgage business.”
“The McLean, Va.-based company, a credit card issuer that continues to expand into retail banking, said its third-quarter net loss totaled $81.6 million, or 21 cents per share, in the July-September period, compared with a profit of $587.8 million, or $1.89 per share, in the year-ago quarter.”
“Excluding the company's $898 million charge related to the shutdown of its troubled GreenPoint Mortgage unit, Capital One posted third-quarter earnings of $2.09 per share.”
“As the nation's housing market has cooled, the mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures. Many homebuyers have been forced into default or foreclose because they haven't been able to sell their homes or end up owing more than their home is worth.”
“As a result, it has become more difficult for lenders like GreenPoint to sell the mortgages they originate to investors.”
SunTrust wasn’t spared:
“SunTrust Banks Inc. said Thursday its profit fell 23 percent during the third quarter, as the Atlanta-based banking giant wrestled with rising mortgage-related losses and ongoing costs of work-force reductions and streamlining.”
“‘We are not immune to the deterioration in the housing market and related turmoil in the capital markets, and change in the credit cycle,’ James Wells, SunTrust's president and chief executive officer, said in a written statement.”
“SunTrust, already in the middle of a companywide downsizing and real estate sell-off, said it is considering even more restructuring in the months ahead.”
First Horizon also announced losses:
“First Horizon National Corp. posted a loss of $14.2 million in the third quarter as the mortgage banking business continued to be a drag on profits.”
“The company's mortgage banking division had a loss of $45.8 million for the quarter, hurt primarily by what the company was able to resell the mortgages for in the jittery secondary market.”
WaMu wasn’t left out:
“Washington Mutual Inc.'s third-quarter profit shrank 72 percent as sagging home prices made it harder for borrowers to pay their bills and hurt the value of the bank's portfolio of mortgage loans.”
“The third-biggest home lender on Wednesday reported quarterly profit of $210 million, or 23 cents per share, compared with profit of $748 million, or 77 cents per share, a year earlier.”
“Washington Mutual socked away $967 million in the third quarter to prepare for borrowers defaulting on their debt, mostly mortgages and credit card loans. The reserve is nearly six times bigger than the provision in the same quarter last year.”
“‘I have never seen housing credit conditions change so significantly over such a short period of time, nor can I remember a period when there was less clarity about near-term housing and credit trends,’ Chief Financial Officer Tom Casey told financial analysts.”
Meanwhile, local homebuilder, Levitt & Sons, seem to be clutching its last straws:
“Levitt & Sons, the home builder that invented suburbia when it developed Levittown, Long Island, 60 years ago, is in deep trouble.”
“The Fort Lauderdale-based company has stopped construction of homes in all its Florida subdivisions, including the Cascades at Sarasota, as it attempts to renegotiate its massive debt.”
“‘Levitt & Sons is currently in discussions with lenders and has told its subcontractors that at least for now they should stop work,’ said Michael Freitag, a spokesman for the home builder's parent, Levitt Corp.”
“Numerous big builders with a heavy Florida presence -- including Miami-based Lennar Corp., The St. Joe Co. in Jacksonville and WCI Communities in Bonita Springs -- have announced write-offs, red ink, layoffs, or a combination of the three.”
“‘Every builder is taking hits,’ said Jack McCabe, a Deerfield Beach consultant who advises developers and investors on Florida real estate trends. ‘It doesn't matter how big they are, how good they are. Everybody is taking hits, some worse that others.’”
Dade-County-based Watsco announced a loss:
“Shares in Watsco (WSO) fell 94 cents to $40.70 Thursday after the Coconut Grove-based distributor of heating and cooling equipment reported worse than expected profits.”
“Watsco reported that third-quarter earnings fell 13 percent, due in part to a slowdown in home building.”
“Watsco also reduced its fiscal year 2007 outlook on Thursday, as the housing slowdown and pricing pressures persist.”
With all this terrible earnings news, it’s not surprising that jobless claims are climbing:
“The number of newly laid off workers filing claims for unemployment benefits shot up by the largest amount since early February, a far bigger increase than had been expected.”
“The Labor Department reported Thursday that applications for jobless benefits hit 337,000 last week, an increase of 28,000 from the previous week. That was the biggest one-week surge since jobless claims jumped 42,000 the week of Feb. 10.”
“The increase was four times larger than the gain of 6,000 that economists had been expecting and could be a sign that the labor market is starting to weaken under the impact of a severe downturn in housing and the credit crisis that jolted financial markets in August.”
