NOTE:
nothing on this page is to be considered official information;
opinions expressed are those of the webmaster. THE HOUSING
PAGE INDEX SO HOW DID WE GET TO THIS POINT?
(i.e. Everyone who wanted a home loan or refinance got one, the
entire chain of feeders on the real estate tree made theirs...and a view from the political right.) And a view from a different directionhere. Appraisals? What is something worth?
How about a
life? Ethics
in foreclosure
policy? Foreclosures,
May 28, 2009 NYTIMES; in
CT, some reported practices
under investigationby
AG. Morerecent article, from A.P.
BEFORE
THE STORM
BROKE...when did the problem move from affordable units,
teardowns,
McMansions to foreclosures? What
is next? PRICES; some
history...the big picture here...Williams Park at left and New
London vacancies, New London apartment projects story.
Stamford and Norwalk build the most affordable housing stock; new
mega-projects such as ANTARES
may have
some, too! Rep. Frank speaks to CT housing
advocates. Well publicized
fight in Darien; Hartford Courant overview of CT housing market, May
2007 (link to article).
Tear
down
("makeover") WestportNow...and in North
Carolina, unfinished home
just sits. How
about the pools?
Keeping affordable housing affordable - foreclosure; link to New York Times article on
global banking/finance here.
HomeConnecticut idea (DAY editorial);
changed its number many times - and was alive as S.B. 1057at the end,
ultimately becoming Section 38-49 of
the Omnibus bill 1500 in Special Session. Another DAY
editorial; latest onhomelessnessin Connecticut; homelessnesselsewhere.
2008 "Short" Legislative Session
OLR reports on housing and...NOTHING MUCH PASSES IN 2008, read about
2007 here: Read interview with one of the "winners" the "long" Session
2007. Read about the "incentives" housing legislation passed as
part of Omnibus Bill 1500 here!
BLUE RIBBON COMMISSION to
assess the housing/economy linkage - Click here.
WASHINGTON (Reuters) – Sales of previously owned U.S. homes jumped last
month to their highest level in more than 2-1/2 years, but a fall in an
economic activity gauge was a reminder recovery from recession would be
patchy.
The National Association of Realtors said on Monday sales of existing
home sales surged a record 10.1 percent month-over-month to an annual
rate of 6.10 million units as buyers rushed to take advantage of a
popular tax credit for first-time buyers that had been scheduled to end
this month. It was the highest since February 2007 and beat
market expectations for a 5.70 million-unit pace. Sales in September
were at a 5.54 million-unit rate.
"Although the data are biased higher from policy measures, we do
believe this sharp gain signals pent up demand and a willingness to
purchase homes, which is a good sign for the sustainability of the
housing recovery," said Michelle Meyer, an economist at Barclays
Capital in New York.
U.S. stock indexes extended gains on the housing data, which shifted
attention away from an earlier report from the Federal Reserve Bank of
Chicago showing its National Activity Index slid to -1.08 from -1.01 in
September. U.S. Treasury debt prices eased as the market prepared
for another huge dose of supply this week.
The National Activity Index's three-month moving average, CFNAI-MA3,
decreased to -0.91 in October from -0.67 in September, declining for
the first time in 2009.
According to the Chicago Fed, a move below -0.70 in the three-month
moving average following a period of economic expansion indicates an
increasing likelihood a recession has begun. This development
will likely feed into fears the economic recovery that started in the
third quarter may lose some momentum once government stimulus wanes,
given high unemployment which is crimping consumer spending.
Analysts are cautiously hoping a sustained housing market recovery will
help improve the psychology of households, which has been shaken by an
unemployment rate of 10.2 percent, the highest in 26-1/2 years.
EXISTING HOME SALES BOTTOMED
The NAR said data on Monday, which showed broad-based gains in the
largest segment of the housing market, was proof that the decline in
purchases of existing homes had bottomed.
"Home prices are almost there. We are seeing a less of a decline in
house values," said Lawrence Yun, NAR's chief economist.
"Many buyers have been rushing to beat the deadline for first-time
buyer credit that was scheduled to expire at the end of this month, and
similarly robust sales may be occurring in November."
Distressed transactions accounted for 30 percent of sales last month
and continued to weigh on house prices. First-time buyers made up a
third of sales in October. The national median home price fell
7.1 percent from October last year, the smallest decline in over a
year, to $173,100. Homes in foreclosure typically sell for 15 to 20
percent less than traditional homes.
The housing market is slowly mending after a three-year decline, which
contributed to tipping the U.S. economy into its worst recession in
seven decades. Housing construction contributed to economic growth in
the third quarter for the first time since 2005.
Recovery is being supported by the $8,000 tax credit for first-time
buyers, low mortgage rates and falling house prices. The government
this month extended the incentive into next year and added a $6,500
credit for home owners buying a new residence. It had been due to
expire on November 30.
Purchases by the U.S. Federal Reserve of mortgage-related assets have
helped to push home loans down, boosting the affordability of house and
aiding the sector's recovery. On Sunday, St. Louis Federal
Reserve Bank President James Bullard said the U.S. central bank should
keep its mortgage-related asset purchase program beyond a scheduled
expiration in March.
The Fed, which cut interest rates to near zero last December, has
committed to keep borrowing costs ultra low for an extended period of
time. In October, sales of single-family homes -- the biggest
segment of the market -- rose 9.7 percent to an annual rate of 5.33
million units. Condominium and co-ops increased 13.2 percent to a
770,000-unit rate.
Sales were up in all four regions of the country. Prices rose 1.1
percent in the Midwest, which didn't see the same boom as the rest of
the country. They declined in the other three. The rise in the Midwest
was the first price increase in any region since November 2008.
The inventory of existing homes for sale in October fell 3.7 percent to
3.57 million units from the previous month, NAR said. At October's
sales pace, that represented a supply of 7.0 months, the lowest in
2-1/2 years, from September's revised 8.0 months. Blumenthal Backs New Financial Agency
DAY
By Patricia Daddona
Published on 7/15/2009
Direct federal oversight of the often incomprehensible banking and
credit card markets would better protect consumers, Attorney General
Richard Blumenthal testified Tuesday.
Blumenthal defended a bill designed to create a Consumer Financial
Protection Agency, while speaking on a panel of industry experts before
the Banking, Housing, and Urban Affairs Committee chaired by Sen. Chris
Dodd, D-Conn., in Washington. The hearing was telecast live on the
Internet.
The proposal would, in part, establish federal law as a minimum
standard for consumer protection and allow states to enact laws and
regulations if those rules afforded consumers better protection than
federal law, Blumenthal said in written testimony.
He also supported establishing a federal agency that would watch out
for consumers investing in the federal finance markets. Seven distinct
agencies now monitor the markets, he said.
Blumenthal said the bill would restore the “historic state-federal
alliance that existed for so many years so productively in combating
financial fraud” - an alliance that has been replaced with conflict and
tension. Mortgage documents, terms of service and other financial
instruments are so complicated the consumer can easily be misled, he
said.
”Consumers ultimately have to be their own protectors, but anybody who
has to read these documents, and I'm trained to read them, will find
them extraordinarily complex and confusing,” Blumenthal said. “This
(new agency) will not only fill that regulatory black hole but provide
clear truthful disclosure.”
Sen. Richard Shelby of Alabama, a Republican on the Senate committee,
called the proposal flawed and said he favored letting the market work
and consumers make their own decisions. The bill is a “radical
departure from the way we've regulated before,” Shelby charged.
Blumenthal countered that the proposed agency “marks a radical
departure from past practices in a time that demands radical solutions.
It is a fundamental break with the past that is very well justified.”
Earlier, Dodd said the recent failure of federal regulators to protect
consumers swamped by subprime mortgages and covert credit card fees and
the impact on the economy was “unprecedented. “
Eward Yingling, president and chief executive officer of the American
Bankers Association, criticized the bill as one that would penalize the
traditional mortgage industry, most of whom took no part in recent
subprime lending scams.
Peter J. Wallison, the Arthur F. Burns Fellow in Financial Policy
Studies for the American Enterprise Institute, added that language in
the bill calling for easily digestible “plain vanilla products or
services” and imposing penalties for complex instruments when consumers
complained about them would have a chilling effect and force bankers to
limit what they offer.
Blumenthal acknowledged such criticism as valid but pointed out the
legislation is a first draft, and the ultimate need for a “super cop”
to oversee enforcement is vital to coherent consumer protection.
”We can disagree where the floor of enforcement should be, but the
question for Congress should be, 'Do we have a point person … for
protecting consumers … ensuring uniform disclosure nationwide,'” he
said. “Mortgage rescue scams can disappear into the Internet ether and
we need federal enforcement.”
Travis Plunkett, legislative director for the Consumer Federation of
America, said the proposed agency needs authority to address unfair
deceptive and abusive industry practices. He criticized the banking
industry's “elaborate defense of the status quo, minimizing harm (and)
making usual threats that this will impede credit.”
Yingling noted, however, “We are not arguing for the status quo; the
status quo has been a failure. We are arguing for change.”
The US sub-prime
crisis in graphics Last Updated: Wednesday,
21 November 2007, 08:07 GMT
The
US sub-prime mortgage crisis has lead to plunging property prices, a
slowdown in the US economy, and billions in losses by banks. It stems
from a fundamental change in the way mortgages are funded.
THE
NEW MODEL OF MORTGAGE LENDING
Traditionally, banks have financed their
mortgage lending through the deposits they receive from their
customers. This has limited the amount of mortgage lending they could
do.
In recent years, banks have moved to a new
model where they sell on the mortgages to the bond markets. This has
made it much easier to fund additional borrowing,
But it has also led to abuses as banks no
longer have the incentive to check carefully the mortgages they issue.
THE RISE OF THE MORTGAGE BOND
MARKET
In the past five years, the private
sector has dramatically expanded its role in the mortgage bond market,
which had previously been dominated by government-sponsored agencies
like Freddie Mac.
They specialised in new types of mortgages,
such as sub-prime lending to borrowers with poor credit histories and
weak documentation of income, who were shunned by the "prime" lenders
like Freddie Mac.
They also included "jumbo" mortgages for
properties over Freddie Mac's $417,000 (£202,000) mortgage limit.
The business proved extremely profitable for
the banks, which earned a fee for each mortgage they sold on. They
urged mortgage brokers to sell more and more of these mortgages.
Now the mortgage bond market is worth $6
trillion, and is the largest single part of the whole $27 trillion US
bond market, bigger even than Treasury bonds.
HOW SUB-PRIME LENDING AFFECTED
ONE CITY
THE SUB-PRIME CRISIS IN
CLEVELAND
For many years, Cleveland was the sub-prime
capital of America.
It was a poor, working class city, hit hard by
the decline of manufacturing and sharply divided along racial lines.
Mortgage brokers focused their efforts by
selling sub-prime mortgages in working class black areas where many
people had achieved home ownership.
They told them that they could get cash by
refinancing their homes, but often neglected to properly explain that
the new sub-prime mortgages would "reset" after 2 years at double the
interest rate.
The result was a wave of repossessions that
blighted neighbourhoods across the city and the inner suburbs.
By late 2007, one in ten homes in Cleveland had
been repossessed and Deutsche Bank Trust, acting on behalf of
bondholders, was the largest property owner in the city.
THE CRISIS GOES NATIONWIDE
Sub-prime lending had spread from inner-city
areas right across America by 2005.
By then, one in five mortgages were sub-prime,
and they were particularly popular among recent immigrants trying to
buy a home for the first time in the "hot" housing markets of Southern
California, Arizona, Nevada, and the suburbs of Washington, DC and New
York City.
House prices were high, and it was difficult to
become an owner-occupier without moving to the very edge of the
metropolitan area.
But these mortgages had a much higher rate of
repossession than conventional mortgages because they were "balloon"
mortgages.
The payments were fixed for two years, and then
became variable and much higher.
Consequently, a wave of repossessions is likely
to sweep America as many of these mortgages reset to higher rates in
the next two years.
And it is likely that as many as two million
families will be evicted from their homes as their cases make their way
through the courts.
The Bush administration is pushing the industry
to renegotiate rather than repossess where possible, but mortgage
companies are being overwhelmed by a tidal wave of cases.
THE HOUSING PRICE CRASH
The wave of repossessions is having a dramatic
effect on house prices, reversing the housing boom of the last few
years and causing the first national decline in house prices since the
1930s.
There is a glut of four million unsold homes
that is depressing prices, as builders have also been forced to lower
prices to get rid of unsold properties.
And house prices, which are currently declining
at an annual rate of 4.5%, are expected to fall by at least 10% by next
year - and more in areas like California and Florida which had the
biggest boom.
HOUSING AND THE ECONOMY
The property crash is also affecting the
broader economy, with the building industry expected to cut its output
by half, with the loss of between one and two million jobs.
Many smaller builders will go out of business,
and the larger firms are all suffering huge losses.
The building industry makes up 15% of the US
economy, but a slowdown in the property market also hits many other
industries, for instance makers of durable goods, such as washing
machines, and DIY stores, such as Home Depot.
Economists expect the US economy to slow
in the last three months of 2007 to an annual rate of 1% to 1.5%,
compared with growth of 3.9% now.
But no one is sure how long the slowdown will
last. Many US consumers have spent beyond their current income by
borrowing on credit, and the fall in the value of their homes may make
them reluctant to continue this pattern in the future.
CREDIT CRUNCH
One reason the economic slowdown could get
worse is that banks and other lenders are cutting back on how much
credit they will make available.
They are rejecting more people who apply for
credit cards, insisting on bigger deposits for house purchase, and
looking more closely at applications for personal loans.
The mortgage market has been particularly badly
affected, with individuals finding it very difficult to get
non-traditional mortgages, both sub-prime and "jumbo" (over the limit
guaranteed by government-sponsored agencies).
The banks have been forced to do this by the
drying up of the wholesale bond markets and by the effect of the crisis
on their own balance sheets.
BANK LOSSES
The banking industry is facing huge losses as a
result of the sub-prime crisis.
Already banks have announced $60bn worth of
losses as many of the mortgage bonds backed by sub-prime mortgages have
fallen in value.
The losses could be much greater, as many banks
have concealed their holdings of sub-prime mortgages in exotic,
off-balance sheet instruments such as "structured investment vehicles"
or SIVs.
Although the banks say they do not own these
SIVs, and therefore are not liable for their losses, they may be forced
to cover any bad debts that they accrue.
BOND MARKET COLLAPSE
Also suffering huge losses are the bondholders,
such as pension funds, who bought sub-prime mortgage bonds.
These have fallen sharply in value in the last
few months, and are now worth between 20% and 40% of their original
value for most asset classes, even those considered safe by the ratings
agencies.
If the banks are forced to reveal their losses
based on current prices, they will be even bigger.
It is estimated that ultimately losses suffered
by financial institutions could be between $220bn and $450bn, as the $1
trillion in sub-prime mortgage bonds is revalued.
Washington — President Barack Obama said Wednesday he is acutely aware
of Nevada’s foreclosure crisis and is evaluating whether more can be
done to help homeowners, including by redirecting unused bank bailout
money for homeowner relief.
Obama warned that using a portion of the $70 billion returned from the
banks may require help from Congress.
On a particular problem vexing Nevadans — the inability of many
homeowners to qualify for refinancing because they have lost so much
equity in their homes — the president would not commit to any changes.
The question is under review, he said.
“There are folks who still find themselves having done all the right
things, always made their mortgage payments, always been responsible,
and are still suffering,” Obama said during a round-table with a
handful of reporters in the West Wing. “This is something that we’re
taking very seriously.”
The president said just days ago he asked Treasury Secretary Timothy
Geithner for a top-to-bottom evaluation of the administration’s
homeowner relief program, Making Home Affordable, to determine “what’s
working and what’s not, and whether there’s more that we can do.”
Democratic Rep. Dina Titus, who had asked the administration to address
shortcomings of the program, welcomed the review as a chance to
continue pressing her case for changes.
“We always looked at the housing programs as works in progress and felt
they would be modified and would be adjusted,” Titus said.
Announced in February, the Making Home Affordable plan has been the
administration’s signature effort to help families avoid foreclosure.
Nevada’s foreclosure rate has topped the nation every month since
January 2007, according to RealtyTrac.
One part of the Obama plan is to help 3 million to 4 million homeowners
at imminent risk of loan default by working with banks to lower the
interest or principal on mortgages to less than 38 percent of
homeowners’ income. The administration offered $75 billion to help
lower interest rates. Bankers are paid for each loan modified.
The other part of the Obama plan is to help 4 million to 5 million
homeowners refinance at today’s lower interest rates, which could
provide relief by potentially shaving hundreds of dollars off monthly
mortgage payments.
But it is this second part of the plan that has bedeviled Nevada.
The problem is this: To qualify for refinancing, homeowners must owe no
more than 105 percent of the home’s current value — say, a $210,000
mortgage on a $200,000 home.
That’s increasingly difficult in Las Vegas, where housing prices have
fallen by one-third in the past couple of years and equity has vanished.
Nevada has a greater rate of mortgages underwater — meaning the homes
are worth less than the mortgages — than anywhere in the nation,
according to the most recent data from First American CoreLogic for the
final quarter of 2008. In one northwest Las Vegas ZIP code, mortgages
are 20 percent more than home values.
Some homeowners say they would rather walk away from their homes than
keep paying off a house that may take decades to recoup value.
The White House refinancing plan was an improvement in that previously
loans backed by Fannie Mae and Freddie Mac needed to have 20 percent
equity to qualify for refinancing.
Still, Titus, and more recently Senate Majority Leader Harry Reid, have
urged the Obama administration to loosen the equity requirement,
arguing that with unemployment now at 11.6 percent, refinancing could
help avoid foreclosures.
Opponents, however, have warned that taxpayers will hold the bag if
homeowners default on the refinanced loans. Fannie and Freddie are
essentially backed by the government.
Plus, politicians risk populist unrest over bailout fatigue.
Obama was well aware of the problem facing Nevada’s underwater
homeowners, but not ready to commit to its solution.
“I know one suggestion that has been made is to further drop the equity
requirements,” Obama said Wednesday. “I don’t want to weigh in yet
because I haven’t seen the conclusions from Treasury about how that
would impact the program, if it would cost additional money to
taxpayers in order for us to get the banks to play along with it ... I
just want to see what works within the constraints of the resources
that we have.”
Obama did indicate, however, that bank bailout money is being eyed for
housing — a move supported by Titus, Reid and Rep. Shelley Berkley.
“If those resources are now available and can be recycled in even more
help for homeowners, that’s something that is worth considering,” Obama
said.
Last week Titus, Berkley and other House lawmakers sent a letter to
Geithner saying the additional funding could “help more principal
homeowners in severely affected areas to stay in their homes.”
The legality of reusing the funds has been questioned by other
lawmakers who argue the bank bailout law was more narrowly drafted.
Obama seemed well aware of the potential battle ahead.
“We may need some cooperation with Congress if we end up doing that,”
he said.
“One of the things that we’re having to struggle with is the magnitude
of this recession. The depth of it — starting back in September but
really picking up speed in the first of January — meant that a lot of
the resources were used up very quickly.”
The Treasury Department could not immediately comment on when it will
produce the president’s request for a program evaluation. It could also
not say how many foreclosures have been prevented since the Obama
housing plan was launched.
NOTE: the top
three counties...CT got rid of this level of
government in the late 1950's. AP IMPACT: Foreclosures Add to
Hurricane Hazards
NYTIMES
By THE ASSOCIATED PRESS
May 31, 2009; Filed at 11:53 a.m. ET
LEHIGH ACRES, Fla. (AP) -- Mike Manikchand points toward his neighbors
-- a half-dozen empty, foreclosed-upon homes, sitting on weed-strewn
yards -- and he wonders: What will happen if a hurricane slams into
southwest Florida this year?
His simple answer: ''A lot of these places will get destroyed.''
Unoccupied, these homes would be defenseless in a storm; there will be
no one to put up shutters, batten down garage doors and otherwise
secure homes. But that's not all. Nearby homes and their residents
would also be at risk from wind-propelled debris. Lehigh Acres
and other communities at the epicenter of the nation's housing crisis
are coming to realize that this year's hurricane season, beginning June
1, represents yet another pitfall. Hurricanes could make hazards of
thousands of foreclosed-upon houses, and their diminished value could
decrease even more.
''Here's your choice,'' said Julie Rochman, president of the
Tampa-based Institute for Business and Home Safety. ''Spend a little
bit of time and money to secure the properties to withstand wind and
water or not do the right thing and have the homes become damaged and
are valued less.''
The Associated Press Economic Stress Index -- a month-by-month analysis
of foreclosure, bankruptcy and unemployment rates in more than 3,000
U.S. counties -- confirms that some of the areas most likely to be
stuck by a hurricane are suffering the most in this recession. In
March, there were 281,691 homes in foreclosure in Florida and coastal
counties in Alabama, Georgia, Louisiana, Mississippi, North Carolina,
South Carolina, Texas and Virginia.
Lee County, where Manikchand lives, is among the hardest-hit counties
in the country. A 22-year-old pharmacy student, he took advantage of a
dismal housing market and bought a foreclosed duplex for $36,000.
In coming months, he and millions of others along the Atlantic and Gulf
coasts will dutifully track tropical weather forecasts and stockpile
batteries, flashlights and tins of tuna, hoping that hurricanes blow
harmlessly out to sea. But who will secure all the foreclosed
homes if a storm does approach? No one really knows.
In some cases, a property management company hired by the bank could do
the work. Or it could be a real estate agent, a homeowners' association
or even resourceful neighbors who clear debris from yards and board
windows. Yet no state laws mandate who prepares buildings before a
hurricane; even officials from the Florida Division of Emergency
Management say that securing foreclosures isn't a concern.
''It's not an aspect that we really deal with,'' said John Cherry, the
agency's external affairs director. ''Our No. 1 concern is life
safety.''
Quick evacuation will be the priority, not securing vacant homes, if a
major storm looms, others say. But shutterless homes can be a major
safety hazard in a hurricane. And a region full of destroyed or heavily
damaged homes would depress real estate values even further.
Randall Webster, director of the Horry County Emergency Management
Department in South Carolina, said if a storm does hit, properties in
foreclosure could slow recovery if the county can't immediately find
the owner, ''especially if it were in a neighborhood where others
around it were taking care of business and this one gets in rough
shape,'' he said.
The issue of who cares for vacant homes during a time of crisis seems
simple: The legal owner is responsible for securing the property. But
communities are already struggling to get banks to mow lawns, much less
put up hurricane shutters -- if they weren't swiped from the foreclosed
home, along with appliances, copper wiring and air conditioners.
If the bank hasn't yet taken the title of a home, the property is in a
kind of limbo, and local officials or homeowners associations may have
no legal right to trespass and secure it. And many hard-hit counties
don't have the money or manpower to do it. ''Simple logistics tells me (the
banks) don't have the staff to follow up,'' said Kenneth Wilkinson,
property appraiser for Lee County (FLA), which in March had the
third-highest foreclosure rate in the United States, after California's
Merced County and Nevada's Clark County.
There are some places that are trying to board up windows and batten
down garage doors, although largely to stave off crime. Wellington, in
Palm Beach County, has gone to court to receive the legal OK to board
up homes. And in Cape Coral, city officials have passed an ordinance
that requires the owner of a foreclosed home to pay $150 to register
the address and provide a contact number for the person who will
maintain the property. Palm Beach County Commissioner Burt
Aaronson has asked county attorneys to research whether it is legal to
board up empty homes.
''If we board them up, we're protecting them,'' Aaronson said.
''Hopefully we will be able to keep some of the value up.''
Aaronson contends that the banks don't always maintain the homes and
doesn't expect that they will in the days before a storm -- and if the
county takes over that responsibility, then he wants the banks to pay.
''We want to use the full power we have as a government to levy the
greatest fines that we can to penalize banks for not taking care of the
properties,'' he said.
Horry County's Webster says there might be another way for public
officials to take matters into their own hands.
''If it became deemed a public health issue or public safety hazard,
the county would have some legal recourse to secure it in terms of
making it off limits or safer,'' said Webster, whose county includes
Myrtle Beach and has seen foreclosures rise over the past year.
Some banks say that they have a plan for hurricanes; JP Morgan Chase
says it will use property management companies and bank field employees
to make sure properties are storm-ready. And if the homes are damaged
or destroyed during a storm, said Michael Fusco, a spokesman for JP
Morgan Chase, the bank ''acts just like a homeowner'' and will file an
insurance claim.
Debora Blume, a spokeswoman for Wells Fargo Bank, said her company
hires local real estate agents who have been assigned to market
bank-owned properties to secure homes against hurricane damage.
But one real estate agent in the Fort Myers area said the process of
putting the maintenance work out to bid and then getting approval from
the bank that owns the property might not be workable as a storm bears
down.
''During a hurricane, we need to get out of town, not wait for approval
for funding to secure a building,'' said Suzanne Sherer, president of
the Realtors Association of Greater Fort Myers and the Beaches. ''I
won't have time to get a bid from a handyman.''
In Lee County, metal hurricane shutters cover a few new, unsold homes.
Many empty homes have swing sets in the yard, garbage cans strewn in
the driveway and loose roof tiles, all of which could become
projectiles during a storm. Sherer said it would be
''devastating'' if a powerful storm similar to Hurricane Charley, which
hit nearby Charlotte County in 2004, struck Lee County.
In Galveston, Texas, where more than 17,000 home were damaged by
Hurricane Ike last year, there are still many empty homes -- but not
because of foreclosures. The properties were damaged during the storm
and owners don't have the money to rebuild.
''These homeowners have the biggest hurdles as far as getting back into
their homes,'' City spokeswoman Alicia Cahill said. ''A lot of the
homes that were affected were lower income to moderate income families
who didn't have a huge insurance policy or a lot of extra cash lying
around to make repairs.''
Tybee, Ga., mayor Jason Buelterman says officials there haven't
considered potential problems with foreclosures during storm season.
Their first priority, he said, is assuring the safety of island
residents and tourists if a hurricane heads their way. Dealing with
foreclosed homes will be an afterthought. Yet residents
throughout the hurricane zone are worried, especially those who live in
foreclosure-dotted neighborhoods. Armando Gonzalez, 72, retired from
Miami to Lehigh Acres five years ago.
He and his wife moved to a small home a few blocks from the city
center, in a quiet yet thriving neighborhood. But in the last two
years, his neighbors left, either because of foreclosure or job loss.
Now he's the only one on his block; the home next to him has a broken
window and the one across the street is only half-built. When
asked what would happen to all the nearby, dilapidated homes if a
hurricane hit, Gonzalez shrugged and grinned.
''I can't do anything,'' he said. ''Maybe I'll pray. God will save me.'' Minority Gains in Homeownership
Erode NYTIMES
By JOHN LELAND
May 13, 2009
After a decade of growth, the gains made in homeownership by African
Americans and native-born Latinos have been eroding faster than those
for whites, according to a report released Tuesday by the Pew Hispanic
Center.
The numbers indicate that the gains for minority groups, achieved
between 1994 and 2004, were disproportionately tied to relaxed lending
standards and subprime loan products, and that those gains are now
being reversed. The exception to the pattern was foreign-born
Latinos, whose rate of homeownership, while low, has stalled in the
downturn but has not fallen. Since 2004, homeownership for all
Americans has declined to 67.8 percent from 69 percent. For African
Americans it fell to 47.5 percent from 49.4 percent. Latinos had a
longer period of growth, with homeownership rising until 2006, to 49.8
percent, before falling to 48.9 percent last year. Homeownership for
native-born Latinos fell to 53.6 percent from a high of 56.2 percent in
2005.
The losses for immigrants have been more modest.
For all immigrants, homeownership fell minimally, to 52.9 percent from
53.3 percent in 2006. Latino immigrants, who have the lowest rates of
homeownership among the groups studied, did not lose any ground,
remaining at the high of 44.7 percent that they reached in 2007.
The numbers reflect the changing character of the foreign-born
population, said Rakesh Kochhar, associate director of research for the
Pew Hispanic Center, a project of the nonprofit Pew Research Center.
Immigrants become more financially secure the longer they live in the
country, and since 1995 the typical immigrant’s period of living in the
United States has increased.
“A lot of foreign-born Hispanics have not been in the country for long,
so they’re still on an upward path” compared to the general economy,
Mr. Kochhar said. “The force of assimilation into homeownership is
strong,” even during a downturn.
The decreases in homeownership reflect both high foreclosure rates and
lower rates of home buying, Mr. Kochhar said.
Even with the declines, the rates for all groups remained higher than
before the boom, with nearly 68 percent of Americans owning homes in
2008, up from 64 percent in 1994. “This is a historic expansion, the
biggest since World War II,” Mr. Kochhar said. “There’s been a setback
in last two to three years, but overall everyone is better placed.”
The gaps between whites and minorities remain significant, with
homeownership rates for Asians (59.1 percent), blacks (47.5 percent)
and Latinos (48.9 percent) well below that for whites (74.9 percent).
Like previous studies, the report found that blacks and Hispanics were
more than twice as likely to have subprime mortgages as white
homeowners, even among borrowers with comparable incomes. Only 10.5
percent of white home buyers took out high-cost loans in 2007, compared
to 27.6 percent of Latinos and 33.5 percent of African Americans. These
loans, which typically require little or no down payments and are meant
for borrowers with low credit scores, made homeownership possible for
many black and Hispanic families during the boom years, but also led to
high rates of foreclosure.
“Basically that gap was closed on poor loans that never should have
been made and wound up harming folks and their neighborhoods,” said
Kevin Stein, associate director of the California Reinvestment
Coalition, an organization of nonprofit housing groups.
African Americans and Latinos remain more likely than whites to be
turned down for mortgages, with 26.7 percent of applications from
Hispanics being rejected in 2007; 30.4 percent for blacks; and 12.1
percent for whites. These disparities held even for borrowers whose
incomes were well above average for their area.
Though there are no data on the race or ethnicity of homeowners in
foreclosure, the researchers found that counties with high
concentrations of immigrants had high rates of foreclosure. This
association was even stronger than that between the prevalence of
subprime mortgages and the foreclosure rate.
But the research did not suggest that high rates of immigration cause
high levels of foreclosure on their own, Mr. Kochhar said. High
unemployment, falling house prices, subprime loans and high ratios of
debt to income all contributed to high foreclosure rates. Op-Ed
Contributor: Don’t Let
Judges Fix Loans
NYTIMES
By ALAN SCHWARTZ
February 27, 2009
IN his housing plan, President Obama has asked Congress to give
bankruptcy judges the authority to rework the terms of mortgages and
allow more people to stay in their homes. Though the president’s idea
sounds appealing, there are at least three reasons it is misguided.
First, the proposal would swamp bankruptcy courts. There are only about
300 bankruptcy judges, and they are already busy with an increasing
number of bankruptcies. Clearing millions of new mortgage cases will
take a long time and thus have little immediate effect on the
foreclosure crisis. In addition, the flood of new cases would delay the
resolution of business bankruptcies, to the detriment of the economy.
Second, many debtors will be disappointed. Consider the parties’
incentives. Debtors will argue for low home values while lenders will
argue for the opposite, to minimize their losses. Lenders will win many
of these valuation contests: they have more expertise than individuals
in making their case and greater resources.
Finally, the proposal worsens economic uncertainty. A major cause of
the financial crisis is that many banks do not know what their assets —
and particularly home mortgages — are worth. Valuing homes is simple
when prices are stable. An appraiser can look at prices in a
neighborhood and plausibly infer that a particular house is worth about
as much as similar houses there.
But even experts do not know how to value individual houses when a
large number of them are in default, and thus potentially for sale, and
cash is tight for prospective buyers. Under the president’s proposal,
however, bankruptcy judges who are not experts at valuation would be
required to price individual houses. Valuation thus will likely be a
shot in the dark, inevitably affected by a judge’s personal sympathies.
The arbitrariness of valuing single homes in bankruptcy will further
increase the already considerable uncertainty regarding the value of
the banks’ “toxic assets.”
There are many things that can be done to help debtors retain their
homes. It would help, for instance, to change regulations to let loan
administrators modify mortgages without fear of liability from the
mortgage’s ultimate holders. What won’t help, however, would be to put
bankruptcy judges in the business of reworking bad home loans.
Alan Schwartz is a professor
of law and management at Yale. Homeowners'
Rallying Cry: Produce The
Note. Strategy looks for paperwork glitches, may buy some
time
DAY
By Mitch Stacy , Associated Press
Published on 2/18/2009
Zephyrhills, Fla. - Kathy Lovelace lost her job and was about to lose
her house, too. But then she made a seemingly simple request of the
bank: Show me the original mortgage paperwork. And just like
that, the foreclosure proceedings came to a standstill. Lovelace
and other homeowners around the country are managing to stave off
foreclosure by employing a strategy that goes to the heart of the whole
nationwide mess.
During the real estate frenzy of the past decade, mortgages were sold
and resold, bundled into securities and peddled to investors. In many
cases, the original note signed by the homeowner was lost, stored away
in a distant warehouse or destroyed. Persuading a judge to compel
production of hard-to-find or nonexistent documents can, at the very
least, delay foreclosure, buying the homeowner some time and turning up
the pressure on the lender to renegotiate the mortgage.
”I'm going to hang on for dear life until they can prove to me it
belongs to them,” said Lovelace, a 50-year-old divorced mother who owns
a $200,000 home in Zephyrhills, near Tampa. “I'll try everything I can
because it's all I have left.”
In interviews with The Associated Press, lawyers, advocates and
homeowners outlined the produce-the-note strategy. Exactly how many
homeowners have employed it is unknown. Nor is it clear how successful
it has been; some judges are more sympathetic than others. More
than 2.3 million homeowners faced foreclosure proceedings last year and
millions more are in danger of losing their homes. A study last year of
more than 1,700 bankruptcy cases stemming from foreclosures found the
original note was missing more than 40 percent of the time. Other
pieces of required documentation also were routinely left out.
Chris Hoyer, a Tampa lawyer whose Consumer Warning Network offers the
free court documents Lovelace used, has promoted the produce-the-note
strategy.
”We knew early on that the only relief that would ever come to people
would be to the people who were in their houses,” Hoyer said. “Nobody
was going to fashion any relief for people who have already lost their
houses. So your only hope was to hang on any way you could.”
WWW.CONSUMERWARNINGNETWORK.COM
Tom Deutsch, deputy executive director of the American Securitization
Forum, a group that represents banks, law firms and investors,
dismissed the strategy as merely a stalling tactic, saying homeowners
are “making lawyers jump through procedural hoops to delay what's
likely to be inevitable.”
Deutsch said the original note is almost always electronically retained
and can eventually be found.
Judges are often willing to accept electronic documentation. And
lenders are sometimes allowed to produce other paperwork to establish
they are the holder of a loan. Still, assembling such documents to a
judge's satisfaction takes time, which to homeowners is the
point. Lovelace filed her produce-the-note demand last fall after
the bank acknowledged that her original mortgage document had been lost
or destroyed. Since then, there has been no activity on the foreclosure
- no letters from the lender, no court filings.
The law firm handling the foreclosure for the lender refused to
comment. The first big success of the produce-the-note movement
came in 2007 when a federal judge in Cleveland threw out 14
foreclosures by Deutsche Bank National Trust Co. because the bank
failed to produce the original notes. Michael Silver, a lawyer
for two of the families in that case, said at least one eventually lost
their home. Still, he considers that a success.
”From the perspective of the person who's in the home, you may have
kept them in the house another 10 or 12 months,” he said. “If I can get
a result with economic benefits to a client, then I think I won.”
Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery
speech on the House floor during debate on the federal bank bailout
last month.
”Don't leave your home,” she said. “Because you know what? When those
companies say they have your mortgage, unless you have a lawyer that
can put his or her finger on that mortgage, you don't have that
mortgage, and you are going to find they can't find the paper up there
on Wall Street.”
April Charney, head of foreclosure defense for Jacksonville Area Legal
Aid in Florida, said the strategy has been so successful for her that
she now travels around the country to train other lawyers in how to use
it. She said she has gotten cases delayed for years by demanding that
lenders produce paperwork they cannot find.
”This is an army of lawyers getting out there to stop foreclosures so
we can get to the serious business of creating solutions,” Charney
said. “Nothing good is going to happen as long as we continue to bleed
homeowners.”
Resisting Home Evictions Becomes a Group Effort NYTIMES
By FERNANDA SANTOS
February 18, 2009
As resistance to foreclosure evictions grows among homeowners,
community leaders and some law enforcement officials, a broad civil
disobedience campaign is starting in New York and other cities to
support families who refuse orders to vacate their homes.
The community organizing group Acorn unveiled
the campaign with a spirited rally on Friday at a Brooklyn church and
will roll it out in at least 22 other cities in the coming weeks.
Through phone trees, Web pages and text-messaging networks, the effort
will connect families facing eviction with volunteers who will stand at
their side as officers arrive, even if it means risking arrest.
“You want to haul us out to jail? Fine. Let the world see how
government has been ineffective,” Bertha Lewis, Acorn’s chief
organizer, said in an interview. “Politicians have helped banks, but
they haven’t helped families in the way that it’s needed, and these
families are now saying, enough is enough.”
At the onset of the foreclosure crisis, the problem was regarded by
some as one of a homeowner’s own making, the result of irresponsible
decisions made by families who chose to live beyond their means. But as
foreclosures spread across the country, devastating even solidly
middle-class communities, the blame has slowly shifted to the financial
companies that made questionable loans and have received billions of
dollars in federal aid to stave off collapse.
In recent months, a budding resistance movement has grown among
Americans who believe they have been left to face their predicament on
their own — and the Acorn campaign is an organized expression of that
frustration, Ms. Lewis said. Instead of quietly packing up and turning
their homes over to banks, homeowners are now fighting back.
On Feb. 9, a man scrawled a message on the roof of his house in a
suburb of Los Angeles: “I Want 2 Be Heard.” Then he barricaded himself
inside when deputies showed up to evict him, surrendering after a few
hours. In October, a woman in San Diego chained herself to her front
porch after the bank that held her mortgage refused to renegotiate the
terms. She remains in her home, but has received a second eviction
notice.
And last year in Boston, neighbors and activists locked arms outside
eight buildings that had been foreclosed upon to prevent the
authorities from forcing residents onto the streets.
Sheriffs in some places have also taken a stand. In Wayne County in
Michigan, Sheriff Warren C. Evans, suspended all evictions starting
Feb. 2 until the federal government implements a plan to help
homeowners facing foreclosures.
In Cook County in Illinois, which includes Chicago, Sheriff Thomas J.
Dart directed a lawyer to review all eviction orders to protect people
who kept on paying rent after the buildings where they lived had been
seized by banks. In Butler County in Ohio, Sheriff Richard K. Jones
ordered his deputies not to evict people who had no place else to go.
“This is a cold place in the winter and I will not give people a death
sentence for not paying their debts,” Sheriff Jones said in an
interview. “These are human beings, responsible middle-class people who
fell on hard times, and I just can’t toss them out onto the streets.”
Acorn’s strategy is modeled on a movement the group led in the 1980s,
when squatters occupied and set out to renovate thousands of abandoned
city-owned buildings in New York, Philadelphia and Detroit, among other
cities. The motivation was to solve what Ms. Lewis has called “the
working family’s housing crisis.”
In cities like Orlando, Fla., which has one of the nation’s highest
foreclosure rates — and Boston, Houston, Baltimore, Oakland, Calif.,
and Tucson, Ariz. — Acorn organizers have been creating networks to
alert a homeowner’s neighbors when an eviction has been scheduled or
deputies are on the way. Some volunteers will summon friends and
relatives to converge at the home, while others will be in charge of
notifying the news media. Organizers are also recruiting lawyers
willing to defend for no fee those who are arrested.
The campaign, called Home Defenders, enlisted about 500 participants
during meetings held Friday and Saturday in New York and five other
cities. Ms. Lewis and other organizers said that they believed the
number will reach into the tens of thousands within weeks.
“This is a desperate, last-ditch effort by folks who are working two or
three jobs, single mothers, elderly people who don’t know what else to
do to save their homes,” said Ginny Goldman, Acorn’s lead organizer in
Texas, where the campaign began in Houston on Saturday.
The rally in Brooklyn, at Brown Memorial Baptist Church in Fort Greene,
drew about 150 people. There were homeowners, Acorn members, community
advocates and candidates for the City Council. One councilman, Mathieu
Eugene, was carrying a slab of papers as thick as a large dictionary,
each sheet representing, he said, a family facing foreclosure in his
district, which includes parts of Crown Heights, Flatbush and
Kensington.
The church’s pastor, the Rev. Clinton M. Miller, opened the gathering
with this prayer: “If anybody here is facing foreclosure, God, we ask
that a miracle be made and a home be saved.”
Then, between homeowners’ sharing their plight, the crowd chanted,
“Enough is enough.”
One homeowner, Myrna Millington, 73, who lives in Laurelton, Queens,
said that she had to take a second mortgage on her home of 38 years to
pay for repairs that turned out to more extensive than originally
planned. What Ms. Millington did not know was that she had signed for a
subprime loan, which carried interest rates so high she could not keep
up with the payments. Her house was foreclosed on in September.
“I may lose my home, but I’m only leaving in handcuffs,” Ms. Millington
said.
Another homeowner, Denise Parker, a mother of three who works as a
housekeeper at two Midtown Manhattan hotels, bought a home in
Springfield Gardens, Queens, in 2005 with an adjustable interest rate
that, after two years, went up every six months. Her payments started
at $3,500 and now are $5,050 a month, she said. She fell behind last
year and her house is scheduled to be auctioned off on Friday.
“I refuse to leave the home that I’ve worked so hard to keep,” Ms.
Parker, 42, told the audience. “I will not let the bank take my home
and I will not leave.”
Eviction resistance actions are scheduled for Thursday in cities
including New York, Oakland and Houston. Organizers will try to recruit
enough volunteers to form a human wall on the sidewalk to avoid being
arrested for trespassing. But occupying a house or having people attach
themselves to a home could also be a tactic.
The campaign has earned praise and raised concern. Sheriff Dart, in
Illinois, said it was a “slippery slope when you have individuals
deciding whether they can lawfully remain in their homes.”
Sheriff Jones, in Ohio, equated the planned resistance to “chaining
yourself to a tree that’s about to be cut down” and said that though he
may not agree with it, he sympathizes.