“Earlier this week, both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned that the housing crisis was likely to last longer than had been expected.”
“Construction of new homes and apartments plunged to a 14-year low in September while the National Association of Home Builders' survey of builder confidence plunged in early October to the lowest level ever recorded in the 22-year history of the survey.”
Finally, the Palm Beach Post is reporting that local rental prices are stagnant:
“Palm Beach County and the Treasure Coast - two of the hottest real estate markets in the nation during the housing boom - kept relatively high rental rates steady in the third quarter of this year, according to a RealFacts study of the nation's metropolitan areas released today.”
“The average rent for an apartment in Palm Beach County from July through September was $1,146, relatively unchanged from the same period a year ago, when it was $1,141, RealFacts said. The study averaged rents for all unit sizes for those figures. It also tracked rents by apartment size.”
“Declining occupancy is a trend that confuses Bates, given that other data-analysis companies have documented a tsunami of foreclosures in what has come to be known as the ‘mortgage meltdown.’”
“‘We cover nine of the 10 markets in those foreclosure reports,’ Bates said, ‘and we looked for an increase in rental occupancies after all those people lost their homes. We didn't find it.’”
“Then he realized that credit reports took a nosedive after foreclosure.”
“‘When they're foreclosed on, their FICO (credit) scores are screwed, and landlords take that seriously,’ Bates said, referring to investment-grade units. ‘They can't rent.’”
Wednesday, October 10, 2007
Today's Local Real Estate News: "I've seen some tough times, but I've never seen anything like this."
The Palm Beach Post provided one of the more realistic views of the local real estate market:
“The housing market in Palm Beach County and the Treasure Coast has turned "brutal" and is getting worse, a veteran mortgage broker said Tuesday.”
“The stark outlook came from William Davis, president of Private Funding Specialists Inc. in Palm Beach Gardens and past president of the Palm Beach County chapter of the Florida Association of Mortgage Brokers.”
“‘I've seen some tough times, but I've never seen anything like this,’ Davis told members of the Economic Forum of Palm Beach County.”
“There were 33,708 houses and condos listed for sale in Palm Beach County in August, according to Illustrated Properties Real Estate's analysis of Multiple Listing Service data. Illustrated Properties President Chappy Adams didn't attend Davis' speech but agreed with his conclusions.”
“‘It's pretty bad,’ Adams said. ‘We've got a 40-month supply of homes, which has got to be an all-time high. For the foreseeable future, prices are going to keep coming down a bit.’”
A Palm Beach Post real estate blog added some other quotes made by William Davis at the same meeting:
“On the foreclosures that follow negative amortization loans: ‘We called them neutron bombs, because the people would go away, and the buildings would stay.’”
“On the housing hangover: ‘We had a three-year fraternity party, and it’s going to take more than a month of Sundays to clean up the mess.’”
“On the glut of homes on the market: ‘It’ll make you sicker than West Palm water if I tell you how many houses are for sale.’”
A Miami Herald poll tells a similar story:
“Last week, we asked readers what impact the stagnant real estate market is having on them. Those with homes on the market made a strong turnout: 48 percent of respondents said they're trying to sell but buyers aren't biting. On the other end of the spectrum, 29 percent said they aren't feeling any impact, as they have no plans to move; 14 percent said they'd like to buy, but taxes and insurance are still too high; 5 percent said they'd like to sell but will wait until the market picks up, and another 5 percent are ready and willing to buy now.”
The New York Times reports on the troubles faced a bank that financed condominium developments:
“Javier Miglin may walk away from an $80,000 down payment on a condominium with water views in Miami. Randal Mills may give up a $130,000 deposit on a 15th floor condo on the Strip in Las Vegas. And in San Diego, Jeanette Graham would just like to meet the neighbors.”
“The three seemingly unrelated predicaments have a common thread that leads to Chicago, and Corus Bankshares, which financed the construction of each condominium development involved.”
“Whether buyers like Mr. Miglin and Mr. Mills close on their condos will be a crucial indicator for Corus. Many condo projects that started during the real estate boom are just being completed, and developers must begin repaying construction loans taken out before the market turned sour. If buyers do not close, and developers struggle, lenders like Corus may be left holding the bag.”
“Still, the Corus Bank president, Robert J. Glickman, remained optimistic. So far, he said in an e-mail message, developers have used many successful strategies ‘to ensure that buyers come to the closing table.’”
“‘Good developers — those that are diligent, successful — need to keep up the buyers’ interest and desire to close,’ he said.”