In Washington, Acorn has found a staunch supporter in Representative
Marcia C. Kaptur of Ohio, who, during a discussion last month about the
$700 billion bailout package for financial companies, took to the floor
of the House and instructed people to “stay in your homes — if the
American people, anybody out there, is being foreclosed, don’t leave.”
In an interview, Ms. Kaptur said, “I’m thrilled that the American
people are rising up and exercising the power that Wall Street has
taken away from them.”
FORECLOSURES BUT FORECLOSURES RISING...
Home sales rose in '09 as prices plunged 12 pct. YAHOO
By ALAN ZIBEL, AP Real Estate Writer
January 25, 2010
WASHINGTON – Sales of previously
occupied homes rose in 2009 for the first time in four years, despite a
December slump that was due to a tax credit that led many buyers to
complete sales earlier.
Still, prices plunged more than 12
percent last year — the sharpest fall since the Great Depression. The
price drop for 2009 — to a median of $173,500 — showed the housing
market remains too weak to help fuel a sustained economic recovery.
Concerns remain that home sales will
weaken after March 31, when the Federal Reserve is set to end its
program to buy mortgage securities to keep home loan rates low. Once
that program ends, mortgage rates could rise. Adding to the worries, a
newly extended homebuyer tax credit is set to run out at the end of
April.
Some analysts question whether the
housing market can remain stable without the hundreds of billions in
government spending now propping it up.
Once the Fed's mortgage-buying
program ends, analysts say rates could rise as high as 6 percent from
the current level of around 5 percent for 30-year loans. That's why
some expect the Fed to either extend or expand the program after March,
concluding that the housing market remains too fragile.
"You just can't go from 100 miles an
hour to a dead stop and expect it to happen without a big jump in
mortgage rates," said Greg McBride, senior financial analyst at
Bankrate.com.
Still, some real estate agents say
they feel encouraged. More buyers are shopping around this month than
in a typical January, said Kevin O'Shea, an agent with Homes of
Westchester Inc. in White Plains, N.Y.
"There are indications that the
economy is coming back," he said. "And that makes buyers feel more
secure."
With median sale prices down 23
percent from their peak in summer 2006, homes have become more
affordable in many markets. The tax credit has helped. Many of those
active in the housing market these days are first-time buyers or
investors looking to gain from the lower prices.
Connie McInturff, 58, and her
husband, for example, looked at about 50 properties over 10 months
before deciding on a four bedroom foreclosed home in a suburb of
Orlando, Fla.
They're paying $135,000 for a house
that's been vacant for two years, and they plan to spend up to $10,000
to replace missing appliances and install carpeting. They plan to rent
it out, with the goal of eventually turning a profit.
The poor December results reported
Monday by the National Association of Realtors occurred after Congress
extended the tax credit, easing pressure on buyers to act quickly. The
credit of up to $8,000 for first-time homeowners had been due to expire
Nov. 30. But Congress extended the deadline and expanded it with a new
$6,500 credit for existing homeowners who move.
December's sales fell 16.7 percent
to a seasonally adjusted annual rate of 5.45 million, from an unchanged
pace of 6.54 million in November, the Realtors report said. It was the
largest monthly drop in 40-years of record-keeping. Sales had been
expected to fall by about 10 percent, according to economists surveyed
by Thomson Reuters.
For all of 2009, sales totaled
nearly 5.2 million, up about 5 percent from 2008.
The median sales price for December
was $178,300, up 1.5 percent from a year earlier and the first yearly
gain since August 2007. But some of that increase might be due to a
drop-off in purchases from first-time buyers who tend to buy less
expensive homes.
Sales are now up 21 percent from the
bottom a year ago. But they're down 25 percent from the peak more than
four years ago. Last
year, first-time buyers were the main driver of the housing market. But
their role is shrinking. They accounted for 43 percent of purchases in
December, down from about half in November, the Realtors group said.
The
inventory of unsold homes on the market fell about 7 percent to 3.3
million. That's a 7.2 month supply at the current sales pace, close to
a healthy level of about six months.
Many
analysts project that home prices, which had begun to rise last summer,
will fall again as spring approaches. That's because foreclosures make
up a larger proportion of sales during winter, when fewer sellers
choose to put their homes on the market.
And
foreclosures are still rising. The Obama administration's program to
aid homeowners has been a disappointment, with only 66,500 borrowers,
or 7 percent of those who signed up, completing the program as of
December.
The
Treasury Department plans later this week to announce a streamlined
process designed to get more borrowers to complete the loan
modification program, a spokeswoman said. The program reduces mortgage
rates to as low as 2 percent for five years.
Last
week, Richard Neiman, New York's top banking regulator, warned that
450,000 homeowners risk falling out of the program by the end of the
month because they haven't returned the necessary paperwork. The
program, he said, is "simply being drowned by a fierce flood of
foreclosures."
___
AP Real Estate Writers J.W.
Elphinstone in New York and Adrian Sainz in Miami contributed to this
report. Geithner:
bailout program extended to October YAHOO
By JEANNINE AVERSA, AP Economics Writer
December 9, 2009
WASHINGTON – Treasury Secretary
Timothy Geithner announced Wednesday that the administration will
extend the government's financial bailout program until next fall.
In a letter to House and Senate
leaders, Geithner said the extension is "necessary to assist American
families and stabilize financial markets."
Money from the $700 billion
taxpayer-funded bailout program has helped rescue big Wall Street
firms, auto companies and others. That's angered many Americans, who
feel the government hasn't provided them with relief from high
unemployment and rising home foreclosures.
Geithner said the Troubled Asset
Relief Program that Congress passed in October 2008, will be extended
until Oct. 3, 2010. He has the authority to extend the TARP simply by
notifying lawmakers.
"The recovery of our financial
system remains incomplete," Geithner told lawmakers. "And, near-term
shocks to that system could undermine the economic recovery we have
seen to do."
The Treasury secretary said new
commitments bankrolled by the bailout fund will be limited to three
areas next year.
One focus is stepping up efforts to
curb record-high home foreclosures, a move necessary to stabilize the
housing market and support a lasting economic recovery.
Another will be providing capital to
small banks, which play a crucial role in providing credit to small
businesses — normally a leading engine of job creation. But small banks
have been weighed down by problem commercial real estate loans, which
has made them reluctant to lend and hurt the ability of small
businesses to expand and hire.
In a third area, Geithner said the
government may boost its commitment to a program aimed at sparking
lending to consumers and small businesses. Run by Treasury and the
Federal Reserve, the Term Asset-Backed Securities Loan Facility, or
TALF, started in March.
Geithner said he didn't expect any
new commitments to the TALF would result in additional costs to
taxpayers. U.S. to Pressure
Mortgage Firms for Loan Relief NYTIMES
By PETER S. GOODMAN November 29, 2009 The Obama administration on Monday
plans to announce a campaign to pressure mortgage companies to reduce
payments for many more troubled homeowners, as evidence mounts that a
$75 billion taxpayer-financed effort aimed at stemming foreclosures is
foundering.
“The banks are not doing a good
enough job,” Michael S. Barr, Treasury’s assistant secretary for
financial institutions, said in an interview Friday. “Some of the firms
ought to be embarrassed, and they will be.”
Even as lenders have in recent
months accelerated the pace at which they are reducing mortgage
payments for borrowers, a vast majority of loans modified through the
program remain in a trial stage lasting up to five months, and only a
tiny fraction have been made permanent.
Mr. Barr said the government would
try to use shame as a corrective, publicly naming those institutions
that move too slowly to permanently lower mortgage payments. The
Treasury Department also will wait until reductions are permanent
before paying cash incentives that it promised to mortgage companies
that lower loan payments.
“They’re not getting a penny from
the federal government until they move forward,” Mr. Barr said.
From its inception early this year,
the Obama administration’s program, called Making Home Affordable, has
been dogged by persistent questions about whether it could diminish a
swelling wave of foreclosures. Some economists argued that the plan was
built for last year’s problem — exotic mortgages whose payments
increased — and not for the current menace of soaring joblessness.
Lawyers who defend homeowners against foreclosure maintained that
mortgage companies collect lucrative fees from long-term delinquency,
undercutting their incentive to lower payments to affordable levels.
Last month, an oversight panel
created by Congress reported that fewer than 2,000 of the 500,000 loan
modifications then in progress had become permanent under Making Home
Affordable. When the Treasury releases new numbers next month, it is
expected to report a disappointingly small number of permanent loan
modifications, with estimates in the tens of thousands out of the more
than 650,000 borrowers now in the program.
More unsatisfactory data is likely
to intensify pressures on the Obama administration to mount a more
muscular effort to stem foreclosures beyond the Treasury’s campaign
this week. Populist anger has been fanned by a growing perception that
the Treasury has lavished generous bailouts on Wall Street institutions
while neglecting ordinary homeowners — this, in the midst of
double-digit unemployment, which is daily sending more households into
delinquency.
“I’ve been very frustrated by the
pace of the program,” said Senator Jeff Merkley, an Oregon Democrat who
sits on the Senate Banking Committee. “Very few people have emerged
from the trial period.”
Though the administration’s program
was initially proclaimed as a means of sparing three to four million
households from foreclosure, “they’re going to be lucky if they save
one or one-and-a-half million,” said Edward Pinto, a consultant to the
real estate finance industry who served as chief credit officer to the
government-backed mortgage company Fannie Mae in the late 1980s.
A White House spokeswoman, Jennifer
R. Psaki, said the administration would continue to refine the program
as needed. “We will not be satisfied until more program participants
are transitioning from trial to permanent modifications,” she said.
Capitol Hill aides in regular
contact with senior Treasury officials say a consensus has emerged
inside the department that the program has proved inadequate,
necessitating a new approach. But discussions have yet to reach the
point of mapping out new options, the aides say.
“People who work on this on a
day-to-day basis are vested enough in it that they think there’s a need
to do a course correction rather than a wholesale rethink,” said a
Senate Democratic aide, who spoke on the condition he not be named for
fear of angering the administration. “But at senior levels, where
people are looking at this and thinking ‘Good God,’ there’s a sense
that we need to think about doing something more.”
Mr. Barr, who supervises the
program, portrayed such deliberations as part of a constant process of
assessment within the Treasury. He expressed confidence that the
mortgage program had sufficient tools to deliver relief, characterizing
the slow pace as reflecting a lack of follow-through, and not
structural defects requiring a revamping.
“We’re seeing a failure by some of
the bigger banks on execution,” Mr. Barr said. “We’re going to be quite
focused and direct on particular institutions that are not doing a good
job.”
The banks say they are making
good-faith efforts to comply with the program and provide relief.
“We’ve poured resources into this,”
said a spokesman for JPMorgan Chase, Tom Kelly. “We’ve made dramatic
improvements, and we continue to try to get better.”
Some senators contend that the
Treasury program, addressing mortgages whose low promotional interest
rates had soared, is outmoded. At this point, foreclosures are being
propelled by joblessness, which is sending millions of previously
credit-worthy people with ordinary mortgages into delinquency.
Within the Senate, some discussion
now focuses on pursuing legislation that would create a national
foreclosure prevention program modeled on one started last year in
Philadelphia. That program forces mortgage companies to submit to
court-supervised mediation with delinquent borrowers aimed at striking
an equitable resolution before they are allowed to proceed with the
sale of foreclosed homes.
Some Democrats say the time has come
to reconsider a measure opposed by the Obama administration: giving
bankruptcy judges the right to amend mortgages as a means of pressuring
lenders to extend reductions.
Lawyers who defend homeowners
against foreclosure increasingly say they doubt the Treasury program
can be made effective. Under the plan, companies that agree to lower
payments for troubled borrowers collect $1,000 from the government,
followed by another $1,000 a year for up to three years. The program is
premised on the idea that a small cash incentive will induce the banks
to cut their losses and accept smaller payments.
But the mortgage companies that
collect payments from homeowners — servicers, as they are known —
generally do not own the loans. Rather, they collect fees from
investors that actually own mortgages, and their fees often increase
the longer a borrower remains in delinquency.
Under the Treasury program,
borrowers who receive loan modifications must make their new payments
on a trial basis and then submit new paperwork validating their income
to make their modifications permanent.
But borrowers and their lawyers
report that much of the required paperwork is being lost in a haze of
bureaucratic disorganization. Servicers are abruptly changing fax
numbers and mislaying files — the same issues that have plagued the
program from its inception.
“People continue to get lost in the
phone tree hell,” said Diane E. Thompson, a lawyer with the National
Consumer Law Center.
Some lawyers who defend homeowners
against foreclosure assert that mortgage companies are merely stalling,
using trial loan modifications as an opportunity to extract a few more
dollars from borrowers who would otherwise make no payments.
“I don’t think they ever intended to
do permanent loan modifications,” said Margery Golant, a Florida lawyer
who previously worked for a major mortgage company, Ocwen Financial.
“It’s a shell game that they’re playing.” U.S.
Mortgage Delinquencies Reach a Record High NYTIMES
By DAVID STREITFELD November 20, 2009
The number of people at least one
month behind on their house payments rose to a record in the third
quarter, the Mortgage Bankers Association said Thursday.
Nearly 10 in 100 homeowners are
delinquent, according to the association’s data, up from about seven
out of 100 in the third quarter of 2008.
These
numbers do not include those
who are actually in foreclosure, a figure that also rose sharply. The
combined percentage of those in foreclosure as well as delinquent is
14.41 percent, or about one in seven of mortgage holders...full story here.
U.S. "option" mortgages to
explode, officials warn
YAHOO
By Lisa Lambert
Thu Sep 17, 3:15 pm ET
WASHINGTON (Reuters) – The federal government and states are girding
themselves for the next foreclosure crisis in the country's housing
downturn: payment option adjustable rate mortgages that are beginning
to reset.
"Payment option ARMs are about to explode," Iowa Attorney General Tom
Miller said after a Thursday meeting with members of President Barack
Obama's administration to discuss ways to combat mortgage scams.
"That's the next round of potential foreclosures in our country," he
said.
Option-ARMs are now considered among the riskiest offered during the
recent housing boom and have left many borrowers owing more than their
homes are worth. These "underwater" mortgages have been a driving force
behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the the next
year and many have started to adjust this month, the state's attorney
general, Terry Goddard, told Reuters after the meeting.
"It's the other shoe," he said. "I can't say it's waiting to drop. It's
dropping now."
The mortgages differ from other ARMs by offering an option to pay only
the interest each month or a low minimum payment that leads to a rising
balance in the loan's principal. When the balance of the loan
reaches a certain level or the mortgage
hits a specific date, the borrower must begin making full payments to
cover the new amount. The loan's interest rate also may have been fixed
at a low level for the first few years with a so-called teaser rate,
but then reset to a higher level.
Because the new monthly payments can be five or 10 times what borrowers
are accustomed to paying, they "threaten a much greater hit to the
consumer than the subprimes," Goddard said, referring to the mortgages
often extended to less credit-worthy borrowers that fed the first wave
of the financial crisis.
Miller said option-ARMs were discussed at Tuesday's meeting on mortgage
scams, which brought state attorneys general from across the country
together with U.S. Treasury Secretary Timothy Geithner, Attorney
General Eric Holder, Housing and Urban Development Secretary Shaun
Donovan, and Federal Trade Commission Chairman Jon Leibowitz.
The mortgages tend to be "jumbo," or for significantly large amounts,
Goddard said, making it even harder for borrowers to sidestep
foreclosure. He said he expected to see an increase in scams as
distressed homeowners become more desperate to refinance big
debts. Goddard said his office is investigating hundreds of cases
where
companies have made fraudulent promises, and charged large fees, to
mortgage defaulters.
The U.S. housing market has suffered the worst downturn since the Great
Depression, and its impact has rippled through the recession-hit
economy. Some signs of stabilization emerged recently, with sales
rising and
home price declines moderating in many regions of the country. Home
prices in some regions have risen. However, many economists say
there is still a huge supply of unsold
homes lingering on the market and that, coupled with a frenzy of more
foreclosures ahead, should depress home prices for the rest of 2009.
Real estate data firm RealtyTrac, in its August 2009 U.S. Foreclosure
Market Report, said foreclosure filings -- default notices, scheduled
auctions and bank repossessions -- were reported on 358,471 U.S.
properties during the month, a decrease of less than 1 percent from the
previous month, but an increase of nearly 18 percent from the same
month a year ago.
The report said one in every 357 U.S. housing units received a
foreclosure filing last month. Treasury
Says Millions More
Foreclosures Coming
NYTIMES
By REUTERS
September 9, 2009
Filed at 11:02 a.m. ET
WASHINGTON (Reuters) - Only 12 percent of U.S. homeowners eligible for
loan modifications under the Obama administration's housing rescue plan
have had their mortgages reworked, and millions more foreclosures are
coming, the Treasury Department said on Wednesday.
A Treasury report showed 360,165 people had their monthly payments
reduced through August, up from 235,247 through July, but a senior
Treasury official conceded much more must be done to soften the impact
of a severe and prolonged housing crisis. Treasury has begun
releasing monthly reports on the loan modification
program, called the Home Affordable Modification Program or HAMP.
In July, it said that just 9 percent of the estimated number of
homeowners eligible had had their loans modified, so Treasury's
assistant secretary for financial institutions, Michael Barr, was able
to claim modest progress in August. He told a House Financial
Services subcommittee that the program
launched in February, which brings banks and loan servicers together
with at-risk homeowners, was on target to help a half million Americans
homeowners by November 1. But that is a small start on a huge
problem at the heart of U.S. economic woes...full story here. A ‘Little Judge’ Who Rejects Foreclosures,
Brooklyn Style
NYTIMES
By MICHAEL POWELL
August 31, 2009
The judge waves you into his chambers in the State Supreme Court
building in Brooklyn, past the caveat taped to his wall — “Be sure
brain in gear before engaging mouth” — and into his inner office, where
foreclosure motions are piled high enough to form a minor Alpine chain.
Every week, the nation’s mightiest banks come to his court seeking to
take the homes of New Yorkers who cannot pay their mortgages. And
nearly as often, the judge says, they file foreclosure papers speckled
with errors.
He plucks out one motion and leafs through: a Deutsche Bank
representative signed an affidavit claiming to be the vice president of
two different banks. His office was in Kansas City, Mo., but the
signature was notarized in Texas. And the bank did not even own the
mortgage when it began to foreclose on the homeowner.
The judge’s lips pucker as if he had inhaled a pickle; he rejected this
one.
“I’m a little guy in Brooklyn who doesn’t belong to their country
clubs, what can I tell you?” he says, adding a shrug for punctuation.
“I won’t accept their comedy of errors.”
The judge, Arthur M. Schack, 64, fashions himself a judicial Don
Quixote, tilting at the phalanxes of bankers, foreclosure facilitators
and lawyers who file motions by the bale. While national debate focuses
on bank bailouts and federal aid for homeowners that has been slow in
coming, the hard reckonings of the foreclosure crisis are being made in
courts like his, and Justice Schack’s sympathies are clear.
He has tossed out 46 of the 102 foreclosure motions that have come
before him in the last two years. And his often scathing decisions,
peppered with allusions to the Croesus-like wealth of bank presidents,
have attracted the respectful attention of judges and lawyers from
Florida to Ohio to California. At recent judicial conferences in
Chicago and Arizona, several panelists praised his rulings as a
possible national model.
His opinions, too, have been greeted by a cry of affront from a bank
official or two, who say this judge stands in the way of what is
rightfully theirs. HSBC bank appealed a recent ruling, saying he had
set a “dangerous precedent” by acting as “both judge and jury,”
throwing out cases even when homeowners had not responded to
foreclosure motions.
Justice Schack, like a handful of state and federal judges, has taken a
magnifying glass to the mortgage industry. In the gilded haste of the
past decade, bankers handed out millions of mortgages — with terms
good, bad and exotically ugly — then repackaged those loans for sale to
investors from Connecticut to Singapore. Sloppiness reigned. So many
papers have been lost, signatures misplaced and documents dated
inaccurately that it is often not clear which bank owns the mortgage.
Justice Schack’s take is straightforward, and sends a tremor through
some bank suites: If a bank cannot prove ownership, it cannot foreclose.
“If you are going to take away someone’s house, everything should be
legal and correct,” he said. “I’m a strange guy — I don’t want to put a
family on the street unless it’s legitimate.”
Justice Schack has small jowls and big black glasses, a thin mustache
and not so many hairs combed across his scalp. He has the impish eyes
of the high school social studies teacher he once was, aware that
something untoward is probably going on at the back of his classroom.
He is Brooklyn born and bred, with a master’s degree in history and an
office loaded with autographed baseballs and photographs of the
Brooklyn Dodgers. His written decisions are a free-associative trip
through popular, legal and literary culture, with a sideways glance at
the business pages.
Confronted with a case in which Deutsche Bank and Goldman Sachs passed
a defaulted mortgage back and forth and lost track of the documents,
the judge made reference to the film classic “It’s a Wonderful Life”
and the evil banker played by Lionel Barrymore.
“Lenders should not lose sight,” Justice Schack wrote in that 2007
case, “that they are dealing with humanity, not with Mr. Potter’s
‘rabble’ and ‘cattle.’ Multibillion-dollar corporations must follow the
same rules in the foreclosure actions as the local banks, savings and
loan associations or credit unions, or else they have become the Mr.
Potters of the 21st century.”
Last year, he chastised Wells Fargo for filing error-filled papers.
“The court,” the judge wrote, “reminds Wells Fargo of Cassius’s advice
to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’:
‘The fault, dear Brutus, is not in our stars, but in ourselves.’ ”
Then there is a Deutsche Bank case from 2008, the juicy part of which
he reads aloud:
“The court wonders if the instant foreclosure action is a corporate
‘Kansas City Shuffle,’ a complex confidence game,” he reads. “In the
2006 film ‘Lucky Number Slevin,’ Mr. Goodkat, a hit man played by Bruce
Willis, explains: ‘A Kansas City Shuffle is when everybody looks right,
you go left.’ ”
The banks’ reaction? Justice Schack shrugs. “They probably curse at
me,” he says, “but no one is interested in some little judge.”
Little drama attends the release of his decisions. Beaten-down
homeowners rarely show up to contest foreclosure actions, and the judge
scrutinizes the banks’ papers in his chambers. But at legal
conferences, judges and lawyers have wondered aloud why more judges do
not hold banks to tougher standards.
“To the extent that judges examine these papers, they find exactly the
same errors that Judge Schack does,” said Katherine M. Porter, a
visiting professor at the School of Law at the University of
California, Berkeley, and a national expert in consumer credit law.
“His rulings are hardly revolutionary; it’s unusual only because we so
rarely hold large corporations to the rules.”
Banks and the cottage industry of mortgage service companies and
foreclosure lawyers also pay rather close attention.
A spokeswoman for OneWest Bank acknowledged that an official,
confronted with a ream of foreclosure papers, had mistakenly signed for
two different banks — just as the Deutsche Bank official did. Deutsche
Bank, which declined to let an attorney speak on the record about any
of its cases before Justice Schack, e-mailed a PDF of a three-page
pamphlet in which it claimed little responsibility for foreclosures,
even though the bank’s name is affixed to tens of thousands of such
motions. The bank described itself as simply a trustee for investors.
Justice Schack came to his recent prominence by a circuitous path,
having worked for 14 years as public school teacher in Brooklyn. He was
a union representative and once walked a picket line with his wife,
Dilia, who was a teacher, too. All was well until the fiscal crisis of
the 1970s.
“Why’d I go to law school?” he said. “Thank Mayor Abe Beame, who froze
teacher salaries.”
He was counsel for the Major League Baseball Players Association in the
1980s and ’90s, when it was on a long winning streak against team
owners. “It was the millionaires versus the billionaires,” he says.
“After a while, I’m sitting there thinking, ‘He’s making $4 million,
he’s making $5 million, and I’m worth about $1.98.’ ”
So he dived into a judicial race. He was elected to the Civil Court in
1998 and to the Supreme Court for Brooklyn and Staten Island in 2003.
His wife is a Democratic district leader; their daughter, Elaine, is a
lawyer and their son, Douglas, a police officer.
Justice Schack’s duels with the banks started in 2007 as foreclosures
spiked sharply. He saw a plague falling on Brooklyn, particularly its
working-class black precincts. “Banks had given out loans structured to
fail,” he said.
The judge burrowed into property record databases. He found banks
without clear title, and a giant foreclosure law firm, Steven J. Baum,
representing two sides in a dispute. He noted that Wells Fargo’s chief
executive, John G. Stumpf, made more than $11 million in 2007 while the
company’s total returns fell 12 percent.
“Maybe,” he advised the bank, “counsel should wonder, like the court,
if Mr. Stumpf was unjustly enriched at the expense of W.F.’s
stockholders.”
He was, how to say it, mildly appalled.
“I’m a guy from the streets of Brooklyn who happens to become a judge,”
he said. “I see a bank giving a $500,000 mortgage on a building worth
$300,000 and the interest rate is 20 percent and I ask questions, what
can I tell you?”
Mortgages: Beware of Neighbor’s Home Foreclosure
NYTIMES
By BOB TEDESCHI
June 14, 2009
WHEN it comes to selling your house or planning your next home equity
line of credit, being a nosey neighbor could very well pay off.
That’s one implication of a recent report from the Center for
Responsible Lending, a consumer advocacy group based in Durham, N.C.
The report, which was released in May, focuses on the ripple effects of
home foreclosures, and suggests that homeowners who are concerned about
their home’s value should watch for signs of trouble among their
closest neighbors.
This year alone, it says, foreclosures will cause an estimated 69.5
million nearby homes to suffer price declines averaging $7,200 per
home. The loss in property value could total $500 billion.
The resulting loss in financial flexibility is significant. “Homeowners
who had counted on using their home equity to finance their retirement,
cover tuition costs, start a small business, or pay medical bills in
many cases no longer have this option,” the report said.
Ellen Schloemer, the executive vice president of the Center for
Responsible Lending, said that over the next four years, foreclosures
would affect an estimated 91.5 million neighboring homes.
“As the foreclosure crisis continues to worsen, the contagion is
spreading,” Ms. Schloemer said. “You can’t just say those foreclosures
are hurting someone else.”
The rate of home foreclosures has rise sharply since 2007, when the
first subprime adjustable-rate mortgages began resetting to higher
rates. But even borrowers with good credit have defaulted on their
loans as the economy has faltered.
According to the Mortgage Bankers Association, an industry trade group,
about 1.4 percent of all first mortgages entered foreclosure in the
first quarter of this year, a 20 percent jump from the fourth quarter
of 2008, and a record high.
The center’s report relied on forecasts from Credit Suisse, which said
late last year that about nine million homes would probably go into
foreclosure in 2009 to 2012. The center also used late 2008 data from
the Mortgage Bankers Association to estimate this year’s foreclosure
figures (about 2.4 million homes).
Two earlier reports released by the Center for Responsible Lending
examined the spillover effects of the mortgage crisis. But this year it
relied on new research about how a foreclosure affects neighborhood
home values — specifically, a 2008 study that includes researchers at
Fannie Mae, the government-sponsored agency, and the University of
Connecticut.
This study found that homeowners who lived within 300 feet of a
foreclosed residential property experienced a drop of 1.3 percent in
home value; those living 300 to 500 feet of the foreclosed home
typically see a drop in value of 0.6 percent.
John P. Harding, a professor at the University of Connecticut’s Center
for Real Estate and Urban Economic Studies, and an author of the study,
said the properties that are most affected by a foreclosure are the
ones close enough to see the peeling paint, broken windows and
overgrown lawns that often accompany such situations.
The worst time for immediate neighbors to sell their homes, refinance
or cash out some of their home equity, Mr. Harding said, is just before
the bank takes title to the property, because that is the point of
greatest neglect.
After that point, Mr. Harding said, many lenders will at least maintain
the property’s appearance well enough to attract prospective buyers.
OF course, the best time to try to sell a home or convert equity into
cash is when neighbors are on sound financial footing, though it may
not be easy to determine.
Job loss is the biggest cause of mortgage default, according to
industry experts, so if a neighbor becomes unemployed, you should
probably start your own clock ticking.
For those living outside the immediate vicinity of the foreclosure, but
still in the neighborhood, Mr. Harding said home values typically
bottom out around the time when the bank actually sells the home.
“My advice would be to try to ride that out, not panic, and know that
this is the peak effect from lower-priced competition,” he said.
Mr. Harding said that banks, municipalities and the federal government
are justified in financing foreclosure-avoidance programs, but not if
they help homeowners just barely afford to stay in their homes. In such
situations, neighboring homes could still see values drop.
“You want to offer help at a level at which people can still do
critical maintenance to the property,” he said.
Connecticut Mortgages: 1 In 17 In
Foreclosure Or Overdue
The Hartford Courant
By KENNETH R. GOSSELIN
August 21, 2009
Foreclosures and seriously delinquent home loans in Connecticut have
jumped to their highest level in at least 30 years as unemployment
increasingly hurts homeowners with traditional mortgages.
The state had 31,979 residential mortgages either in foreclosure or 90
or more days past due, according to a report Thursday from the Mortgage
Bankers Association. That's equal to 6 percent of all home loans as of
June 30, or one mortgage in every 17.
The foreclosure figure rose from 5.3 percent — or one mortgage in every
20 — as of March 31, but was still lower than the nearly 8 percent for
the nation.
Until unemployment levels start to drop, economists are expecting that
foreclosures will continue to increase in coming months. And an uptick
in employment is still months away by some estimations and may not come
until well into next year. It isn't clear by how much Connecticut could
lag the nation in an economic recovery.
"If someone is hanging on by their fingernails right now and hasn't
been called back to work and is falling behind on the mortgage, it's
very difficult to see any relief for them," said Nicholas S. Perna,
economic adviser to Webster Bank. "The recovery may come too late for
them."
Foreclosures earlier in the recession largely hit homeowners who were
marginal buyers, financing their houses through subprime mortgages. Now
many families with traditional mortgages who didn't overextend
themselves are fueling the trend, facing the loss of their homes
because of layoffs.
"The housing markets are going to remain weak until we get some
traction in the labor market," said Donald L. Klepper-Smith, an
economist at DataCore Partners Inc. in New Haven. "It's that simple."
A recovery in home prices could help struggling homeowners, but that's
likely to come some months after jobs begin to return. Rising home
prices help homeowners sell or refinance because the value of their
property has a better chance of being more than they owe on the
mortgage.
Since Connecticut slipped into recession, the state has lost 76,000
jobs and many expect that number to increase to 100,000 over the next
year, even though monthly job losses appear to be moderating.
There have been some encouraging signs for the state's housing market
recently. Sales of single-family houses in Greater Hartford rose in
July for the first time in nearly two years, showing that buyers are
tiptoeing back into the market, attracted by lower prices.
And not all homeowners in foreclosure end up losing their homes.
Since it began in July 2008, the state's foreclosure mediation program,
administered through the courts, has helped 2,078 borrowers reach
agreements with lenders and loan servicers to stay in their homes.
That's 62 percent of the mediation cases closed as of June 30. Of the
agreements made, 1,391, or 42 percent, involved new terms such as lower
interest rates.
While that is upbeat news, the number of homeowners in trouble isn't
abating, said Roberta Palmer, the mediation program's manager.
"The mediators don't see any slowdown," Palmer said.
Connecticut has been spared the brunt of the foreclosure crisis and is
not nearly as hard hit as Arizona, California, Florida and Nevada, the
four states most heavily influencing the national foreclosure and
delinquency numbers.
Although mortgages in foreclosure or seriously delinquent are a gauge
of borrowers most at risk of losing their homes, the numbers are even
higher when including mortgages that are 30 or 60 days late.
Nationally, 13.1 percent of all residential loans are late or in
foreclosure, according to the Mortgage Bankers Association; that figure
in Connecticut is 10.8 percent.
Mortgage
Delinquencies Hit Record High in Q2 NYTIMES
By THE ASSOCIATED PRESS August
20, 2009Filed at 10:00 a.m. ET
WASHINGTON (AP) -- An industry group
says a record of more than 13 percent of American homeowners with a
mortgage are either behind on their payments or in foreclosure as the
recession throws more people out of work.
The Mortgage Bankers Association's
report Thursday provided more evidence that the source of distress in
the U.S. mortgage market has shifted from shady subprime loans with
adjustable rates to traditional fixed-rate mortgages.
One in three new foreclosures
between April and June was a prime, fixed-rate loan, up from one in
five a year earlier. Last year, subprime adjustable-rate loans were the
largest share of foreclosures.
Delinquent Mortgages Hit Record In 2nd Q DAY
By EILEEN AJ CONNELLY, Associated Press Published on 8/18/2009
New York - The delinquency
rate on U.S. mortgage loans hit an all-time high in the second quarter,
but the pace of growth for the rate slowed, a possible sign the
mortgage crisis may be about to turn the corner.
Data provided by credit reporting
agency TransUnion shows the ratio of mortgage holders who are 60 days
or more behind on their payments increased for the 10th straight
quarter, to 5.81 percent nationwide for the three months ended June 30.
That's up 65 percent, from 3.53
percent, in the 2008 second quarter.
Delinquency of 60 days is considered
a precursor to foreclosure, because of the difficulty homeowners would
have coming up with two back payments to bring themselves current.
While the delinquency rate hit a new
high, however, the increase from the first quarter to the second was
11.3 percent. In the two prior quarters, the rate jumped nearly 16
percent.
That slowdown may be a good sign,
said FJ Guarrera, vice president of TransUnion's financial services
division. “We have reason to be cautiously optimistic,” he said.
While there's no way to know exactly
why the pace of growth is slowing, Guarrera said, it appears that
programs aimed at helping distressed homeowners from both the
government and mortgage lenders are beginning to help. In addition, he
said, consumers are being more careful with their spending.
For the second quarter, Nevada,
Florida, Arizona and California remained the four states with the
highest delinquency rates, mirroring the locations where foreclosures
are the highest. Nevada's delinquency rate spiked to 13.8 percent, from
11.6 percent in the first quarter and 6.63 percent in the 2008 second
quarter.
In Florida, the delinquency rate
rose to 12.3 percent, from 11 percent in the first quarter, and 6.47
percent in the 2008 second quarter.
TransUnion culls its database of 27
million consumer records to produce the statistics.
North Dakota and South Dakota
remained the states with the lowest delinquency rates. North Dakota's
rate actually edged down a hundredth of a percent, to 1.5 percent.
Ohio, Idaho and Connecticut also saw decreases from the first quarter
to the second.
Guarrera saw particular importance
in the statistics for Ohio, where delinquency edged down to 4.57
percent from 4.58 percent in the first quarter.
The Ohio rate remains up
substantially from the 2008 second quarter, when it stood at 3.77
percent, but the quarter-over-quarter decline, while small, was
significant, he said.
”I believe this is a precursor to
recovery,” Guarrera stated, noting that the recession was felt first in
the Rust Belt and Sun Belt states. “We see this as a really good sign.”
Not all of the news was positive,
Wyoming and Utah, two states that have been far from the center of the
foreclosure crisis, saw their delinquency rates jump the most, to 2.85
percent and 4.68 percent. RealtyTrac: July foreclosures rose 7
percent from June; lenders slow to modify loans
AP Real Estate Writer
ALAN ZIBEL
1:50 PM EDT, August 13, 2009
WASHINGTON (AP) — The number of U.S. households on the verge of losing
their homes rose 7 percent from June to July, as the escalating
foreclosure crisis continued to outpace government efforts to limit the
damage.
Foreclosure filings were up 32 percent from the same month last year,
RealtyTrac Inc. said Thursday. More than 360,000 households, or one in
every 355 homes, received a foreclosure-related notice, such as a
notice of default or trustee's sale. That's the highest monthly level
since the foreclosure-listing firm began publishing the data more than
four years ago.
Banks repossessed more than 87,000 homes in July, up from about 79,000
homes a month earlier.
Nevada had the nation's highest foreclosure rate for the 31st-straight
month, followed by California, Arizona, Florida and Utah. Rounding out
the top 10 were Idaho, Georgia, Illinois, Colorado and Oregon. Among
cities, Las Vegas had the highest rate, followed by the California
cities of Stockton and Modesto.
While there have been numerous recent signs that the ailing U.S.
housing market is finally stabilizing after three years of plunging
prices, foreclosures remain a big concern. Foreclosures are typically
sold at a deep discount, hurting neighbors' home values.
The mortgage industry has been slow to adapt to the surge in
foreclosures. Many lenders have needed government prodding to get up to
speed with the Obama administration's plan to stem foreclosures.
The Treasury Department said last week that banks have extended only
400,000 offers to 2.7 million eligible borrowers who are more than two
months behind on their payments. More than 235,000, or 9 percent, those
borrowers have enrolled in three-month trials in which their monthly
payments are reduced.
"The volume of loans that are in distress simply overwhelms" those
efforts, said Rick Sharga, RealtyTrac's senior vice president for
marketing.
Copyright 2009 Associated Press. All
rights reserved. This material may not be published, broadcast,
rewritten, or redistributed. Sector Snap: Toll Bros. Sales Goose
Homebuilders
NYTIMES
By THE ASSOCIATED PRESS
Filed at 1:32 p.m. ET
August 12, 2009
NEW YORK (AP) -- Homebuilder stocks joined the market rally Wednesday
after luxury builder Toll Brothers Inc. posted its first annual
increase in signed contracts in four years.
The company said new home contracts for the fiscal third quarter rose 3
percent from the prior year, and 44 percent from the fiscal second
quarter. The company was even able to scale back some of the incentives
it's been offering buyers to spur sales.
Among the bright spots in the report was Toll Brother's lowest
cancellation rate in three years -- 9 percent.
Leading the sector higher, Toll Brothers shares gained $2.63, or 12.9
percent, to $23.12, with volume more than twice normal in afternoon
trading.
''We believe the key question is whether this marks a turning point for
TOL and/or the broader industry or just a nice spike that may not
portend a sharply rising trend,'' Stifel Nicolaus analyst Michael
Widner wrote, using the company's New York Stock Exchange ticker symbol.
He noted that while the spike is better than expected, ''we can't help
contemplating that we're talking about roughly 300 incremental home
sales here.
''Was this a spike of a few hundred buyers being lured off the fence
through strong marketing efforts coupled with financial incentives, tax
rebates, and financing options, or has the market genuinely turned the
corner?'' Widner asked. While he saw the results as strong, he
encouraged investors not to chase a rally, noting that the luxury
sector has been hit harder than the broader housing market.
Nevertheless, investors bought into the sector on the news.
Shares of Beazer Homes Inc. added 35 cents, or 9.6 percent, to $4.
Hovnanian Enterprises Inc. gained 23 cents, or 5.9 percent, to $4.15
and Centex Corp. shares added 53 cents, or 4.4 percent, to $12.46.
Elsewhere, Lennar Corp. gained 59 cents, or 4.5 percent, to $13.59,
while Pulte Homes Inc. added 50 cents, or 4.1 percent, to $12.82.
KB Home gained 41 cents, or 2.3 percent, to $18.18 and DR Horton Inc.
added 34 cents, or 2.6 percent, to $13.45.
Markets Rise on Signs of Economic Growth
NYTIMES
By JACK HEALY August 4, 2009
For thousands of investors whose portfolios are benchmarked to the
Standard & Poor’s 500-stock index, recovery was a thing with four
digits on Monday.
The closely watched stock index crossed 1,000 points for the first time
since early November, fueling hopes that stock markets would continue
to march higher as the recession showed signs of reaching a bottom.
Like other market gauges, the S.&P. 500 is still off more than a
third from its all-time highs, but it has rallied strongly off its
bear-market lows and is now up more than 10 percent for the year.
The day’s activity added more momentum to a three-week surge that
lifted the Dow above 9,000 points and kindled optimism that banks and
major corporations could still turn profits, even as the toll of job
losses mounts and the prospects for economic growth coming out of the
recession remain uncertain.
As Wall Street headed higher for another day, waves of optimism about
global industry lifted financial markets and lifted the price of oil,
grains metals and other commodities, as traders bet that a recovery
would lift global consumption and revive the demand for raw materials.
Automakers were reaping a boost in sales from the government’s “cash
for clunkers” program, which gives credits to motorists who trade in
their cars for new, more fuel efficient ones. The Ford Motor Company
reported that sales rose 2.3 percent in July, its first monthly sales
increase since 2007.
Shares of Ford were up more than 6 percent, and American-traded shares
of foreign car companies Toyota, Nissan and Honda were all higher.
Signs of improvement the industrial sectors of China, Europe and
Britain bolstered stock markets in Asia, London, Paris and Frankfurt.
And more positive readings on manufacturing and the housing market in
the United States propelled stock markets on Wall Street toward their
highest levels of the year.
At 1:25 p.m. the Dow Jones industrial average was about 100 points or
1.1 percent higher, and the S.&P. 500 was up by 1.3 percent,
hovering just above 1,000 points. The Nasdaq composite index was
crossed above the 2,000-point threshold, a line it had not breached
since early October.
Leading the way were companies that sell oil and natural gas, and those
that manufacture basic materials like steel, paper products or plastic.
Investors rushed to buy their shares as the price of oil rose more than
$2, to nearly $72 a barrel, and the prices of gold and copper also
surged.
A
surprising, though slender, 0.3 percent increase in construction
spending in June also leavened the mood on Wall Street and offered
optimistic forecasters another sign that the housing market was near
bottom, if not already staging a recovery.
Builders spent more money in June to construct new homes, hotel
projects, commercial centers and other projects, the Commerce
Department reported on Monday. Part of the overall rise came from a 1
percent increase in government construction spending as stimulus
projects began to get under way.
And the Institute for Supply Management reported that manufacturing
activity contracted at its slowest pace since last August as businesses
reported more orders and higher production than previous months, and
improvements in employment conditions. The group’s manufacturing index
rose to 48.9 in July, from 44.8 a month earlier.
“This is good news, though we still can’t be sure if further sustained
strength is possible in the face of continued consumer deleveraging,”
said Ian Shepherdson, chief United States economist at High Frequency
Economics. “This could just be a catch-up after the post-Lehman
disaster.” Conn. sees jump in housing
permits
CTPOST
Updated: 07/29/2009 08:40:10 PM EDT
HARTFORD -- A spike in new housing permits in Connecticut has sparked
some optimism among government and construction industry officials
about the state's economic future.
The 128 cities and towns that report monthly data say they handed out
403 permits for new housing units in June, more than double the number
for May and the most since November.
But the numbers are still down compared with last year. June's total is
a drop of nearly 46 percent compared with June 2008. The 1,430 new
housing permits issued in the first six months of this year is also
down 46 percent from the same period last year.
The president of the Home Builders Association of Connecticut, George
LaCava, said the June number is a good sign, but not necessarily a sign
of a rebound. U.S. HOME PRICES Slide in Home Prices Is Slowing Down, Index
Shows
NYTIMES
By DAVID STREITFELD
July 29, 2009
The long slide in housing prices is continuing to brake, figures
released Tuesday indicate.
For the fourth consecutive month, there was modest improvement in home
prices in May, according to Standard & Poor’s Case-Shiller Home
Price Index, a closely watched measure of the market.
The index of 20 metropolitan areas had an annual decline of 17.1
percent in May from the same month in 2008, an improvement over April’s
18.1 percent fall. Prices improved in 13 of the 20 cities in the
survey, with Cleveland reporting the largest increase, 4.1 percent,
followed by Dallas with 1.9 percent and Boston 1.6 percent. Several
other cities — Chicago, Denver, Minneapolis, San Francisco and
Washington — reported increases of more than 1 percent.
Five cities reported a drop in prices, led by Las Vegas with 2.6
percent.
The 10-city index also noted an improvement in prices, with a 16.8
decline in May compared with the month a year ago, after a 18 percent
drop in April.
While the numbers are still grim, the important thing is the direction
they are heading, Wells Fargo chief economist John E. Silvia said.
“Recession is over, economy is recovering — let’s look forward and stop
the backward-looking focus,” he wrote in a research note.
Before bottoming in January, the Case-Shiller index showed 16
consecutive months of record annual declines. From its peak three years
ago, the index is down about a third, pushing prices in major cities
back to where they were in 2003.
Noting that 13 of the 20 cities in the index reported positive returns
compared with April, David M. Blitzer, index chairman at Standard &
Poor’s, said that “these are the first time we have seen broad
increases in home prices in 34 months. This could be an indication that
home price declines are finally stabilizing.”
A housing market where prices are merely flat — never mind one that
rises — nevertheless appears a long way off. Many analysts think the
most hopeful scenario is that prices start to rise modestly late next
year. An economy that double dips into another recession would push
that date even further back. NEW HOME SALES November new home sales
sink 11 percent
YAHOO
By ALAN ZIBEL, AP Real Estate Writer
Dec. 23, 2009
WASHINGTON – Sales of new homes plunged unexpectedly last month to the
lowest level since April, a sign the housing market recovery will be
rocky.
The 11 percent slump from October's pace shows that consumers are
taking their time following an extension of a deadline for first-time
buyers to qualify for a tax credit. The incentive was set to expire at
the end of November, but Congress pushed back the date to April 30 and
expanded the program to include current homeowners who relocate.
"They don't have to act today," said David Crowe, chief economist at
the National Association of Home Builders, who called the results
"pretty awful."
New home sales data are a better indicator of future real estate than
sales of previously occupied homes, but capture a smaller slice of the
market. The new home figures tally sales agreements signed in November,
while home resale numbers reflect contracts signed over the summer that
were completed in November.
So while home resales rose 7 percent last month, the National
Association of Realtors reported Tuesday, most economists expect
completed sales to decline during the winter months.
"Buyer traffic is likely to be flat until spring," predicted Mark
Vitner, senior economist with Wells Fargo Securities.
Despite the poor showing from new home buyers, the housing market has
been recovering from the worst downturn in decades, largely due to a
massive infusion of federal assistance. New home sales are up 8 percent
from the bottom in January but 74 percent below the peak in July 2005.
Compared with November last year, sales were off 9 percent.
The Commerce Department said sales hit a seasonally adjusted annual
rate of 355,000 last month, off from a downwardly revised 400,000 pace
in October. Economists surveyed by Thomson Reuters had expected 440,000.
The median sales price of $217,400 was down nearly 2 percent from
$221,600 a year earlier, but up about 4 percent from October's level of
$209,400.
Builders clearly saw the drop coming: the National Association of Home
Builders said last week its index of industry confidence fell to the
lowest level since June. The trade group blamed high unemployment and a
slow economic recovery that are stifling demand.
The only strong region was the Midwest, where sales rose 21 percent.
Sales fell by 21 percent in the South, 9 percent in the West and 3
percent in the Northeast.
Builders had 235,000 new homes for sale nationwide at the end of
November. That was down 2 percent from October and the lowest inventory
level since April 1971. At the current weak sales pace, that still
represents nearly eight months of supply.
Robert Toll, CEO of luxury builder Toll Brothers Inc. said earlier this
month demand has been "choppy" after several strong months in the
spring and summer.
"You just have to bite the finger, be patient, and wait until you see
what comes out in the latter part of January, all of February and in
the early part of March," he said. New home sales unexpectedly tumble
YAHOO
By Lisa Lambert
October 28, 2009
WASHINGTON (Reuters) – Sales of new U.S. homes
unexpectedly tumbled in September, their first drop in six months,
underscoring the hazards to an economic recovery that businesses
appeared to be banking on.
New single-family home sales fell 3.6 percent to a 402,000 unit annual
pace from a downwardly revised 417,000 units in August, the Commerce
Department said on Wednesday. Analysts polled by Reuters had expected
sales to rise to a 440,000 unit pace from August's previously reported
429,000.
A separate report from the Mortgage Bankers Association on Wednesday
showed demand for mortgages has fallen for the past three weeks as
buyers move to the sidelines ahead of the November 30 expiration of a
popular home-buyers' tax credit.
The housing data represented a road bump in a recovery that otherwise
appears to be widening. Another report from the Commerce Department
showed that new orders for long-lasting U.S. manufactured goods rose 1
percent in September as business stepped-up investment plans.
"One month is obviously not a trend and I think there is plenty of
evidence that things are turning around. I still believe the economy
has hit bottom and is on the way up, but it will be a long, slow
process," said Mark Bonhard, an investment advisor at Dawson Wealth
Management in Cleveland, Ohio.
U.S. stock indexes extended losses when the data was released, while
U.S. Treasury prices added to gains and the U.S. dollar rose against
the euro.
Despite the drop in sales, the number of new homes for sale at the end
of the month shrank to its smallest in 27 years, leaving the supply of
homes available at 7.5 months' worth.
The median sales price rose in September to $204,800 from $199,900,
while the average sales price rose to $282,600 from $265,500.
The new home-buyer tax credit affected recent housing market trends,
Cary Leahey, economist at Decision Economics in New York, said.
The $8,000 credit, which expires on November 30, helped lift the
housing market from its deepest downturn since the Great Depression.
U.S. lawmakers are considering extending it.
"There are some distortions because of the new home-buyer tax credit,
but we can say housing sales have bottomed," Leahy said. "Some are
afraid housing will fade in 2010. That will not happen unless the labor
market fades or does not improve."
The Mortgage Bankers Association said its mortgage applications index
fell 12.3 percent to 562.3 in the week ended October 23, with purchase
applications the weakest since mid-May and refinancing requests at a
two-month low.
Eligible borrowers who applied last week would unlikely be able to
close their loan by the scheduled November 30 expiration of the tax
credit, industry experts said.
DURABLES GOODS ORDERS UP
The increase in new orders for long-lasting U.S. manufactured goods met
Wall Street expectations and was the second increase in the last three
months, offering some hope that the economic recovery will continue.
However, compared with a year ago, orders were down 24.1 percent.
"In a recovering economy, you'll get three steps forward and then two
steps back. That's what you're seeing here," said David Katz, chief
investment officer at Matrix Asset Advisors in New York. "This data
point is positive."
Durable goods orders are a leading indicator of manufacturing, which in
turn provides a good measure of overall business health.
The report shows that durable goods orders are off their previous lows
but have not reached a vigorous pace, said Michael Moran, chief
economist at Daiwa Securities America in New York.
"There is still a good bit of uncertainty on the part of business
executives about the economic outlook and as a result we are seeing
cautious behavior," he said.
Shipments of durable goods rose 0.8 percent in September and have been
up for three of the last four months, while inventories fell for the
ninth month in a row, by 1 percent.
There are concerns that the continued paring of inventories will be a
drag on economic growth. The Commerce Department will report
third-quarter gross domestic product on Thursday, and analysts are
expecting a 3.3 percent rise, based on rebounds in consumer spending
and the housing market. July New US Home Sales Up 9.6 Percent
NYTIMES
By THE ASSOCIATED PRESS
Filed at 10:03 a.m. ET
August 26, 2009
WASHINGTON (AP) -- New U.S. home sales surged 9.6 percent in July,
rising for the fourth straight month and beating expectations as the
housing market marches steadily back from its historic downturn.
The Commerce Department says sales rose to a seasonally adjusted annual
rate of 433,000 from an upwardly revised June rate of 395,000.
It was the strongest sales pace since September and exceeded the
forecasts of economists surveyed by Thomson Reuters, who expected a
pace of 390,000 units. The last time sales rose so dramatically was in
February 2005.
The median sales price of $210,100, however, was still down 11.5
percent from $237,300 a year earlier.
New U.S. Home Sales Rise Sharply
as
Prices Fall
NYTIMES
By JACK HEALY
July 28, 2009
Sales of new homes in the United States posted their largest monthly
gain in eight years in June, the government reported on Monday, a sign
that the housing market is bottoming as buyers take advantage of lower
prices.
The Commerce Department reported that new single-family home sales rose
11 percent in June, an increase that dwarfed economists’ expectations
of a 3 percent increase. The pace of home sales rose to a seasonally
adjusted rate of 384,000 a year, the highest level since November.
Despite the monthly increase, sales of new homes were still down 21
percent from June 2008, and the market is still swamped by a glut of
for-sale houses and foreclosed properties.
“These are still really bad numbers,” an economist at IHS Global
Insight, Patrick Newport, said. “The market just couldn’t have dropped
much further.” As sales rose, median prices of new homes continued to
fall, slipping to $206,200 from $232,100 in June a year ago.
The figures were the latest evidence that a three-year slump in the
country’s housing market was leveling off as prices fell back and some
builders and buyers began to step tentatively back into the market.
Housing starts rose 3.6 percent in June from a month earlier, and sales
of previously owned homes also rose for another month.
“Sales are picking up a little,” a senior economist at 4Cast, David
Sloan, said. “Whether it’s going to pick up any momentum is really the
key. I think we have to be doubtful about that.”
Although new-home sales have risen for three months, many economists
worry that rising unemployment, stagnant wages and continued tightness
in lending markets will weigh down the housing market for the rest of
the year.
“There’s still worries that the lack of employment growth and lack of
wage growth is restraining consumer income, and that’s going to ensure
that the recovery is quite modest,” Mr. Sloan said. U.S. HOME SALES
- EXISTING HOMES
December home sales down nearly 17 percent
YAHOO
By ALAN ZIBEL, AP Real Estate Writer
January 25, 2010
WASHINGTON – Sales of previously occupied homes took the largest
monthly drop in more than 40 years last month, sinking more
dramatically than expected after lawmakers gave buyers additional time
to use a tax credit.
The report reflects a sharp drop in demand after buyers stopped
scrambling to qualify for a tax credit of up to $8,000 for first-time
homeowners. It had been due to expire on Nov. 30. But Congress extended
the deadline until April 30 and expanded it with a new $6,500 credit
for existing homeowners who move.
"It's 'exit stage left' for first-time homebuyers," wrote Guy LeBas, an
analyst with Janney Montgomery Scott.
December's sales fell 16.7 percent to a seasonally adjusted annual rate
of 5.45 million, from an unchanged pace of 6.54 million in November,
the National Association of Realtors said Monday. Sales had been
expected to fall by about 10 percent, according to economists surveyed
by Thomson Reuters.
The report "places a large question mark over whether the recovery can
be sustained when the extended tax credit expires," wrote Paul Dales,
U.S. economist with Capital Economics.
The median sales price was $178,300, up 1.5 percent from a year earlier
and the first yearly gain since August 2007. However, some of that
increase could be due to a drop-off in purchases from first-time buyers
who tend to buy less expensive homes.
Sales are now up 21 percent from the bottom a year ago, but down 25
percent from the peak more than four years ago.
The big question hanging over the housing market this spring is whether
a tentative recovery will stumble after the government pulls back
support. The Federal Reserve's $1.25 trillion program to push down
mortgage rates is scheduled to expire at the end of March — a month
before the newly extended tax credit runs out.
Last year, first-time buyers were the main driver of the housing
market, but their presence is on the decline. They accounted for 43
percent of purchases in December, down from about half in November, the
Realtors group said.
The inventory of unsold homes on the market fell about 7 percent to 3.3
million. That's a 7.2 month supply at the current sales pace, close to
a healthy level of about 6 months.
Total sales for 2009 closed out the year at 5.16 million, up about 5
percent from a year earlier. That was the first annual sales gain since
2005. But prices fell dramatically last year, declining 12.4 percent to
a median of $173,500, the largest decline since the Great Depression.
Though the results missed Wall Street's expectations, the Realtors'
group says there are signs the market is finally stabilizing.
"There is some sustainable momentum building in the housing market
right now," said Lawrence Yun, the group's chief economist. However, he
cautioned that the recovery will depend on whether the economy starts
adding jobs in the second half of the year.
Many experts project home prices, which started to rise last summer,
will fall again over the winter. That's because foreclosures make up a
larger proportion of sales during the winter months, when fewer sellers
choose to put their homes on the market.
Despite fears that home prices are starting to fall again, some
analysts still believe the worst is over.
"We do not believe it is fair to consider this a double dip in the
housing market," Michelle Meyer, an economist with Barclays Capital,
wrote last week. "The recovery is still under way, but hitting some
bumps in the road."
(This version CORRECTS pct decline in graf 11.) Pending
home sales tumble 16 percent
in November
YAHOO
January 5, 2010
WASHINGTON (Reuters) – Pending sales of previously owned U.S.
homes fell more than expected in November because of the end of a rush
to beat the initial expiration of a popular tax credit, a survey showed
on Tuesday.
The National Association of Realtors said its Pending Home Sales Index,
based on contracts signed in November, dropped 16 percent to 96.0,
after rising for nine straight months.
Analysts polled by Reuters had forecast pending home sales, which lead
existing home sales by one to two months, falling 2 percent in November
after rising to 114.3 in October.
Despite the monthly drop, the pending Homes Sales Index was 15.5
percent higher compared to November 2008, the Realtors group said.
Home sales have been boosted by a $8,000 tax credit for first-time home
buyers, which has been expanded and extended to mid-2010. The popular
tax credit had been scheduled to expire at the end of November.
"The fact that pending home sales are comfortably above year-ago levels
shows the market has gained sufficient momentum on its own," said
Lawrence Yun, NAR chief economist.
"We expect another surge in the spring as more home buyers take
advantage of affordable housing conditions before the tax credit
expires."
The pending home sales index in the Northeast dropped 25.7 percent to
74.4 in November, but was 14.7 percent above a year ago. In the Midwest
the index fell 25.7 percent to 82.0 and was 9.2 percent higher than
November 2008.
Pending home sales activity in the South fell 15.0 percent to an index
of 97.8, but was 14.7 percent higher than a year ago. Contract activity
in the West declined 2.7 percent to 124.6, but was 21.4 percent above
November 2008.
U.S.
home prices up for 5th month, 2nd
straight quarter
YAHOO
By Lynn Adler Lynn Adler
Nov. 24, 2009
NEW YORK (Reuters) – U.S. home prices rose for the fifth
straight month and posted the second quarterly increase, but the pace
of appreciation in September slowed and was less than expected,
according to Standard & Poor's/Case-Shiller indexes on Tuesday.
"We have seen broad improvement in home prices for most of the past six
months," David M. Blitzer, chairman of the Index Committee at S&P,
said in a statement. "However, the gains in the most recent month are
more modest than during the seasonally strong summer months.
The S&P composite index of home prices in 20 metropolitan areas
rose 0.3 percent in September from August after a 1.2 percent rise the
prior month, below the 0.8 percent rise forecast in a Reuters poll.
The 20-city index had an annual decline of 9.4 percent.
The national index for the third quarter increased 3.1 percent from the
prior quarter, the same as in the second quarter, resulting in an 8.9
percent annual drop. That was a significant improvement from the 14.7
percent annual downturn reported in the prior quarter and 19 percent
slump in the first quarter.
The 10-city composite index rose 0.4 percent in September after a 1.3
percent August gain. The annual drop was 8.5 percent.
"We are going into the holiday season, and consumers are not losing
value on their homes," said Craig Thomas, senior economist at PNC
Financial Services in Pittsburgh. "Last Christmas, they were losing
equity value on their homes at a 20 percent clip."
Both the 10-city and 20-city indexes emerged from double-digit annual
declines for the first time in 21 months, S&P said.
The November extension of the $8,000 first-time homebuyer tax credit,
and the addition of a $6,500 credit for move-up buyers, should support
home sales and prices in coming months, economists said.
So should mortgage rates that hover near record lows. Average 30-year
home loan rates are close to 4-7/8 percent, according to Freddie Mac
(FRE.N).
"This is another indication that the housing market is not taking away
from the aggregate economy, and housing is what led us into this
(recession) in the first place," Thomas said after the latest home
price gains.
Average home prices have returned to levels last seen in autumn 2003 as
they gain traction after a three-year rout.
Fewer cities had monthly price improvements in September than in August.
San Francisco and Washington, DC, reported the six straight month of
positive returns. Chicago, Minneapolis, San Diego each had their fifth
straight month of price increases. Nine metro areas in total had
positive monthly returns in September.
Las Vegas remained the most depressed market, S&P said. Prices
there have fallen for 37 straight months, slumping 55.4 percent from
the peak.
The home price trend overall "does suggest that maybe we're seeing a
turn in the housing market and that we're cleaning up some inventory,"
said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St.
Louis.
"This part of the economy is particularly weak, and we're seeing more
consistent signs of recovery," he added. "But high unemployment and
foreclosures are still problems for the housing market. So we're not
completely out of the woods."
We are less
hopeful - looks as if "distressed" sales hide the real transaction
level... Pace Of U.S.
Existing
Home Sales Fastest In 2 Years
NYTIMES
By REUTERS
Filed at 1:51 p.m. ET
August 21, 2009
WASHINGTON (Reuters) - Sales of previously owned U.S. homes jumped 7.2
percent in July to mark the fastest pace in nearly two years, a survey
showed on Friday, in a strong sign that housing is pulling out of a
three-year slump.
Sales in July rose for the fourth straight month to hit an annual rate
of 5.24 million units, the highest since August 2007, the National
Association of Realtors said. The total beat market expectations of a 5
million unit pace and June's 4.89 million pace.
July's increase was the largest monthly gain since the series started
in 1999. The last time sales rose for four consecutive months was in
June 2004, the NAR said.
The Realtors group heralded the July sales as a turning point, while
other observers offered a more cautious view.
"The housing market has decisively turned for the better. We are
bouncing back. A combination of first-time buyers taking advantage of
the housing stimulus tax credit and greatly improved affordability
conditions are contributing to higher sales," NAR Chief Economist
Lawrence Yun said. With
distressed sales accounting for 31 percent of the transactions in July,
inventories rising and home prices remaining depressed, analysts said
the housing market was not out of the woods yet.
The national median home price was $178,400 in July, down 15.1 percent
from the same period last year, weighed down by distressed sales --
sales in foreclosure or close to it -- as such homes typically sell for
15 to 20 percent less than traditional homes.
"It's really going to take home prices to broadly stabilize and come
back a bit before you want to characterize the housing market as being
fully recovering," said Craig Thomas, a senior economist at PNC
Financial Services Group in Pittsburgh.
"I will say there is not an indicator out there that doesn't suggest we
are not moving in that direction."
White House spokesman Robert Gibbs said the housing market appeared to
be bottoming out.
U.S. STOCKS RALLY
U.S. stocks rallied to new 2009 highs on the robust report, with shares
of home builders posting hefty gains. D.R. Horton Inc gained 3.6
percent, while luxury home builder Toll Brothers Inc was up 3.7
percent. A broader measure of home construction stocks was up 3.65
percent.
Treasury debt prices fell as investors viewed the data as another
indication that the recession that started in 2007 was close to an end,
if not over.
U.S. Federal Reserve Chairman Ben Bernanke, speaking at a gathering of
central bankers and top economists in Jackson Hole, Wyoming, said
economic activity appeared to be leveling off, both in the United
States and abroad, and prospects for a return to growth looked good in
the near term.
The housing market is at the epicenter of the worst U.S. recession in
70 years. A recovery in the housing market would help to draw a line
under losses at financial institutions, which have been battered by
defaults on mortgages.
It would also improve the psychology of households, whose net worth has
been decimated by the plunge in home values, and encourage them to
spend rather than save to make up for lost wealth, analysts say.
Even more encouraging, existing homes sales in July were 5 percent
higher compared with the same period last year, the biggest
year-on-year gain since November 2005.
The improvement in July sales was broad-based, with sales of
single-family homes, the worst-hit segment of the market, up 6.5
percent to an annual rate of 4.61 million units and multi-family
dwellings up 12.5 percent to a 630,000 unit rate. Sales were up in
three of the four regions.
Still, high unemployment threatens the budding recovery as many
homeowners continue to lose their properties, and some economists
question the sustainability of the economic recovery many see taking
root.
A report from the Mortgage Bankers Association on Thursday showed late
home loan payments jumped to a record high in the second quarter, with
almost one in eight homeowners delinquent or in the process of
foreclosure.
The inventory of existing homes for sale in July rose 7.3 percent to
4.09 million units from the previous month, NAR said. At July's sales
pace, that represented a 9.4 months' supply, the same as in June.
"The inventory overhang needs to be reduced significantly further
before prices can start rising on a sustained basis. Overall, these
figures may suggest that the recovery in housing activity is gathering
pace, but there is a long way to go yet," said Paul Dales, U.S.
economist at Capital Economics in Toronto.
Pace of home
price declines slows in April
YAHOO!
June 30, 2009
NEW YORK (Reuters) – Prices of U.S. single-family homes declined in
April from the prior month, but the pace moderated, suggesting
stability is emerging in some regions, according to Standard &
Poor's/Case Shiller home price indexes reported on Tuesday.
The index of 20 metropolitan areas dipped 0.6 percent in April from
March, after a 2.2 percent decline the month before, for an 18.1
percent downturn from a year earlier.
S&P said its index of 10 metropolitan areas declined 0.6 percent in
April for an 18 percent year-over-year drop, after falling 2.1 percent
month on month in March.
The rate of annual decline in these measures has improved, from 18.7
percent for both indexes in March.
"While one month's data cannot determine if a turnaround has begun, it
seems that some stabilization may be appearing in some of the regions,"
David M. Blitzer, chairman of the index committee at S&P, said in a
statement. "We are entering the seasonally strong period in the housing
market, so it will take some time to determine if a recovery is really
here."
Blitzer said that the stock market has risen from March and consumer
confidence gauges have turned higher, fostering improved sentiment in
housing.
WASHINGTON (Reuters) - Pending sales of existing homes plunged to a
seven-year low in November, data showed on Tuesday, as mounting job
losses and a deepening economic recession kept potential house buyers
on the sidelines.
The National Association of Realtors Pending Home Sales Index, based on
contracts signed in November, dropped 4 percent to 82.3, the lowest
level since the series started in 2001. The reading was 5.3 percent
lower than November 2007's print of 86.9.
Economists polled by Reuters ahead of the report had forecast pending
home sales dropping by 1 percent. October's pending home sales were
revised down to 85.7. And an idea how to fix the housing mess!
The Reckoning: Tax Break May Have Helped Cause Housing Bubble
NYTIMES
By VIKAS BAJAJ and DAVID LEONHARDT
December 19, 2008
“Tonight, I propose a new tax cut for homeownership that says to every
middle-income working family in this country, if you sell your home,
you will not have to pay a capital gains tax on it ever — not ever.”
— President Bill Clinton, at the 1996 Democratic National Convention
Ryan J. Wampler had never made much money selling his own homes.
Starting in 1999, however, he began to do very well. Three times in
eight years, Mr. Wampler — himself a home builder and developer — sold
his home in the Phoenix area, always for a nice profit. With prices in
Phoenix soaring, he made almost $700,000 on the three sales. And
thanks to a tax break proposed by President Bill Clinton and approved
by Congress in 1997, he did not have to pay tax on most of that profit.
It was a break that had not been available to generations of Americans
before him. The benefits also did not apply to other investments, be
they stocks, bonds or stakes in a small business. Those gains were all
taxed at rates of up to 20 percent.
The different tax treatments gave people a new incentive to plow ever
more money into real estate, and they did so. “When you give that big
an incentive for people to buy and sell homes,” said Mr. Wampler, 44, a
mild-mannered native of Phoenix who has two children, “they are going
to buy and sell homes.”
By itself, the change in the tax law did not cause the housing bubble,
economists say. Several other factors — a relaxation of lending
standards, a failure by regulators to intervene, a sharp decline in
interest rates and a collective belief that house prices could never
fall — probably played larger roles. But many economists say that
the law had a noticeable impact, allowing home sales to become tax-free
windfalls. A recent study of the provision by an economist at the
Federal Reserve suggests that the number of homes sold was almost 17
percent higher over the last decade than it would have been without the
law.
Vernon L. Smith, a Nobel laureate and economics professor at George
Mason University, has said the tax law change was responsible for
“fueling the mother of all housing bubbles.”
By favoring real estate, the tax code pushed many Americans to begin
thinking of their houses more as an investment than as a place to live.
It helped change the national conversation about housing. Not only did
real estate look like a can’t-miss investment for much of the last
decade, it was also a tax-free one. Together with the other
housing subsidies that had already been in the tax code — the
mortgage-interest deduction chief among them — the law gave people a
motive to buy more and more real estate. Lax lending standards and low
interest rates then gave people the means to do so.
Referring to the special treatment for capital gains on homes, Charles
O. Rossotti, the Internal Revenue Service commissioner from 1997 to
2002, said: “Why insist in effect that they put it in housing to get
that benefit? Why not let them invest in other things that might be
more productive, like stocks and bonds?”
The provision — part of a sprawling bill called the Taxpayer Relief Act
of 1997 — exempted most home sales from capital-gains taxes. The first
$500,000 in gains from any home sale was exempt from taxes for a
married couple, as long as they had lived in the home for at least two
of the previous five years. (For singles, the first $250,000 was
exempt.)
Mr. Wampler said he never sold a home simply because of the law’s
existence, but it played a role in his decisions and also became part
of his stock pitch to potential customers who were considering buying
the homes he was building in the desert. He would point out that the
tax benefits would increase their returns on a house, relative to
stocks.
“Why not put your money on the highest-yielding investment with the
highest tax benefit?” he said recently.
During the boom years, he prospered. But today he owns 80 acres of land
on the outskirts of Phoenix that he cannot sell. He owes $8 million to
his banks, which may soon foreclose on his land.
“I am literally dying on the vine,” he said.
The change in the tax law had its roots in a Chicago speech that
Senator Bob Dole, Mr. Clinton’s Republican opponent in the 1996
presidential election, gave on Aug. 5 of that year. Trailing Mr.
Clinton in the polls, Mr. Dole came out for an enormous tax cut,
including an across-the-board reduction in the capital-gains tax.
The proposal made Mr. Clinton’s political advisers more nervous than
almost anything else during the campaign. The campaign’s chief
spokesman, Joe Lockhart, traveled to Chicago to stand outside the
ballroom where Mr. Dole was speaking and make the case that the Dole
tax cut would cause the deficit to soar.
At the same time, Mr. Clinton’s aides began scrambling to come up with
their own tax proposal. Dick Morris, the president’s chief outside
political adviser, argued that Mr. Clinton could assure his re-election
by matching Mr. Dole’s call for a big cut in the capital-gains tax.
But members of Mr. Clinton’s economic team, led by Treasury Secretary
Robert E. Rubin, disliked that idea. They thought it would undo the
tough work the administration had done to reduce the budget deficit. So
they instead went looking for smaller tax cuts that would allow their
boss to campaign as both a fiscal conservative and a tax cutter.
Getting rid of capital gains on most home sales seemed like the perfect
idea.
Treasury officials had become interested in that provision earlier in
Mr. Clinton’s term after Jane G. Gravelle, an economist at the
Congressional Research Service, had called it to their attention,
according to Eric J. Toder, an official in the tax policy office at the
time. He and his colleagues were looking for ways to simplify the tax
code, and Ms. Gravelle told them that eliminating capital-gains taxes
on houses was an excellent candidate.
The tax forced homeowners to keep track of all their renovations over
many years, because the cost of those renovations could be subtracted
from their taxable gain. Even renovations on previous homes often
qualified, as long as people had deferred the tax in the past by buying
a new house at least as valuable as their old one.
“It was very hard for people to keep track of that information,” said
Leslie B. Samuels, the assistant Treasury secretary for tax policy from
1993 to 1996.
People could also avoid the tax under a one-time exemption, for profits
of up to $125,000, if they were older than 55. Thus, the tax raised
relatively little revenue — perhaps just a few hundred million dollars
in today’s terms. “It was the worst kind of tax system,” Ms. Gravelle
said recently. “It raised very little revenue, but it caused all these
distortions and compliance problems.”
Three weeks after Mr. Dole’s speech, with support from top Treasury
officials, the proposal made it into Mr. Clinton’s speech at the
Democratic convention. During the presidential debates that followed,
he used it to parry Mr. Dole’s calls for a big tax cut. The following
summer, Mr. Clinton signed the provision into law.
At the time, Realtors and home builders lobbied for the provision and
there was only scant opposition. Grover Norquist — a conservative
activist and adviser to Newt Gingrich — said home sales did not deserve
special treatment. But Republicans ended up voting for the bill by even
wider margins than Democrats.
Today, it is the subject for considerably more debate. Ms. Gravelle and
Mr. Samuels said they thought the law had done more good than ill. And
William G. Gale, director of economic studies at the Brookings
Institution, said he did not think that the change in the law was
central to the bubble. Low interest rates, he said, were far more
important.
The law’s defenders say that it also removed at least one tax incentive
that had pushed homeowners to trade up. Before 1997, people had to buy
a house that was at least as valuable as their previous one to avoid
the tax, or else take the one-time exemption. Now they could buy a
smaller property or move into a rental.
But many economists say the net effect of the law was clearly to
inflate the real estate market. Dean Baker, co-director of the Center
for Economic and Policy Research, a liberal policy group in Washington,
criticized the exemption as “a backward policy” that “helped push more
money into housing.”
A spokesman for Mr. Clinton declined to comment for this article.
Perhaps the most detailed analysis of the provision has been the study
by a Federal Reserve economist, Hui Shan, who did the analysis while at
M.I.T. Ms. Shan looked at homeowners with significant equity gains,
before and after 1997, and compared the likelihood of their selling
their house. Her study covered 16 towns around Boston and took into
account a host of other factors, like the general rise in home prices
at the time.
Among homes that had appreciated less than $500,000, she concluded that
the change caused a 17 percent increase in sales in the decade after
1997. Before the law changed, many people apparently avoided paying the
tax by simply staying in their homes.
Ms. Shan also found that sales actually declined among homes with more
than $500,000 of gains after the law passed. (Under the new law,
couples have to pay taxes on gains above $500,000, even if they roll
all those gains into a new house.) Nationwide, however, less than 5
percent of home sales over the last decade had gains of more than
$500,000, according to Moody’s Economy.com.
Despite the criticism, there has been little political support for
trimming the tax breaks for housing. In 2005, a bipartisan panel of tax
experts, which was appointed by President Bush and included Mr.
Rossotti, concluded, “The tax preferences that favor housing exceed
what is necessary to encourage homeownership.” Among other things, it
recommended increasing to three years the amount of time people had to
stay in homes to claim the tax break on a sale. But Mr. Bush and other
policy makers largely ignored the panel’s report.
Geo Hartley, a lawyer who has lived in Los Angeles and Washington over
the last two decades, captures the divergent effects that the law
appears to have. Mr. Hartley, who is 59 and single, said he found the
old law “weird,” because it led him to buy bigger houses than he wanted.
Since the law changed, Mr. Hartley has bought smaller homes. But he has
also moved more frequently, knowing that most of the gains on his
houses would not be taxed. He lived in one house in Los Angeles for a
full decade before 2000. Since then, he has moved three times, making a
handsome — and mostly tax-free — profit each time.
“It’s part of the thinking that gets you more motivated to buy and sell
property,” said Mr. Hartley, who now lives in a town house in
Washington that he is trying to sell, “and have the American dream of
owning a home.”
Homeowners Who Modified
Loans Are in Trouble Again NYTIMES
By THE ASSOCIATED PRESS
Filed at 12:40 p.m. ET
December 8, 2008
WASHINGTON (AP) -- More than half of all homeowners who had their loans
modified to make the payments more affordable in the first half of the
year are already in default again, banking regulators said
Monday. The new data raise questions about whether government
money may be better spent on creating jobs, rather than averting
foreclosures, said John Reich, director of the federal Office of Thrift
Supervision office at a housing industry forum sponsored by his agency.
''I do have concerns about allocating federal resources'' Reich said.
However, many experts claim the bulk of loan modifications don't
actually provide much financial relief for borrowers. The
government's data don't include enough detail about the types of the
loan modifications that were made, said Sheila Bair, chairman of the
Federal Deposit Insurance Corp. ''The quality of the (modifications)
are not what they should be,'' she said.
The U.S. economic picture has darkened over the past month. One in 10
Americans with a mortgage is either behind or in foreclosure, and more
than 500,000 jobs were lost in November. Unemployment stands at
6.7 percent, and the worldwide credit markets have only improved
modestly from the freeze that led Congress to approve a $700 billion
bailout before the election.
Discussion on Monday's focused on how broad the government's
intervention should be, rather than whether the government should play
any role at all. The U.S. is on track for 2.25 million foreclosures
this year.
''We need a bottom-up approach, in my view, by modifying people's
mortgages and helping them stay in their homes,'' said New Jersey Gov.
Jon Corzine.
Corzine called for a three to six month halt to foreclosures while the
government works out a more aggressive plan.
Mark Zandi, chief economist at Moody's Economy.com, said the public is
likely to be more sympathetic to efforts to assist troubled borrowers,
because the link between the foreclosure crisis and the sinking economy
is increasingly clear in the midst of most Americans.
''It's now in every corner of the country,'' Zandi said. ''I think that
people understand that this is a broader issue.''
During an interview that aired Sunday on NBC's ''Meet the Press,''
President-elect Barack Obama declined to say how large an economic
stimulus plan he envisions. He said his blueprint for recovery will
include help for homeowners facing foreclosure on their mortgages if
President George W. Bush has not already acted when Obama takes office
next month.
For nearly a year, some consumer advocates, lawmakers and think tanks
have advocated a dramatic government response. The effort, they say,
should be similar to created the Home Owners' Loan Corp. in 1933 to
help borrowers refinance troubled home loans during the Great
Depression. The Bush administration has focused mainly on
voluntary industry efforts to modify loans, and those have not stopped
the surge in foreclosures.
Shouldn’t
We Rescue Housing?
NYTIMES
By JOE NOCERA
Published: October 17, 2008
Now that the government has “saved” Wall Street — at least for the
moment — hasn’t the time finally come to save Main Street too?
The Treasury Department just pumped $125 billion into the country’s
largest financial institutions, and it promises to use another $125
billion — more, if necessary — to recapitalize regional and community
banks. They are vital steps. This week, at long last, the credit
markets thawed, at least a little, and the global recapitalization of
the banking system is the reason.
But the job isn’t done yet. The government now needs to tackle what R.
Glenn Hubbard, the former chairman of the Council of Economic Advisers
under President Bush, calls “the elephant in the room”: the continuing
decline of housing prices. That decline means more and more homeowners
are saddled with “impaired mortgages” (to use the current lingo),
meaning their homes are worth less than what they owe on them. They
didn’t necessarily do anything wrong; they just bought a house near the
peak of an unsustainable bubble. Now they have little economic
incentive to keep making mortgage payments.
Of course, millions of additional homeowners did make a big mistake:
they took advantage of “liar loans” and other too-good-to-be-true deals
to buy homes they couldn’t afford. Many are still in those homes,
hanging on for dear life. Many others have already faced foreclosure
proceedings.
I’ve seen estimates suggesting as many as one out of every six
homeowners has a troubled mortgage. This is an enormous social problem.
It is also a continuing economic problem. In the year since the crisis
began, the world’s financial institutions have written down around $500
billion worth of mortgage-backed securities. Unless something is done
to stem the rapid decline of housing values, these institutions are
likely to write down an additional $1 trillion to $1.5 trillion. In
other words, we ain’t seen nothin’ yet.
And please don’t raise the specter of moral hazard, the notion that
people who did dumb things need to take their lumps so they won’t do it
again. First of all, you would have to be an absolute idiot to repeat
the folly of the housing bubble, even if you don’t lose your house in
the crisis. I contend that this financial crisis is going to cause an
entire generation to become debt-averse, as our parents were after the
Depression.
Second, there is the question of justice. For Wall Street, which made
plenty of its own dumb mistakes, moral hazard went out the window the
minute the government realized what a catastrophic error it made when
it allowed Lehman Brothers to go bankrupt. The government is not going
to let another big institution fail. Why should homeowners have to pay
more for their sins than Wall Street is paying for its sins? As anger
across the country rises, this is becoming a political issue as well.
Yes, there were lots of Americans who were not greedy or foolish during
the housing bubble, and many resent the idea that their neighbors might
get a bailout they don’t deserve. They need to get over themselves. If
housing prices keep falling, many millions of additional homeowners
will find themselves, through no fault of their own, with underwater
mortgages. Besides, foreclosures damage property values for everyone,
not just those losing their homes.
Finally, and perhaps most important, the housing bubble and its
aftermath form the core problem from which all other problems flow. If
the government doesn’t do anything about it, the economy will remain in
chaos. Banks will still be afraid to write mortgages because they won’t
trust the value of the collateral. Giant financial institutions will
continue to post multibillion-dollar write-downs. And homeowners will
continue to face the stark reality that their primary asset is in
jeopardy.
And yet, so far the government’s response to this part of the crisis —
the part that most directly affects voters, for crying out loud — has
been anemic. The Hope for Homeowners program, signed into law in July,
is both too complicated and too narrow. The new $700 billion bailout
bill contains some toothless pleas to help homeowners. Efforts to
jawbone the mortgage industry have largely failed.
Just a few days ago, the chairman of the Federal Deposit Insurance
Commission, Sheila Bair, publicly broke with her counterparts at the
Treasury and the Federal Reserve and criticized the Bush administration
for not doing enough for homeowners. “We’re attacking it at the
institution level as opposed to the borrower level, and it’s the
borrowers defaulting,” she told The Wall Street Journal. “That is
what’s causing the distress at the institution level. So why not tackle
the borrower problem?”
Why not, indeed. It turns out there are plenty of plans out there to do
just that. But not one has broken through to gain wide backing.
For instance, both presidential candidates have homeowner assistance
plans, but they are poorly conceived and would cost the government
billions of additional dollars. Mr. Hubbard, now the dean of the
Columbia Business School, and a Columbia colleague, Chris Mayer, say
they believe the answer lies in having “the Bush administration and
Congress allow all residential mortgages on primary residences to be
refinanced into 30-year fixed-rate mortgages at 5.25 percent (matching
the lowest mortgage rate in the last 30 years), and place those
mortgages with Fannie Mae and Freddie Mac,” as they wrote recently.
A Yale economist named John D. Geanakoplos suggests a new system
to “modify mortgage loans to keep homeowners in their homes,” as he put
it in a recent paper. He also says the government should give financial
incentives to renters to buy homes — and thus create a floor for
housing prices. Both of these ideas are far better than the proposals
of the two candidates. But recently a proposal came across my
desk that I believe is so smart,
and so sensible, that I hope our nation’s policy makers will give it a
serious look. It comes from Daniel Alpert, a founding partner of
Westwood Capital, a small investment bank. I have quoted Mr. Alpert
frequently in recent columns, because he has been both thoughtful and
prescient on the subject of the financial crisis.
Here’s his idea: Pass a law that
encourages homeowners with impaired
mortgages to forfeit the deed to their lenders but allows them to stay
in the homes for five years, paying prevailing market rent. Under the
law Mr. Alpert envisions, the lender would be forced to accept the
deed, and the rent. After five years, the homeowner-turned-renter would
have the right to buy the home back, at fair market value, from the
lender.
There are so many things I like about
this idea that I hardly know
where to begin. Let’s start with the fact that it doesn’t require a
large infusion of taxpayers’ money. Indeed, it doesn’t require any
government money at all. It also doesn’t let either homeowners or
lenders off the hook, as many other plans would. The homeowner loses
the deed to his home, which will be painful. The lending institution,
in accepting prevailing market rent, will get maybe 60 or 70 percent of
what it would have gotten from a healthy mortgage-payer. (Rents are
considerably lower than mortgage payments right now.) That will be
painful too. Moral hazard will not be an issue.
As Mr. Alpert told me the other day,
his proposal “admits the truth:
the homeowner doesn’t have equity, and the lender has taken a loss.
They should exchange interest, but not in a way that throws the
homeowner out in the street.”
Which is the other key part of his
plan. It has the best chance of
preventing, as he puts it, “the massive disruption of the economy and
the social dislocation” that will come from large numbers of
foreclosures. And it is the continuing foreclosures that are likely to
cause housing prices to fall so hard that they will drop below the real
value of the shelter.
That, of course, is exactly what
happened during the bubble, albeit in
reverse — prices wildly overshot the true value of the home — and it
has to be prevented on the way down. Otherwise we face further economic
calamity.
Why did Mr. Alpert choose five years?
Two reasons. First, he feels
confident that housing prices will have stabilized by then. “We
continue to have a growing population,” he said. “And there is zero
chance there will be a material increase in housing stock over the next
five years that will exceed demand. Those two factors alone will cause
housing to stabilize.”
Second, he says five years will give
the renters enough time to get
their financial affairs in order — to pay down their various debts and
save enough to make the 10 percent down payment an F.H.A. loan
requires. (Many of the homeowners affected by this plan would be
eligible for F.H.A. loans, Mr. Alpert believes.)
If they don’t have enough for a down
payment, they would have to leave,
of course, but it would be far less disruptive to the economy than it
would be right now, in the middle of the crisis.