“That optimism raises warning signs with analysts like Jack McCabe, a real estate consultant in Deerfield Beach, Fla. He has been hired by hedge funds and other investors to study 8 of 12 projects in Miami that Corus has financed and advise them on their progress.”
“‘In this market downturn, even the most successful developers with the best projects and the best geographic locations are going to take hits,’ Mr. McCabe said. ‘Mr. Glickman’s comments are eagerly overoptimistic and do not match the severity of this downturn.””
As the prices of condos tumble, expect more builders to walk away from unfinished projects. The Sun-Sentinel reports on one troubled condominium project in Boca Raton:
“The developer of the troubled Eden condo project missed two deadlines Tuesday that were part of its agreement with the city to extend its building permits.”
“Three weeks after the City Council scolded Ceebraid-Signal Corp. before agreeing to permit extensions, the city put the company on notice they would expire if it didn't submit a $500,000 letter of credit or a written plan on securing the four-building site in the next 15 days.”
“After years of financial trouble and construction delays, three Eden buildings remain unfinished.”
“Expiration of the building permits could lead to the demolition of the unfinished buildings.”
USA Today reports on how the housing slump is affecting homebuilders:
“Even as home buyers were being offered a free washer, dryer, refrigerator and window blinds, plus 5% off the price or in cash to pay closing costs, business was dragging at Reeves Williams' communities.”
“So at the end of July, Reeves Williams, a home builder in the South, began offering $20,000 in incentives or cash assistance. In the first week, 22 buyers had signed contracts for new homes. Then the mortgage market fell into a tailspin.”
“‘We lost 17 of them. It was a huge hit,’ says Martha Fondren, vice president of sales. ‘It was a credit issue. They did not have horrible credit. But they didn't have the credit scores to get (a loan), and six months ago they would have.’”
“Since early August, the real estate market has sunk deeper into recession. Forecasts of a recovery have been pushed back to the middle of 2008 — at the earliest. For home builders, market conditions are already worse than in the last housing recession, in 1991-92.”
“Stuart Miller, CEO of Miami-based Lennar, says he thinks some builders' price cuts have been ‘unrealistic, maybe even ridiculous.’ Lennar reported the worst quarterly financial results in the company's history and a surge in cancellation rates.”
“Miller says he walked away from 15,000 home sites the company had planned to develop and has laid off 35% of his staff. ‘August seemed to be a melting pot of all things negative,’ Miller says.”
“Some laid-off employees have managed to find jobs in commercial real estate, which so far hasn't been affected as much by the turmoil in the credit markets. But the magnitude of the downsizing among builders is exerting a drag on the economy that could, in turn, further dampen demand for new homes.”
“‘We have hundreds of thousands of jobs to lose over the next six to 18 months,’ says Mark Zandi, chief economist for Moody's Economy.com. ‘Housing employment accounts for 10% of all jobs nationwide and 15% of the economy.’”
CBS 4 reports on the mortgage woes facing South Floridians:
“Since 2005, home buyers in Miami-Dade and Broward counties have signed so-called ‘exotic’ mortgages at twice the rate of borrowers in the rest of the country, according to a report done by CBS4 news partner The Miami Herald.”
“These mortgages included loans with low so-called ''teaser'' rates which can skyrocket within three years to as high as 16 percent.”
“Roughly one in five mortgages written in Miami-Dade and Broward counties between 2005 and July 2007 fell into one of those categories, according to data from McDash Analytics, a private firm that gathers information from nine of the 10 largest loan servicers in the United States and provided to The Herald.”
“The potential financial peril could go beyond the more than 100,000 South Floridians who signed such loans since they became popular in 2005. If banks foreclose, or owners are forced to sell at a bargain price, experts say it could extend, and deepen, the pain from the already troubled housing market.”
The Palm Beach Post explains how the dissolution of many subprime lenders is affecting homeowners:
“The worst housing slump in 16 years has produced a subprime mortgage meltdown, widespread layoffs and record foreclosures.”
“It also has produced Larry Leggett, a Vero Beach homeowner who wants to make his monthly payment — he just doesn't know where to send it.”
“That's because HomeBanc, his mortgage company, filed for Chapter 11 bankruptcy protection in August. As of Thursday, the only thing he had received was a form letter — addressed to ‘Dear Valued HomeBanc Customer’ — telling him he would get a statement at the end of the year.”
“And this: ‘As a reminder, effective Oct. 1, 2007, all checks will be made payable to the new mortgage company that will service your loan. If you have any questions about this transfer, please contact your new lender on all matters concerning your loan.’”