Does the plan have stumbling blocks?
Sure it does. One obvious one is
that ideologues will view its being mandatory as an improper “taking”
of homeowners’ property rights and a violation of the mortgage
contract. But, as Mr. Alpert puts it, “the homes involved are
economically without value to the existing homeowners.” He adds, “What
the plan buys is time to heal for both sides in a fairly equitable and
controlled manner.”
Mr. Alpert calls his plan “The Freedom
Recovery Plan.” On my blog
(www.nytimes.com/executivesuite), I have linked to Mr. Alpert’s
detailed description of how it would work, which runs eight pages. I
have also posted a series of short “comments” that he sent me recently,
which outline the severity of the problem. I encourage you to read both
documents, and weigh in on the plan’s merits.
That goes for you, too, government
policy makers. I acknowledge that
this may not be the perfect solution. It may have some fatal flaw that
neither Mr. Alpert nor I can see. But if you don’t like this idea, it
is incumbent upon you to come up with something better.
Actually, it’s long overdue.
Page
last updated at 17:29 GMT, Friday, 17 July 2009 18:29 UK
New US home
starts surge in June
The construction of new homes in the
US rose 3.6% between May and June to the highest level in seven months,
official figures have shown.
This is the second month in a row that housing starts have
risen following a post-war low in April.
Compared with the same month a year ago, however, June starts
were down 46%, the Commerce Department said.
The number of single family homes being built jumped 14.4% in
June, the biggest jump in over four years.
'Genuine surprise'
The number of new homes built totalled 582,000, many more
than analysts had expected.
Figures for May were also revised upwards, from 532,000 to
562,000.
"These figures look like a genuine upward surprise, and
support our
view that housing construction activity is bottoming out," said Dean
Maki at Barclays Capital.
For the April to June months, Mr Maki added that single
family starts saw the biggest quarterly increase since the early 1990s.
The
number of permits to break ground - considered an indicator of
confidence in the building sector - climbed to its highest level since
December last year.
Completions down
Some analysts, however, urged caution in the wake of the
stronger-than-expected data.
"It is too soon to call a bottom to the housing market in the
US," said the Centre for Economics and Business Research.
William
O'Donnell, head treasury strategist at RBS Securities, argued that:
"This is another piece of data for those seeing the recession ending
soon."
"But housing starts are still within the range of the past
six months and the completion rate is still down," he said.
A leading
indicator for new construction - to the lagging indicator housing
industry?
Construction Spending Falls More Than Expected
NYTIMES
By THE ASSOCIATED PRESS
Filed at 10:04 a.m. ET
July 1, 2009
WASHINGTON (AP) -- Construction spending fell more than expected in
May, a sign the problems facing the nation's builders are far from over.
The Commerce Department says construction spending dropped 0.9 percent
in May, nearly double the 0.5 percent drop that economists expected.
Adding to the signs of weakness, activity in the past two months was
revised lower.
Construction rose 0.6 percent in April, lower than the 0.8 percent
originally reported. A March increase of 0.4 percent was replaced with
a decline of the same amount. That left the April gain as the only
increase in the past eight months. CHFA Head Says Junk Mortgages'
Effects Persist DAY
By Anthony Cronin
Published on 6/30/2009
A housing official said Monday that effects of the subprime mortgage
mess are still reverberating throughout the state's economy, but he
held out hope that revved-up state and federal programs will be able to
revive Connecticut's housing market.
Timothy Bannon, president and chief executive officer of the
Connecticut Housing Finance Authority (www.chfa.org) in Rocky Hill,
told a housing symposium sponsored by Liberty Bank that “we know how
the mess that we're in today began.”
Subprime lenders began to flood the housing market in late 2004, said
Bannon, “offering loans that seemed too good to be true - and that's
exactly what they turned out to be.”
Bannon said the “house of cards” subprime lenders created has been
falling ever since. “They took advantage of the dream of homeownership
and turned it into a nightmare of financial destruction and family
destitution,” he told those attending the symposium at The Water's Edge
resort in Westbrook.
He said subprime lenders concentrated their loans in lower-income
neighborhoods with lower education levels. “The subprime lenders ...
purposely took advantage of people who had too little education, too
little experience and too much hope. They stole their money and they
dashed their dreams,” Bannon said.
The housing official told those attending the bank forum - from
affordable housing experts to bankers and municipal officials -that the
impact of unscrupulous subprime lenders were not problems of their
making, but they have impacted the banking, lending and municipal
arenas.
The Rocky Hill-based CHFA works with lower income or disadvantaged
borrowers, and its typical borrower makes less than $65,000 annually.
Almost 40 percent of its borrowers are female heads of households. “But
we make - you make and we buy - good loans,” he said of his agency.
Bannon congratulated Liberty Bank's financial performance this past
year as well as its stellar lending reputation. “Liberty Bank is a
Connecticut success story,” he added. Between 1992 and 2008, Liberty
has originated nearly 600 CHFA loans totaling nearly $67 million. This
past year, the Middletown-based mutual savings bank - the state's
oldest - was among the housing agency's top 20 loan originators.
Bannon said several new federal housing initiatives, as well as new
programs from Fannie Mae, the giant mortgage lender, are helping to
restore some stability in the state's, and nation's, wobbly housing
market.
He said his agency is working through numerous initiatives, including
the CT Families mortgage-loan refinancing program, to help borrowers
delinquent on their adjustable rate mortgages, along with the Emergency
Mortgage Assistance Program that provides financial assistance to help
homeowners meet their monthly housing expenses.
Bannon also said free mortgage counseling provided by CHFA and a
judicial mediation program are helping homeowners. He said these
programs have made possible nearly 19,000 repayment and loan
modifications to help homeowners avoid foreclosure.
HOUSING PERMITS-CT Housing
permits plummet in state; Builders in 'survival mode' after
Connecticut records 43.5 % drop over 12-month period
DAY
Article published Oct 28, 2009
People in the local building industry say they've never seen business
conditions as difficult as they are today, and statewide new
housing-permit figures released Tuesday seem to bear out their
concerns. New housing permits in Connecticut were down 43.5
percent in
September compared with a year ago, according to figures released by
the state Department of Economic and Community Development. Permit
activity is off nearly 40 percent so far this year compared with the
same period last year - and 2008 wasn't a great year, either.
"I've been in this business over 50 years and I've never seen it this
bad," said Tom Lenihan, owner of Lenihan Lumber in Waterford. "It's
worse than it was (during the last real estate recession) in the late
'80s and early '90s."
The 218 housing permits issued in the state last month represented less
than a quarter of the number approved for the same period four years
ago.
"We're all in survival mode," said Norton C. Wheeler III, owner of the
Mystic River Building Co.
Lenihan said the problem today is that people cannot get loans or
mortgages.
"Money is not available; the banks are very cautious," he said. "That
was not the case in '88, '89 and '90."
"People are scared, and the banks are being totally careful," said
Renee Main, executive officer of the Builders Association of Eastern
Connecticut. "It's just the opposite of what was going on" during the
real estate boom three to five years ago.
Jim Cronin, president of Dime Bank in Norwich, agreed that local
financial institutions have more stringent loan requirements than they
did before the financial crisis hit last year. But he has seen few loan
requests from individuals or developers, and those his bank does
receive can be difficult to consummate because of low appraisals based
on a falling real-estate market and the paucity of comparable
properties on which to base valuations.
"Sales are down and values are down. It's a Catch-22," he said.
Adding to the pain, said Wheeler, a former president of the local
builders association, is that banks are now requiring developers to put
up about half of the cost of a project, using their own funds or
private equity. This compares with banks' willingness to fund 80 or 90
percent of development projects before last year's financial panic.
"They want you to have some skin in the game," Wheeler said. "We're
working on a smaller margin this year than last year."
Cash flow has become a problem for some builders, said Main, who noted
that several longtime members have dropped out of the association
because they can't afford the annual dues.
"These are members that made it through the '90s," said Main. "They've
been members for 25 or 30 years."
Main said the problem is affecting just about everyone associated with
building, including home renovators, lumberyards and even
equipment-rental businesses. While the cost of labor has come
down,
other fixed costs such as medical insurance and liability insurance
continue to rise, according to industry insiders. Strangely,
the cost
of land hasn't come down as quickly as real-estate prices, builders
said, making it more difficult for new home construction to compete on
cost with already built residences.
"The spec market is certainly nonexistent," Wheeler said. "Things are
pretty slow right now."
As an indication of the slowdown, Michael Mastronunzio, owner of Brom
Builders in Norwich, said he had 17 houses under construction at one
point in 2005; this year, he has only about half a dozen - and he
considers himself lucky. But Mastronunzio and others are starting
to
feel like the worst may be behind them. Brom Builders just took out a
permit last month for a 22-unit affordable-housing project in Norwich
called Summit Woods Apartments 2, and it is planning a few individual
houses in Groton and North Stonington.
"We're feeling a lot better than six months ago," he said.
"There's decent demand for custom homes," said Wheeler. "In the last
two months we've seen an uptick in inquiries on new homes. People
sitting on the fence for a couple of years are starting to get antsy."
But many fence-sitters may stay there if worries over job losses
persist, insiders said.
"People are just being very cautious on an individual basis," said
Cronin of Dime Bank.
Building-industry officials say a key to breaking the slow building
cycle will be to get real estate sales moving again. They praise the
$8,000 first-time homebuyer tax credit, which has provided a life
jacket for the lower end of the market, but said it will take a while
before it affects to new construction.
"The key is the economy," Wheeler said. "People need confidence that
there's some stability. State's
housing permits plunge 47% for year DAY
By Anthony Cronin
Published on 6/26/2009
The state's new-home construction activity remained lackluster in May,
with the number of building permits falling more than 60 percent from a
year earlier.
Through the first five months of this year, Connecticut saw permit
activity for new-home construction decline about 47 percent.
Figures provided by the Connecticut Department of Economic and
Community Development show the state's various cities and towns issued
just 192 permits for new construction this past month. A year earlier,
that figure stood at 493.
Through the first five months of this year, 1,031 permits for new
housing units have been issued across the state - down from 1,947
permits issued in last year's comparable period.
The state's economic-development agency compiles monthly permit figures
for all of Connecticut's 169 municipalities.
May's steep dropoff in new-home activity follows three consecutive
months of modest increases. In February, 200 permits were issued
compared to 92 in January, followed by 208 in March and 339 in April.
In southeastern Connecticut, permit activity mirrored the statewide
performance, with permits falling in nearly every town and city through
the first five months of this year. In East Lyme, for instance, only
five permits were issued through May, compared to 13 a year earlier.
New London issued 9 permits compared to 15 a year earlier, while
Groton's permit activity fell to 9, compared to 28
a year earlier.
New-home construction continues to be hampered by this prolonged
recession, which has seen a tightening of the credit spigot. Credit is
a key ingredient in the home-building and lending industries. Despite
the downturn, mortgage rates for 30-year loans continue to hover above
5 percent, still at historic lows but showing an upward creep from a
few months back.
On Thursday, BankRate.com reported average 30-year mortgage rates of
nearly 5.6 percent. Last week, they were around 5.4 percent, according
to the mortgage-tracking firm.
U.S. Homes Recovery Distressingly Slow: Reuters / UMich NYTIMES
By REUTERS
Filed at 10:11 a.m. ET
June 19, 2009
NEW YORK (Reuters) - A "distressingly slow" U.S. housing recovery, with
inflation-adjusted home values expected to decline over the next five
years, makes it unlikely that housing wealth will drive consumer
spending in the next decade, a Reuters/University of Michigan survey
found.
Consumers are apt to maintain their renewed emphasis on savings and
paring debt, Richard Curtin, director of the survey, said in a June
home price update on Friday. Housing wealth changes have a lagged
impact on spending, and the influence of declines seen in 2008 will
depress growth in consumer spending in 2009 and 2010, the survey said.
"To be sure, refinancing has reduced the burden of mortgage payments,
giving consumers more discretionary income, but the refinancing impact
on spending will fade as mortgage rates increase," Curtin said.
"Moreover, conventional refinancing is largely limited to consumers
whose home is worth about 20 percent more than their current
outstanding mortgage."
The pool of those homeowners is fast shrinking with each month that
home prices sink. On average, home prices nationally have slumped by
more than 32 percent from mid-2006 highs, based on Standard &
Poor's/Case-Shiller indexes. Sixty percent of homeowners reported
home price declines in the second quarter Reuters/University of
Michigan surveys. The share of those reporting losses was greatest in
the West, at 77 percent, and least in the South, at 51 percent.
Some signs of sentiment improvement emerged in the second quarter. Just
22 percent of those surveyed expected price declines in the year ahead,
the lowest share since 2007. The share of homeowners reporting
price declines in the past year and expected further erosion in the
year ahead fell to 28 percent in the second quarter from 35 percent in
the first quarter and 43 percent a year ago.
"Declines in prices have prompted consumers to view home buying
conditions much more favorably, but those same price declines have
prompted the least favorable assessments of home selling conditions
ever recorded," Curtin said.
Most home buyers are also sellers. As a result, many potential
transactions are thwarted because the reluctance to sell at a "loss" is
seen as greater than the advantage of the buying at a reduced price, he
said. HOUSING
PERMITS-USA Fewer home-building permits signal
weakness ahead
YAHOO
By MARTIN CRUTSINGER, AP Economics
Oct. 20, 2009
WASHINGTON – Applications for home building permits, a gauge of
future construction, fell in September by the largest amount in five
months — a discouraging sign for the housing industry.
The decline, in part, reflected uncertainty about whether Congress will
extend a tax credit for first-time homebuyers.
At the same time, the Commerce Department said Tuesday that
construction of new homes and apartments rose 0.5 percent last month to
a seasonally adjusted annual rate of 590,000 units. That was a weaker
showing than the 610,000 economists had expected.
The applications for building permits fell 1.2 percent in September.
That's the biggest decline since a 2.5 percent drop in April and
underscored worries that the fledgling housing revival could be
derailed by rising unemployment, tighter bank lending standards and the
expiration on Nov. 30 of the government's $8,000 tax credit for
first-time homebuyers.
Housing has been struggling to recover this year following a steep
collapse that helped pull the overall economy into the worst recession
since the 1930s.
Real estate agents and homebuilders are lobbying Congress to extend the
tax credit, an effort appears to be gaining momentum, but the
administration is being vague about its position.
Sen. Johnny Isakson, R-Ga., who spent his career as a real estate agent
before being elected to Congress, said "this market is going to die a
sudden death" without an extension.
Isakson and Sen. Christopher Dodd, D-Conn., chairman of the Senate's
banking committee, want to extend the credit until June 30 and to drop
the requirement that the credit be available only to first-time buyers.
That's estimated to cost $16.7 billion.
The lawmakers have suggested that their measure be attached to an
extension of federal assistance to the millions in danger of exhausting
unemployment insurance benefits.
Housing Secretary Shaun Donovan said at a congressional hearing Tuesday
that supporting the housing market "can be very expensive, especially
at a time of significant budget deficits."
The administration will make a recommendation on whether to extend the
credit in the coming weeks, after studying data on tax filings from the
Internal Revenue Service. While there would be some negative effects if
it were allowed to expire, Donovan said, "I do not believe that a
catastrophic decline would be the result."
Some analysts and lawmakers are skeptical about extending the credit,
arguing that most homebuyers who receive it would have decided to buy
anyway. And soaring unemployment is likely to dull the impact of any
extension, Mark Vitner, a senior economist with Wells Fargo Securities,
wrote in a note to clients.
"Many of the most likely buyers targeted have already taken advantage
of the program," he wrote.
Meanwhile, the Labor Department said wholesale prices fell 0.6 percent
last month on a drop in energy costs. Outside food and energy, core
inflation fell 0.1 percent. In the 12 months ending in September, core
wholesale prices rose a modest 1.8 percent.
The drop in wholesale prices was another sign the recession had kept a
lid on inflation. Last week, the government said consumer prices edged
up a modest 0.2 percent in September.
But the cost for a barrel of crude jumped $10 this month, hitting $75
for the first time in a year last week and than passing $80 early
Tuesday. The value of the dollar plunged in October and because crude
is bought and sold in the U.S. currency, international investors who
can essentially buy more crude for less have rushed in to snap up oil
contracts.
The 0.5 percent rise in overall housing construction in September
followed a 1 percent drop in August that was revised down from an
initial estimate of a 1.5 percent gain.
Construction of single-family homes rose 3.9 percent last month to an
annual rate of 501,000 units, reversing a 4.7 percent drop in August.
Multifamily construction, a much smaller and more volatile segment,
posted a 15.2 percent drop following a 20.7 percent rise in August.
Construction rose 7.1 percent in the South, but all other regions
showed weakness. Building activity fell 5.5 percent in the Northeast,
1.8 percent in the Midwest and 8.8 percent in the West.
An index from the National Association Home Builders that measures
builder confidence slipped slightly in October to a reading of 18, from
19 in September. Builders blamed the slippage on the approaching
expiration of the homebuyer tax credit.
The industry contends that extending and expanding the credit for one
year would generate nearly 350,0000 jobs and $11.6 billion in
additional tax revenues.
Housing Rebounds; Inflation
Holds DAY
By Christopher S. Rugaber , Martin Crutsinger , Associated Press
Published on 6/17/2009
Fresh signs that the economy is stabilizing - though at
very low levels - emerged Tuesday in reports that home construction
rose more than expected last month and wholesale prices remain in check.
The building of new homes and apartments jumped 17.2 percent to a
seasonally adjusted annual rate of 532,000 units from April's record
low of 454,000 units, the Commerce Department said. Building permits,
an indicator of future activity, rose 4 percent to an annual rate of
518,000 units, also better than expected.
But the gains in construction were driven by a surge in the highly
volatile category of multifamily buildings, which soared 61.7 percent
in May after plunging 49.4 percent in April. Single-family home
construction rose at a much lower rate, 7.5 percent.
Meanwhile, the Producer Price Index, which measures wholesale prices,
rose by a seasonally adjusted 0.2 percent from April, the Labor
Department said. That was below analysts' expectations of a 0.6 percent
rise.
Despite the increase, wholesale prices fell 5 percent over the past 12
months. That was the largest annual drop in nearly 60 years. Excluding
volatile food and energy prices, the core PPI dropped 0.1 percent in
May, also below analysts' forecasts of a 0.1 percent rise.
Falling prices can raise fears about deflation, a destabilizing period
of extended declines. But most analysts say efforts by the Federal
Reserve to stimulate the economy will prevent deflation.
The latest governments reports, including a seventh straight drop in
industrial production, follow a dip in homebuilder confidence reported
Monday.
Taken together, along with a recent rise in mortgage rates, they depict
an economy recovering very slowly from the depths of the longest
recession since the Great Depression.
”The bottom line is that housing activity appears to have found a
floor, albeit at a low level,” Paul Dales, U.S. economist at Capital
Economics in Toronto, wrote in a research note.
Joshua Shapiro, chief U.S. Economist at MFR Inc., said overall median
home prices will keep falling, but the bottom end of the housing market
“will probably continue to show signs of life as long as first-time
buyers can get the financing they need.”
Still, any sustained rebound in home construction isn't expected until
next spring. That's partly due to the glut of unsold homes and a record
wave of mortgage foreclosures dumping more properties on the market.
For April, the number of unsold existing homes on the market rose
almost 9 percent to nearly 4 million. And the supply of unsold new
homes dipped to 297,000. That amounts to a 10-month supply of new and
existing unsold homes at the April sales pace, according to data from
the government and the National Association of Realtors.
President Barack Obama on Wednesday is scheduled to unveil the
administration's plan to overhaul financial regulation, in part to
prevent the lending abuses that triggered the financial crisis.
A 2.9 percent rise in energy prices, including a 13.9 percent jump in
the cost of gas, drove the May increase in wholesale prices. Food
prices, meanwhile, fell 1.6 percent, reversing a similar rise in April.
Still, labor is producers' largest expense, and “wage costs will soon
start falling sharply,” Dales wrote. “Accordingly, the surge in the oil
price in unlikely to unleash inflation.”
The Federal Reserve on Tuesday said production at the nation's
factories, mines and utilities fell 1.1 percent in May, the deepest cut
since March. The recession has crimped demand for manufactured goods
and helped keep inflation in check. Plant shutdowns at Chrysler LLC and
General Motors Corp. also weighed on industrial production last month
and probably will into the summer, economists say.
The Fed has cut a key interest rate to a record low near zero and taken
other extraordinary steps to flood the banking system with cash. Many
economists don't expect the Fed to raise interest rates until the
unemployment rate stops rising. It hit a 25-year high of 9.4 percent in
May, and many think the jobless rate will top 10 percent by year's
end.
CT HOME SALES
From the National Realtor's Assoc. - how's that again?
High-priced homes dip in value Grenwich TIME
By Rob Varnon, STAFF WRITER
Published: 02:31 a.m., Saturday, January 16, 2010
Simple economics can explain the plummeting home values in Darien,
Greenwich and New Canaan -- fewer Wall Street jobs and bonuses leaves
fewer people able to buy mansions, right?
Sure, say the experts, slack in demand explains some of it. But those
double-digit house value declines in wealthy towns are also part of a
larger story about an epidemic of debt addiction that has left a trail
of misery from Bridgeport's East Side to backcountry in Greenwich.
Zillow.com puts out regular reports on the nation's housing markets,
though many real estate agents will tell you it's not the most accurate
data available. Still, it's in the ballpark when compared with other
reports.
According to Zillow, 2009 took the heaviest toll on home values in
Greenwich, Darien, New Canaan, Westport and Bridgeport. Through
November, all were down more than 13 percent, though Bridgeport had the
smallest declines. But Greenwich and New Canaan homes are still worth
more than $1 million while a home in Bridgeport is worth about $160,900.
The City of Bridgeport's real estate woes are well-documented. It is
ground central for foreclosures and an inordinate amount of tradesmen
and other blue-collar workers make their home there. Like other areas
of the country, a tightening of lending standards has eliminated a
number of would-be house hunters. And that has hammered the market,
driving down home values in 2008 and 2009. But for the first time in
probably a long time, Bridgeport's price declines do not put it in the
top five for losses. The suburbs surrounding Bridgeport have fared
better in 2009, as has the Naugatuck Valley, where prices have made
moves to stabilize. Fairfield home values are actually up compared to
2008, by 0.6 percent.
The greater Danbury area has proven the most stable in the region
overall and much of that can be attributed to the employment rate. The
Danbury region boasts the lowest unemployment rate in the state, but
its central urban center has not been immune to foreclosures and its
wealthier suburbs have also been hurt by losses in the financial sector
and tightening credit. Goergetown was the only other community in the
area besides Fairfield to see a gain in home prices in 2009 compared to
2008, according to Zillow.
In Greenwich and the downcounty communities, the market looks more like
the one people in the Bridgeport area saw a year ago. There are even 10
bank-owned homes in Greenwich listed on RealtyTrac.com's Web site. And
there are more than 50 in pre-foreclosure, meaning the borrowers are
behind in payments. Some of these homes are in the best sections of
Greenwich.
Lynn Padell, a Realtor with William Raveis Westport, said it's
important to remember every town behaves differently and there are
different reasons why home sale prices and values have dropped at
different rates.
For example, take Weston and Westport, she said.
"Westport was not showing a price decline until 2009," she said, while
Weston prices declined for three straight years.
Weston home prices dropped from an average of $1.3 million in 2007 to
less than $950,000 in 2009, she said, citing Multiple Listing Service
statistics. Westport cruised through 2008 but prices are down 15.8
percent in 2009, according to Zillow.
Padell said compared with 2007, Westport prices are down about 17
percent, according to MLS data.
But the interesting statistic is volume. Westport's volume of sales in
2009 is only down 2.7 percent compared with 2008.
Padell said Westport is still viewed as more desirable than Weston and
the few people still in the market are able to find available homes
there in a more reasonable price range.
Like economists and other experts, Padell said there are fewer people
in the market for houses and those that are in the market are seeing
lower prices in communities like Westport, which Padell said the real
pain in the wealthier communities has come in the
$1 million to $2 million range, which was occupied by a lot of middle
managers in the finance world. Many of them bore the brunt of the job
losses on Wall Street in late 2008 and 2009.
That's kept a lot of people out of the market as well, "paralysis and
fear," she said.
She said people don't want to buy a house because the idea that it's
going to go up in value every year, and therefore worth taking on a
jumbo loan of more than $750,000 has been shattered, Padell said.
And that's another thing, "People were getting in over their heads,"
she said.
Padell described a similar situation to what has been afflicting other
Connecticut housing markets, with people taking loans that they
probably couldn't normally qualify for.
Gillian Anderson, of Westport-based Anderson Wealth Management, agreed.
She said the era of easy credit took in everyone, noting the term
"million dollar no-brainer," isn't necessarily complimentary.
Anderson has been in finance since 1974 and said she's watched five
recessions. Her company's goal is to protect wealth and in 2006 it was
warning clients about problems in the market back then as all the signs
pointed to a correction.
The truth was that the world was over-leveraged and Americans at every
income level were engaging in a dangerous game of taking on more debt,
she said.
Anderson points to the zero-savings rate and notes the government still
is trying to encourage people to borrow money rather than save it by
holding interest rates so low. It also gives you tax breaks on the
interest on your house and has created incentives for buying, she said.
Today's home prices reflect the fallout from a host of ills, not the
least of which is an over-leveraged world. But it also reflects the
change in the financial landscape. Anderson said two major employers,
Lehman Brothers and Bear Stearns, have vanished from the area, costing
thousands of jobs and potential homebuyers.
She said many people used Wall Street bonuses to buy homes or at least
make down payments.
The truth is that many people in these income brackets were living
beyond their means like people in the lower tax brackets.
"If you make seven figures one year, you expect to make it the next,"
she said, explaining the mindset wasn't any different on Wall Street
than Main Street.
Banks are not lending like they used to. Padell and Anderson agreed
that banks are back to the days of taking less chances on expensive
properties knowing that the market for them is limited.
After all, how many people can really afford a
$1.5 million estate?
While Greenwich and Darien grapple with falling prices, there is hope.
As Padell pointed out, volume in Bridgeport was up in 2009 compared
with 2008, which shows people are willing to come into the market when
there are reasonable prices. Report:
April home sales sag, but prices edger higher since March
Stamford ADVOCATE
By Rob Varnon, STAFF WRITER
Posted: 06/05/2009 10:34:13 PM EDT
Updated: 06/06/2009 09:00:03 AM EDT
Home prices in the state have fallen so far that the value built up in
them during the past five years is gone.
According to The Warren Group's monthly report, the median price for a
home in Connecticut in April was $227,500. The last time April prices
were lower was in 2003, when the median sales price was $222,000. The
group tracks housing prices in New England and publishes The Commercial
Record.
But it's not all bad news, because the Warren Group noted that the
median sales price in April of this year was up compared with March.
However, the number of homes sold in Connecticut dropped to their
lowest level since 1987, the group said.
"Low mortgage interest rates, a first-time homebuyer tax credit and
reduced home prices didn't stimulate sales, even though that was the
expectation," Timothy Warren, chief executive officer of The Warren
Group, said in a statement. "Job losses, pay cuts and mounting consumer
debt appear to be affecting people's home-buying decisions."
Rick Higgins, founder of the Higgins Group, said it's been 2003
price-wise in the state and Fairfield County for a while.
But on the sales front, there is some hope, despite the dismal April.
Higgins said his office reported three sales on Thursday, when a couple
of weeks ago, it was lucky to have three sales in a week.
"On a scale of one to 10, with 10 being best and zero being a meteor
hits the Earth, we're at a 3 1/2," he said.
In Fairfield County, there were 1,041 single-family homes sold from
January to April of this year, a drop of more than 35 percent compared
with the same period last year, when 1,605 homes were sold. The median
sales price for a home sold in the county from January to April of this
year was $385,000 compared with $508,000 the same period last year.
"We're a company town and Wall Street is the company in Fairfield
County," Higgins said of the decline in sales and prices.
He pointed to Darien, where the median sales price for April was still
more than $1 million, but when you look at the first four months of
this year, the median price has fallen to less than $1 million and
sales for the year are off 50 percent. He noted the figures for a
single month in Darien and other affluent towns can be hurt by one big
sale.
But Higgins said he's optimistic that the market is moving in the right
direction. He sees opportunities for sellers and buyers out there.
"It's the best time I've ever seen to move up," he said, of people who
might be looking to buy bigger houses because prices have fallen.
People who are downsizing because of a loss of income are finding they
are competing to buy smaller homes, he said.
"Once people stop worrying about losing their jobs, we're going to be
OK," he said of the housing market.
Don Klepper-Smith, chief economist of New Haven-based DataCore
Partners, said employment rates are the real test for the housing
market. Klepper-Smith said he doesn't expect improvement there for a
few quarters. Connecticut has lost more than 65,000 jobs since
April 2008. But the housing market isn't all bad, he said.
"The good news is the rates of declines are starting to ease up,"
Klepper-Smith said, and sales data in recent weeks shows improvement.
If there is a wild card for housing, it's interest rates, which have
been creeping up. Todd Martin, of Fairfield-based Todd P. Martin
Economic Services, said one reason there's been so much activity in the
housing market is that rates have been low. Although an increase in
interest rates could be damaging, Martin pointed out it also can be a
sign of a market that is coming back to life, with investors feeling a
little better about the risks involved in lending.
He noted corporate bond sales have improved in recent weeks. Like
Higgins, Martin said he expects sales will improve for homes at the
lower end of the price range as first-time buyers get back in the
market and people downsize.
April Sales in area towns City/Town 2008 2009 Percent change Ansonia
sales 12 12 0 Median Price $238,000 $148,650 -37.54 Bethel sales 9 7
-22.22 Median Price $372,000 $291,000 -21.77 Bridgeport sales 36 33
-8.33 Median Price $202,925 $133,126 -34.40 Danbury sales 31 21 -32.26
Median Price $290,000 $280,000 -3.45 Darien sales 18 7 -61.11 Median
Price $1,472,500 $1,300,000 -11.71 Derby sales 5 3 -40.00 Median Price
$235,000 $150,000 -36.17 Easton sales 3 6 100.00 Median Price $390,000
$529,500 35.77 Fairfield sales 41 23 -43.90 Median Price $540,000
$620,000 14.81 Greenwich sales 38 17 -55.26 Median Price $1,850,000
$1,025,000 -44.59 Milford sales 31 21 -32.26 Median Price $332,000
$245,000 -26.20 Monroe sales 12 11 -8.33 Median Price $427,500 $445,000
4.09 New Canaan sales 14 6 -57.14 Median Price $2,106,250 $1,775,000
-15.73 New Fairfield sales 9 6 -33.33 Median Price $305,000 $314,000
2.95 New Milford sales 19 17 -10.53 Median Price $313,000 $236,500
-24.44 Newtown sales 16 11 -31.25 Median Price $452,250 $420,000 -7.13
Norwalk sales 42 28 -33.33 Median Price $524,500 $404,950 -22.79 Oxford
sales 8 6 -25.00 Median Price $421,000 $419,950 -0.25 Redding sales 5 1
-80.00 Median Price $737,500 0 -100.00 Ridgefield sales 20 6 -70.00
Median Price $550,000 $652,500 18.64 Seymour sales 11 12 9.09 Median
Price $295,000 $226,450 -23.24 Shelton sales 18 8 -55.56 Median Price
$308,500 $325,000 5.35 Stamford sales 27 26 -3.70 Median Price $679,000
$612,500 -9.79 Stratford sales 29 17 -41.38 Median Price $248,000
$172,000 -30.65 Trumbull sales 22 18 -18.18 Median Price $445,000
$356,250 -19.94 Westport sales 26 20 -23.08 Median Price $905,000
$910,000 0.55 Wilton sales 16 10 -37.50 Median Price $1,176,250
$939,250 -20.15 Home
Sale Prices Fall, Again
The Hartford Courant
By KENNETH R. GOSSELIN
9:41 AM EDT, June 3, 2009
The median sale price for a single-family house in Connecticut fell by
13.5 percent in April, the seventh consecutive month of double-digit,
year-over-year price declines, according to a report released today.
But the price decline -- to $227,500 from $263,000 in April, 2008 --
was the smallest in the seven-month period, and may be an early sign
that price declines in the state are beginning to moderate.
April's decline also was smaller than the year-to-date price declines
for 2009, which came fell 15.5 percent through the first four months of
this year, according to The Warren Group, which tracks the housing
market in New England.
Sales of single-family homes dropped 21 percent to 1,528 in April, from
1,936 for the same month a year ago.
While the decline in sales was still deep in April, it was not as bad
as the declines posted through the first four months of the year and it
was the same as the drop recorded in March.
Even so, sales in April -- the start of the often busy Spring
homebuying season -- were the slowest sales pace for April since the
Warren Group began tracking sales in Connecticut in 1987.
Through the first four months of 2009, sales were off 26 percent.
Timothy M. Warren, Warren Group CEO, said a recovery in the state's
housing market still appears to be stymied by mounting job losses and
pay cuts.
"Low mortgage interest rates, a first-time homebuyer tax credit and
reduced home prices didn't stimulate sales even though that was the
expectation," Warren said.
House sales may be up in many areas of the country but prices continue
to scrape along the floor, data released Tuesday shows.
Prices in 20 major metropolitan areas dropped in March nearly 19
percent, according to the Standard & Poor’s Case-Shiller Home Price
Index that was released Tuesday. That was about the same drop as in
January and February.
“Foreclosures have picked up, and that seems to be pushing prices
down,” said David Blitzer, chairman of S.& P.’s index committee.
“The recession is really biting.”
The national Case Shiller index for the first quarter, also released
Tuesday, also showed a 19 percent decline compared the first quarter of
2008, the biggest drop in the index’s 21-year history. The national
index covers all United States houses.
“At best, we may be stable,” Mr. Blitzer said. “You have to have a
moment of stability before you can move up.”
Minneapolis — not usually thought of a poster child for housing excess
— skidded 6 percent in March, the largest one-month decline for a city
in the history of the index.
New York and Detroit, while both reporting large monthly declines in
March, show the different legacies of the boom. New York is still up 73
percent from January 2000, while in Detroit prices are 29 percent
lower. A Detroit house costs about the same today as it did 14 years
ago.
Las Vegas joined Phoenix in showing a decline from the peak of more
than 50 percent. Dallas, which never had much of a housing boom, is the
best-performing city in the index, down 11 percent.
And a related topic, the "bubble"
(see above)
Housing construction, permits hit
record lows
DAY
Published on 5/19/2009
WASHINGTON (AP) _ A modest rebound in single-family home construction
in April raised hopes Tuesday that the three-year slide in housing
could be bottoming. But with the supply of unsold homes bulging,
foreclosures rising and prices falling, no broad recovery is expected
until next spring at the earliest.
The Commerce Department said construction of new homes and apartments
fell 12.8 percent last month to a seasonally adjusted annual rate of
458,000 units _ the lowest pace on records going back a half-century.
Applications for new building permits dropped 3.3 percent to an annual
rate of 494,000, also the lowest on record.
All of last month's weakness, though, came in the volatile multifamily
part of construction. Single-family construction and permits both rose,
a signal that this bigger sector of home construction is starting to
stabilize.
Construction of single-family homes rose 2.8 percent to an annual rate
of 368,000, following a 0.3 percent gain in March and no change in
February. Building permits for single-family homes were up 3.6 percent
to a rate of 373,000 last month.
"U.S. housing remains very weak, but the stability in single-family
units is encouraging," Benjamin Reitzes, an economist at BMO Capital
Markets, said in a research note.
Multifamily construction plunged 46.1 percent to an annual rate of
90,000 units after a 23 percent fall in March. Permits for multifamily
construction dropped 19.9 percent to 121,000 units. Analysts said
apartment construction is being hurt by a glut of condominiums on the
market and by tightening credit conditions for commercial real
estate. They also said a real rebound for single-family
construction remains distant as heavy job layoffs and record levels of
foreclosures will continue to weigh on this sector.
The number of unsold homes on the market at the end of March fell 1.6
percent from a month earlier to 3.7 million, not including new homes,
according to the National Association of Realtors.
"Progress is under way in working off the inventory of unsold,
unoccupied homes and condos," Gary Stern, president of the Federal
Reserve Bank of Minneapolis, said Tuesday in prepared remarks to local
business people in Willmar, Minn. But since sales remain
sluggish, it would take almost 10 months to rid the market of those
properties, compared with about 6.5 months in 2006, according to the
Realtors data.
"Home building conditions remain weak," Paul Dales, U.S. economist for
Capital Economics, said in a note to clients. "The excess supply of new
homes for sale is still high and heavy discounts on foreclosed
properties have made new homes less appealing. Any rebound in starts
will be modest."
On Wall Street, stocks rose modestly. The Dow Jones industrial average
added about 25 points in afternoon trading and broader indices also
edged up.
The nation's current recession, the longest since World War II, began
with a collapse in housing that triggered rising loan losses and the
worst crisis in the financial sector in seven decades. The government
has provided billions of dollars in support to try to stabilize the
financial system and get banks to resume more normal lending to
consumers and businesses. Housing construction and sales are
expected to bottom out in the second half of this year but economists
are forecasting that prices will keep falling until next spring.
The median price of a new home sold in March was $201,400, down 23
percent from a peak of $262,600 two years earlier. The median price is
the midpoint, which means half of the homes sold for more and half for
less.
In April, housing construction fell 30.6 percent in the Northeast, the
largest drop for any region. Housing starts dropped 21.4 percent in the
Midwest and 21.1 percent in the South.
The West was the only region showing strength with a 42.5 percent jump
in housing starts.
The National Association of Homebuilders reported Monday that its
survey of builder confidence increased for the second straight month in
May, reflecting growing optimism on the part of many builders.
The Washington-based trade group's index rose two points to 16, the
highest reading since September. Even with the rebound, the index
remains near historic lows. Index readings lower than 50 indicate
negative sentiment about the market.
The housing slump has affected related industries such as home
remodeling, but two nationwide chains reported better-than-expected
earnings this week.
Home Depot Inc. said Tuesday its first-quarter profit climbed 44
percent on fewer charges, and the nation's largest home improvement
retailer beat Wall Street's expectations despite lower sales. Smaller
rival Lowe's Cos. on Monday reported a quarterly profit that also beat
analysts' expectations and the company boosted its full-year outlook.
But the nation's top three homebuilders reported financial results
earlier this month that give little hope the spring selling season will
be strong enough to stop the red ink. Pulte Homes Inc. and Centex
Corp., which agreed to combine this year to become the largest U.S.
homebuilder, said that while their quarterly losses narrowed, they
continued to be battered by falling prices and a glut of unsold
homes. D.R. Horton Inc., currently the industry's No. 1 home
builder, also reported that its losses had shrunk, but the company said
it still faces challenges from foreclosures, high inventory levels,
tight homebuyer credit, low consumer confidence and job losses.
The economy contracted by more than 6 percent in the final three months
of last year and the first three months of this year, the steepest
six-month downturn in a half-century. Analysts believe the recession
will end sometime in the second half of this year but they are looking
for the jobless rate, now at a 25-year high of 8.9 percent, to keep
rising into 2010.
Stern said the early stages of an economic recovery are likely to be
subdued. "But with the passage of time _ as we get into the middle of
2010 and beyond _ I would expect to see a resumption of healthy
growth," he added.
Housing
Starts Hurt by Steep Drop in
Apartment Building
NYTIMES
By JACK HEALY
May 20, 2009
Despite talk of stability and glimmers of recovery, struggling home
builders and the construction industry are a long way from a rebound.
New home construction fell to its lowest pace on record in April, the
government reported on Tuesday, disappointing forecasters, who had
hoped for a modest increase. Building permits fell to record lows and
construction on new multi-family units plunged.
Overall, housing starts were down 12.8 percent last month from March,
to an annual pace of 458,000.
The results demonstrated that the housing market remained weak, even as
home builders reported that they were regaining some confidence and as
housing prices began to fall at a slightly slower pace.
“The writing’s on the wall in the construction industry,” said Joseph
Brusuelas, director at Moody’s Economy.com. “This is a function of the
oversupply in the market. There’s just simply too much supply on the
market, and construction starts will have to continue to contract.”
Economists said the numbers demonstrated that builders simply do not
see much demand for new homes. A glut of foreclosure properties
continues to flood the market, and many potential buyers are still
hesitant to enter the market as long as home values keep falling and
unemployment continues to rise.
The one bright spot was that new construction of single-family homes
was higher for a second month, rising 2.8 percent to an annual pace of
368,000 units, the Commerce Department reported. Across the country,
housing starts fell by double digits in the Northeast, Midwest and the
South, but they rebounded 42.5 percent in the West from a month
earlier.
Housing permits fell less severely than housing starts, slipping 3.3
percent in April to an annual rate of 494,000.
Economists said the stability in single-family construction offered
some signs of encouragement, and they said that the market still
appeared to be bottoming out, rather than entering a second phase of
declines.
“We’re still at remarkably low levels,” Mike Larson, a real-estate
analyst at Weiss Research, wrote in a research note. “We still have a
large glut of homes for sale, particularly ‘used’ ones. But these
figures add to the evidence of potential stabilization in that part of
the industry.” U.S.
Housing Starts, Permits Hit
Record Lows In April
NYTIMES
By REUTERS
Filed at 8:33 a.m. ET
May 19, 2009
WASHINGTON (Reuters) - New U.S. housing starts and permits unexpectedly
fell to record lows in April, a government report showed on Tuesday,
denting hopes that stability in the housing market was imminent.
The Commerce Department said housing starts fell 12.8 percent to a
seasonally adjusted annual rate of 458,000 units, the lowest on records
dating back to January 1959, from March's upwardly revised 525,000
units. Compared to the same period last year, housing starts tumbled
54.2 percent.
Analysts polled by Reuters had expected an annual rate of 520,000 units
for April.
New building permits, which give a sense of future home construction,
dropped 3.3 percent to 494,000 units, the lowest since records started
in January 1960, from 511,000 units in March. That was well below
analysts' estimates of 530,000 units. Compared to the same period a
year-ago, building permits plunged 50.2 percent.
Building completions rose 4.9 percent to 874,000 units. New
Housing Permits Plummet 33 Percent
By KENNETH R. GOSSELIN | The Hartford Courant
11:49 AM EDT, May 7, 2009
Permits for new housing construction in Connecticut plummeted 33
percent in 2008, marking the fourth straight year of declines.
Last year, 5,220 building permits were issued in Connecticut's 169
towns, compared with 7,746, according to a report from the state
Department of Economic and Community Development.
The decline was steeper than the 25 percent in the 128-town survey that
was released in January. Once a year, the U.S. Census -- the source for
the state's permit numbers -- does a complete tally of all Connecticut
municipalities.
Job losses, which accelerated in the Connecticut at the end of 2008,
remain a concern for the housing market. Builders remain cautious about
adding too much new stock when workers remain worried about whether or
not they will have a job.
The permits are issued for all new residential construction:
single-family houses, condominiums and apartment units.
Last year, 1,462 housing units were demolished, making for a net gain
of 3,758 units, according to the report. Conn. permits for new houses drop by
half
DAY
Published on 4/28/2009
HARTFORD, Conn. (AP) _ Connecticut economic officials say the number of
housing permits issued in the first three months of the year is down by
more than 50 percent.
The state Department of Economic and Community Development also says
there was a nearly 50 percent drop in permits issued for last month.
The agency says towns and cities issued 500 permits for single-family
houses, condominiums and apartment units in the first quarter. Last
year, they issued 1,091 permits for the same period.
In March, the number of permits issued was 208, a 46 percent drop from
the same month a year ago.
Connecticut saw its fourth consecutive year of residential construction
declines in 2008. In
the Region: Housing Inventories on
the Rise
NYTIMES
By ANTOINETTE MARTIN
December 28, 2008
ON the eve of a new year, it is becoming clear that the real estate
market in Hudson County, the “Gold Coast” zone just across the river
from Manhattan, will have to wait at least two years to celebrate a
more prosperous era.
Once New Jersey’s hottest market for high-end condominiums — drawing
streams of Manhattanites — Hudson now finds itself with 24.1 months’
worth of unsold inventory.
This is a much bigger backlog than exists in Brooklyn, which has a
13.8-month supply, and it exceeds unsold inventory levels in Queens; in
Orange, Rockland and Westchester counties in New York; and in Fairfield
County in Connecticut.
On Long Island, the unsold inventory is also swollen. It would take
20.9 months for all the houses and condos currently on the market there
to find buyers, given the current pace of sales.
A new assessment of the region prepared by the Otteau Valuation Group
presents a generally unlovely picture of residential sales markets:
Manhattan now has an 11.8-month supply of unsold inventory, said
Jeffrey G. Otteau, whose Old Bridge, N.J., company analyzes contract
sales figures and advises real estate brokers. “This is not terribly
big,” he said, “but it is significantly bigger than a year ago — and
much bigger than the days when multiple bidders were circling around
every available unit on the market.”
There are a few other areas encircling Manhattan that also maintain
what might be described as less-than-albatross-sized inventories,
including:
• Passaic County in New Jersey,
home to the large suburban communities of Clifton and Wayne, which has
a 12.9-month supply of housing on the market;
• Union County, N.J., home to Elizabeth, Summit and Westfield,
which has a 13.8-month supply;
• Morris County, N.J., an area with 150 towns, including
Mendham, Morristown and Mountain Lakes, which has a 14.1-month supply.
Across New Jersey last month, the pace of sales fell 30 percent below
the same month in 2007. In October, the drop was 28 percent.
Before that, according to various market reports, there had been a
brief, sharp uptick around the region, ascribed to lower mortgage rates
and asking prices. But Mr. Otteau’s numbers clearly indicate that once
the banking crisis, job losses and bailouts began in October, sales
fell and inventories rose.
In Hudson County, home to Hoboken and Jersey City — an area known as
“Wall Street West” — sales were 26 percent fewer in November than the
month before, and 47 percent fewer than in November 2007.
Looking further ahead, Mr. Otteau has recently raised the issue of
potential overbuilding in Hudson County — in addition to his contention
that outer-ring suburbs already have a surfeit of single-family housing
on large lots that will not appeal to buyers of the next decade.
One large developer in Hoboken, the Applied Development Company,
stopped building anything other than rentals as of nearly two years
ago, said its president, David Barry. “We saw the condo market getting
ahead of itself, and becoming temporarily overbuilt, for sure,” he said.
But of the rentals that Applied is moving ahead with, several
developments are in Hudson County. “We just started on 225 Grand, a
348-unit rental in Jersey City,” Mr. Barry said, “and we’re preparing
to start with the Berkshire, 93 rental units, at the Shipyard.” The
Shipyard is an Applied rental/condo complex on the Hudson in Hoboken.
“It will be about two years before these come online,” he said, “and
when the economy does turn around, my experience is that the first
market to benefit from that is the apartment market. As jobs are added,
the first thing that happens is many people go out and rent an
apartment.”
Land costs have become “more reasonable lately,” Mr. Barry added; as a
developer, he is seeking to capitalize on “an opportune time to get in
the ground with apartments.”
Condominium developments that have already posted strong numbers of
sales contracts — like the Trump Plaza Jersey City — will most likely
continue to sell units during this “off time,” he said, but starting
new condo construction at this point is “plain crazy.”
As for the “suburban sprawl” single-family-home developments that New
Jersey policymakers have long been trying to rein in, Mr. Otteau
predicts the market will only worsen.
Sales pace is slack in the northwestern part of the state, where
large-lot single-family development prevails. The inventory backlog is
23.6 months in Sussex County, 21.6 months in Warren County and 16
percent in Hunterdon County, according to the Otteau numbers.
In the more urbanized northeastern New Jersey counties of Bergen and
Essex, the residential backlog approaches 16 months.
Likewise, in New York State, the inventory in outlying boroughs and
counties is very large compared with that of Manhattan and Brooklyn.
Westchester County has the next-largest inventory to Long Island, at 18
months. Orange County’s inventory is nearly 18 months, and Rockland’s
is 14.5. Mr. Otteau foresees a “structural shift” in housing demand
that will come into sharper focus in the region when the overall market
improves.
“Right now we are all focusing on how bad it is,” he said, “but what we
are also seeing is a historic reversal of home-buying demand away from
suburban and rural areas to cities and inner-ring suburbs that are more
walkable than driveable.”
Mr. Otteau says the shift was partly because of higher energy prices.
But the dominant reason is that the number of households with children
living at home is on a persistent decline.
“In 1985,” he said, “50 percent of households had children at home. In
2000, that was down to 33 percent. Today it is 29 percent, headed to 25
percent.
“That means that 75 percent of home buyers over the next 15 years will
have childless households — and within that group are empty-nester
baby-boomers, or couples or singles buying a first house. And that
means that three out of four home buyers will have no interest in a
house in the suburbs with a good school system, which is pretty much
what we’ve created over the last 50 years.”
Mr. Otteau cited a new study from Virginia Tech projecting that a
nationwide surplus of 22 million suburban homes on lots larger than a
sixth of an acre will be languishing on the market by 2025.
WASHINGTON (AP) -- The Bush administration, acting to avert the
potential for major financial turmoil, announced Sunday that the
federal government was taking control of mortgage giants Fannie Mae
(NYSE:FNM) and Freddie Mac. (NYSE:FRE)
Officials announced that the executives of both institutions had been
replaced. Herb Allison, a former vice chairman of Merrill Lynch
(NYSE:MER) (OOTC:MERIZ) , was selected to head Fannie Mae, and David
Moffett, a former vice chairman of US Bancorp (NYSE:USB) , was picked
to head Freddie Mac.
Treasury Secretary Henry Paulson says the actions were being taken
because "Fannie Mae and Freddie Mac are so large and so interwoven in
our financial system that a failure of either of them would cause great
turmoil in our financial markets here at home and around the globe."
The huge potential liabilities facing each company, as a result of
soaring mortgage defaults, could cost taxpayers tens of billions of
dollars, but Paulson stressed that the financial impacts if the two
companies had been allowed to fail would be far more serious.
"A failure would affect the ability of Americans to get home loans,
auto loans and other consumer credit and business finance," Paulson
said.
Both companies were placed into a government conservatorship that will
be run by the Federal Housing Finance Agency, the new agency created by
Congress this summer to regulate Fannie and Freddie.
The Federal Reserve and other federal banking regulators said in a
joint statement Sunday that "a limited number of smaller institutions"
have significant holdings of common or preferred stock shares in Fannie
and Freddie, and that regulators were "prepared to work with these
institutions to develop capital-restoration plans."
The two companies had nearly $36 billion in preferred shares
outstanding as of June 30, according to filings with the Securities and
Exchange Commission. Homeless
count grows, says report
NORWALK HOUR
By JILL BODACH, Hour Staff Writer
August 8, 2008
The results of a recent statewide survey show there are more homeless
individuals and families in Connecticut this year than there were last
year.
The 2008 Point-in-Time count of homeless residents in Connecticut
showed a 13-percent increase in homeless families statewide; a
4-percent increase in the number of households experiencing
homelessness; and a 5-percent increase in the number of individuals
experiencing homelessness from 2007 to 2008.
In Connecticut, there are 4,366 homeless individuals; 3,448 households
experiencing homelessness and 482 families experiencing homelessness
compared to 430 in 2007.
The Point-in-Time counts seeks to provide a snapshot of what
homelessness looks like in Connecticut on "any given day." The 2008
count was conducted simultaneously in communities across the state.
According to the report, the total number of families living in
sheltered situations on Jan. 30 -- the day the count was conducted --
rose from 392 last year to 474 this year. The number of homeless adults
in families rose from 446 to 519, while children in those families rose
from 728 to 861. Single adults in shelters rose from 2,138 to 2,257.
In Norwalk, statistics improved slightly. This year, there were 13
adults in families and 146 single adults living in sheltered
conditions. There were also 15 unsheltered adults. During last year's
count there were 153 single adults and 23 adults in families residing
in emergency shelter or transitional housing. Forty-nine single adults
were unsheltered that night.
While the causes of homelessness are varied and complicated, the lack
of affordable housing in Connecticut continues to be one of the largest
contributing factors to homelessness.
"The most commonly identified reason given for homelessness was the
high cost of housing, high rents and the shortage of affordable
housing," said Kate Kelly, manager for the Reaching Home Campaign and
the Partnership For Strong Communities. "Twenty-seven percent of the
sheltered adults and families reported leaving their last place of
residence because of difficulty paying the rent."
Other factors are the struggling economy and mental health issues.
"One-third of adults in families reported that they were currently
working and that work was an income source at the time of the count,"
Kelly said. "This supports what we're hearing anecdotally from shelter
directors. There are people in shelters currently who are working and
earning an income and still cannot afford housing."
Additionally, one-third of both sheltered and unsheltered single adults
claimed to have had a history of mental health hospitalizations.
Despite the increase in the overall number of homeless individuals, the
report also showed a decrease in the number of chronic homeless
individuals, many of whom often suffer from mental health issues or
drug and alcohol addictions.
The number of single adults found living in locations not meant for
human habitation -- including living on the streets, in parks, cars,
transportation terminals -- fell to 590 from 707. Additionally, there
was a drop in the number of chronically homeless residents.
"The reduced number of chronically homeless people across the state
indicates that efforts by the governor and legislature to fund
supportive housing and related efforts may be having an extremely
effective impact," said Carol Walter, executive director of the
Connecticut Coalition to End Homelessness. "We know supportive housing
works, and I would be willing to bet that it's the cause of at least
some of the progress apparent here, but we can't be sure."
Kelly also attributed the decrease in the number of chronic homeless,
in part, to the creation of supportive housing throughout the state.
Supportive housing provides affordable homes plus individually-tailored
support services to residents to help them get back to work and school
and reconnect with family and friends.
"We saw a 3-percent decrease in chronic homeless population across
state, which is who supportive housing is aimed at," Kelly said. "I
can't say for certain that this is why the number went down, but I
would bet a week or two's salary that the strategies we are employing
brought that number down. In a difficult economy, a decreased number of
chronic homeless is telling."
This was the second annual Point-in-Time count in which volunteers
across the state conducted simultaneous counts of homeless individuals.
Walter cautioned that because the count was only the second statewide
coordinated effort, that it cannot provide definitive evidence or
conclusions about the homeless population.
"We should be cautious concluding anything from this data, but the
findings do indicate that more families are facing the horrors of
homelessness," Walter said.
For the complete report, visit www.ctreachinghome.org. (Photo: Michelle Litvin for The
New
York Times)A
house in Chicago that has
solar panels and plants on the roof. U.S. mortgage delinquency in first quarter 2009. Green financing news; and then there is
Stuyvesant Town/Peter Cooper Village...
Fraud Reported in Program to Help
New Homebuyers
NYTIMES
By JACKIE CALMES October 23, 2009
WASHINGTON — Just as Congressional leaders are calling to extend a
popular $8,000 tax credit for first-time homebuyers, or even to expand
it to all home purchasers, government investigators are reporting new
findings that point to widespread abuse and errors in the program.
A new report from the Treasury Department’s inspector general said that
as of Sept. 30 the Internal Revenue Service had identified 167
suspected criminal schemes and opened nearly 107,000 examinations of
potential civil violations. In late July, the I.R.S. announced its
first successful prosecution, of a tax preparer.
While government officials said many suspected abuses could turn out to
be simple errors, the Treasury investigation found examples of
claimants who pretended to be first-time buyers when they already owned
homes, or had not yet purchased one. Some claims were filed for
children as young as 4 years old. Of 1.4 million claimants to nearly
$10 billion in credits, 60 percent had incomes below $50,000, raising
questions about whether some of them could afford a home.
The report was released at a hearing on Thursday by the oversight
subcommittee of the House Ways and Means Committee. Representative John
Lewis, Democrat from Georgia who is chairman of the committee,
announced afterward that he had introduced legislation to give the
I.R.S. additional authority to detect and block questionable claims and
to require that taxpayers provide documents with their returns to prove
they closed their purchases.
It is unclear what effect the alleged fraud will have on the debate
about whether to extend or expand the credit beyond its scheduled Nov.
30 expiration. Supporters said Mr. Lewis, by quickly proposing
remedies, would help blunt opposition based on the findings. At the
hearing, he and other lawmakers in both parties indicated support for
extending the program given the housing market’s continued weakness,
assuming the I.R.S. can better enforce it.
Mr. Lewis called the credit “an important resource for families” and “a
vital part of our economic recovery efforts.” But he added, “We must
ensure that we are administering the credit accurately.”
At the hearing’s opening, the Treasury Department’s inspector general
for tax administration, J. Russell George, said, “I am very concerned
about the I.R.S.’s ability to administer the credit” in a way that
would guard against tax cheats.
The $8,000 credit is available to individuals earning up to $75,000 a
year and couples with income up to $150,000; people above those limits
can get smaller benefits but the credit phases out at $95,000 for
individuals and $170,000 for couples. It is a refundable credit, so
taxpayers get a check for any amount beyond their tax liability.
The Obama administration is lukewarm at best about extending it and
opposes increasing it, officials say. But the housing industry is
lobbying hard to expand the credit to as much as $15,000 for all
homebuyers. The program also is a priority of the Senate majority
leader, Senator Harry Reid of Nevada, who is up for reelection in a
state that has among the highest rates of both foreclosures and
claimants of the tax credit.
The credit has been claimed in 1.4 million home sales, though fewer
than 400,000 are believed to be a result of its availability, according
to estimates of the real estate industry and independent economists.
Extending it would cost about $1 billion a month, Congressional
analysts say.
The credit was created in mid-2008 and set at $7,500 in a stimulus law
signed by former President George W. Bush as the housing and economic
crisis took hold. It was increased to $8,000 in the $787 billion
economic recovery package that President Obama shepherded into law soon
after taking office, which also dropped a requirement that homebuyers
repay the credit over 15 years.
The current credit applies to sales of primary residences that have
closed between Jan. 1 and Dec. 1. It can be claimed on taxpayers’
returns for 2008 or 2009. Both Linda E. Stiff, a deputy I.R.S.
commissioner, and James R. White, director of tax issues at the
Government Accountability Office, testified at the hearing that part of
the problems for taxpayers and the I.R.S. has been confusion between
the two overlapping versions of the temporary credit.
The audit of the credit was required and financed by the stimulus law,
which included money for anti-fraud investigations of all spending and
tax breaks provided for the recovery effort. A story or
just a rumor?
IRS probing home-buyer tax credit claims: report
YAHOO
Tue Oct 20, 2009, 2:09 am ET
(Reuters) – The U.S. Internal Revenue Service is probing more than
100,000 doubtful claims of a tax credit meant for first-time home
buyers, the Wall Street Journal reported on its website on Tuesday.
The $8,000 tax credit for first-time home buyers under the American
Recovery and Reinvestment Act was passed in February to help prod the
U.S. economy back to life.
Lawmakers have expressed concern that significant number of claims
might turn out to be fraudulent, the paper said.
The IRS was investigating 167 "criminal schemes" involving the credit,
according to the House Ways and Means oversight subcommittee, the paper
said.
The IRS was not available to comment.
U.S. launches aid for state, local housing agencies
YAHOO
October 19, 2009
WASHINGTON (Reuters) – The Obama administration on Monday launched a
new program to aid state and local housing finance agencies in an
effort to provide hundreds of thousands of affordable mortgages and
develop or rehabilitate tens of thousands of rental properties.
The program, described as temporary by the Treasury, the Department of
Housing and Urban Development and the Federal Housing Finance Agency,
will use government-sponsored mortgage finance giants Fannie Mae and
Freddie Mac to provide temporary financing for housing finance agencies
hurt by gridlock in the credit markets.
Easy-money mortgages still provided, by the feds
Patrice Hill
Originally published 04:45 a.m., October 19, 2009, updated 05:43 a.m.,
October 19, 2009
So you thought easy-money mortgages with little or no down payment for
people with bad credit was a thing of the past? Think again.
You can get just such a loan today - and it's guaranteed by the federal
government.
Loans insured by the Federal Housing Administration (FHA) have become
"the new subprime," and these loans are exposing taxpayers to the same
kinds of soaring default rates and losses that brought down Fannie Mae
and Freddie Mac as well as destroyed many banks and the private market
for mortgage loans.
While private lenders learned a lesson from the mortgage crisis and are
shying away from easy-money loans, the FHA has stepped into the breach.
The agency has provided backing for 37 percent of all mortgages used to
buy homes this year.
After the collapse of much of the private mortgage market last year,
Congress and the George W. Bush administration greatly expanded the
FHA's original Depression-era program aimed at assisting sales of
modestly priced homes by more than doubling the ceiling on loans that
the agency can insure to $625,500 while maintaining its loose lending
terms - ensuring that nearly any home sale could be covered by the
agency.
The FHA's predominance was enhanced further this year when Congress
lifted the ceiling to more than $729,000 for major urban areas and
passed an $8,000 tax credit for first-time homebuyers that can be
accelerated for borrowers to use as a down payment on FHA loans and
avoid any cash commitment to their home purchases.
While these changes were intended to be temporary and expire by the end
of the year, given the fragility of the housing and mortgage markets,
Congress is considered likely to extend them this fall.
The significant expansion and liberalization of FHA's loan programs is
enabling Americans to go back to many of the same bad credit practices
that analysts say were at the root of the housing crisis, likely
feeding further waves of default and foreclosure. But this time it is
the taxpayer - not the banks - who could end up holding the bag.
Whitney Tilson, manager of investment firm T2 Partners LLC and author
of "More Mortgage Meltdown: 6 Ways to Profit in These Bad Times,"
called "cataclysmic" the surging default rates of more than 30 percent
on loans insured since 2006 by the FHA. That is not far below the 40
percent rate of default and foreclosure on the notorious subprime loans
that ignited the credit crisis.
"The FHA's portfolio is exploding and the taxpayer is now on the hook
for 100 percent of the losses," he said.
"I find it hard to distinguish between the actions of FHA and the
self-denominated subprime lenders," said Edward Pinto, a former chief
credit officer at Fannie Mae who recently testified before a House
panel on FHA's growing default problems. "The results are the same -
unsustainable loans that prolong and perpetuate our nightmare of
foreclosures."
Mr. Pinto estimates that 20 percent of the FHA's entire portfolio of
$725 billion mortgages will end up in foreclosure - a rate recently
borne out by estimates FHA provided to Congress. He predicts that the
agency will require a taxpayer bailout within two to three years.
One reason defaults are soaring is that the agency is attracting nearly
all of the business of homebuyers who haven't saved enough to make down
payments, he said. Loans with little or no down payments have high
rates of default because the borrowers have little financial stake in
losing their homes to foreclosure.
The agency requires a minimal 3.5 percent down payment - far below the
20 percent now required by private lenders. That's very little "skin in
the game," especially in today's market where the buyer's equity can be
quickly wiped out, Mr. Pinto said. Home prices have fallen an average
of 30 percent nationwide.
Many borrowers have been able to avoid even that minimal level of
personal investment in their homes. The government is enabling these
buyers to put up no cash at all by allowing them to get advanced
payments of the $8,000 homebuyers tax credit through arrangements with
nonprofit housing groups and state housing agencies. The tax credit can
be used the same way to pay closing costs.
Beyond the loosened standards on down payments, the FHA remains willing
to make loans to people with low credit ratings, even those with
histories of default, foreclosure or bankruptcy. Those with histories
of default are far more likely to default again.
Even though the number of defaults is escalating, FHA Commissioner
David Stevens insists that the $30 billion of insurance reserves will
cover any losses and has repeatedly denied that the agency is headed
toward a taxpayer bailout. The reserves are replenished by borrowers,
who pay the agency yearly premiums of 0.5 percent of the loan and an
upfront 1.5 percent payment when their loans close.
But analysts say his optimistic assessment is based on the shaky
assumption that the nascent recovery in the housing market will quickly
put an end to falling house prices and burgeoning default and
foreclosure rates. Many private economists predict that the rates of
default will continue to rise even after housing sales recover. They
also say home prices may continue to fall for a while longer, leaving
increasing numbers of homeowners underwater on their loans and more
prone to default.
In another defense of the agency, Mr. Stevens points out that the
average credit scores of FHA borrowers has risen in the past year as
the disappearance of private home loans sent buyers flocking to the
program. But the deep recession also is causing increasing defaults
among people with better credit, who cite the loss of income because of
layoffs or reduced work hours as their principal reason for not being
able to make their mortgage payments.
The FHA has a program that will help people who missed two or three
payments under such duress by using the insurance fund to make those
payments for them and then recouping the money when the property is
sold - a provision that has been used in about 400,000 cases so far and
could help to bring down the foreclosure rates on loans that go into
default as a result of the recession.
The agency recently announced steps to tighten its standards for
lenders to counter concerns about rising defaults as well as criticism
from the agency's inspector general that its program is riddled with
fraud and corruption by lenders. The agency proposed requiring lenders,
many of whom were subprime dealers, to assume liability for the loans
they make and have a net worth of at least $1.25 million.
The agency also is considering tightening standards for borrowers who
pose multiple risks, such as those with histories of default. But while
the agency has moved quickly to crack down on lender abuses that likely
contributed to high default rates, Adam Sharp, a financial adviser and
blogger for BearishNews.com, said it is perplexing that the FHA has not
moved to tighten borrowing standards that have emerged as the lowest in
the post-crisis mortgage market.
"I suppose responsible lending would spoil the housing recovery," he
said. "The FHA has effectively replaced subprime lenders who went bust.
They're under pressure to prop up housing prices, and are insuring
heaps of risky loans in an effort to do so."
The FHA's backers in Congress, led by House Financial Services
Committee Chairman Barney Frank, Massachusetts Democrat, maintain that
high default rates are the price of Congress' decision to use the FHA
to prevent a complete collapse of the housing and mortgage markets in a
time of extreme distress.
"By keeping affordable loans flowing, particularly to the growing ranks
of first-time homebuyers, the FHA has been critical to our nation's
economic and housing market recovery," said U.S. Department of Housing
and Urban Development Secretary Shaun Donovan. The FHA is part of HUD.
But even some liberal housing advocates say the FHA's spectacular
expansion could be worrisome.
The agency's low downpayment requirement "may be workable under some
circumstances, but this practice is likely to run into problems in the
context of declining house prices and the most severe downturn since
the Great Depression," said Dean Baker, co-director of the Center for
Economic and Policy Research.
"Furthermore, given the huge ramp up in its lending in a very short
period of time, it seems unlikely that the FHA has been able to
adequately scrutinize the loans that it is buying."
While any bailout of FHA likely would be small in comparison with the
gigantic sums spent bailing out Fannie Mae and Freddie Mac, Mr. Baker
said, "the crippling of the FHA as a lender would be another blow to
the housing market" and would be "a serious political blow to efforts
to ensure access to mortgages for moderate-income families."
Housing
authority mismanaged funds
DAY
By Kathleen Edgecomb
Published on 9/15/2009
New London - The executive director of the New London Housing
Authority was let go after a federal audit revealed the agency did not
properly administer the $1 million in federal Capital Program funds it
received over three years. Joseph A. Abrams, who went out on sick
leave in June, resigned his post Aug. 3.
In their response to an Aug. 7 report by the Office of Inspector
General of the Department of Housing and Urban Development, authority
officials said they were “unable to make appropriate decisions on
contracts, proposals, budgets, internal controls, procurements, and
other activities cited for violations'' because of the executive
director's poor performance.
The auditor's report found that the housing authority had not properly
administered $910,000 in federal Capital Program funds and may not be
competent to administer new stimulus money. The housing authority
also
cannot account for $91,000 in unsupported administrative fees for the
program, and auditors have recommended the authority pay it back.
The
August report found that the authority improperly awarded contracts,
failed to establish written contracts and did not ensure that
contractors paid workers minimum wages.
In its response, the five-member board that oversees the authority told
HUD that it was not responsible for Abrams' managerial flaws.
”The Board, in addition, wishes to express its desire to avoid taking
the blame for its Executive Director's unprofessional conduct, lack of
responsibility and generally dismissive attitude toward any
accountability to the Board of Commissioners as well as to federal and
state regulators,'' officials wrote in comments at the end of the
25-page report.
The board indicated that once it was notified of the numerous
regulatory violations in April, it “swiftly sought and obtained the
resignation of the Executive Director and installed new management.”
Abrams was replaced in August by Sue Shontell, acting executive
director.
”I have not seen the report. I am no longer an employee, I have no
comment,'' Abrams said Monday. “I have no desire to get embroiled in
it.''
Shirley Gillis, chairwoman of the authority, could not be reached to
comment. The report, which covers Jan. 1, 2006, to Dec. 31, 2008,
outlines a lack of formal accounting procedures; failure to regularly
monitor capital funds; and accounting records that were not accurate or
up to date.
The housing authority also did not accurately report obligations and
expenditures to HUD to support $91,012 in administration costs for the
capital program. Shontell said that money is not missing. It was
used
for administration of the program but wasn't recorded properly, she
said.
”Obviously someone was doing the work,'' she said. “But we didn't show
how much admin time was spent on it.''
The audit is part of the inspector general's initiative to evaluate
public housing authorities' abilities to administer stimulus money
received under the American Recovery and Reinvestment Act of 2009.
Julie B. Fagan, field office director at HUD in Hartford, said the
audit is under review by her office, which will set up a meeting with
local officials to discuss the findings.
”We have no comment on the report yet,'' Fagan said. “We have to sit
down and do reviews and come up with agreements.”
She said any potential criminal investigation would be the
responsibility of the criminal investigation division of the Inspector
General's Office.
”It's really too early to say what's going to happen,'' she said.
The housing authority is a quasi-public agency that manages 224 units
of federal housing and 580 units of state-subsidized housing. A board
of directors, appointed by the city manager, oversees operations.
In April the authority received $381,000 in stimulus money for outside
improvements to Thames River Apartments on Crystal Avenue. Last week,
Shontell said the money was being redirected to purchase water heaters
for Thames River and HUD's other property in the city, the Williams
Park senior housing on Hempstead Street. The funds will also be used to
install concrete platforms for garbage receptacles at Williams Park,
repairing a retaining wall at Thames River and upgrading elevators at
both complexes.
Fagan said the proposed changes are under review and a decision will be
made in the next few weeks. In May HUD “strongly urged” the board
to
contract with a management company to run the federal properties. It
has been on HUD's list of troubled agencies since 1998, after accruing
debts to utility companies, the city and the state. Also, earlier
this
month, the housing authority was awarded $2.1 million in low-income tax
credits for a $48 million project to renovate the 302 units of state
moderate income public housing.
The project is a joint venture between the authority and The Carabetta
Organization of Meriden. After construction, Carabetta is expected to
take over management of Briarcliff, located off Colman Street and Bates
Woods, located off Jefferson Avenue.
Huge N.Y. Housing Complex Is Returned to Creditors
NYTIMES
By CHARLES V. BAGLI
January 25, 2010
The owners of Stuyvesant Town and Peter Cooper Village, the iconic
middle-class housing complexes overlooking the East River in Manhattan,
have decided to turn over the properties to creditors, officials said
Monday morning.
The decision by Tishman Speyer Properties and BlackRock Realty comes
four years after the $5.4 billion purchase of the complexes’ 110
buildings and 11,227 apartments in what was the most expensive real
estate deal of its kind in American history.
The surrender of the properties, first reported by the Wall Street
Journal, ends a tortured real estate saga that saw the partnership make
expensive improvements to the complex and then try to rent the
apartments at higher market rates in a real estate boom. But a real
estate downturn and the city’s strong rent protections hindered those
efforts, leaving the buyers scrambling to make payments on loans due
for the properties, which have been a comfortable harbor for the city’s
middle class since they opened in the late 1940s.
“We have spent the last few weeks negotiating in good faith to
restructure the debt and ownership of Stuyvesant Town/Peter Cooper
Village,” said the statement by the partnership. “Over the last few
days, however, it has become clear to us through this process that the
only viable alternative to bankruptcy would be to transfer control and
operation of the property, in an orderly manner, to the lenders and
their representatives.”
Metropolitan Life built the complexes for World War II veterans in the
1940s, when the city was in desperate need of new housing. It received
tax breaks and other incentives in return for maintaining low rents.
The buildings became home for generations of workers searching for an
affordable spot in Manhattan.
But with the real estate market soaring in 2005, MetLife decided to
sell. Tishman Speyer and BlackRock won an auction the following year.
This month, the partnership headed by Tishman Speyer defaulted on $3
billion in debt on the properties, and in the last few days secondary
lenders have been calling to replace the partnership.
Under one scenario, Tishman would have been offered a long-term
contract to operate the complex, but it rejected that plan. Lenders
will now be looking for new managers for Stuyvesant Town, and its
smaller adjacent property, Peter Cooper Village, where the rents are
typically higher and the apartments more spacious.
The surrender of the property is a huge blow to Tishman Speyer, which
controls Rockefeller Center and the Chrysler Building. When it
spearheaded the Stuyvesant Town purchase, it projected itself as the
best stewards of such an iconic property.
But instead Tishman Speyer and its partner BlackRock found themselves
facing a mountain of debt. It had been negotiating since November to
restructure $3 billion worth of loans and to hold on to the properties,
which cover 80 acres east of First Avenue, from 14th Street to 23rd
Street. But their reserves, once stuffed with $890 million for capital
improvements, interest payments and renovations, were left virtually
depleted.
The rents collected did not cover the mortgage payments, as the new
owners failed in their efforts to increase net income by steadily
renovating and deregulating vacant apartments while raising rents
substantially.
For tenant advocates and urban planners, the sale underscored the loss
of affordable housing in the city and the highly speculative financial
structures that, they warned, would only end in disaster. Buyers
of Huge Manhattan Complex Face Default Risk
NYTIMES
By CHARLES V. BAGLI
September 10, 2009
Three years ago, the sale of the 110 red brick apartment buildings at
Stuyvesant Town and Peter Cooper Village in Manhattan amounted to the
biggest American real estate deal of all time.
Now the buyers are running out of time and money. Jerry and Rob Speyer
and their partner, BlackRock Realty, who together paid $5.4 billion for
the quiet middle-class redoubt near the East River, have nearly
exhausted an additional $890 million set aside for apartment
renovations, landscaping and interest payments. Rents are down 25
percent from their peak.
Real estate analysts say that the partnership’s money will run out as
soon as December and that the owners are at “high risk” of default on
$4.4 billion in loans. Two real estate executives who have been briefed
on the finances insist that the owners can hold out, but only until
February.
On Thursday, the partnership will go before the Court of Appeals in
Albany to try to overturn a lower court decision that could force them
to pay hundreds of millions of dollars in rent rebates to thousands of
tenants.
Regardless of the outcome at the Court of Appeals, Stuyvesant Town and
Peter Cooper Village are in trouble. City officials have been
monitoring the looming crisis, worried that the financial problems
could eventually lead to default, deferred maintenance and
disinvestment at a complex that has served as an oasis of affordability
in Manhattan for middle-class New Yorkers. Some 6,875 of the 11,227
apartments at the two adjoining complexes are rent regulated.
“We are absolutely keeping an eye on it,” said Rafael E. Cestero, the
city’s housing commissioner. “It’s an iconic complex.”
“We’re not doing this to bail out anybody who was part of the original
transaction,” he added. “Those folks are going to take their lumps. We
are looking at how we can ensure that the rent-stabilized units and the
families that live there and families that could live there in the
future could be insulated from the unwinding of this deal.”
Rob Speyer, who is co-chief executive of Tishman Speyer Properties with
his father, Jerry, acknowledged the problem, saying that it went beyond
the need for a cash infusion from the partners and their investors,
which include Calpers, the giant California pension fund that is the
nation’s largest, as well as other pension funds.
“The asset is going to require a restructuring,” he said. “Once the
court case is resolved, we’ll speak to our debt holders as well as our
fellow equity investors.”
But between the $5.4 billion purchase price and four “reserve funds”
with $890 million, Tishman Speyer and BlackRock spent $6.3 billion
acquiring Stuyvesant Town and Peter Cooper Village from the original
owner, Metropolitan Life.
The deal has become a “poster child” for all that was wrong with that
era of easy credit, highly speculative deals and greed, said Ben
Thypin, an analyst at Real Capital Analytics, a research firm.
A recent report from Realpoint, a credit rating agency, estimates that
the property has a value today of only $2.13 billion. That would seem
to indicate that $1.9 billion in equity in the deal has been completely
wiped out.
“The lender has to determine its own interests, as does the equity,”
Rob Speyer said. “When the time comes we will be fair and reasonable
and hope to get a new deal done.”
The Stuyvesant Town travail has put a dent in the armor of Tishman
Speyer, a real estate company that zealously protects its image as the
preferred caretaker for the city’s crown jewels: Rockefeller Center,
the Chrysler Building and the Met Life Building on Park Avenue. Indeed,
Mayor Michael R. Bloomberg said as much in response to criticism when
they bought Stuyvesant Town that the city should have supported a rival
$4 billion bid from tenants.
Like other developers and real estate managers, Tishman Speyer has been
left holding a couple of sour deals now that the real estate and credit
markets have collapsed. A partnership led by the Speyers defaulted
recently on debt payments for its $2.8 billion acquisition of
CarrAmerica, a collection of 28 prime office buildings in Washington.
Its $22 billion purchase of Archstone-Smith Trust, a vast collection of
400 apartment complexes, has also fared poorly. Earlier this year, the
banks that financed the deal were forced to pour in another $500
million to give Archstone more time to sell properties and reduce its
debt. Tishman Speyer, whose investment fund invested $250 million in
the deal expecting to get 13 percent of the profits, declined to
participate. Its 1 percent stake was reduced substantially.
Rob Speyer said that in both cases the properties have “a lot of
long-term value.” But the bad deals also represent only a fraction of
the $35 billion in real estate assets that it owns or manages in the
United States, India, China and Brazil. At the top of the market, he
said the company also sold $10 billion worth of property over six
months in 2007, including The New York Times Building in Manhattan,
which went for $525 million, three times what it paid less than three
years earlier.
Despite several bad deals, the Speyers insist their company is still
providing investors with “20 percent returns” and has $2 billion to
invest in new deals. “You show me anybody who measured up to that
standard,” Jerry I. Speyer said. Still, the purchase of
Stuyvesant Town and Peter Cooper Village was one of the most publicized
and controversial of its deals in recent years. The winning bid
presumed the partnership could increase profits by replacing
rent-stabilized residents with much higher-paying tenants after
renovating and deregulating apartments.
But the existing rents covered less than half of the annual debt
service on the loans. And they have been unable to convert apartments
to market rates as quickly as they had imagined. At the same time,
rents, which had escalated for years, suddenly fell sharply as the
economy slowed and layoffs prevailed.
Daniel R. Garodnick, a city councilman who lives in Peter Cooper
Village, said Tishman Speyer had problems of “its own making.”
“Tishman Speyer is in trouble, and tenants are already seeing the
effects,” he said. “Residents are increasingly concerned that the
maintenance of the buildings is slipping, even as they are getting hit
with a flurry of potential charges for major capital improvements.”
In March, the Appellate Division of the State Supreme Court ruled
unanimously that the Tishman Speyer partnership and the prior owner,
Met Life, had wrongfully deregulated about 4,350 apartments and raised
rents beyond certain set levels, while receiving tax breaks from the
city. Tishman Speyer, Met Life and much of the real estate
industry in New York appealed to the state’s highest court, arguing
that the court was attempting to overturn “15 years of real estate
industry practice that has been endorsed by two government agencies.”
If the Appellate Court is upheld, the market-rate tenants could seek
treble damages, which could cost the partnership more than $200
million. Even if it the ruling is overturned, the partnership will
still run out of cash and it must renegotiate its loans or face
foreclosure. A similar project with a similar business plan, the
Riverton in Harlem, is already in foreclosure. At Stuyvesant
Town, there is a $3 billion first mortgage, or commercial
mortgage-backed security, and a $1.4 billion second loan, known as
“mezzanine debt” held by SL Green, the government of Singapore and
others.
Finally, there is $1.9 billion in equity put up by Tishman Speyer,
BlackRock and their investors. Tishman Speyer, which generally earns
development and management fees from the properties, has about $56
million of its own money in the deal.
“I’d say their equity has been wiped out,” said Craig Leupold,
president of Green Street Advisors, “given the decline in apartment
values.”
Editorial: Another Way to Lose the House
NYTIMES August
28, 2009
The foreclosure crisis will get much worse before it gets any better.
That’s the only conclusion to draw from a recent survey by the Mortgage
Bankers Association, which found that six million loans were either
past due or in foreclosure in the second quarter of 2009, the highest
level ever recorded by the group. Worse, loan defaults are not the only
cause of foreclosures. In some areas, unpaid property taxes are
provoking foreclosures, even for homeowners otherwise current on their
payments.
The Times’s Jack Healy reported the other day that in recent years,
some cities and counties that are strapped for money have sold their
delinquent tax bills to private firms. The firms, which typically
charge double-digit interest rates and steep fees, get to keep what
they collect. They also get the right to foreclose on the homes, taking
priority over mortgage lenders.
Debt collection is always tough. But it is especially fraught when
private firms go after unpaid taxes, because private collection
distorts the public interest. For example, governments can also
foreclose for unpaid taxes, but they are less likely to do so out of
concern for property values and quality of life. The auditor in Lucas
County, Ohio — which sold more than 3,000 tax liens for $14.7 million —
said that the cost to the community from abandoned and foreclosed
properties has been greater than the short-term benefit from selling
the liens.
Local governments cannot undo their previous tax lien sales. But
changes in federal policy can reduce the foreclosure risk from unpaid
property taxes. During the mortgage bubble, some lenders kept monthly
loan payments low by not tacking on an extra amount to cover taxes and
insurance.
For the loans in question — which generally fell into the categories of
subprime, Alt-A (a notch above subprime) or jumbo loans — neither
federal law nor pressure from mortgage investors compelled the
inclusion of taxes and insurance in the monthly payment. Housing
advocates say that many homeowners did not realize the amounts were
excluded.
In 2008 — after the bubble had burst — the Federal Reserve altered the
rules, but the changes were weak. They require taxes and insurance to
be included, but only for subprime loans and only for a year. After
that, lenders can let borrowers opt out of paying those charges as part
of their monthly bills.
Excluding the charges might help lenders, because it increases the
likelihood that borrowers will need to refinance to cover unexpected
expenses. But it puts many borrowers and whole communities at risk.
What is needed is a rule that requires the inclusion of taxes and
insurance in the monthly payment for all types of mortgages and that
disallows opt-outs until borrowers have made at least five years of
steady payments.
The issue is also one more reminder that the nation badly needs an
independent consumer safety regulator for mortgages and other loans —
and that the Fed is not the right choice for the job.
Adjustable Mortgages Loom as Threat to
Housing Recovery
NYTIMES
By JOHN LELAND August
27, 2009
When Harvey Clavon took out an exotic mortgage to refinance his home in
Santa Clarita, Calif., three years ago, he thought he knew what he was
doing. Mr. Clavon, 63, was planning to sell the home in a few
years and retire to Palm Springs. So he got a loan called an option
adjustable rate mortgage, or option ARM, which allowed him the option
of paying less than the interest for the first five years.
On his annual salary of $100,000 as a television camera operator, he
could afford the $2,200 initial mortgage payments. And he would sell
the home before the mortgage reset.
Now Mr. Clavon is part of what many economists say is a looming threat
to a housing recovery — more than a half-million option ARMs scheduled
to reset in the next four years, at rates many homeowners cannot
afford. His mortgage payments have risen to $2,700 a month because of a
clause he did not notice on his contract, and are scheduled to rise
above $4,000 in two years. Default and foreclosure rates on option ARMs
recently passed those of subprime mortgages, according to the research
firm First American CoreLogic, in part because so many subprime
mortgages have already failed.
Because Mr. Clavon made only minimum payments on his mortgage, his
balance has risen to $680,000 from $618,000, on a house worth closer to
$400,000.
“I don’t know what I’m going to do, ” he said. “I got duped into the
loan, and I consider myself an educated man.” In June Mr. Clavon filed
for bankruptcy protection and stopped making payments on the house.As
the housing market seeks a bottom, option ARMs, which accounted for
$750 billion in mortgages made from 2004 to 2007, according to the
industry newsletter Inside Mortgage Finance, remain a risk, especially
because many are not eligible for refinancing. About a third are
already in default, according to analysts.
Compared with subprime loans, option ARMs are less numerous but tend to
have larger balances. Resets on option ARMs in recent years have often
doubled the payments.