“Unfortunately, HomeBanc didn't tell him who his new lender is. Or how to contact it. Or where to send his mortgage payment.”
“‘We were making it through this horrible, tough time,’ he said, ‘and then this happens. I am just trying to make my payment.’”
The Sun-Sentinel reports that Governor Crist continues to push for property tax reform:
“Gov. Charlie Crist on Tuesday released a retooled $6.3 billion package of property-tax cuts he said he may ask Florida legislators to vote on next week.”
“‘I don't know if we'll be able to do it for sure,’ Crist said. ‘But if you get the good framework ... my view is, ‘Why not do that? Why not get the job done?’”
“The plan would scale back the $8 billion in tax savings promised by an earlier proposal that was thrown off the Jan. 29 ballot by a Leon County judge. It would save the owner of a $275,000 home just $214 a year in property taxes, though it would deliver substantially bigger breaks to first-time home buyers or people who sell one home and buy another.”
“Fort Lauderdale Vice Mayor Carlton Moore called Crist's proposal ‘a political stunt.’ Genuine tax reform, he said, would end the possibility of two next-door neighbors getting drastically different tax bills.”
“‘You have not done anything until you're addressed the inequity of our tax process,’ Moore said.”
The Miami Herald reports on a troubled real estate firm:
“The housing-market decline has taken its toll on another giant Florida real estate company. St. Joe, Florida's largest private landowner, plans to eliminate more than 75 percent of its workforce and sell about 100,000 acres of land.”
“St. Joe, whose 800,000 acres in Northwest Florida include some of the last pristine beachfront land, had ambitious plans to remake the region. It owns 10 master-planned communities, seven commerce parks, six golf courses and three marinas and had donated land for a new airport in the Florida Panhandle.”
“Now the company that referred to itself as a ‘place maker’ is handing off the management of its planned communities to what it calls strategic partners. CEO Peter Rummell said the move makes good business sense regardless of market conditions.”
“‘This is not a fire sale,’ Rummell told analysts Monday on a conference call. ‘We are not going to make stupid decisions, but there are things that we believe have reached their height in pricing. I firmly believe that we would be doing this whether the market was good or bad.’”
But, the housing slump also continue to affect non-real-estate industries. Ryder is the latest to report lowered earning as a result:
“Trucking company Ryder System Inc. lowered its third-quarter and full-year earnings forecast Monday because of softness in the housing and construction industries and beyond.”
“Miami-based Ryder also said it's cutting 300 jobs among its more than 28,000 employees worldwide. The cuts are part of a restructuring plan that will result in charges of about $12 million in the third quarter. The charges will offset a third-quarter gain of about $10 million from the sale of a property, Ryder said.”
“The economic factors have hurt Ryder's higher-margin commercial rental segment, where revenue has declined for six straight quarters, said analyst Todd Fowler of KeyBanc Capital Markets.”
“‘It is our opinion the concentration of Ryder's weakness is housing related, although we sense the company is seeing some spillover to broader industries, resulting in a more cautious outlook,’ Fowler said.”
“The housing market in Palm Beach County and the Treasure Coast has turned "brutal" and is getting worse, a veteran mortgage broker said Tuesday.”
“The stark outlook came from William Davis, president of Private Funding Specialists Inc. in Palm Beach Gardens and past president of the Palm Beach County chapter of the Florida Association of Mortgage Brokers.”
“‘I've seen some tough times, but I've never seen anything like this,’ Davis told members of the Economic Forum of Palm Beach County.”
“There were 33,708 houses and condos listed for sale in Palm Beach County in August, according to Illustrated Properties Real Estate's analysis of Multiple Listing Service data. Illustrated Properties President Chappy Adams didn't attend Davis' speech but agreed with his conclusions.”
“‘It's pretty bad,’ Adams said. ‘We've got a 40-month supply of homes, which has got to be an all-time high. For the foreseeable future, prices are going to keep coming down a bit.’”
A Palm Beach Post real estate blog added some other quotes made by William Davis at the same meeting:
“On the foreclosures that follow negative amortization loans: ‘We called them neutron bombs, because the people would go away, and the buildings would stay.’”
“On the housing hangover: ‘We had a three-year fraternity party, and it’s going to take more than a month of Sundays to clean up the mess.’”
“On the glut of homes on the market: ‘It’ll make you sicker than West Palm water if I tell you how many houses are for sale.’”