“Everyone’s been focused on subprime, but we’re more concerned about
this,” said Todd Jadlos, managing director of LPS Applied Analytics,
which analyzes data for the financial industry. “By the time subprime
defaults had increased 200 percent, in June and July of 2007, option
ARMs had gone up 400 percent. People just didn’t notice because the
overall numbers weren’t as high.”
First American CoreLogic anticipates 600,000 option ARMS to reset
within four years.
Option ARMs, which lenders stopped offering last year, gave borrowers
four payment options: less than the interest, which increases the
balance every month; just the interest; the equivalent of a 30-year
fixed-rate mortgage; and the equivalent of a 15-year fixed.
Three-quarters of borrowers take the minimum option, which usually
expires after five years or when the balance reaches a cap, generally
110 percent to 125 percent of the original loan, according to the
Mortgage Bankers Association. Once the cap is reached, borrowers
have to pay down a higher balance at a higher rate in a shorter period
of time.
“This was a loan meant for sophisticated investors, or people who
expected their cash flow to increase over time,” said Elena Warshawsky,
a residential credit analyst with Barclays Capital, which expects 81
percent of the option ARMs originated in 2007 to default, with many
ending in foreclosure. “But then they were extended to all sorts of
buyers. Now it wasn’t people hoping their income would grow. It was
people hoping their house price would increase” so they could refinance
or sell, she said.
The firm projects that banks will lose $112 billion on option ARMs
written from 2005 to 2007.
The respite for option ARMs recently is that interest rates have
dropped, so loans take longer to reach their cap and do not recast to
as high a rate, said Chandrajit Bhattacharya, a mortgage analyst at
Credit Suisse. Loans that would have recast this spring will remain at
low rates until next year, Mr. Bhattacharya said. Banks are using
the reprieve to help some homeowners refinance into more conventional
loans, said Michael Fratantoni, vice president of single family
research for the Mortgage Bankers Association.
But the loans have had extraordinarily high rates of failure even
before reaching their reset dates. Ron Dzurinko, 62, who lives on a
fixed income in Sacramento, took out an option ARM five years ago
without understanding it, knowing only that he could afford the initial
payments of $900 a month. “The mortgage person said, ‘It could adjust,
but we don’t foresee any major bumps,’ ” Mr. Dzurinko said. “It sounded
good to me.”
When his payments shot up to $1,400 last fall, he said, he defaulted on
credit cards, took in a tenant and started a vegetable garden, but
still could not make the payments. Meanwhile, his home’s value fell
below his $260,000 balance. Finally, through a lawyer at Legal Services
of Northern California, he was able to get the loan modified to $800 a
month — but only after months of calls and rejections.
Mr. Clavon has not had this relief. Sam Hussein, a housing counselor at
the nonprofit Clearpoint Credit Counseling Solutions, who has been
trying since February to help Mr. Clavon modify his loan, said that
even for his eligible clients, lenders have agreed to modifications
only about half the time — “and then it’s usually on the lender’s
terms,” with payments often increased, he said. Amid the wreckage,
though, option ARMs have been a boon for some borrowers. Gary Kopff,
64, a retired financial manager, took an option ARM on his Washington
home in 2006, increasing his balance to $1.2 million from $800,000. Mr.
Kopff chose the minimum payments so that all of his payments were
interest, allowing him the greatest tax deduction, and because he had
no desire to pay off his home.
But a surprising thing happened. His rate went down.
Mr. Kopff’s rate is tied to a figure called the London interbank
offered rate, or Libor, a measure of the rates banks charge one another
to borrow money. As the 30-day Libor fell to less than one half of 1
percent, the rate on Mr. Kopff’s loan fell below 3 percent. Now,
though he is still making only the minimum payments, he is actually
paying down his balance.
“In 2009 I found out I have a 2.5 percent mortgage,” Mr. Kopff said.
“That’s not onerous by any standards.”
But even for Mr. Kopff, the future has some storm clouds. Interest
rates are rising again. When he took out the loan he planned to
refinance into a 30-year fixed mortgage before the reset, but now few
banks are refinancing loans his size.
“I’m better off than a great deal of mortgage holders,” he said. “But
what looks like a good deal today may not look so good in a few years.”
Home Financing Moving Toward Green
Courant.com July 26, 2009
You're probably familiar with some of the federal government's 2009
incentives for home-energy efficiency: heftier tax credits for solar
panels, solar water heaters, geothermal heat pumps, heavy-duty
insulation, windows, air conditioning and the like.
But these come-ons are just the beginning of an unprecedented
federal-government-wide push getting under way for energy conservation
in housing, and even "locational efficiency" benefits.
At the Department of Housing and Urban Development, a new generation of
energy-efficient mortgages is being rolled out, starting with FHA loans
that offer 5 percent larger mortgage amounts to people who plan to
undertake energy-efficiency improvements.
For example, if you qualify for a $300,000 FHA mortgage to purchase a
standard house, under recent guidance to lenders, FHA might now be able
offer you $15,000 more upfront — a $315,000 loan amount — if the extra
money is used to substantially lower the property's annual energy
consumption.
HUD Secretary Shaun Donovan wants FHA to offer additional incentives.
One of the possibilities: Give applicants credit on their qualifying
incomes for a home loan in exchange for documentable savings in annual
energy expenditures.
Meanwhile, the House of Representatives has passed a massive
energy-conservation and emissions-control bill. Though the American
Clean Energy and Security Act is better known for its more
controversial "cap-and-trade" carbon-emissions program, the bill also
contains an entire subsection devoted to creating incentives for
consumers and federal agencies to build and finance more
energy-efficient dwellings.
Among the key housing-related provisions in the bill:
•The FHA is directed to insure a minimum of 50,000 new energy-efficient
mortgages during the coming three years. An energy-efficient house is
defined as one in which energy consumption is reduced by 20 percent
following renovations.
•Fannie Mae and Freddie Mac are directed to develop new mortgage
products and more flexible underwriting guidelines to reward
energy-conscious borrowers and builders.
The two companies — currently operating under federal conservatorship —
also are required to help establish a secondary market for
energy-efficient and location-efficient mortgages for moderate- and
lower-income homebuyers. The new generation of loans would increase the
qualifying incomes of applicants by at least one dollar for every
dollar of projected energy savings from renovations, green construction
or efficient design.
Similar concessions on loan applicants' incomes would be extended for
properties in areas close to employment centers or near mass transit
lines. No concessions would be made on dwellings located in far-flung
subdivisions that eat into family incomes through long commutes and add
to carbon emissions.
•Real-estate appraisers would be required to take energy improvements
and the money they save into account as they value houses. As a
hypothetical example, if you spent $30,000 on a series of major
upgrades, an appraiser would need to consider the annual cost savings
in energy produced and the impact — if any — on market value. States
would require licensed appraisers to undergo additional professional
training to equip them for their new energy-efficiency valuation
responsibilities.
•Federal financial regulators would be directed to support the
establishment of privately run "green banking centers" inside banks and
credit unions across the country. The centers, which presumably could
be anything from unmanned kiosks to staffed offices, would help
consumers understand how best to obtain financing for energy-conserving
home improvements, second and primary mortgages, and energy audits and
ratings. HUD also would be authorized to conduct "renewable energy home
product expos" to educate the public about the latest technologies and
financing concepts.
•State governments would be required to ensure that homeowners whose
energy technologies allowed them to get "off the grid" — no longer
fully dependent on utility companies to provide them power — are not
denied property hazard coverage by insurance companies.
With all this emphasis on home-energy efficiency and reduction of real
estate-related emissions, is there any evidence that buyers will take
part? Will they use energy-efficient mortgages or even pay more for
houses that are highly efficient, loaded with the latest energy-saving
technologies?
The jury is out since a lot of this is prospective, and hasn't yet been
signed into law.
But a Seattle-based real estate firm, G2B Ventures, which is raising
$50 million for a Efficient Real Estate Fund to buy up and rehab
houses, says green-certified, high-energy conserving homes in its area
sold for 7.5 percent more per square foot and 24 percent faster between
2007 and 2008.
So maybe there's going to be some extra green in green — better
financing, higher property values, and faster selling times — and more
money in your wallet.
•Contact Kenneth R. Harney at kenharney@earthlink.net.
Nation's
mortgage delinquencies hit
record 12% in first quarter
DAY
Published on 5/29/2009
A record 12 percent of homeowners with a mortgage are behind on their
payments or in foreclosure as the housing crisis spreads to borrowers
with good credit.
And the wave of foreclosures isn't expected to crest until the end of
next year, the Mortgage Bankers Association said Thursday.
The foreclosure rate on prime fixed-rate loans doubled in the last
year, and now represents the largest share of new foreclosures. Nearly
6 percent of fixed-rate mortgages to borrowers with good credit were in
the foreclosure process.
At the same time, almost half of all adjustable-rate loans made to
borrowers with shaky credit were past due or in foreclosure.
The worst of the trouble continues to be centered in California,
Nevada, Arizona and Florida, which accounted for 46 percent of new
foreclosures in the country.
The pain, however, is spreading throughout the country as job losses
take their toll. The number of newly laid off people requesting jobless
benefits fell last week, the government said Thursday, but the number
of people receiving unemployment benefits was the highest on record.
These borrowers are harder for lenders to help with loan modifications.
President Barack Obama's recent loan modification and refinancing plan
might stem some foreclosures, but not enough to significantly alter the
crisis.
”It may be too much to say that numbers will fall because of the plan.
It's more correct to say that the numbers won't be as high,” said Jay
Brinkmann, chief economist for the Mortgage Bankers Association.
Servicers Asked About Criteria
For Foreclosure Law Firms
The Hartford Courant
By DAVE ALTIMARI and MATTHEW KAUFFMAN
7:07 AM EDT, June 9, 2009
Attorney General Richard Blumenthal has sent letters to three of the
country's largest mortgage servicers in an attempt to find out why only
two law firms in the state seem to handle all of the companies'
foreclosure proceedings.
At a Monday afternoon news conference, Blumenthal said the letters ask
the companies to disclose their criteria for choosing law firms to
handle foreclosure cases for them in Connecticut.
The letters went to the Federal Home Loan Mortgage Corp., better known
as Freddie Mac; the Federal National Mortgage Association, better known
as Fannie Mae; and Lender Processing Services, a firm that provides
foreclosure and other services to more than 1,000 financial
institutions.
Blumenthal has been investigating why two firms — Hunt Leibert Jacobson
in Hartford and Bendett & McHugh in Farmington — file nearly
two-thirds of the foreclosure actions clogging Connecticut courts. He
started an investigation after The Courant reported last year on the
two firms' near monopoly of the growing foreclosure market. In turn,
those firms pass along the process-serving work to a small group of
state marshals led by John Fiorello, who netted more than $1.1 million
last year serving foreclosure notices.
"Concentrating service of mortgage foreclosure actions in a select few
law firms and state marshals is not only potentially anti-competitive,
but also anti-consumer," Blumenthal said.
Hunt Leibert and Bendett & McHugh are the only Connecticut firms
chosen as "designated counsel" by both Fannie Mae and Freddie Mac, a
designation that makes the firms more attractive to banks. Last
November, a third firm, The Witherspoon Law Offices in Farmington, was
added to Fannie Mae's preferred list. One of the partners in the
Witherspoon firm is a former partner at Hunt Leibert.
"Dominance over foreclosure service by a few select law firms and
marshals has spurred complaints about improper or illegal practices —
wrongfully allocating work to non-marshals, forging papers, failing to
serve papers and making kickbacks," Blumenthal said. "A scarce few are
spinning foreclosures into fortunes and perhaps deepening homeowner
despair."
Adam Bendett, a partner with Bendett & McHugh, said the firm
sympathizes with borrowers facing foreclosure and works to keep them in
their homes. "A significant part of the service we provide to our
clients is related to foreclosure avoidance, including facilitating
loan modifications and repayment plans between borrowers and our
clients," he said. "We perform this function both as a part of the
Connecticut foreclosure mediation program as well as outside of that
program. Our dedicated team of attorneys, paralegals and legal
assistants takes this responsibility very seriously, and we strive to
exercise it with great care."
Hunt Leibert and Bendett & McHugh filed about 1,200 suits a month
last year, 99 percent of them foreclosure actions, records show.
The firms directed about half of their process-serving work last year
to Fiorillo, according to the disclosure forms, and sent most of the
rest to a handful of other marshals.
Hunt Leibert gave Fiorillo more than $2.2 million in business last
year. Bendett & McHugh provided him with $762,000 worth of work.
In his letter to the three companies Blumenthal asked them to provide:
•all the law firms in Connecticut that have done foreclosures for them
since 2007;
•the criteria used to select those law firms;
•an itemized account of fees they paid those law firms and copies of
any agreements with the firms regarding fee schedules.
BRIDGEPORT, Conn. (AP) -- A Haitian immigrant says he's losing his home
in Connecticut because he owes $50 in back taxes.
The city of Bridgeport is foreclosing on Jean Castro's single-family
home because of the unpaid taxes, which total $51.69. A judge last week
approved the foreclosure and ordered the home to be sold in December.
Castro says the city sent him a notice that he owed back taxes and he
forwarded it to his mortgage company, which pays his property
taxes. The mortgage company ended up paying $3,000 in back taxes,
leaving the small balance.
The city's lawyer says by the time he learned about the payment it was
too late, because the foreclosure had started and the city had racked
up more than $3,000 in legal costs and fees. Blumenthal Probes Foreclosure
Procedures
DAY
By Lee Howard
Published on 6/9/2009
Attorney General Richard Blumenthal, saying he has received reports
ranging from forged paperwork to illegal kickbacks, announced Monday he
is questioning mortgage giants Lender Processing Services, Freddie Mac
and Fannie Mae over concerns that they are relying only on certain law
firms and marshals to carry out foreclosure procedures.
”Dominance over foreclosure service by a few select law firms and
marshals has spurred complaints about improper or illegal practices,”
Blumenthal said in a statement. “A scarce few are spinning foreclosures
into fortunes - and perhaps deepening homeowner despair.”
Blumenthal didn't say it, but it has been reported that two firms -
Hunt Leibert Jacobson in Hartford and Bendett & McHugh in
Farmington - handle most of the foreclosure suits filed in state courts.
Blumenthal said some of the foreclosure practices being questioned
include whether concentrating the legal work on foreclosures in a few
hands is a problem for consumers. The attorney general said he had
received complaints about the way the foreclosure process works in
Connecticut, including allocating the work of notifying homeowners to
non-marshals and failing to serve papers.
The Hartford Courant has reported that a small group of state marshals
headed by John Fiorello gets most of the state's business in serving
foreclosure notices, netting him more than $1.1 million last year alone.
”As concentration in the foreclosure business has increased, so have
consumer complaints,” Blumenthal said. “My office is investigating to
ensure that competition is preserved and consumers protected.
Blumenthal wants Lender Processing Services, Freddie Mac and Fannie Mae
to answer a series of questions about how they conduct foreclosures in
Connecticut. Blumenthal, for instance, wants to know all state law
firms used by these organizations in the past few years as well as how
much the firms were paid.
”These companies - mortgage lending giants - have a public trust,” he
said. “Concentrating this work in a few hands can be severely
problematic - causing unconscionable costs and failed notice delivery.”
Connecticut Foreclosures Set New Record
By KENNETH R. GOSSELIN | The Hartford Courant
11:39 AM EDT, May 28, 2009
Foreclosures and seriously delinquent home loans in Connecticut broke
another record in the first quarter, as job losses deepened and more
borrowers with prime mortgages fell behind in their payments.
As of Mar. 31, the state had 28,285 home mortgages either in
foreclosure or 90 days past due, or about 5.3 percent of all home
loans, according to a quarterly report released this morning by the
Mortgage Bankers Association.
That compares with 24,230, or 4.5 percent, as of Dec. 31.
Nationally, more than 3.2 million home mortgages were either in
foreclosure or 90 days past due. That amounted to 7.3 percent of total
loans. The figure compares with 2.8 million, or 6.3 percent as of Dec.
31.
Op-Ed Contributor This Old Wasteful House
NYTIMES
By RICHARD MOE
April 6, 2009
Washington
NEVER before has America had so many compelling reasons to preserve the
homes in its older residential neighborhoods. We need to reduce energy
consumption and carbon emissions. We want to create jobs, and
revitalize the neighborhoods where millions of Americans live. All of
this could be accomplished by making older homes more energy-efficient.
Let’s begin with energy consumption and emissions. Forty-three percent
of America’s carbon emissions come from heating, cooling, lighting and
operating our buildings. Older homes are particularly wasteful: Homes
built in 1939 or before use around 50 percent more energy per square
foot than those constructed in 2000. But with significant improvements
and retrofits, these structures could perform on a par with newer
homes.
So how does a homeowner go green? The first step is an energy audit by
a local utility. These audits can be obtained in many communities at
little or no cost. They help identify the sources of heat loss,
allowing homeowners to make informed decisions about how to reduce
energy use in the most cost-effective way.
Homeowners are likely to discover that much of the energy loss comes
down to a lack of insulation in attics and basements. Sealing other air
leaks also helps. This can be done by installing dryer vent seals that
open only when the dryer is in use, as well as fireplace draft stoppers
and attic door covers.
Experience has shown that virtually any older or historic house can
become more energy-efficient without losing its character. Restoring
the original features of older houses — like porches, awnings and
shutters — can maximize shade and insulation. Older wooden windows
perform very well when properly weatherized — this includes caulking,
insulation and weather stripping — and assisted by the addition of a
good storm window. Weatherizing leaky windows in most cases is much
cheaper than installing replacements.
The good news is that the administration is taking steps to help homes
save energy with a program that will invest almost $8 billion in state
and local weatherization and energy-efficiency efforts. The
Weatherization Assistance Program, aimed at low-income families, will
allow an average investment of up to $6,500 per home in energy
efficiency upgrades.
My organization is also working with the Natural Resources Defense
Council and members of Congress on legislation to help cover the costs
of making all older homes more energy-efficient. Under this proposal, a
homeowner would receive a $3,000 incentive for improving energy
efficiency by 20 percent, and $150 for each additional percentage point
of energy savings. If 3,000 homes could be retrofitted each year, we
estimate that after 10 years we could see a reduction of 65 million
metric tons of carbon emitted into the atmosphere, and the equivalent
of 200 million barrels of oil saved.
The labor-intensive process of rehabilitating older buildings would
also create jobs, and this labor can’t be shipped overseas. The wages
would stay in the community, supporting local businesses and
significantly increasing household incomes — just the kind of boost the
American economy needs right now.
Before demolishing an old building to make way for a new one, consider
the amount of energy required to manufacture, transport and assemble
the pieces of that building. With the destruction of the building, all
that energy is utterly wasted. Then think about the additional energy
required for the demolition itself, not to mention for new
construction. Preserving a building is the ultimate act of recycling.
FROM NYC...Another architect who calls himself a planner? NOT SO FAST...READ THIS!
AP analysis: Foreclosures stabilize in key states
DAY
By MIKE SCHNEIDER and CHRISTOPHER S. RUGABER, Associated Press
Writers
Posted on Aug 3, 9:25 AM EDT
Even as Americans suffer rising unemployment, foreclosure rates in
three states hit hardest by the housing bust - California, Arizona and
Florida - stabilized in June, offering hope that the worst of the real
estate crisis is over, according to The Associated Press' monthly
analysis of economic stress in more than 3,100 U.S. counties.
The latest results of AP's Economic Stress Index show foreclosure and
bankruptcy rates held steady from May in some states. Yet mounting
unemployment is hampering an economic recovery in some regions,
especially the Southeast and industrial Midwest.
The AP calculates a score from 1 to 100 based on each county's
unemployment, foreclosure and bankruptcy rates. The higher the score,
the higher the economic stress. The average county's Stress score rose
to 10.6 in June, up from 10 in May, mainly because of rising
unemployment.
In June 2008, the average county's Stress score was 6.7. The pain was
lower then because the economy was still expanding. In fact, the second
quarter of 2008 was the last time the economy grew.
Under a rough rule of thumb, a county is considered stressed when its
score zooms past 11. In June, 41 percent of the counties scored 11 or
higher, up from 36 percent in May and 34 percent in April. The latest
reading was slightly worse than for February and March, when nearly 40
percent of counties met or exceeded that threshold.
The national economy, meanwhile, shrank at a pace of just 1 percent in
the second quarter of the year, according to figures released Friday.
It was a better-than-expected showing that provided the strongest
signal yet that the recession is finally winding down.
In June, foreclosure rates held steady for Arizona, California and
Florida at 4.1 percent, 3.5 percent and 3.4 percent, respectively.
"It's obviously good news to stop the losses," said Jim Diffley, a
regional economist at consulting firm IHS Global Insight.
He cautioned, though, that even as foreclosures level out in some
states, they're doing so "at very high levels."
Other figures from the past two weeks suggest that the housing market
is recovering in many areas.
Nationally, seasonally adjusted home resales in June were up 9 percent
from January. New-home sales surged 17 percent in the same period.
Construction is up nearly 20 percent since the year began. And prices
rose in May for the first time since June 2006.
The housing bust struck first in states such as California, Arizona and
Florida, which had seen outsized price increases during the real estate
boom.
Now, California's real estate market, for one, is improving by most
measures. Sales increased 20.1 percent in June, and prices rose for the
third straight month, according to the California Realtors' Association.
"It looks like we're past the peak in foreclosures," said Steve
Goddard, president-elect of the realtors' association. "Most bank-owned
properties are receiving multiple offers."
Still, foreclosure rates are rising in other states, such as Nevada,
Georgia and Utah. Nationwide, Diffley and many other economists say
rising unemployment may push foreclosures higher into next year.
Meanwhile, the sharpest year-to-year rise in bankruptcy rates in June
occurred in counties in California and Nevada that have been the
epicenter of the housing bust, along with areas of Georgia and
Tennessee that tend to have high bankruptcy rates.
Among states, Nevada, Michigan and California showed the most economic
distress, with Stress scores of 20.41, 18.34 and 15.78, respectively.
In June, Nevada had the nation's highest foreclosure rate (7.3 percent)
and the fifth-highest unemployment rate (12 percent). Its counties have
absorbed some of the sharpest growth in bankruptcy filings this year.
Michigan had the nation's highest unemployment rate in June (15.2
percent) and the sixth-highest foreclosure rate (2 percent). California
also had among the nation's highest unemployment rates (11.6 percent)
and foreclosure rates (3.5 percent).
North Dakota, South Dakota and Nebraska showed the least economic
distress in June with Stress scores of 5.23, 5.43 and 6.14,
respectively.
The states with the biggest year-to-year change for the worse were
Nevada, Oregon and Michigan.
For a third straight month, Imperial County, Calif., topped the list of
stressed counties of more than 25,000 residents, with a Stress score of
31. Imperial is among the most impoverished U.S. counties.
It was followed by Merced County, Calif. (25.73), Yuma County, Ariz.
(24.56), Yuba County, Calif. (23.76) and Lauderdale County, Tenn.
(23.46).
"We've had a couple of factory closings which have impacted a lot of
our workers - mainly automotive supply parts and printing," said Leslie
Sigman, president of the Bank of Ripley, in western Tennessee's
Lauderdale County.
Riley County, Kan., home to the Army's Fort Riley and Kansas State
University, had the nation's lowest Stress score in June (4.04) in
counties with more than 25,000 residents.
It was followed by Brown County, S.D. (4.07), Brookings County, S.D.
(4.12), Ward County, N.D. (4.22) and Burleigh County, N.D. (4.27), home
of the state's capital, Bismarck.
These counties are part of an economic "safe zone" stretching from the
Plains to Texas that has been largely shielded from the recession
because of high energy and crop prices.
Counties with the biggest year-to-year change for the worse were:
Howard County, Ind., Williams County, Ohio, Union County, S.C., Chester
County, S.C., and Noble County, Ind. At least a third of the jobs in
those counties involve manufacturing. Obama administration to expand housing
plan
DAY
By ALAN ZIBEL, AP Real Estate Writer
Posted on May 14, 6:33 AM EDT
WASHINGTON (AP) -- The Obama administration is expected to expand its
mortgage aid program on Thursday, announcing new measures that would
help homeowners avoid a blemished credit record even if they don't
qualify for other assistance. The new initiatives are expected to
include ways to allow borrowers to avoid foreclosure by selling their
properties or giving them back to lenders, according to people briefed
on the plan who declined to be identified because it has yet to be
announced.
One way would be to encourage a "short sale," in which the home is sold
for less than the amount owed on the mortgage but the lender considers
the debt paid off. Another option is a deed-in-lieu of foreclosure - in
which the borrower gives the property to the lender to satisfy a
delinquent loan and to avoid foreclosure proceedings.
Treasury Secretary Timothy Geithner and Housing and Urban Development
Secretary Shaun Donovan are scheduled to appear Thursday morning with
some borrowers who have benefited from the government's housing aid
program launched in March. An administration official said more than
55,000 offers have been made to modify borrowers' loans in its first
two months. Short sales are often seen as preferable to
foreclosure
because they don't harm a borrowers' credit record as much as a
foreclosure, but real estate agents have complained that the process
can drag out for months.
"The problem is it's never clear who in a bank has the authority to
approve a short sale," said Howard Glaser, a mortgage industry
consultant in Washington and a former HUD official. Federal standards
"would speed the process for buyers and sellers by making it more
efficient."
The administration estimated earlier this year that as many as 9
million borrowers will be helped through its "Making Home Affordable"
initiative, including up to 5 million borrowers who are refinancing
loans and 4 million who are modifying mortgages at lower monthly
payments. So far, 14 companies representing about three quarters
of
the mortgage market have signed up and are in line to pocket a portion
of $50 billion in incentives to lower borrowers' monthly payments so
they can stay in their homes.
"We are confident that banks and servicers will move as quickly as
possible to modify these loans to avert additional foreclosures in the
coming months," Donovan said earlier this week.
Meanwhile, the pace of the foreclosure crisis continues to accelerate.
The number of U.S. households faced with losing their homes to
foreclosure jumped 32 percent in April compared with the same month
last year, with Nevada, Florida and California showing the highest
rates, foreclosure listing service RealtyTrac Inc. said Wednesday.
More than 342,000 households received at least one foreclosure-related
notice in April. That means one in every 374 U.S. housing units
received a foreclosure filing last month, the highest monthly rate
since Irvine, Calif.-based RealtyTrac began its report in January 2005.
April was the second straight month that more than 300,000 households
received a foreclosure filing, as the number of borrowers with mortgage
troubles failed to abate. The April number, however, was less
than 1
percent above that posted in March, when more than 340,000 properties
were affected. Obama’s
Housing Plan: Who Will Benefit?
NYTIMES
By David Leonhardt
February 18, 2009,
1:57 pm Updated at 4:20
p.m.
In his speech in Phoenix today, President Obama emphasized that his
plan would help those homeowners who had acted responsibly. “It will
not rescue the unscrupulous or irresponsible,” Mr. Obama said. “And it
will not reward folks who bought homes they knew from the beginning
they would never be able to afford.”
The political reasons to describe the plan in this way are obvious. A
housing bailout that helps those who played by the rules is likely to
be far more popular than a bailout for unscrupulous investors.
But the lines aren’t quite as clear as Mr. Obama suggested. In fact,
his plan will end up helping a fair number of people who bought homes
that they should have known they would never be able to afford. The
core of the plan gives banks a financial incentive to reduce many
mortgage payments to no more than 31 percent of a borrower’s income.
Which homeowners will benefit from this reduction?
Certainly, some who took out a reasonable mortgage and later lost their
job will be helped. But people who bought too much house — and banks
that allowed people to do so, or even encouraged them to do so — will
also benefit. As distasteful as this may be, it’s the only way to make
a serious dent in foreclosures and, in the process, to help the
financial system.
These same political calculations help explain the public emphasis that
the White House is giving to the relatively modest steps it is taking
to help underwater homeowners — those with a mortgage worth more than
the value of their house — who can afford their monthly payments.
These homeowners are precisely the sort who seem as if they have done
nothing wrong. They seem like innocent victims of the housing crash.
The new plan will help some of them refinance their mortgage at a lower
rate. But only loans backed by Fannie Mae and Freddie Mac — not many of
the subprime loans at the heart of the foreclosure problem — will be
eligible. And the loan cannot exceed 105 percent of the current value
of the property. Since prices have fallen almost 50 percent in some
areas, like Phoenix, Las Vegas and parts of Florida, the cap will
exclude many homeowners.
In fact, the number of homeowners that the White House estimates will
be helped by the refinancing part of the plan — between four and five
million — includes many who are not now underwater. Their mortgages are
worth between 80 percent and 100 percent of their house value, which
means they are above water but cannot refinance. (On many refinancings,
banks require the equivalent of a 20 percent down payment, in the form
of house value.)
So this plan will help only a small fraction — perhaps one in 10, or
even less — of underwater homeowners. And it will provide only a modest
subsidy to those it does help.
But as I wrote this morning, such an approach has many advantages.
About $500 billion worth of mortgage debt is now underwater, and the
number may eventually get close to $1 trillion. A plan that tried to
put this debt back above water would be vastly more expensive than the
one Mr. Obama announced today. It would also deliver less bang for the
buck, since a great majority of underwater homeowners are likely to
continue making their monthly payments. Obama Plan on Housing Said to Push on
Lenders
NYTIMES
By EDMUND L. ANDREWS
February 17, 2009
WASHINGTON — President Obama’s plan to reduce the flood of home
foreclosures will include a mix of government inducements and new
pressure on lenders to reduce monthly payments for borrowers at risk of
losing their houses, according to people knowledgeable about the
administration’s thinking.
The plan, to be announced Wednesday, is expected to include government
subsidies for reducing a borrower’s interest rate, which a lender would
have to match with its own money.
But officials cautioned that subsidies for lower interest rates would
not in themselves help many troubled homeowners, because lenders were
still likely to view many of those borrowers as bad risks and refuse to
restructure their loans. As a result, they have been casting about for
sticks as well as carrots to persuade the lenders to take part.
Exactly what kind of pressure Mr. Obama would bring to bear remains
unclear. One possibility is a stepped-up effort to enact legislation
that would give bankruptcy judges new power to restructure mortgages
and reduce a borrower’s payments.
That change, sometimes described as a mortgage “cram-down,” would
greatly increase the bargaining power of borrowers in negotiating new
loan terms with their lenders. The banking industry has vehemently
opposed it, warning that investors will stop financing mortgages if
they know that a judge can unilaterally change the terms at a later
date.
But Mr. Obama and Democratic leaders in Congress support the change,
and Democratic lawmakers had already been planning to attach such a
measure to a catch-all spending bill that Congress will soon have to
pass to keep the government running.
Administration officials refused to say on Monday exactly what carrots
and sticks they intended to invoke as part of their plan. But Mr.
Obama’s top advisers are keenly aware that a long series of voluntary
loan-modification programs, championed by the Bush administration, made
no dent in the flood of foreclosures that began in 2007.
By the end of 2008, slightly more than 9 percent of all mortgages in
the United States were either delinquent or in foreclosure, according
to the Mortgage Bankers Association. The number of loans in foreclosure
hit a new record of 2.3 million last year, more than double the volume
in 2006, and industry analysts estimate that it will hit at least 3
million in 2009 in the absence of a government rescue.
The plan to subsidize lower interest rates for distressed homeowners
would involve the government and the lender each contributing matching
amounts to reduce a person’s monthly payment, possibly by several
hundred dollars a month.
Supporters contend that the measure will be comparatively simple to
execute and less expensive than many other options that have been
considered. Mr. Obama’s top advisers have vowed to spend at least $50
billion to help homeowners keep their houses, and they already have the
authority to tap the remaining $350 billion in the Treasury
Department’s financial industry bailout fund.
“I think it is going to have far more effect on the mortgage servicers
and the bondholders than previous proposals,” said Senator Charles E.
Schumer, Democrat of New York. “It’s going to have both carrots and
sticks.”
One of the biggest headaches in modifying mortgages has been the fact
that most loans were bundled into pools, which were then resold as
mortgage-backed securities. Mortgage servicers, third-party companies,
collect the monthly payments and take action against delinquent
borrowers. These companies remain nervous that bondholders will sue
them if they make overly generous concessions.
While stumping for his economic stimulus plan last week in Elkhart,
Ind., Mr. Obama renewed his call for legislation that would authorize
bankruptcy judges to reduce mortgage payments and said he hoped to make
the idea “part of our housing package.”
“It turns out you can’t modify that mortgage if you’re in bankruptcy,”
the president told residents. “Now that makes no sense. What that’s
doing is, it’s forcing a lot of people into foreclosure who potentially
would be better off, and the bank would be better off and the community
would be better off, if they’re at least making some payments.”
White House officials are likely to release a comprehensive plan on
home foreclosures, determined to avoid a repeat of the drubbing that
the Treasury secretary, Timothy F. Geithner, received last week when he
released only the outlines of a plan to rescue the nation’s banks,
leaving the most important elements to be decided later.
On Wednesday, Mr. Obama will go to Phoenix to outline the plan for
rescuing homeowners. He is expected to supply concrete details as well
as a timetable for getting the plan off the ground.
But Mr. Obama will be running the risk of angering vast numbers of
homeowners, both those at risk of losing their homes and the tens of
millions more who are current on their payments and bitterly resent the
government bailing out those who borrowed more than they could afford.
“This puts the whole moral-hazard issue front and center,” said Howard
Glaser, a former Clinton administration official and now a financial
consultant.
“This is the equivalent of having the government write a check to both
the borrowers and the banks, who both made bad decisions,” he said.
“But if you are going to do something, regardless of the mechanism, you
are going to have to cross the Rubicon to direct federal assistance.
It’s a sign of how very few options are left.”
For all the political hazards of bailing out people who made bad
decisions, many economists say the government needs to attack
foreclosures if it wants to turn around the economy. Obama picks New
York housing commissioner to head Department of Housing and Urban
Development
Hartford Courant
Associated Press Writer
By PHILIP ELLIOTT
9:47 AM EST, December 13, 2008
CHICAGO (AP) — President-elect Barack Obama on Saturday named New York
City's housing commissioner to his Cabinet, turning to a former Clinton
administration aide with a national reputation for developing
affordable housing.
Obama praised Shaun Donovan's record in New York, where he managed a
$7.5 billion plan with a goal of putting a half-million New Yorkers in
affordable housing. The Harvard-educated architect also kept
foreclosures to a minimum in the city's low- and moderate-income home
ownership plan, with just five out of 17,000 participating homes.
"We can't keep throwing money at the problem, hoping for a different
result," Obama said during his radio address released early Saturday.
"We need to approach the old challenge of affordable housing with new
energy, new ideas, and a new, efficient style of leadership. We need to
understand that the old ways of looking at our cities just won't do."
While the mortgage crisis has threatened cities, Obama said it also
provides a chance to rethink how the Housing and Urban Development
Department can help city residents. He said Donovan, who also has a
degree in public service from Harvard, will bring "fresh thinking
unencumbered by old ideology and outdated ideas."
Obama's selection of Donovan marks the 11th post he has filled in his
cabinet, in just over a month since his election as the first
African-American president. Still to come are announcements of his
selections to head the Central Intelligence Agency, the Environmental
Protection Agency, and the departments of energy, education, interior,
labor, transportation and agriculture.
Donovan's appointment was something of a surprise. Most speculation has
centered around Miami Mayor Manny Diaz, Atlanta Mayor Shirley Franklin
or Bronx borough President Adolfo Carrion Jr.
HUD often has been led by someone who is a minority; Donovan is white.
Latino groups were pushing heavily for Diaz, following in the footsteps
of Clinton appointee Henry Cisneros of San Antonio, Texas. Bush picked
Mel Martinez of Florida, a Hispanic, and Alphonso Jackson of Texas, an
African American.
Even the rollout of the selection — announced at 6 a.m. Saturday via
e-mail and later in Obama's Saturday radio address — broke with how
Obama has announced previous Cabinet positions. For his other
appointees, Obama invited reporters to a news conference, along with
the nominee, and took questions.
Obama's last news conference on Thursday, to introduce former Senate
Majority Leader Tom Daschle as his pick for Health and Human Services,
was dominated by questions about the corruption scandal swirling around
Illinois Gov. Rod Blagojevich, who is accused of putting Obama's Senate
seat up for sale. Obama has said he's confident none of his aides were
involved in any of the alleged deals.
New York Mayor Michael Bloomberg named Donovan, a New York native, to
head the city's Housing Preservation and Development Department in
2004. He has been the point person for implementing Bloomberg's plan to
build and preserve 165,000 affordable housing units for 500,000 people
by 2013. It is the largest housing plan in the nation.
Donovan took a leave-of-absence as New York's housing commissioner to
campaign for Obama.
Before working for Bloomberg, he worked at Prudential Mortgage Capital
Company. And before that, he was deputy assistant secretary for
multifamily housing at HUD during the Clinton administration. In that
role he was the government's chief administrator for managing privately
owned, government-subsidized housing. The housing subsidy programs
provided over $9 billion annually to 1.7 million families. He also
oversaw some 30,000 multifamily properties with more than 2 million
housing units.
Donovan, 42, has a reputation for finding new ways to create and
preserve affordable housing. As New York's housing commissioner, he
spearheaded the creation of the $200 million New York Acquisition Fund,
a collaboration between the city, foundations and financial
institutions. It is intended to help small developers and nonprofit
groups compete for land in the private market.
He was acting commissioner of the Federal Housing Administration during
the transition from Clinton to President George W. Bush. Sales of homes take big drop in
Connecticut
DAY
By Lee Howard
Published on 12/5/2008
Connecticut, which took longer than other New England states
to fall into a real estate recession, now appears to be lagging the
rest of the region in coming out of the downturn.
A report Thursday by The Warren Group, publisher of The
Commercial Record, showed that single-family sales statewide plummeted
17 percent in October from a year earlier, while prices were off more
than 10 percent.
The steep drops followed a relatively optimistic September report, in
which sales statewide were down a little more than 5 percent. It also
followed reports from Massachusetts and Rhode Island, states that
showed “considerable gains” in single-family home sales in October,
said Timothy Warren Jr., chief executive of The Warren Group.
”October was the ninth month in 2008 that home sales in Connecticut
were off by more than 15 percent, and this is the third month that
prices dropped by about 11 percent,” he added. “Without a significant
uptick in home sales for several months, price declines aren't likely
to level off.”
In New London County, single-family home sales dipped in October by 9.4
percent and prices fell 10 percent from a year earlier, according to
The Warren Group. The median price of a local house in October was
$225,000, a drop of $25,000 from the year before.
Sales of condominiums in the region dropped more than 50 percent, but
median prices held steady at about $174,000.
The statewide median price for a single-family home was $250,000 in
October, down more than $30,000 from a year ago. Statewide condominium
prices were at $190,000, off $22,000 from last year, the highest
monthly slippage so far this year.
So far this year, condo sales statewide have slipped by about a third
from the previous year, while single-family home sales are off by
nearly a quarter.
Windham and Fairfield counties have recorded the steepest drops in
median home prices throughout 2008. Fairfield has seen the biggest drop
in median prices, with the $535,000 typical sales price off $65,000
from the previous year. Windham has had the biggest percentage
decrease, with the median price sinking from $219,000 to $191,000, a
decline of 12.8 percent for the year. Senate
plans vote today on
anti-foreclosure plan
DAY
By JULIE HIRSCHFELD DAVIS, Associated Press Writer
Posted on Jun 24, 7:40 AM EDT
WASHINGTON (AP) -- A plan to help hundreds of thousands of homeowners
avoid foreclosure is drawing bipartisan support in the Senate, setting
the stage for high-stakes negotiations among congressional Democrats.
The far-reaching housing plan faces a Senate test-vote Tuesday, when it
could also come to a final vote. The disputes among Democrats over key
details, however, as well as a veto threat from the White House will
almost certainly push any final agreement into July.
Conservative "Blue Dog" Democrats are concerned about how to pay for
the measure, while members of the Congressional Black Caucus - most of
them liberal - call it "unacceptable," arguing it doesn't do enough to
address the needs of African Americans.
The centerpiece of the package is a foreclosure rescue program in which
the Federal Housing Administration would provide $300 billion in new,
cheaper mortgages for distressed homeowners who otherwise would be
considered too financially risky to qualify for government-insured,
fixed-rate loans.
Borrowers would be eligible if their mortgage holders were willing to
take a substantial loss and allow them to refinance, and would
ultimately have to share with the government a portion of any profits
they made from selling or refinancing their properties.
The bill would tighten controls and create a new regulator for Fannie
Mae and Freddie Mac, which provide huge amounts of cash flow to the
mortgage market by buying home loans from banks.
It also would provide a $14.5 billion array of tax breaks, including a
credit of up to $8,000 for first-time homebuyers who buy a home in the
next year and boosts in low-income tax credits and mortgage revenue
bonds.
In a letter to Democratic leaders last week, the 42 House members of
the Black Caucus said the bill is plagued with "glaring omissions,"
including affordable housing funds for states affected by Hurricane
Katrina and grants for states and localities to buy and fix up
foreclosed properties.
To draw GOP support, Senate Democrats diverted the affordable housing
money to pay for the foreclosure aid program.
The Senate bill provides $3.9 billion in grants to deal with foreclosed
properties - compared with a House plan providing $15 billion - but the
White House singled out the funds in its veto threat, and Blue Dogs are
demanding that the money be offset with cuts elsewhere.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman,
said he'd be willing to yank the money and add it to a separate measure
in the interests of a deal. Foreclosures,
Delinquent Loans Increase In Connecticut The
Hartford Courant By KENNETH R. GOSSELIN 11:44 AM EST, November 19, 2009
Foreclosures and seriously delinquent loans in Connecticut broke
another record in the third quarter, jumping a full percentage point
from the previous quarter as unemployment continues to take a toll on
homeowners with traditional loans, according to a new report today.
The state had 37,022 residential mortgages either in foreclosure or 90
days or more days past due, according to a report from the Mortgage
Bankers Association. That's the highest in at least 30 years and equal
to the 7 percent of all home loans as of Sept. 30, or one mortgage in
every 14.
Connecticut's foreclosure figure rose from 6 percent — or one mortgage
in every 17 — as of June 30, but was still lower than nearly 9 percent
for the nation.
Shirley Reimann powers up her computer most
mornings at the social services agency she supervises in Killingly and
immediately runs a Google search: Windham County foreclosures.
What she sees has her worried.
The number of houses and condominiums for sale in Windham County as a
result of foreclosure has climbed from five last winter, when Reimann
first started tracking them, to more than 40, as of last week.