A Miami Herald poll tells a similar story:
“Last week, we asked readers what impact the stagnant real estate market is having on them. Those with homes on the market made a strong turnout: 48 percent of respondents said they're trying to sell but buyers aren't biting. On the other end of the spectrum, 29 percent said they aren't feeling any impact, as they have no plans to move; 14 percent said they'd like to buy, but taxes and insurance are still too high; 5 percent said they'd like to sell but will wait until the market picks up, and another 5 percent are ready and willing to buy now.”
The New York Times reports on the troubles faced a bank that financed condominium developments:
“Javier Miglin may walk away from an $80,000 down payment on a condominium with water views in Miami. Randal Mills may give up a $130,000 deposit on a 15th floor condo on the Strip in Las Vegas. And in San Diego, Jeanette Graham would just like to meet the neighbors.”
“The three seemingly unrelated predicaments have a common thread that leads to Chicago, and Corus Bankshares, which financed the construction of each condominium development involved.”
“Whether buyers like Mr. Miglin and Mr. Mills close on their condos will be a crucial indicator for Corus. Many condo projects that started during the real estate boom are just being completed, and developers must begin repaying construction loans taken out before the market turned sour. If buyers do not close, and developers struggle, lenders like Corus may be left holding the bag.”
“Still, the Corus Bank president, Robert J. Glickman, remained optimistic. So far, he said in an e-mail message, developers have used many successful strategies ‘to ensure that buyers come to the closing table.’”
“‘Good developers — those that are diligent, successful — need to keep up the buyers’ interest and desire to close,’ he said.”
“That optimism raises warning signs with analysts like Jack McCabe, a real estate consultant in Deerfield Beach, Fla. He has been hired by hedge funds and other investors to study 8 of 12 projects in Miami that Corus has financed and advise them on their progress.”
“‘In this market downturn, even the most successful developers with the best projects and the best geographic locations are going to take hits,’ Mr. McCabe said. ‘Mr. Glickman’s comments are eagerly overoptimistic and do not match the severity of this downturn.””
As the prices of condos tumble, expect more builders to walk away from unfinished projects. The Sun-Sentinel reports on one troubled condominium project in Boca Raton:
“The developer of the troubled Eden condo project missed two deadlines Tuesday that were part of its agreement with the city to extend its building permits.”
“Three weeks after the City Council scolded Ceebraid-Signal Corp. before agreeing to permit extensions, the city put the company on notice they would expire if it didn't submit a $500,000 letter of credit or a written plan on securing the four-building site in the next 15 days.”
“After years of financial trouble and construction delays, three Eden buildings remain unfinished.”
“Expiration of the building permits could lead to the demolition of the unfinished buildings.”
USA Today reports on how the housing slump is affecting homebuilders:
“Even as home buyers were being offered a free washer, dryer, refrigerator and window blinds, plus 5% off the price or in cash to pay closing costs, business was dragging at Reeves Williams' communities.”
“So at the end of July, Reeves Williams, a home builder in the South, began offering $20,000 in incentives or cash assistance. In the first week, 22 buyers had signed contracts for new homes. Then the mortgage market fell into a tailspin.”
“‘We lost 17 of them. It was a huge hit,’ says Martha Fondren, vice president of sales. ‘It was a credit issue. They did not have horrible credit. But they didn't have the credit scores to get (a loan), and six months ago they would have.’”
“Since early August, the real estate market has sunk deeper into recession. Forecasts of a recovery have been pushed back to the middle of 2008 — at the earliest. For home builders, market conditions are already worse than in the last housing recession, in 1991-92.”
“Stuart Miller, CEO of Miami-based Lennar, says he thinks some builders' price cuts have been ‘unrealistic, maybe even ridiculous.’ Lennar reported the worst quarterly financial results in the company's history and a surge in cancellation rates.”
“Miller says he walked away from 15,000 home sites the company had planned to develop and has laid off 35% of his staff. ‘August seemed to be a melting pot of all things negative,’ Miller says.”
“Some laid-off employees have managed to find jobs in commercial real estate, which so far hasn't been affected as much by the turmoil in the credit markets. But the magnitude of the downsizing among builders is exerting a drag on the economy that could, in turn, further dampen demand for new homes.”
“‘We have hundreds of thousands of jobs to lose over the next six to 18 months,’ says Mark Zandi, chief economist for Moody's Economy.com. ‘Housing employment accounts for 10% of all jobs nationwide and 15% of the economy.’”
CBS 4 reports on the mortgage woes facing South Floridians:
“Since 2005, home buyers in Miami-Dade and Broward counties have signed so-called ‘exotic’ mortgages at twice the rate of borrowers in the rest of the country, according to a report done by CBS4 news partner The Miami Herald.”