Telephone calls to her office tell the same story: There were 14 from
homeowners falling behind in their payments last month, up from "next
to none" a year ago.
"We have a shortage of apartments, and rents are high," Reimann said.
"Where are these people going to go?"
A town-by-town analysis by The Courant of 16
months of Connecticut home mortgage data through the end of April shows
that Windham County is hardest hit, with 23 foreclosure-related filings
for
every 1,000 households, compared with 17 in the state as a whole.
Throughout the state, the numbers are rising — reaching 6,500 in the
first four months of this year, or 40 percent ahead of last year's
pace, according to The Warren Group, which tracks the housing market in
New England.
But so far the state's foreclosures and home mortgage delinquencies
have not led to the sort of crisis that has gripped California,
Michigan, Florida and Nevada, the
nexus of the country's mortgage troubles. In most Connecticut towns and
cities, the incidence of homeowners losing their houses is scattered
thinly across neighborhoods.
Still, the state's foreclosures and distress sales are tamping down the
value of houses not just in eastern Connecticut but throughout the
state, especially in the bigger cities and lower-income towns. A Warren
Group report showed the statewide decline in median sale prices
reaching 9.8 percent for the year ending in April.
And economists warn that if recession hits Connecticut harder than
expected, the foreclosure problem could deepen fast. Job losses, so far
relatively mild, could pick up momentum and strain household budgets
already under pressure from rising gas, home heating oil and food
prices.
"We're holding up OK so far," said Donald L. Klepper-Smith, an
economist at DataCore Partners Inc. in New Haven. "But I think there is
a risk of increased foreclosure
because of energy prices."
Reimann, whose nonprofit Access Community Action Agency provides social
services throughout eastern Connecticut, shares those concerns. Today,
150 gallons of home heating oil costs $682, but Access can only provide
$675 for an entire season of energy assistance to the neediest
families, she said.
"These are the choices they have to make: heating their home or paying
the mortgage," Reimann said.
A Grand Thoroughfare
Northeastern Connecticut has long struggled with the
loss of manufacturing and defense jobs. It has also been hurt by its
dependence on employment in nearby Rhode Island,
where the housing and economic downturn is the deepest of the six-state
New England region.
Although service sector jobs at the casinos and in new, mega-shopping
centers are replacing some employment from traditional industries, they
cannot match the hourly wages.
Just a short walk down Broad Street from Reimann's office in Killingly,
there have been four homes with foreclosure-related filings since the
year began. It's easy to pick out two of the properties; both are
Victorians with wide front porches. Front lawns are overgrown. At one
there is mail spilling out of the mailbox, a sign the house was
recently abandoned.
Neighbors on the street worry about the blight on their neighborhood,
once a grand thoroughfare, now characterized as a neighborhood in
decline. They worry the decay will pull down their property values.
"I've been here 28 years," said Don Costello, who owns a funeral home
in town. "Of course I'm concerned. This used to be one of the nicest
streets in town."
Studies have shown that once a property goes into foreclosure it
immediately lowers the value of surrounding properties by $5,000.
Lucien Laliberty, a longtime residential real estate broker in
northeastern Connecticut, disputes that measure, but says properties in
foreclosure clearly are dragging down the price of other similarly
styled homes in surrounding neighborhoods.
"Some foreclosures are selling at bargain basement prices," Laliberty
said. "Investors are back in the market, buying them cheap."
Foreclosures have cut across all price ranges but are most prevalent in
houses and condominiums that were priced at $200,000 or less, Laliberty
said.
Laliberty estimates that prices have declined as much as 18 percent in
some parts of the market as a result of an increase in foreclosures.
Most callers to Reimann's agency are people with adjustable-rate
mortgages who had low introductory rates that are now resetting higher,
she said. That echoes what's happening across the country.
"People were making a choice when they went into an adjustable-rate
loan," Reimann said. "Homeownership. This is the American Dream. They
were never looking at what would happen if the rate went up..."
NEW HAVEN, Conn. (AP) -- An influential economist who long
predicted the housing market bubble cautioned Tuesday that the slump in
the U.S. housing market could cause prices to fall more than they did
in the Great Depression and bailouts will be needed so millions don't
lose their homes.
Yale University economist Robert Shiller, pioneer of the widely watched
Standard & Poor's/Case-Shiller home price index, said there's a
good chance housing prices will fall further than the 30 percent drop
in the historic depression of the 1930s. Home prices nationwide already
have dropped 15 percent since their peak in 2006, he said.
"I think there is a scenario that they could be down substantially
more," Shiller said during a speech at the New Haven Lawn Club.
Shiller's Standard & Poor's/Case-Shiller home price index is
considered a strong measure of home prices because it examines price
changes of the same property over time, instead of calculating a median
price of homes sold during the month.
Shiller, who admitted he has a reputation for being bearish, said real
estate cycles typically take years to correct.
Home prices rose about 85 percent from 1997 to 2006 adjusted for
inflation, the biggest national housing boom in U.S. history, Shiller
said.
"Basically we're in uncharted territory," Shiller said. "It seems we
have developed a speculative culture about housing that never existed
on a national basis before."
Many people became convinced that housing prices would increase 10
percent annually, a notion Shiller called crazy.
Shiller, who said it's difficult to forecast prices, endorsed
legislation proposed by Sen. Chris Dodd, D-Conn., and Rep. Barney
Frank, D-Mass., that would allow the Federal Housing Administration to
back as much as $300 billion in mortgages for struggling homeowners.
Servicers would have to agree to take a loss on the existing loans,
while borrowers would have to show they could afford to make new
payments on their refinanced mortgages.
On Tuesday, the National Association of Realtors said that sales of
existing homes fell in March while the median home price declined to
$200,700, a decline of 7.7 percent from the median price a year ago.
Sales of existing single-family homes and condominiums dropped by 2
percent in March to a seasonally adjusted annual rate of 4.93 million
units.
Many analysts said they do not expect a rebound for a number of months,
given the problems weighing on housing from a severe glut of unsold
homes to tighter credit standards for prospective buyers and a rising
tide of mortgage foreclosures. Federal Rescue Considered As
Homeowners Drown In Debt; With No Other Solution in Sight, Government
Is Forced To Weigh Options
DAY
By Edmund L. Andrews, Louis Uchitelle, New York Times News
Service
Published on 2/22/2008
Washington — Prodded in part by some of the nation's biggest banks, the
Bush administration and Congress are considering costly new proposals
for the government to rescue hundreds of thousands of homeowners whose
mortgages are higher than the value of their houses.
Not since the Depression has a larger share of Americans owed more on
their homes than they are worth. With the collapse of the housing boom,
nearly 8.8 million homeowners, or 10.3 percent of the total, are
underwater. That is more than double the percentage just a year ago,
according to a new estimate of the damage by Moody's Economy.com.
Administration officials say they still oppose any taxpayer bailout for
either people who borrowed more than they could afford or banks that
made foolish loans during the height of the speculative bubble in
housing.
But with the current efforts to arrest the housing collapse so far
bearing little fruit, Washington is being forced to explore new ideas,
among them the idea of a federal mortgage guarantee for troubled
borrowers.
And policymakers are listening to proposals from industry and community
groups to use government funds to purchase and refinance billions of
dollars in mortgages now in danger of default.
Many owners are only gradually becoming aware that their home would
sell for less than the debt against it — a phenomenon, said Richard T.
Curtin, director of the Reuters/University of Michigan Surveys of
Consumers, that is “beginning to weigh on people, making them uncertain
and nervous about the future.”
That nervousness is evident across the country, particularly in places
like Memphis, Tenn., a city of nearly 1.3 million people where falling
home prices and negative equity are new experiences.
The housing slumps of the mid-1970s and late 1980s were confined to the
coasts. The current bust — while leaving some regions, including
southeastern Connecticut, relatively unscathed — has cut a far wider
path and it comes just when home debt is at its highest level since
World War II.
For Stuart B. Breakstone, the problem hit home when he was forced to
come to the closing on the sale of his 8-year-old, custom-built house
with a check for $65,000. The money, out of his own pocket, was to pay
the difference between what he still owed on the mortgage for his home
and the lower selling price.
Breakstone, a 42-year-old lawyer, and his wife, Lori, chief of Customs
agents at Memphis International Airport — who together earn more than
$250,000 a year — managed to extricate themselves by paying off the
mortgage. But millions of others are trapped in their homes. They have
jobs, make their mortgage payments on time, but cannot raise enough
cash to cover the shortfall.
Some eventually default, surrendering to foreclosure. But the vast
majority — embedded in their communities, their children in public
schools, their reputations at stake — wait nervously in hope that
prices will bottom and rise once again, eliminating their negative
equity and restoring their freedom to sell or refinance.
“People can't believe this is happening to them,” said Robert Moulton,
president of Americana Mortgage Group in Manhasset, N.Y.
In Washington, it will be difficult to engineer a bailout similar to
the one for savings-and-loan companies in the early 1990s, because
Democrats and Republicans alike cringe at the word bailout and fear a
backlash by people who never became overextended.
But with millions of homeowners already underwater and the prospect
that millions more may face the same situation, Democrats and
Republicans alike are scrambling for ideas to keep people from simply
walking away from their homes and to help those struggling to pay their
bills.
Bank of America, which is in the process of acquiring Countrywide
Financial and has potentially huge exposure, has circulated a proposal
to create a new federal agency that would buy vast quantities of
delinquent mortgages at a deep discount and replace them with
fixed-rate, federally guaranteed loans.
The bank warned that tightening credit conditions were leading to
“escalating levels of delinquency and default among borrowers” and “an
unprecedented number” of homes that would enter foreclosure.
Administration officials have given the Bank of America plan a cold
reception. But the idea is similar to one proposed by Sen. Chris Dodd,
D-Conn., the chairman of the Senate Banking Committee.
Meanwhile, the Federal Housing Administration is examining ways to
expand its new insurance program, known as FHA Secure, to help people
replace their costly subprime mortgages with federally guaranteed,
fixed-rate mortgages.
Mortgage industry executives have complained that the FHA's eligibility
requirements are so restrictive that the new program has helped only a
trickle.
Credit Suisse executives said they have held lengthy meetings with FHA
officials, and have urged the agency to relax rules that currently
disqualify many borrowers.
One idea, company officials said, was to allow borrowers who had simply
made six payments during the course of their mortgage to qualify.
Rep. Barney Frank, D-Mass., the chairman of the House Financial
Services Committee, has ordered his staff to come up with options for a
broader rescue bill. An aide to Frank said his bill would, among other
things, allow the government to buy up at least some troubled mortgages.
A more modest plan is being developed by John M. Reich, director of the
Office of Thrift Supervision, the agency that regulates
savings-and-loan companies. His plan, still in rough form, would create
a voluntary system under which mortgage lenders would reduce debt and
monthly payments to reflect the diminished sales value of a home.
It would take the remainder of the mortgage as a “negative amortization
certificate,” a lien that the investor could recoup if the house were
later sold for its original mortgage value or higher.
In an interview, Reich said he hoped that most of the old mortgages
would be replaced by cheaper mortgages insured through the FHA.
“It isn't a bailout,” Reich said. “It is a market-driven solution.”
Pushing
Supportive Housing; Nonprofits
To Rally At Capitol March 4
By REGINE LABOSSIERE | Courant Staff Writer
February 19, 2008
Groups across the state are promoting what they believe is the best way
to end homelessness — permanent supportive housing.
On March 4, nonprofit groups such as the Connecticut Coalition to End
Homelessness and Reaching Home, a Hartford-based organization whose
goal is to create 10,000 new supportive housing units in the state, are
holding a rally at the state Capitol called "Supportive Housing Lobby
Day."
Permanent supportive housing is independent and affordable housing that
offers residents some social and employment services. The groups
are asking state legislators and the governor to fund 650 new units in
the 2008 budget to add to the 3,000 existing units across the
state. Kate Kelly, Reaching Home's campaign manager, said the 650
units could cost about $13 million from a few funding sources. She said
long-term costs to the state for supportive housing would be less
expensive than paying for homeless people who go in and out of
emergency shelters.
"It only costs $54 a day to house somebody in supportive housing.
Typically with emergency shelters, the person has been in the emergency
room, in jail, is circulating in and out of other systems," Kelly said.
Supportive housing also adds stability, she said.
"For individuals with a serious mental illness, unless you know where
you're going to sleep every night, it's hard to get recovery. And for
families, kids can't do their homework every day if they don't know
where they're going to stay," Kelly said.
She said local groups in Manchester, the Farmington Valley and Enfield
are organizing supportive housing efforts and 10 communities are
creating or have adopted 10-year plans to end homelessness, including
greater Hartford, New Britain, greater New Haven and the greater
Windham region. A few years ago, Manchester resident David
Blackwell helped create the Manchester Initiative for Supportive
Housing, or MISH.
"Supportive housing is the most effective and least costly way to
permanently end homelessness," he said.
Since its inception, the nonprofit organization mostly has focused on
an awareness of issues facing those without homes and those who are at
risk of losing their homes. But recently, the initiative embarked on a
new project to find a building in town that it can purchase with the
help of other organizations that can be turned into about a dozen
supportive housing units. He explained that the goal of the
initiative was to bring a supportive housing project to town "so when
we do come out with a project, everybody in the community would come
out and say, 'Yeah, we need this.' "
Local shelters also are trying to find ways to help people so they
don't have to continue using the emergency shelters. Shelters and
nonprofit organizations are using data they collect on their own, as
well as statewide data generated from point-in-time counts from this
year and last year.
The second annual statewide point-in-time count was conducted Jan. 30,
and more than a dozen towns dispatched volunteers to count the homeless
in emergency shelters, emergency hospital rooms, the streets, abandoned
buildings and wooded areas. Just like last year, Dennis Culhane,
professor of social welfare policy at the University of Pennsylvania,
is leading the research team that will analyze the data. The count's
data will be used by local and state agencies to quantify their needs
and apply for federal funding for emergency shelters and for permanent
supportive housing.
The Connecticut Coalition to End Homelessness estimates that there are
about 33,000 people, 13,000 of whom are children, who are homeless at
some point during the year. Last year's point-in-time count revealed
that there were about 2,138 single adults and 392 families with
children who were either staying in shelters or outside on Jan. 30,
2007. This year's statewide data won't be released until March.
"The [statewide] point-in-time count is going to be most beneficial
going forward ... to get a picture of what's going on in Connecticut to
know what to expect from clients or guests who are coming into the
shelter," said Sarah Melquist, director of shelter and outreach
services for the Manchester Area Conference of Churches.
Although the statewide point-in-time count has happened only twice,
groups have conducted smaller counts in their own towns for years. For
communities to receive federal funding to help combat homelessness, the
federal Department of Housing and Urban Development requires them each
year to survey the number of homeless living in their area. In
Manchester, local groups have conducted weeklong point-in-time counts,
which have revealed about 115 to 120 homeless people in town during
those periods.
Town officials said the findings from the 2007 data show an increase in
those needing mental health and substance abuse services, an increase
in the use of clinics and a decrease in the use of emergency rooms, a
decrease in the number of homeless children found and an increase in
those citing unemployment or underemployment as the reason they are
without a home. Kelly said she hopes that the March 4 rally, as
well as data from the homeless counts, help the organizations get the
650 units they're looking for.
"Last year, the point-in-time count showed us the need is there," Kelly
said. Taxes
Are Reassessed in Housing Slump
as Prices Drop
NYTIMES
By JENNIFER STEINHAUER
Published: December 23, 2007
LOS ANGELES — Home owners across the nation are looking to county
governments to reassess the values of their homes in the face of
flattening and falling prices that have befallen scores of markets.
Downward assessments, done at the request of homeowners or
pre-emptively by government, appear to be most pronounced in areas
where the housing market was exploding just a few years ago, or where
economic conditions are poorest.
In Maricopa County, the largest in Arizona, a “large percentage”
of the one million single-family home owners will see their houses
reassessed at lower rates in February, said Keith Russell, the county
assessor. In Phoenix, the largest city in the county, housing prices
fell 8.8 percent over the last year, according to the
S&P/Case-Shiller index, which monitors the residential housing
market.
Among the roughly 200,000 parcels in Lucas County, Ohio, 7,083 owners
requested reassessments in 2007, about 10 times the yearly average,
said Anita Lopez, the assessor, who ran for office on a campaign to
adjust assessments.
“Citizens know the market is slow if not declining,” Ms. Lopez said,
“and they are informed and feel comfortable in challenging their county
values. People here can’t sell their homes, they have less money, and
they don’t understand why the government is asking for more money in a
declining housing market.”
Local governments, which rely heavily on property taxes, will have to
find ways to replace lost revenue or face having to cut services, lay
off staff members or delay projects. The possibility of those losses
has alarmed officials in areas already facing large numbers of
foreclosures and slumping sales, products, in part, of the mortgage
credit crisis that has rippled through the country. [Sunday Business.]
“Government has been the beneficiary of increasing home prices,” said
Relmond Van Daniker, the executive director of the Association of
Government Accountants. “And now they are on the other side of that,
and they will have to reduce expenses.”
While every state and local government has its own methods for
assessing home values for tax purposes — some do it annually, some
every five years, and everything in between — many counties are hearing
from residents that they would like their homes reassessed, or have
taken steps to bring the taxes down of their own volition.
While in some areas, a county or city is required to make whole any
loss in revenues to schools, public education is a frequent beneficiary
of property tax revenues. “They are obviously concerned,” Ms. Lopez
said about her county’s school systems.
No one has aggregated the total number of counties reassessing home
values, and many counties take at least a year to catch up to the
marketplace. In some places where reassessments are rising, the numbers
have yet to approach historical heights.
For example, in 2007 roughly 1,800 homeowners asked for reassessments
in Los Angeles County, far above the average of about 500, yet far
below the tens of thousands of homeowners in Los Angeles who looked for
tax adjustments during some years of the downturn in the 1990s. But
elected officials and property tax experts said that the numbers were
notable and that they expected them to grow in 2008.
In San Bernardino County near Los Angeles, tens of thousands of owners
of the 860,000 homes will have their assessments lowered in the coming
year, said Bill Postmus, the assessor, rivaling the numbers during the
California real estate crash of the 1990s.
“You should see more of this activity,” said Chris Hoene, director of
policy and research at the National League of Cities. “It is mostly in
areas most likely to be seeing some decline, like Southern California,
Florida, and big cities in the Midwest,” rapid growth areas that are
now seeing the other side of the curve.
The United States Conference of Mayors recently released a report
showing that the value of taxable residential land had declined by $2.9
billion in California from 2005 to 2008 based on current tax rates, and
by hundreds of millions of dollars in other major cities. “We are
hearing a lot about this housing market change and its effect on city
revenues every day,” Mr. Hoene said
Cities where home values have fallen the most are the obvious first
place to look for residents clamoring for reassessments, but that is
not always the case. Some states, like California, Michigan and Nevada,
have statutory caps in property tax increases, which mean the market
value of single family homes almost always exceeds the assessed tax
values, except in a major downturn.
However, even in California, if a home buyer made his purchase during a
market top in the last several years, he might be in the position of
qualifying for lower assessed values. For instance, in Santa Clara
County, where pricey Palo Alto and San Jose are located, 17,758
properties were reassessed downward for the 2007-2008 tax period,
compared with the same period from 2000 to 2001, when the number was
closer to 300.
“Obviously 2001 was the dot-com boom,” said Larry Stone, the Santa
Clara assessor. “And the whole assessment role in my county was carried
by a very hot residential market,” which has substantially cooled.
In his area, prices, and therefore values, remain strong in high
end residential areas with great schools, Mr. Stone said. The coming
reassessments are driven in large part in the lower and middle markets,
especially the condo market, where the greatest part of the subprime
lending problems have occurred.
Indeed, areas with high levels of foreclosures, vacant housing and a
reduction in prices expect to see adjustments to the property taxes
continue, which is bad news for local governments.
“Rising tax values are not usually a popular thing,” Mr. Hoene said ,
but homeowners tend to accept it, even begrudgingly, when they know the
market value of their home is on the rise. “But the minute you think
that your local government assessment practices are out of whack with
what is happening in the market,” he said, “you will not accept it.” Global? House prices to drop much lower:
Greenspan
Fri Sep 21, 2007 3:25 AM ET
VIENNA (Reuters) - A big overhang of property will bring U.S. house
prices down further, but it is too early to say if the economy will
plunge into recession, former Federal Reserve chief Alan Greenspan was
quoted as saying on Friday.
Greenspan said in an interview with Austrian magazine Format that low
interest rates in the past 15 years were to blame for the house price
bubble, but that central banks were powerless when they tried to bring
it under control.
"It's a difficult situation, there is an enormous overhang on the real
estate market," Greenspan was quoted as saying. "Many buildings which
just have been finished can't be sold ..."
"So far, prices have dropped only slightly. But it was enough to cause
alarm around the world," he said. "Prices are going to fall much lower
yet."
"However, it is too early to answer the question about a recession. We
simply don't know yet. It depends on how flexibly the economy can
react," he said.
Greenspan said deregulation and the introduction of market economies in
the former Communist bloc after the Berlin Wall fell in 1989 had caused
a global boom and a worldwide reduction of interest rates, which both
helped fuel the property bubble.
"There is no doubt about the fact that low interest rates for long-term
government bonds have caused the real estate bubble in the United
States," he said.
"The Federal Reserve began a series of interest rate increases in 2004.
We were hoping to bring the speculative excesses in the real estate
sector under control. We failed. We tried it again in 2005. Failure,"
he said.
"Nobody could do anything about it, neither us nor the European Central
Bank. We were powerless," he said.
Town Unites Against 408-Unit
Complex ; Emotional Crowd Fears Affordable-Housing Juggernaut Will
Overwhelm North Stonington's Rural Character
DAY
By Jenna Cho
Published on 8/11/2007
North Stonington — In this town, four-story residential buildings are
unheard of. The volunteer fire company isn't equipped to handle
emergencies in structures taller than three stories.
In this town, a proposed development with 408 residential units would
significantly add to the town's population, which is about 5,000 and
which, between 1990 and 2000, grew by only 2.2 percent, according to
the town's 2003 Plan of Conservation and Development.
Now, as the Planning and Zoning Commission reviews a proposal that
would add just those things, residents fear the usual zoning measures
to prevent such developments will fail them.
That's because the text amendment application to create a new housing
overlay district, and the second application to place that overlay zone
on 97 acres on rural Boom Bridge Road, are affordable-housing
applications. The state recommends that 10 percent of a town's housing
units meet affordable housing guidelines, and North Stonington has only
0.58 percent.
The state cannot force a town to add affordable units, but because
North Stonington doesn't meet the 10-percent recommendation, any
affordable-housing application that comes the town's way can't be
rejected for regular zoning concerns.
The commission cannot cite impact on town schools or even town
character, for instance.
If it rejects an affordable-housing application, the commission must
prove that its reasons for denying it outweigh the need for affordable
housing.
The estimated 150 residents at Thursday's public hearing on Garden
Court LLC's applications said they felt the proposal was unreasonable
for a town like North Stonington and especially for an area of town
best known for the cows and cornfields on Beriah Lewis Farm.
The public hearing will continue at 7 p.m. Aug. 30 in the elementary
school multipurpose room.
The concept plan for the Garden Court development, which the applicant
intends to build if the text amendment and zone change are approved,
entails 408 one- and two-bedroom units in 17 four-story buildings. Of
that, 30 percent, or 123 units, would be marketed as affordable.
“I look at the scale of the application, and right from the get-go it's
out of scale with everything else in this town,” resident Art Pintauro
said.
Residents spoke against not affordable housing itself but the density
with which it is being proposed.
“My suggestion to this board is, let's do 50 (affordable houses) here,
50 there, 50 there, till we meet the requirement,” resident George
Parent said.
Nearly unified in their opposition, residents clapped after each public
comment, at times rising to their feet to emphasize their agreement.
Only one resident who spoke did not outright oppose the Garden Court
proposal. Jane Dauphinais, director of the Southeastern Connecticut
Housing Alliance, spoke of the importance of affordable housing.
Residents said the applicant, represented by attorney Timothy Bates of
the law firm Robinson & Cole, was forcing change upon a town that
wishes to maintain its rural character and develop accordingly.
John Olsen said he heard “an attitude of arrogance” in Bates'
presentation of the applications at the opening of the public hearing
last month.
“I feel that this developer has said nothing but, 'Try us. We are ready
for an appeal,' ” Nita Kincaid said. She said she got no sense that the
developer was willing to work with the town to develop a more
manageable project.
The town can reject an affordable-housing application if it threatens
public safety or health, and residents brought up those arguments on
Thursday. They spoke of the already numerous automobile accidents at
the intersection of Route 184 and Boom Bridge Road; of how the roads in
that area cannot handle a massive traffic increase that 408 new housing
units would bring; of the fire hazard of placing what are essentially
apartment buildings in a town without a ladder firetruck; and of how
the proposed on-site sewer system in Garden Court could fail and
contaminate the groundwater in an aquifer protection area.
Ledyard Lewis, who owns 216-year-old Beriah Lewis Farm with his mother,
Rosalind, and brother Ted, scoffed at calling the development a
“garden.” If you want to see a garden, he said, drive down Boom Bridge
Road right now.
“That's a garden,” he said.
Lewis said he hoped his 3-month-old son would one day work with him on
the farm, one of four remaining dairy farms in town. Tearing up, he
said his father told him before he died to do the best he could “and
let the rest go to hell.”
“Please, ladies and gentlemen, stand behind me and don't let this
happen,” Lewis said.
Housing
Problems Are Far From Over
Hartford Courant
By GAIL MARKSJARVIS
August 5, 2007
This is what you call "contagion."
With revelations throughout the past week that the housing recession is
intensifying and infecting stock and bond investments, as well as
lending practices, investors have focused on what could go wrong.
"Recession chatter is surfacing," said Merrill Lynch economist David
Rosenberg.
With homeowners still facing mortgage adjustments of an extra 5 or 6
percentage points on their mortgage interest rate, consumers could face
more foreclosures and struggle so much with monthly payments that they
will cut back sharply on purchases.
There was evidence of that in last week's consumer spending data. On an
annualized basis, spending was up just 1.3 percent - the lowest number
recorded in a year. Meanwhile, analysts worry that businesses could cut
back, too, if they have fewer avid customers and have to spend more to
borrow money - an outgrowth of today's nervous lenders.
"It is kind of scary," said Peter Anderson, chief investment officer
for RBC, a part of Allianz SE, a German insurance company. "I am
normally very bullish, but you have to be careful here. These are real
dangers here."
Even as market indexes rose Wednesday, for example, investors were
selling the stocks on the New York Stock Exchange by 3 to 1. That is
called bad market breadth - a lot more selling than buying, and an
indication that investors are leery of most stocks. Financial
stocks in particular were in decline, and more hedge funds revealed
subprime-related messes. Analysts also estimated that the insurance
company American International Group Inc. had lost between $1 billion
and $2.3 billion on subprime mortgage-related securities.
Financial stocks are down more than 8 percent for the year, and are
declining worldwide as institutions as far away as an Australian hedge
fund choke on U.S. mortgage investment problems.
Meanwhile, the Case-Shiller index of home prices for May was released
during the week, and showed housing prices down 2.8 percent over the
past year nationally, and as much as 11 percent in Detroit. The stocks
of homebuilders and mortgage companies have dropped about 60 percent
from their highs. On Wednesday, investors knocked the stock of Beazer
Homes USA Inc. down as much as 42 percent when a rumor surfaced that
the company was going to file for bankruptcy. The company denied it and
the stock ended the day down 18 percent.
Rumors were flowing throughout the week as investment bankers and
traders headed to Internet sites such as dealbreaker.com and
wallstfolly.com for insight.
The good news last week was that Citadel Investment Group, a giant
hedge fund, said it would buy most of the assets of the injured Sowood
Capital hedge fund. The bad news, which wasn't lost in Internet
chatter, was that Sowood has been considered an outgrowth of the
Harvard hedging brainpower that has been lauded and copied by pension
funds and wealthy individuals during the last few years.
Also causing a buzz was the revelation that credit default swaps
(bonds) for some of the nation's premier investment banking firms have
been trading like junk.
The banks, such as JPMorgan, got stuck in a downturn of confidence,
agreeing to loan billions of dollars for leveraged corporate buyouts
involving private equity firms, and then not being able to unload the
obligation--as planned--to bond investors. The total obligation to the
nation's premier banking institutions could total about $310 billion,
according to T. Rowe Price bond analysts.
"That could leave the burden on their balance sheets," Anderson said.
Also troubling, he noted, was increasing evidence that the lax lending
which caused a mess in mortgage loans also has been happening in
commercial loans, too - with lenders tossing more loans to developers
than their property has been worth.
With the tap turned off on the flow of easy money, and caution now
well-entrenched on Wall Street, Merrill Lynch strategist Richard
Bernstein told clients last week not to expect the good old days of
effortless borrowing to return for five years.
And he warned stock investors not to ignore the message bond markets
are sending about the risks to investors. Investors buying high-yield
bonds are now seeking yields about 1.5 percentage points above the
levels they accepted just a couple of weeks ago.
"There is no more argument about contagion," Rosenberg said. Investors
are demanding higher yields on risky bonds from the U.S. and in
emerging markets too.
"The reappraisal of risk means that lending growth is going to pull
back and this will have macro repercussion," Rosenberg said. He noted
news that Nomura is thinking about pulling out of the mortgage market
entirely and Wells Fargo, one of the largest U.S. mortgage lenders, is
shuttering its subprime wholesale lending business.
Meanwhile, Rosenberg, who started predicting outcomes like these in
2004 as consumer appetite for risky mortgages grew, said he thinks the
housing troubles are far from over. He noted that housing
affordability continues to deteriorate, even though unsold homes on the
market keep mounting. Unsold inventory of single-family homes has
risen to 8.7 months' supply from 6.5 months' supply at the beginning of
the year. The build-up in unsold homes has not risen as fast since
1990, a severe housing recession.
Meanwhile, as mortgage delinquencies build among people with bad credit
and even those who were considered more stable borrowers, he notes the
problems have just begun. Billions of dollars in mortgages are
yet to reset to higher levels.
"If you thought that the $111 billion of mortgage rollovers created
some indigestion in the second quarter, look out because they balloon
to $126 billion in the third quarter and $138 billion in the fourth
quarter," Rosenberg said.
And in the middle two quarters of 2008, there will be another $322
billion in resets.
Open space
challenged in Byram
Greenwich TIME
By Michael Dinan, Staff Writer
Published July 30 2007
Advocates of a proposal to create more affordable housing in Greenwich
are challenging the notion that a 4-acre parcel in Byram that's
critical to the plan is off-limits because it serves as open space.
"You can't just say it's off the table," said Sam Deibler, director of
the Commission on Aging, which has endorsed the Greenwich Housing
Authority's plan to create more than 200 affordable units in town. "I
think you have to look at it and use responsible criteria to review it
and ask yourself, 'Do we make a change in this case?' "
The housing authority is calling for construction of 224 new units for
seniors and working families in central and western Greenwich, through
rebuilding on one property the housing authority owns and another it
leases, and on the wooded 4-acre lot that is owned by the town.
Neighborhood leaders from western Greenwich have spoken out against
developing the 4-acre parcel, located south of the Post Road near
Western Junior Highway. The land is a rare piece of open space in a
densely settled area, they say.
Housing authority Executive Director Tony Johnson challenges that
characterization, describing the property as "scrub woods" that serve
no recreational purpose in western Greenwich.
"That space has not been used as park space, not as hiking space and
it's not even practical for that use," Johnson said.
But leaders from a group that calls itself the Western Greenwich
Community Coalition say it's still important not to develop the woods.
The group includes leaders from the Byram Neighborhood Association,
Chickahominy Neighborhood Association, Pem-berwick Community
Association, Northwest Greenwich Association, King Merritt Community
and Glenville School PTA.
"If you don't consider that (4-acre parcel) open space, then you can't
say the Pomerance property is open space or the (Montgomery) Pinetum or
anything else in town," said Sylvester Pecora Jr., president of the
Chickahominy Neighborhood Association. "I mean there's woods all over
town that we own. Why are you picking on Byram? Why should we have to
accept the housing when no one else in town will?"
According to Town Planner Diane Fox, property becomes classified as
open space one of two ways. Either the town, through the Department of
Parks and Recreation, asks for the designation under state statutes, or
it's designated as open space through a deed restriction when the town
acquires the property, Fox said.
It isn't clear whether the parcel under dispute falls into either
category, Fox said.
"Based on our files, it doesn't show as dedicated open space," she
said. "Parks and Recreation may have something else in their files, but
we don't have anything here. If there is a deed restriction, I don't
have any records of that."
Parks Director Joseph Siciliano could not be reached for comment.
The designation "protected open space" does not itself block
development. Under a 1963 state law designed to protect against rampant
development, "protected open space" is simply assessed at the value it
has according to its current use rather than fair market value based on
its development potential. Yet it's not easy to undo an "open space"
designation once it's in place, Fox said.
The way to change an open space designation depends on how it was made
in the first place, Fox said.
If the designation was made by the Planning and Zoning Commission
through a petition, then changing it would require a public hearing,
Fox said. If it was made under state statutes, then any designated open
space that's taken away must be replaced in kind, she said.
In any case, Johnson intends to obtain a lease on the property and
build 34 units of workforce housing there. Developing the parcel is key
to the larger plan, according to Johnson, since it will spread out
overall costs across a greater number of units. The housing authority,
which is not a town department, hasn't asked Greenwich officials for
municipal taxpayer dollars to help pay for construction.
According to Johnson, the land fails to meet much of the criteria that
municipalities consider in designating open space. Those include
whether the lot provides recreational and educational opportunities,
scenic vistas or street scapes, and if the area provides a buffer
between urban infrastructure and residential neighborhoods.
"They want to say it's a 'buffer.' I would say, a buffer from what?"
Johnson said. "On one side you have a hill that comes to the Post Road.
On the other side we have a baseball field and across the street from
us we have Putnam Green."
Pecora said such arguments are designed to single out Byram for
additional affordable housing.
"What is it with the western end of town?" Pecora said. "What, it's a
place that you can throw everything that no one else wants?"
Meanwhile, Johnson said the housing authority is seeking approvals for
the first phase of its overall plan. The agency plans next month to
file an application to put a 21-unit addition onto McKinney Terrace,
Johnson said. The addition will serve as temporary housing for seniors
dislocated when a central Greenwich property, Quarry Knolls, is razed
and rebuilt to accommodate more units. In The
Region | Connecticut When
Good Causes Collide
New York TIMES
By LISA PREVOST
Published: February 4, 2007
IN the past 18 months, Christopher and Margaret Stefanoni have made few
friends and many enemies. Since announcing that they want to replace
their house in a shoreline neighborhood of Darien with an affordable
housing complex, the couple and their neighboring opponents on
Nearwater Lane have warred across yards, through the media and in
multiple lawsuits.
So when the town’s Environmental Protection Commission recently
approved the Stefanonis’ application for a permit to build 13 units of
senior housing (including four affordable apartments) on an acre
adjacent to marshland, Mr. Stefanoni was rather surprised by the
margin, 4 to 1. “When I found out the degree to which I won, I was
humbled,” he said. “The members of the commission went by the book.”
The Darien Land Trust was not so impressed. Two of the 178 acres that
the nonprofit trust owns throughout the town are next to the
Stefanonis’ house. After publicly objecting to the project’s potential
impact on their property’s tidal wetlands, the trust’s 22-member board
voted unanimously to appeal the commission’s decision in Superior
Court.
That challenge irks Mr. Stefanoni, who called the opposition “so
hypocritical.” A pipe carrying stormwater runoff from Nearwater Lane
has dumped pollutants into the tidal area for years, he noted, but the
trust has not spoken out. A lawyer for the trust said that was because
the all-volunteer organization had only recently learned of the
detrimental impact of the pipe. Mr. Stefanoni has a different theory.
“The reason they’re fighting is because it’s affordable housing,” he
said.
The Darien scenario is a familiar one in Connecticut, where the
Affordable Housing Appeals Law frequently pits developers and
affordable housing advocates against environmentalists and wetlands
commissions. The result is often years of litigation — and slow
progress on construction of affordable units.
The law gives developers of affordable housing a density bonus,
regardless of local planning and zoning restrictions, in towns in which
less than 10 percent of the housing stock meets the state definition of
affordable. Developments qualify for the bonus if at least 30 percent
of the proposed units are set aside for buyers earning no more than 80
percent of the state’s median family income (currently about $81,000).
Because the housing law does not supersede wetlands regulations,
however, projects proposed in environmentally sensitive areas have to
meet the same permitting criteria as everyone else. Local wetlands
commissions, then, often come under intense pressure to scrutinize
these projects carefully.
“The structure of the law puts the focus on the environmental issues
right from the beginning if the town wants to oppose it,” said Timothy
Hollister, a lawyer who frequently represents affordable housing
developers. “The towns realize that if they want to stop an affordable
housing project, the environmental issues are the way to do it.”
Some developers complain that towns tend to be overzealous in their
application of wetlands regulations to affordable housing proposals.
A wetlands-permit application for an 8,000-square-foot home on a
two-acre lot is likely be approved, said Neil Marcus, a lawyer who also
represents developers. “But if, say, you want to cover the same size
foundation so that it’s four 2,000-square-foot apartments, or six
1,250-square-foot apartments, you will find out that most inland
wetlands agencies will find that to be a significant impact to the
wetlands. They seem to apply a different standard.”
But town officials and environmental groups justify a more rigorous
review for high-density projects by pointing out that such projects
usually make use of more of the site — with parking lots, for instance.
“Many applicants stretch the intent of the affordable housing appeals
law in order to put units where they don’t belong,” said Natalie
Ketcham, the first selectwoman in Redding, where the conservation
commission recently rejected a proposal by one of Mr. Marcus’s clients
for 10 houses, 3 of them affordable, on 14 acres on Route 53.
When these showdowns wind up in court, Mr. Hollister estimated,
affordable housing developers win about a quarter of the time.
One well-known case involved the Wilton wetlands commission’s rejection
of an AvalonBay Communities development because of the potential threat
to spotted salamanders. The case went before the state Supreme Court in
2003 and resulted in a ruling that reined in local wetlands boards.
Wetlands commissions “are not little environmental protection
agencies,” the court ruled, and do not have jurisdiction over wildlife
that is not directly beneficial to wetlands and waterways.
As for Darien, its environmental commission held four public hearings
and heard from eight experts before concluding that the stormwater
treatment system for the Stefanonis’ proposed complex actually exceeded
town requirements. But the Land Trust, beset by doubts, felt compelled
to challenge the decision.
“Darien is 98 percent developed,” said Shirley Nichols, the group’s
executive director, “and our mission is to preserve and protect the
remaining pieces of open land.”
Affordable housing advocates say the state is losing its work force
because young adults can no longer afford to live in Connecticut. State
Senator Andrew Roraback, a Republican from Goshen, agrees, even though
he sponsored an amendment last year to repeal the affordable housing
law. It failed 17 to 14, but the senator is trying again this year.
“There is no more critical need in my district than for affordable
housing,” said Mr. Roraback, “because New Yorkers, whom we love, have
driven up property values to a point where natives are priced out of
the market.” His district covers 15 towns in the state’s northwestern
corner, an area that appeals to second-home buyers and young families
priced out of the Westchester market.
The problem with the existing law, Mr. Roraback said, is that it runs
up against towns’ attempts to meet a second critical need, for open
space.
A legislative proposal drafted by a coalition of business, housing and
governmental leaders represents an attempt to make these two needs more
compatible. The coalition, called HOMEConnecticut, is suggesting a
series of state-financed incentives for municipalities to designate
areas for high-density housing.
Towns would receive payments from the state for the total number of
units possible in the designated zones, and bonuses would be paid when
building permits are issued. Towns would also be reimbursed for
additional education costs associated with the families living in the
units.
“The idea is to get the production up and avoid some of the costly
court battles,” said Mr. Hollister, who sits on the campaign’s steering
committee. However, the incentive program is not expected to replace
the current housing law, he emphasized, but only to provide a second
option. The existing law, he explained, is “meant to remain in the
background,” reminding towns that if they don’t choose sites for
affordable housing on their own, a developer may do it for them.
RENTAL MARKET
STORIES AROUND THE COUNTRY
Struggling Landlords Leaving Repairs Undone NYTIMES
By MANNY FERNANDEZ and JENNIFER 8. LEE July 15, 2009
As property owners run into trouble paying their mortgages,
neighborhoods around New York City have been witnessing a disturbing
consequence: small and large apartment buildings are being abandoned in
a state of disrepair, leaving tenants in limbo without basic services
or even landlords.
In the Bronx, anybody can walk into the four-story building at 422 East
178th Street. Someone took the front door off the hinges and sold it
for scrap metal. Drugs have been sold out of vacant apartments.
“A nightmare,” said Cesar Guzman, 29, who lives in the building. “I
can’t describe it as anything else.”
In Brooklyn, a woman at 76 Newport Street said the landlord disappeared
this year and stopped collecting rent, so she stopped paying it. A
19-year-old man in Apartment 1F has become the unofficial
superintendent, sealing holes in ceilings with cardboard and duct tape.
The two landlords of those buildings were in foreclosure in 2008 and
2009, and have earned a distinction of sorts: They own properties on
the city housing agency’s annual list of the most poorly maintained
apartment buildings in New York City. Of the 200 properties on the 2008
list, at least 77 were in foreclosure from January 2005 to October
2008, according to data from PropertyShark.com.
Many of these landlords, particularly those who bought in recent years
when the real estate market was at its peak, are struggling to make
mortgage payments, let alone pump thousands of dollars into buildings
for repairs. Elected officials and tenant advocates place much of the
blame for the distress of multifamily apartment buildings not on
landlords, but on the lenders who financed many of those now in
default, saying the loans for the properties were based on shoddy
lending practices and unrealistic projections of rising rents.
Rafael Cestero, the commissioner of the city housing agency, the
Department of Housing Preservation and Development, told a City Council
committee in April that a “small but significant proportion” of
multifamily buildings bought in recent years may be over-leveraged,
meaning their debt is unsupportable by the income generated by the
rents.