“These mortgages included loans with low so-called ''teaser'' rates which can skyrocket within three years to as high as 16 percent.”
“Roughly one in five mortgages written in Miami-Dade and Broward counties between 2005 and July 2007 fell into one of those categories, according to data from McDash Analytics, a private firm that gathers information from nine of the 10 largest loan servicers in the United States and provided to The Herald.”
“The potential financial peril could go beyond the more than 100,000 South Floridians who signed such loans since they became popular in 2005. If banks foreclose, or owners are forced to sell at a bargain price, experts say it could extend, and deepen, the pain from the already troubled housing market.”
The Palm Beach Post explains how the dissolution of many subprime lenders is affecting homeowners:
“The worst housing slump in 16 years has produced a subprime mortgage meltdown, widespread layoffs and record foreclosures.”
“It also has produced Larry Leggett, a Vero Beach homeowner who wants to make his monthly payment — he just doesn't know where to send it.”
“That's because HomeBanc, his mortgage company, filed for Chapter 11 bankruptcy protection in August. As of Thursday, the only thing he had received was a form letter — addressed to ‘Dear Valued HomeBanc Customer’ — telling him he would get a statement at the end of the year.”
“And this: ‘As a reminder, effective Oct. 1, 2007, all checks will be made payable to the new mortgage company that will service your loan. If you have any questions about this transfer, please contact your new lender on all matters concerning your loan.’”
“Unfortunately, HomeBanc didn't tell him who his new lender is. Or how to contact it. Or where to send his mortgage payment.”
“‘We were making it through this horrible, tough time,’ he said, ‘and then this happens. I am just trying to make my payment.’”
The Sun-Sentinel reports that Governor Crist continues to push for property tax reform:
“Gov. Charlie Crist on Tuesday released a retooled $6.3 billion package of property-tax cuts he said he may ask Florida legislators to vote on next week.”
“‘I don't know if we'll be able to do it for sure,’ Crist said. ‘But if you get the good framework ... my view is, ‘Why not do that? Why not get the job done?’”
“The plan would scale back the $8 billion in tax savings promised by an earlier proposal that was thrown off the Jan. 29 ballot by a Leon County judge. It would save the owner of a $275,000 home just $214 a year in property taxes, though it would deliver substantially bigger breaks to first-time home buyers or people who sell one home and buy another.”
“Fort Lauderdale Vice Mayor Carlton Moore called Crist's proposal ‘a political stunt.’ Genuine tax reform, he said, would end the possibility of two next-door neighbors getting drastically different tax bills.”
“‘You have not done anything until you're addressed the inequity of our tax process,’ Moore said.”
The Miami Herald reports on a troubled real estate firm:
“The housing-market decline has taken its toll on another giant Florida real estate company. St. Joe, Florida's largest private landowner, plans to eliminate more than 75 percent of its workforce and sell about 100,000 acres of land.”
“St. Joe, whose 800,000 acres in Northwest Florida include some of the last pristine beachfront land, had ambitious plans to remake the region. It owns 10 master-planned communities, seven commerce parks, six golf courses and three marinas and had donated land for a new airport in the Florida Panhandle.”
“Now the company that referred to itself as a ‘place maker’ is handing off the management of its planned communities to what it calls strategic partners. CEO Peter Rummell said the move makes good business sense regardless of market conditions.”
“‘This is not a fire sale,’ Rummell told analysts Monday on a conference call. ‘We are not going to make stupid decisions, but there are things that we believe have reached their height in pricing. I firmly believe that we would be doing this whether the market was good or bad.’”
But, the housing slump also continue to affect non-real-estate industries. Ryder is the latest to report lowered earning as a result:
“Trucking company Ryder System Inc. lowered its third-quarter and full-year earnings forecast Monday because of softness in the housing and construction industries and beyond.”
“Miami-based Ryder also said it's cutting 300 jobs among its more than 28,000 employees worldwide. The cuts are part of a restructuring plan that will result in charges of about $12 million in the third quarter. The charges will offset a third-quarter gain of about $10 million from the sale of a property, Ryder said.”
“The economic factors have hurt Ryder's higher-margin commercial rental segment, where revenue has declined for six straight quarters, said analyst Todd Fowler of KeyBanc Capital Markets.”
“‘It is our opinion the concentration of Ryder's weakness is housing related, although we sense the company is seeing some spillover to broader industries, resulting in a more cautious outlook,’ Fowler said.”
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