Many of these over-leveraged buildings — the agency does not have
precise numbers — are made up of low-income tenants in rent-regulated
or subsidized apartments. International developers and private equity
firms have borrowed hundreds of millions of dollars to buy buildings
with rent-regulated units in the belief that they could profit by
replacing existing residents with higher-paying ones, a trend tenant
advocates call predatory equity.
The owner of the building at 422 East 178th Street is a real estate
investment company called Ocelot Capital Group. Ten of Ocelot’s 25
properties in the Bronx were placed on the city’s worst buildings list
in 2007 and 2008, racking up 5,000 serious and immediately hazardous
housing maintenance code violations.
Fannie Mae, the government-controlled mortgage-finance company, bought
the loans Deutsche Bank Berkshire Mortgage made to Ocelot for 18 of
Ocelot’s 25 buildings, totaling $29 million from 2006 to 2007. Fannie
Mae has now acknowledged that the loans did not meet their underwriting
standards at the time of origination.
Mr. Cestero said in an interview that the poor conditions created by
overleveraged buildings was nowhere near the widespread abandonment of
the late 1970s and early ’80s, which turned some neighborhoods into
urban wastelands. But he said the conditions not only threatened
tenants’ health and safety, but risked destabilizing entire blocks. As
a result, he said, the agency had become more aggressive in tracking
the buildings, making emergency repairs and working with lenders to
find new, responsible owners, as he said the agency was doing with
Fannie Mae on the Ocelot buildings.
“We are very concerned and continue to be concerned about the overall
problem that Ocelot represents in the city, where you have multifamily
buildings in some state of financial distress,” he said. “If that
financial distress is not corrected quickly, you will ultimately end up
with physical distress.”
Tenants have grown frustrated waiting for repairs. Fannie Mae, which
initiated foreclosure proceedings in March on the 18 Ocelot properties
for which it had purchased loans, is only able to make repairs in those
buildings for which a court has appointed a receiver. Residents at one
run-down Ocelot building sued the landlord, persuading a judge to
appoint an independent administrator to make repairs.
Ocelot, which described itself in a 2007 Deutsche Bank press release as
building a portfolio of subsidized, “income-producing real estate,” has
become a kind of phantom. Its Web site is defunct. It used to have a
suite in a Madison Avenue office tower, but it was evicted for
nonpayment of rent earlier this year. “The owner is making no attempt
to repair the buildings or fix the violations or make them decent
places to live,” said Mr. Cestero, whose agency has so far paid for
roughly $850,000 in emergency repairs in the 25 buildings, money Ocelot
now owes the city.
Rachel Arfa, Ocelot’s president, did not return phone calls seeking
comment.
For Ocelot tenants in the Bronx, life has been far from ordinary.
At 1744 Clay Avenue, residents have endured winter days without heat
and hot water. The super has not been paid in about three months;
tenants took up a collection to buy building supplies. On Crotona
Avenue, the occupants of one apartment abandoned it last year after
parts of the ceiling collapsed, leaving many of their belongings
behind. It remains vacant, a small-scale disaster zone of leaky pipes
and caved-in walls and ceilings. Tenants in the building and other
Ocelot properties use knives, scissors and screwdrivers to open doors
without locks or doorknobs.
“This is some MacGyver stuff,” said Kim Payne, 43, who lives at 422
East 178th Street. “People shouldn’t have to live like this.”
Tenants and elected officials have raised concerns about Fannie Mae’s
role in the Ocelot buildings, and they want Fannie Mae and the city to
keep the buildings affordable to low-income families.
“Fannie helped create this problem and they have an obligation to solve
it,” said Senator Charles E. Schumer, Democrat of New York.
Mr. Schumer and tenant advocates are outraged that Fannie Mae has
allowed Ocelot’s defaulted mortgages to be sold on an eBay-style
auction Web site called DebtX. They fear an Internet auction will
attract buyers more interested in turning a profit than in improving
conditions.
“We are glad that Fannie Mae is working with H.P.D. on this serious
issue,” said Dina Levy, director of organizing and policy for the Urban
Homesteading Assistance Board, which has been assisting Ocelot tenants.
“However, Fannie Mae’s plan to sell the distressed debt through a Web
auction opens the door for more speculation, more over-leveraging and
more suffering for tenants.”
Kenneth J. Bacon, executive vice president of housing and community
development at Fannie Mae, said the company was committed to putting
the buildings in the hands of a responsible owner, and that it was
moving forward with foreclosure proceedings while also pursuing the
Internet sale to expedite the process of finding a new owner. Fannie
Mae has spent hundreds of thousands of dollars on safety-related
repairs, and is prepared to spend hundreds of thousands more, the
company said.
“When you inherit a situation where things are wrong, you go in and fix
it,” Mr. Bacon said.
Tight Mortgage Rules Exclude Even Good
Risks
NYTIMES
By DAVID STREITFELD
July 11, 2009
BOSTON — Inna Komarovskaya was ready to do her part to revive
the economy: She found a “really cute” condo to buy.
Despite a good credit score, a six-figure income and an ample down
payment, Dr. Komarovskaya, a recent dental school graduate, could not
get a loan. Her mortgage broker told her she ran afoul of new rules
requiring two years of sufficient tax returns from some home buyers,
instead of only one.
“Everyone says this is a buyer’s market, but they wouldn’t let me buy,”
said Dr. Komarovskaya, 30. “It’s not fair.”
Not fair, perhaps, but far from unique, brokers and agents say. The
readiness of banks to sell foreclosed properties has led to rising home
sales in some areas. But the traditional housing market, the one that
involves willing buyers and sellers, is still dead, with transactions
lower than they have been for decades.
The recession is the major reason sales are dragging, of course, but it
is not the only one. As Dr. Komarovskaya found, buyers once viewed as
perfectly qualified are being denied mortgages.
Brokers and bankers say that in past decades, the credit markets would
almost certainly have accommodated many of these people.
“The credit pendulum is stuck at ‘stupid,’” said Lou S. Barnes, an
owner of Boulder West Financial Services, a Colorado mortgage bank. “I
am turning down loans every day that my grandfather in his Ponca City,
Okla., savings and loan in 1935 would have been happy to make. And he
was tough.”
The denials are occurring for a wide array of reasons: the buyers’
incomes are adequate but irregular; they are self-employed and take
many deductions, reducing the taxable income on which lenders focus;
their credit scores are below the cut-off point, which has been raised
drastically; their down payments are less than 20 percent.
Housing usually leads the country into a recession, which certainly
happened this time, and also leads it out — which will not happen in
2010, the real estate industry contends, without stronger efforts to
thaw the market.
No one is advocating a return to the lax lending standards of 2006,
when buyers with no income or documentation could get loans. But many
people say they believe lenders and the government, in correcting the
excesses of that era, have gone too far in the other direction.
Fannie Mae, the government-controlled company that buys mortgages, is
so dominant in the lending market that its rules set the standard. It
recently toughened its policies, saying it would count only 70 percent
of the value of stocks and mutual funds when calculating a buyer’s
assets. Previously, that figure was 100 percent.
A Fannie spokesman, Brian Faith, said tighter regulations screened out
those unprepared to be owners.
“One of the important lessons learned in the past few years is that it
is not enough to help a borrower own a home,” Mr. Faith said. “We must
also help ensure that they will be able to stay in the home over the
long term.”
Mortgage brokers say those who are being rejected for loans are often
entrepreneurs who are used to taking risks. “They are chomping at the
bit to get into this market, but are forced to the sidelines,” said
Stuart Fraass of Guaranteed Rate Inc. “If you’re self-employed, you
have virtually no chance of getting a mortgage now.”
Mr. Fraass was unable to help Raghbir Singh, a real estate investor who
owns a gas station in Dover, N.H. Mr. Singh tried to buy a $301,000
house for himself and his family with 10 percent down and excellent
credit, but was rejected. “It was unfair,” Mr. Singh said. “I’m a good
risk, but I’m forced to rent.”
Lately, the continued deep-freeze in the traditional market has to some
extent been veiled by the brisk sale of foreclosed houses. In April,
distressed transactions made up nearly half of all existing house and
condo sales, the National Association of Realtors said. In May, they
were a third.
That means traditional or so-called move-up sales, where the parties at
both ends of the transaction are individuals instead of banks, are
limping along at an annual rate of about three million, the lowest
figure in a quarter-century.
“Without further action, we’re not going to stabilize,” said Steve
Murray of Real Trends, a Denver research group. “The real estate
recovery will take 10 or 12 years.”
There are plenty of plans to unlock the market.
Members of Congress are proposing to extend and enlarge an $8,000
credit for first-time buyers, which is due to expire in December. One
bill would extend the credit to all buyers through next June. Another
would extend it to all buyers through 2010. A third bill would expand
it to $15,000 for all buyers.
Some economists, noting that tax incentives helped stoke the boom, say
these proposals should be shunned. “When do you decide enough is
enough?” said the housing consultant Ivy Zelman. “I don’t want to feed
the drug addict with more drugs.”
The continuing deterioration in traditional real estate can be seen in
the market in Massachusetts, where the economy, as measured by the
unemployment rate, is better than in the nation as a whole.
Yet sales of single-family homes in Massachusetts in May were tied for
the lowest level for the month in the 22 years since reliable
statistics were first assembled, according to Timothy M. Warren Jr. of
the Warren Group, which collects real estate data. Condo sales were
only marginally better.
As bleak as those numbers may be, they do not fully convey the troubles
here in the upper half of the market. In towns where the median home
price is above $500,000, sales during the first five months of the year
were 21 percent below the level of 1990, when the state’s population
was smaller and the local economy equally in crisis.
Real estate agents, always optimistic, had looked for some recovery
this spring, the strongest season in the Northeast. Mr. Warren said he
was more pessimistic, but was disappointed anyway. “There’s a lot of
pent-up demand, but it takes nerves of steel to buy,” he said.
Dr. Komarovskaya, the rejected dentist, tries to be philosophical about
missing out on that two-bedroom condo she wanted in the Dorchester
neighborhood of Boston. She understands that after years of mortgage
abuse and fraud, the rules had to be tightened.
But what might be an inevitable process in the larger economy is a
burden on her personal finances.
“Renting is a waste of money,” she
said. Having no choice, she has dropped plans to buy and signed a new
apartment lease.
A commentary
on the housing crunch - only place to find a place to live w/o rent
is...jail? Westport man jailed for not paying
rent
DAY
Posted on Dec 12, 8:09 AM EST
NORWALK, Conn. (AP) -- A Westport man with a history of skipping out on
his rent in several Connecticut towns has been sentenced to two years
in prison. Sixty-three-year-old Roger Negri pleaded guilty in
Norwalk Superior Court this week to a reduced charge of second-degree
larceny for stiffing his landlord in Norwalk out of three months rent.
Authorities say Negri and his wife were evicted from apartments in
Darien, Stamford and New Canaan for not paying their rent before moving
to Norwalk. His wife, Desiree Wahlquist, was also arrested and is
facing identical charges.
Negri also pleaded guilty to first-degree larceny in October to settle
allegations that he failed to pay $20,000 in rent to several Darien
landlords from 2004 to 2008. Is
It Better to Buy or Rent? Time to Buy? The Conversion of a
Renter
NYTIMES
By DAVID LEONHARDT
Published: May 28, 2008
For the last few years, I have been an evangelist for renting.
I’ve told my sister-in-law and her husband that they would be crazy to
abandon their reasonably priced one-bedroom rental in Brooklyn. When
two of my colleagues were moving to Los Angeles, I e-mailed them a
spreadsheet that helped persuade them not to buy a house there. That
same spreadsheet was the basis for an article in 2005, when I argued
that “renting has become a surprisingly smart option.” Last spring —
like any good evangelist, comfortable with repetition — I wrote a
similar article.
The case for renting has been simple enough. House prices rose so high
in the first half of this decade that you could often get more for your
money by renting. You could also avoid having a large part of your net
worth tied up in a speculative bubble.
All this time, I have been a renter myself, first in the New York
suburbs and then in Manhattan. But my wife and I will be moving to
Washington this summer. And the housing market has, obviously, changed
quite a bit since our last move in 2005. Nationwide, prices fell 14
percent from early 2007 to early this year, as Standard & Poor’s
reported Tuesday. Home prices almost certainly still have a way to
fall, but they’re now well below their peak.
So my wife and I began our search with open minds, willing to consider
renting or buying. We ended our search by signing a contract to buy a
house.
This is the story of my conversion.
•
One of the big lies of the real estate business is the idea that
renting a home is tantamount to throwing money away. It’s a useful
fiction for real estate agents, because they make vastly bigger
commissions on house sales than rentals. But the comparison isn’t
nearly so straightforward for the rest of us.
Renting involves one obvious, recurring cost that can never be
recouped: the monthly rent check. Buying, on the other hand, involves
multiple expenses, some of which aren’t so obvious. On top of closing
costs, there are repairs, property taxes, mortgage principal and
mortgage interest. (The mortgage-interest tax deduction reduces this
last cost but doesn’t eliminate it.) When you own, you also lose the
ability to invest your down payment elsewhere, like the stock market.
Of course, owning also brings benefits that have nothing to do with
money. You can settle into your home, confident that no landlord will
kick you out. You can repaint the walls and redo the kitchen. All else
being equal, owning seems far preferable to renting.
Knowing all this, my wife and I were willing to buy a house even if it
was ultimately going to cost us a bit more than renting. We just
weren’t willing to have it cost a lot more than renting.
Over the last several years, I’ve come to like a simple,
back-of-the-envelope way to compare the costs of renting and owning.
You find two similar houses, one for sale and the other for rent, and
divide the sale price by the rent over a 12-month period. You can call
the result the rent ratio.
The concept will probably sound familiar to stock market investors.
It’s the real estate market’s version of a price-earnings ratio — a
measure of how expensive an asset is, relative to the underlying
economic fundamentals. Like a P/E ratio, the rent ratio provides
something of a reality check.
Throughout the 1970s, ’80s and ’90s, the average rent ratio nationwide
hovered between 10 and 14. In the last few years, though, it broke
through that historical range and hit almost 19 by the time the housing
market peaked, in mid-2006.
And while home prices — and rent ratios — have always been higher on
the coasts, they reached whole new levels recently. In the Washington
area, the ratio went above 20. In Boston, New York, Los Angeles and
south Florida, it topped 25. In Northern California, it approached 35,
higher than it had been in any city, at any point on record.
In concrete terms, a rent ratio above 20 means that the monthly costs
of ownership well exceed the cost of renting. At current mortgage
rates, for example, a $500,000 house would typically bring monthly
expenses of about $3,000 (taking into account taxes, repairs, a typical
down payment and, yes, the mortgage deduction). When the rent ratio is
20, that same house could be rented for only about $2,000 a month.
There are two problems with buying a house in this situation. The
first, plainly, is the extra $1,000 you’re paying each month for the
privilege of owning, on top of the thousands of dollars you spent on
closing costs. The second problem is that a rent ratio above 20 is a
good indication of a bubble. When the prices of houses get out of line
with the competition’s prices — that is, those in the rental market — a
correction is coming.
The question facing my wife and me was whether we were entering the
market before the correction had gone far enough. I really didn’t know
what the answer would be. So as we looked at houses, I started
calculating rent ratios.
In the neighborhoods where we were looking, two-bedroom condominiums
were selling for $400,000 and being rented for about $2,100 a month,
which makes for a rent ratio of 16. Four-bedroom houses were selling
for $700,000 and being rented for almost $4,000, which makes for a rent
ratio of 15. No matter the price range, pretty much every
apples-to-apples comparison produced a similar ratio.
Historically, this is still a bit high. But it’s very different from
where the market was just a couple of years ago. With house prices
having fallen over the last two years and rents continuing to rise, the
decision became a much closer call. We would now have to spend only a
little more each month for the privilege of owning.
Earlier this month, we found a house that we really liked, and we made
an offer. It was accepted.
I’m still not sure how good our timing was. Based on the backlog of
houses on the market, I fully expect that our new house will be worth
less in six months than it is today. I’m also not sure that we would
have been willing to buy in Boston, New York or much of California,
where the rent ratios remain above 20, according to data from Moody’s
Economy.com.
In fact, if you’re now renting — almost anywhere — and do not need to
move, I’d probably recommend that you wait to buy. The market is still
coming your way.
But it’s O.K. with me if our timing wasn’t perfect. After several years
of reporting on the housing market, I’m convinced that the most common
real estate mistake is viewing a house first as a financial investment
and only second as a home. That’s one big reason we ended up in this
bubble-induced mess.
Most of the time, the decision whether to rent or buy should be based
above all on life circumstances. Do you expect to move again in a
couple years? Or is there a good chance that you’re ready to settle in
— and stop worrying about real estate for a while?
The housing bubble, unfortunately, forced a reconsideration of this
standard, because houses became so overvalued. But they’re slowly
coming back to reality, which means that buying has again started to
make sense for more people. Apparently, I’m one of them. Council reaches agreement for
development of old mill
DAY
By Claire Bessette
Published on 5/20/2008
The City Council reached an agreement Monday with a New York-based
developer, with hope of erasing one of the city's most blighted
properties - the collapsing former Capehart Mill in Greeneville.
POKO Partners LLC of Port Chester, N.Y., will convert the decaying mill
into 250 apartments and add public access to the She-tucket River. The
group formed Capehart Ventures LLC for the proposed $60 million housing
complex at the 11-acre property.
The city doesn't own the mill property, but holds a tax lien of nearly
$600,000 on current owner Foot of Fifth, Inc. - the highest delinquent
tax bill. The agreement calls for the city to turn over the tax lien to
Capehart Ventures, which would file the foreclosure action against Foot
of Fifth.
After the unanimous vote, POKO President Kenneth Olson said he expects
his company to spend the next five to six months doing engineering and
environmental planning, working with the DEP and the federal
Environmental Protection Agency on the environmental cleanup plan for
the property. The
Heart of
Teardown Country
NYTIMES
By CARIN RUBENSTEIN
Published: December 16, 2007
HAVE you ever lived near a teardown in progress? Has it ever been your
daily fate to deal with noise, smells, dirt and construction crews
right next door — only to behold, after endless months, a space-hogging
“mansionization” in place of the petite Cape Cod you used to find so
sweet?
If not, your turn may come sooner than you think. Despite the overall
problems troubling the nation’s real estate market, the New York
metropolitan region has now surpassed Chicago, the former record
holder, to become the teardown capital of the United States, according
to a recent report by the National Trust for Historic Preservation,
which has been tracking the phenomenon since 2002.
Financially speaking, there are far worse fates for a homeowner than to
be the neighbor of a “bash and build.” Love them or hate them,
teardowns generally bolster the resale prices of their neighbors.
Although a lot of people do object initially, Mary Ann Laurita, a
Realtor at William Pitt Sotheby’s International Realty in Westport,
Conn., said that that’s only until they decide to put their own homes
on the market.
“They come to like teardowns when their own house is up for sale,” she
said, “because rebuilds bring the price of their home up.”
Therein lies the reason that the teardown market has proved somewhat
immune in the current climate: while they represent only a small part
of new home sales, that part is at the higher end of the scale.
“Teardowns are doing a little better than overall markets, because most
teardowns are located in highly desirable neighborhoods that command a
premium price and are somewhat easier to sell,” said Walter Molony, a
spokesman for the National Association of Realtors in Washington.
According to the National Trust estimates, New Jersey leads the pack in
the New York metropolitan area, with 75 municipalities recording a
significant number of teardowns. Adrian Fine, director of the trust’s
Northeast field office, in Philadelphia, said that the trust relies
largely on local news reports for its figures.
In New York State, 51 areas had a large number of teardowns, many of
them urban neighborhoods like Fieldston and Riverdale in the Bronx; Bay
Ridge, Gravesend and Park Slope in Brooklyn; Astoria, Bayside, Flushing
and 1/5 other parts of Queens; and Staten Island.
The reason for the region’s newfound pre-eminence in this niche, Mr.
Fine explained, is that it has “a high concentration of communities
with great amenities that are close to Manhattan, with high enough
property values that it makes sense for teardowns to occur.”
Teardowns undertaken by individuals have remained strong, said Brian
Hickey, the founder and president of teardowns.com, an Internet real
estate company begun in 2001 that focuses on homes ripe for demolition.
He cited a 19 percent jump in registrations for new buyers at the site
in the last year.
On the other hand, he said, speculative rebuilding, in general, appears
to have softened to some extent. But several pockets of extreme
affluence seem impervious to any and all negative trends. For instance,
speculators in Greenwich, Conn.; Bedford in Westchester County, N.Y.;
and Old Westbury on Long Island are just as involved in the process as
they’ve ever been.
“The Greenwich teardown market is very, very hot right now, because
there are no vacant lots anymore,” said Dominick DeVito, a Greenwich
builder who has done six teardown projects in the last few years alone.
He characterized Greenwich as the “epicenter of the epicenter” of
teardowns.
“If you want a nice lot in Greenwich,” he added, “you have to do a
teardown.”
Last year, through teardowns.com, Mr. DeVito bought a 2,200-square-foot
house, built in 1947 on two acres in Greenwich for nearly $1.8 million.
The owner, Gandhi Ireifej, had paid $550,000 for the house in 1999 and
had planned to demolish it and rebuild on his own. But he changed his
mind, daunted by the cost and effort involved.
“To get the most value out of the lot,” Mr. Ireifej said, “we decided
to take the money and run, and let builders do it.” (Mr. Ireifej moved
to a larger house, also in Greenwich, that he plans to expand, but he
is also hoping to buy another teardown as an investment.)
Mr. DeVito has nearly finished building an 8,800-square-foot
replacement house on the site. It has five bedrooms, five full baths,
two half baths and a four-car garage. Mr. DeVito plans to put it on the
market in late December for $5.9 million, and he expects to sell it
within 30 days.
A quick sale at that price “is not too far off the mark,” said Betsy
Campbell, a Realtor at Sotheby’s International Realty in Greenwich, who
does not know Mr. DeVito and has not seen his new house. “The market in
Greenwich is definitely up, and it’s driven by new construction,” she
said. Close to 40 percent of her sales are either teardowns or
rebuilds, she added.
When it comes to teardowns in nearby Bedford, “property is so valuable
and so expensive that it’s not cost-effective to build anything other
than high-end properties,” said Joan Keating, a broker there with
Prudential Holmes & Kennedy.
Teardowns have become so common in the area that Ms. Keating often
advertises an older house simply as “a gorgeous site,” and she lists
most such properties twice, both “as land and as a residential home,”
she said. In addition, to persuade buyers to do their own teardown, she
often engages an architect to draw up plans to show what a new house
might look like on the property.
Nina Naqvi, a Realtor at Century 21 in Old Westbury, said most brokers
in high-end areas don’t use the term “teardown” anymore. “It’s not a
proper selling term,” she said. “We call it a ‘rebuild’ or ‘remodel.’
There are a lot of homes on the market like that, but we list it as ‘a
lot available,’ and we say, ‘You can build your dream home on this
lot.’”
These properties are selling well, she said, though prices have come
down slightly.
Caroline Shepherd, an associate broker at Houlihan Lawrence, finds much
the same situation in Bedford. “Teardowns have enormous potential,” she
said, “and people are standing in line for good land with endless
possibilities.” The local real estate market has been “surprisingly
good,” she added, and nearly a third of her business this year has
included some kind of teardown or rebuild.
The same is true in Old Westbury, said Michael Berman, a vice president
of Stewart Senter Inc., a Hempstead construction company that
specializes in houses in the $2-million-to-$10-million range. During
the last year, he said, the company has completed seven teardowns and
rebuilds, all of them ranging from 7,000 to 12,000 square feet.
Although “it’s not the go-go years of a few years ago,” Mr. Berman
said, “we’re still very busy.”
Speculative rebuilders in other parts of the region tell a slightly
less rosy story.
Three years ago, Jonathan Nissman bought a three-bedroom house on two
acres in Pound Ridge, N.Y., for $620,000. He tore down the 1960s-era
ranch and built a 4,000-square-foot four-bedroom with four and a half
baths and a three-car garage. He put the new house on the market
in February 2006 but has yet to sell it, although he recently dropped
the price from $1.65 million to $1.35 million.
“We’d like to move this house,” he said, adding that he has no plans to
do another teardown project.
It is the size of the profit margins required by speculators that has
caused some to opt out, said Daniel McMillen, a professor of economics
at the University of Illinois at Chicago who has conducted a financial
analysis of teardowns in the Chicago area. Builders like to sell for
two or three times the original price, he said, so “the slowdown in the
housing market will slow teardowns being done on speculation.”
But regardless of how quickly a teardown project goes or how much money
the rebuild sells for, the neighbors always take notice. Some will
probably be up in arms about a spate of demolitions destroying the
character of their community; others will be delighted at the prospects
that the new construction will increase their own property values.
After watching the razing of several older houses in the hamlet of
Oyster Bay, on Long Island, irate residents formed a group they called
Save the Jewel by the Bay. It was instrumental in instituting an
18-month moratorium on both demolitions and new construction, which
ended in June, said Kathryn Prinz, a founder. Now anyone planning to
demolish a house built more than 50 years ago must appear before a
review board to get permission.
Gordon F. Joseloff, the founder of a Connecticut online newspaper
called westportnow.com, riled residents two years ago when he
instituted a feature called Teardown of the Day. It includes a
photograph of a property newly proposed for demolition, as well as the
address, the listing details and the sale price.
Mr. Joseloff, who has since been elected Westport’s first selectman
(the equivalent of mayor), believes that his site’s exposure of
teardown properties was what persuaded the town’s Planning and Zoning
Commission to impose a 90-day waiting period on such projects. In
addition, the town has hired a land-use consulting firm to help develop
laws to regulate the size of new houses.
A common reason for resisting teardowns in many municipalities, Ms.
Keating said, citing demolitions in the Bedford area as a case in
point, is that neighbors “assume there is historical value to the
building being taken down, but 90 percent of the time, there isn’t.”
But neighbors can be equally vociferous in their support of teardowns.
Mr. Joseloff says that he has fielded angry calls from Westport
residents who accuse him of “messing with their nest egg” by imposing
size restrictions that will ultimately damage their ability to reap a
substantial profit from the sale of their homes.
Frank J. Mottola Jr., the Building Department’s director and the zoning
officer for the Borough of Tenafly, N.J., said, “Neighborhood groups
spring up only when we attempt to curtail the use of land in their
area.” He receives several teardown applications each month, he said,
and almost every one is for a much larger home.
“Our Planning Board grappled with this, to put a limit on the new
construction so it doesn’t appear out of scale for the neighborhood,”
he explained. But, he added, “people look at their home as more of an
investment than they used to, and they don’t want their development
rights curtailed.”
Teardown sales have been increasing in Tenafly during the last few
years, and are likely to persist. “There’s no more land being produced
in Tenafly,” said Marlyn Friedberg, an owner and broker at Friedberg
Properties, which has offices in Tenafly and five other locations.
About half of her sales are now teardowns, she said, and such houses
are sold “in ‘as is’ condition, or ‘as value in the land.’”
Yet a certain ambivalence remains, no matter where the teardowns are
occurring. As Ms. Laurita, the Westport broker, put it, “Buyers like
charm, but charm is not so easy to live with.”
A Place For The Elderly, But Big Scale
Would Lower Prices Of Farmington Units
By JESSICA MARSDEN | Courant Staff Writer
July 16, 2007
From the road, all that is visible of the Linden Ponds development in
Hingham, Mass., is the gatehouse.
Just past the entrance, the scale of the project becomes clear. There
are two clusters of buildings, each several stories tall. A vast
construction site at the end of the main road serves as a reminder that
this is only the halfway point for the project, slated to be completed
gradually over the next several years.
When it is complete, Linden Ponds will be home to more than 2,000
retirees, some active, some elderly. They will move into apartments,
but the development will offer assisted living and nursing to residents
who can no longer live independently. Along with the promise of "aging
in place," still-active residents will be able to take advantage of a
multitude of on-site recreational activities as well as off-campus
trips.
Linden Ponds, south of Boston, and the 18 other developments operated
by Erickson Retirement Communities are among the largest such entities
in the country. In fall 2008, Erickson hopes to start construction on a
similar complex in Farmington.
The company, based in Maryland, has pioneered a financial structure
that aims to make "continuing care" available to middle-income
Americans, with an entrance fee that is fully returnable and relatively
low monthly fees. To make such a structure work, its communities are
significantly larger than most.
If it succeeds in its bid to move into Farmington, the company will
change the face of retirement living in Connecticut. Erickson would not
be the state's first continuing care retirement community - there are
more than a dozen across the state - but would almost certainly be the
largest, by far. And its lower fees would make its many amenities more
affordable to Connecticut residents, many of whom see such communities
as desirable, if pricey, options for retirement.
"By having it this size, you don't have to be rich to live here," said
Mark Hunter, development director for Erickson.
Unprecedented Size
Among Erickson's selling points to skeptical towns such as Farmington
is that it would boost the tax rolls without adding much to the cost of
services in surrounding communities, chiefly because it does not
directly add to school enrollment. But the sheer size of the facilities
may crank up local costs because of a domino effect: Older residents
leave their homes in town to move into an Erickson facility, and young
families with children replace them.
These issues are sure to come up in Farmington, where opponents of the
company's plans for the Krell Farm have already made their voices heard
at local planning meetings.
Industry experts could name no facility in Connecticut larger than the
one proposed by Erickson - or even close. Among about a dozen
communities in the state that are members of the American Association
of Homes and Services for the Aging, none has more than a total of 500
units, said Steve Maag, director of assisted living and continuing care
for the organization.
In addition to its 1,500 apartment-style units, Erickson plans to build
a 300-bed assisted living and nursing care facility in Farmington.
"I would be surprised if there is anybody that's anywhere close to that
in Connecticut," Maag said.
Heritage Village, an active-adult community in Southbury, has 2,580
condominium units, but provides "totally independent living," according
to sales administrator Joyce Upson. While the community has recreation
facilities and 24-hour security, it does not operate restaurants,
stores or a full schedule of activities for residents, and those who
need nursing care must either arrange for in-home care or leave the
community, she said.
The average age for residents is in the low 70s, Upson said, compared
to the late 70s or early 80s at Erickson facilities.
The unprecedented size of the proposed Erickson community is troubling
to some in Farmington. The first meeting to consider the zoning changes
needed for the site drew a large crowd on June 25, and residents have
expressed concerns about the influx of population, traffic and added
demand for town services.
Erickson, in its local presentations, has said it will not burden the
town, not only because of the lack of children but also because it
would provide a one-stop shop for recreational activities as well as
care. Residents would have little demand for local services for the
elderly, company representatives argue.
But Hingham's experience paints a more complicated picture. A majority
of Linden Ponds residents moved to the community from houses in
Hingham, which led to rapid turnover in the neighborhoods. There was
already growth in the number of schoolchildren, but Town Administrator
Charles Cristello said it has accelerated somewhat since Linden Ponds
opened.
Emergency services have also seen additional demand since Linden Ponds
opened. Fire chief Mark Duff said his department makes one or two
visits to the community each week for emergency medical calls. The new
tax revenue has allowed the department to add another ambulance, but
Linden Ponds is in a dead zone for the department's radio
communications, Duff said. An upgrade is needed, and the town is
currently negotiating with Erickson over funding for the project, he
said.
"It's a work in progress," Duff said.
Village In A Town
The Farmington community would employ more than 1,000 people when it is
completed, and would add construction jobs for the estimated seven
years of "build-out." Though residents would be able to take care of
most of their basic needs on-site, local stores and restaurants would
get a boost from the influx of new residents, said Scott Hayward, an
Erickson regional vice president based in Massachusetts.
Erickson is banking on the idea that its offerings will appeal to some
of the 225,000 elderly residents living within a 25-mile radius of the
town.
For Ben Pettersson, one of the first residents of Linden Ponds, a
primary attraction of the community was its location in Hingham, where
he has lived since 1959. When the facility opened in 2004, Pettersson
was active and healthy enough to maintain his home, though he was
tiring of the maintenance work involved.
Pettersson, 74, now occupies a one-bedroom apartment in Linden Ponds,
which has allowed him to stay involved in his activities in the town.
He teaches computer classes for Hingham seniors, and also introduces
new Linden Ponds residents to the area with a tour of restaurants,
stores and churches. Staying in Hingham has kept him close to his two
daughters and his grandchildren, who live in Hingham and Hanover, Mass.
"I've never regretted it," he said.
Erickson officials describe Linden Ponds as a close analogue of the
proposed community in Farmington. The Hingham facility is about halfway
completed, with 800 residents in place. Within its walls, the community
offers residents the choice of four restaurants, a library, a
convenience store, a fitness center and an all-weather swimming pool. A
pharmacy will open later this year, and the medical staff will grow
from two full-time doctors to five or six when the complex is
completed, along with a number of part-time specialists.
The buildings are all linked by weatherproof walkways, so residents can
reach any service without setting foot outdoors. The grounds themselves
are intensively landscaped with walking trails for residents seeking
fresh air.
A high-definition TV in one of the lounges made it possible to see July
4 fireworks "as though you were looking through a window," Pettersson
said. Recently arrived Ruth Diezemann said residents at Linden Ponds
can now play simulated golf on a new Nintendo Wii video game system, a
gadget more likely to be marketed to their grandkids, but apparently
popular with Erickson folks as well.
Middle Income?
Erickson markets its aim to make this level of services available to
"middle America" with a financial structure somewhat different from
that of many continuing-care retirement communities, company officials
said.
Traditionally, many have required entrance deposits that are mostly or
entirely non-returnable, and fixed monthly fees that spread the costs
of assisted living to all residents whether they needed the additional
care or not. Erickson, by contrast, returns the entrance deposit to
residents or their heirs when they leave, years later, without interest.
The monthly charges are "fee-for-service," so the cost rises when a
resident moves into assisted living, and many amenities come at an
extra charge.
"Our goal is to meet the needs of the middle-income senior," said Rick
Grindrod, Erickson's president for health and operations.
Nationwide, continuing-care community residents typically have
household incomes of more than $75,000 a year, said John Krout, a
professor of aging studies at Ithaca College in New York. The median
annual income for an Erickson household is $42,147, the company
reports. That figure is still significantly higher than the national
median income for households headed by a person 65 or older, which is
just over $26,000, according to the U.S. Census.
At Linden Ponds, the entrance deposit ranges from $156,000 to $449,500,
depending on the size of the apartment. The monthly fees range from
$1,327 to $2,304 while residents are in independent living. When the
assisted living and nursing facility opens next year, it will probably
charge between $3,500 and $8,000 a month, depending on the level of
care required.
Erickson requires that its residents have at least $130,000 in assets
above the entrance fee, as well as a monthly income that is at least
1.5 times the initial monthly fee. A resident who runs out of money can
use part of the entrance deposit to cover costs. If that is fully
depleted, Erickson maintains a "Benevolent Care Fund." The company said
no one has ever been forced to leave an Erickson community because of
lack of money.
Erickson's monthly fees tend to be at the middle or lower end of the
spectrum, while its entrance fees are comparable to those of similarly
structured facilities, said Maag, at the American Association of Homes
and Services for the Aging.
As a result, an Erickson facility in Farmington could help fill a gap
documented in a new study on long-term care needs, done for the state,
which showed that not everyone who would want to move into such a
community could afford to.
"People just have expectations that they're not going to be able to
achieve," said Julie Robison, a University of Connecticut professor and
a lead researcher in the study.
But while Robison said Erickson's cost structure is "more flexible"
than that of many communities, she questioned whether the income
requirements were truly "middle income" for an elderly population, as
Erickson advertises. Few Connecticut residents have more than $25,000
to spend annually on their care, she said.
For Pettersson, one of Erickson's attractions was the security of the
returnable deposit. He will be able to pass on a legacy to his
children, and receiving the cash deposit back will be simpler for his
heirs than having to sell his house, he said.
But that day should be far in the future. Pettersson said he has only
gotten healthier since moving in to Linden Ponds. He is on medication
to manage his diabetes, but he credits a combination of herbs and
stress-reducing tai chi for his high level of mobility and activity.
"I plan on being the oldest resident they have," he said.
------------------------ Still Not Cheap
A developer's Farmington proposal is part of a national model aimed at
remaking the face of housing for the elderly with giant complexes,
lower basic costs and separate pricing for nursing and assisted care.
Some sample prices from the firm's complex in Hingham, Mass.:
One bedroom, one bath, with balcony
Entrance deposit: $246,000
Monthly fee (one person): $1,598
FULTON
Two bedrooms, one bath, with bay window
Entrance deposit: $264,500
Monthly fee (one person): $1,843
JACKSON
Two bedrooms, two baths
Entrance deposit: $310,500
Monthly fee (one person): $2,126 Group Sees Progress In
Affordable Housing;
Funds Appropriated For
Incentive Payments
By JEFFREY B. COHEN | Courant Staff Writer
July 4, 2007
An effort to encourage towns and cities to work with developers to
create more affordable housing won a partial victory in the recently
concluded legislative session.
The legislature decided to give incentives to municipalities that
create high-density housing zones and approve permits in those zones,
appropriating $4 million for technical assistance and incentive
payments. Lawmakers also created a study group to report on
affordable housing needs and goals by Feb. 1, 2008.
The bill's backers hoped legislators would approve money to reimburse
additional school costs that towns racked up as a result of the new
housing. They were also looking for project-based rental assistance
payments to help developers make housing affordable. Both of those
measures failed.
David Fink, a spokesman for the effort spearheaded by the Partnership
for Strong Communities, said the group made real progress.
"If we were going from New York to California, we made it to Colorado,"
Fink said.
Advocates say that the state's housing prices increased 66 percent from
2000 to 2006, that the state is losing its 25- to 34-year-old residents
at alarming rates, that the number of mid-sized, affordable housing
units is decreasing, and that households earning the median income are
unable to buy homes at the median sales price in 154 of the state's 169
municipalities.
The state already has affordable housing laws on the books that
advocates say are valuable tools but that critics say make it easy for
developers to muscle municipalities into denser housing complexes that
bring increased costs.
The bill was an initiative of the Partnership for Strong Communities
and is the product of more than a year of study among a broad-based
coalition of developers, housing advocates, real estate agents,
municipal officials, politicians and bankers.
The group initially asked for $60 million from the state's budget
surplus and Fink said the need for affordable housing incentives may
quickly exhaust the money the effort did get.
"I'm not sure how far that $4 million is going to go, but that's OK,"
he said.
"We got the housing issue onto the front burner," Fink said. "That's
not because we're good. That's because everybody - once confronted with
it - realized, wow, this is an issue." Bill
would offer incentives for
affordable homes
Angela Carter, Register Staff
02/24/2007
-HARTFORD — Housing prices in the state have skyrocketed 3½
times faster than wages since 2000, and in that same time frame,
Connecticut has lost more 25- to 34-year-olds than any other state.
But the public-private coalition HOMEConnecticut offered a solution
Friday at the state Legislative Office Building: House Bill 7149. The
legislation proposes to generate 15,000 new single-family homes and
48,000 new multifamily units over 15 years and pay for itself in the
process.
Under the bill, municipalities could voluntarily create "housing
incentive zones" or areas where higher-density residential development
is allowed. Eighty percent of the units would sell or rent at the
market rate, while 20 percent would be affordable to households at or
below 80 percent of the area median and some at 50 percent.
The legislation would give towns control over the appearance, location
and amount of development. It would also provide incentives to cover
additional costs incurred for educating children who live in the zones.
Municipalities would receive one-time incentive payments of $2,000 for
each multifamily unit and $5,000 for each singe-family unit once
construction begins.
Funding would come from a combination of sources: A portion of the 2007
state surplus, $60 million, to cover technical assistance to cities and
towns and nonprofit developers and to offer infrastructure loans at 1
percent interest over 15 years; the state’s Housing Trust Fund; and
authorization for the Connecticut Health and Education Financing
Authority (CHEFA) to issue bonds or other obligations for the one-time
incentive payments, net education cost reimbursements and subsidies for
families earning up to 50 percent of area median.
Statewide, the median income is $81,000 and using that figure, a
household could earn up to $65,000 to qualify for an affordable unit in
the incentive zone model. The U.S. Census Bureau’s benchmarks for 80
percent of median income vary in each region of the state.
James Finley Jr., executive director-designate of the Connecticut
Conference of Municipalities, testified Friday in favor of the bill at
a joint session of the Select Committee on Housing and the Planning
& Development Committee. Finley warned that the state’s lack of
affordable housing hurts teachers, public safety workers, laborers and
young professionals who graduate from college but are unable to rent or
buy starter homes.
"We think this is a powerful economic development tool for the state of
Connecticut," said Deputy State Treasurer Howard Rifkin.
Liz Verna, president of Verna Builders, said developers are confident
there is a market for the units.
Nicholas Perna, an economist for Webster Bank, said the program is
capable of generating enough sales and income tax revenue to cover its
costs but without action by the legislature, the state will become
"even more uncompetitive" in housing prices.
"Housing must be affordable to workers or they will leave Connecticut
and businesses will follow," Perna said.
Witnesses
Line Up to
Support Bill On Affordable Housing; High Costs Are Driving Many
From The State, lawmakers Are Told DAY
By Kenton Robinson
Published on 2/24/2007
Hartford — Alex Feliciano is exactly the sort of person Connecticut
can't afford to lose. And yet, he says, he can't afford to stay.
The 28-year-old father of two, an accounting assistant who is getting a
degree at Central Connecticut State University, says that though he
wants to stay in his home state, he may be forced to join the exodus of
young professionals who are leaving at the rate of some 10,000 a year
because they can't find affordable housing for their young families.
“I'm going to college so I can acquire the skills a Connecticut
employer requires,” Feliciano told legislators Friday. “I don't want to
leave Connecticut, but I want the same things my parents wanted for
their children. I'm looking for a small slice of the American pie.”
Feliciano was one of a long line of witnesses — bankers, builders,
business people and affordable-housing advocates — who came to the
Capitol Friday to lobby for the passage of a bill to address that
problem.
The proposed legislation, put together by HOMEConnecticut, an
initiative of the nonprofit Partnership for Strong Communities, would
create a voluntary program that would encourage municipalities to
develop “housing incentive zones” to build affordable housing in
densities that would allow developers to achieve economies of scale to
bring down the cost of the housing.
Under the program, 80 percent of the units built would be at market
rate and 20 percent would be affordable for residents earning 80
percent of the local median income or less.
The program would set aside $60 million from the anticipated state
budget surplus for fiscal year 2007 to
