Housing Doom

For more than two years, the skeleton of the Elevation Chandler project has stood near the Chandler Fashion Mall, a monument of sorts to the late, great real estate market in Phoenix.  Now it looks like Chandler could have another "ghost development" just down the road: [Thanks M!]

Construction equipment is off and workers have left what was supposed to be a 21-acre project called Chandler Piazza, a Tuscan-style mall with a hotel, shops, restaurants and offices.

The Scottsdale-based owner didn’t return phone calls Wednesday, but those involved in the project, including city officials, said work stalled on the construction site at the southeast corner of Frye and Ellis roads in Chandler.

Plans for Chandler Piazza - owned by Chandler Piazza LLC, according to the Maricopa County Recorder’s office - included a four-story Westin-brand Element hotel, a two-story, 77,000-square-foot office building and 31,000 square feet of retail and restaurant space.

The project isn’t officially dead yet:

Read the rest of this entry »

M is feeling a bit smug on this one.  He thought sales would be up year-over-year this summer, and it looks like he’s right. Unlike the reports done by Dr. Jay Butler of ASU’s Realty Studies, these figures are based on MLS sales, and do not include trustee sales. [Although Kudos to Butler for now separating those out.]

Here’s Doom’s unofficial figures for June, and may vary slightly from official MLS figures: [Thanks M!]

ALL MLS

Active     52,269
UC            8,313
Sold          5,699    5,439 June ‘07   +4.7% YOY
——————————————————————————–

——————————————————————————–

——————————————————————————–

QC and Maricopa only:
 
Active    2,565
UC            807
Sold          519      226 June ‘07   +129%  YOY

It’s important to remember a couple of things.  Even with a slight YOY improvement, these numbers remain below even 2001 numbers. [6164 homes sold June 2001] The market now is largely foreclosure driven- many, many of these sales are REOs or short sales, so the market continues to be especially difficult for resellers. M pointed out the difference between the old "owner occupied market" and a "foreclosure market".  M had the following comment on price drops:

Read the rest of this entry »

The usual comment whenever the failure of large financial institutions is discussed is "it’s too big to fail".  There has been an assumption that the really big lenders are immune from failure, as Uncle Sam would never allow that to happen.  That’s what makes Treasure Secretary Henry Paulson’s comments this morning so interesting:

He said the perception should be avoided that an institution is "too interconnected to fail or too big to fail" and added that "we must improve the tools at our disposal for facilitating the orderly failure of a large, complex, financial institution."

More specifically:

Knowing that Fed support is readily available could cause institutions to willingly take on too much risk, as they did in the run-up to the subprime mortgage crisis, he said.

"For market discipline to constrain risk effectively, financial institutions must be allowed to fail."

The discussion was sparked by problems in the investment banking world, but note Paulson said "financial institutions" not "investment banks".

Read the rest of this entry »

A lot of Americans have planned on using their home equity to help fund their retirement.  There might be a problem with that plan:

With real housing prices falling at a rate of approximately 1.5 percent, the Center for Economic and Policy Research predicts that most Baby Boomers will be financially devastated if the housing crunch continues to 2009.

The study, entitled The Housing Crash and the Retirement Prospects of Late Baby Boomers, tracks wealth for families headed by people aged 45-54 from 2004 through 2009. Findings are that the destruction of housing wealth since the mid-year 2006 is more than $4 trillion in real wealth or as much as $50,000 for every homeowner in the country. Home prices continue to lose as much as $300 billion a month in household wealth, although that number appears to be slowing.

What this amounts to is that primary residence owners had a median net income of $74,000 in 2004 with a net worth of $230,000. Loss calculations are projected to be between 17.8 percent and 37.4 percent. In other words, median boomer households could enter 2009 with as little as $144,000 in total net worth, according to the authors.

Blanche Evans of Realty Times finds their conclusions too pessimistic:

The authors based their worst-case scenarios on the negatively-biased Case-Shiller Indexes. From April 2007 to April 2008, the Case-Shiller 20-city index says home prices were down over 15 percent.

Constrast that outcome with figures from the Office of Federal Housing Enterprise Oversight, which oversees Fannie Mae and Freddie Mac. OFHEO says home prices have receded 4.6 percent from April 07 to April 08.

If housing losses were to extend at the OHFEO [sic] rate through 2009, boomer net worth would be reduced to about $208,000, a loss of $22,000.

Another point that is not included in the report is what would happen if housing turned around, as the National Association of Realtors expects it to.

In its latest forecast, the NAR says the aggregate median existing-home price is likely to decline 8.4 percent in the first half of this year, and then begin to stabilize in the second half before rising 4.4 percent next year to $213,900.

Just to tilt the numbers, let’s throw in all of NAR’s losses last year — 1.4 percent. So if you add negative 1.4 percent and 8.4 percent and then the 4.4 percent gain, you have a two-year net loss of 5.4 percent. Your net worth is now about $218,000, or $12,000 less than it was in 2004. And that’s with no raises, no other investments and no other savings.

Plus, housing always recovers to produce one to two percent gains above inflation levels.

Evans believes Case-Shiller to have a negative bias, and uses NAR projections for a more objective view? And where did she get "housing always recovers to produce one to two percent gains above inflation levels"?  [I suppose this graph of Robert Shiller's is too negative for her.]

Here’s hoping Evans isn’t using the NAR’s [and her own] projections to plan for her own retirement- she could come up a little short.

With so many properties in foreclosure these days, it seems that lenders can’t always keep straight who’s delinquent and who’s not:

A Nigerian couple who are victims of a mortgage mix-up filed a lawsuit Monday in Williamson County [Texas] against the company that removed everything they owned from the house, including family heirlooms, furniture and even food from the pantry.

Bobo and Joy Dickson are suing Field Asset Services Inc. for failing to return their property. The lawsuit seeks money for the lost property plus compensatory damages, and called the company’s conduct "malicious, callous and wanton."

This was especially surprising as the Dicksons had barely moved in:

In early May, the Dicksons bought a house that had been headed for foreclosure. All the paperwork was completed.

But the foreclosure process apparently wasn’t halted, and the couple came home from work May 14 to find all their possessions gone.

Read the rest of this entry »

It’s Monday, and we are waiting to see if the markets continue to hammered this week.  In the meantime, here’s a new glimpse into the fraud that helped bring on this collapse: [Thank you Vegas RE]

So just how extensive was the fraud anyway?  Feel free to chime in with your four cents worth [Trite phrase adjusted for inflation.] or share your links ideas and stories- anything housing related.

This is an open thread, so the floor [or whatever you happen to be on at the moment] is yours.

Foreclosures are up in the Phoenix area- way, way, up.

Last June Doom looked at the Notice of Trustee Sales [NOTs] and Cancellation of Notice of Trustee Sales [CNOTs] issued in Maricopa County. [Phoenix area] Our data includes both residential and commercial property.

There was a record 2325 NOTs issued is June 2007.  As of last Frday, there were 6668 NOTs issued in Maricopa County for the month of June, and there is still one business day left. At the height of the S&L crisis in the 1980s, the record month for NOTs was March 1988 when 1431 NOTs were issued.  Here’s the historical graph:

Read the rest of this entry »

Just when I think I’ve seen every possible home buying incentive:

PALM BEACH GARDENS, Fla. - She has tried nightclubs and online dating sites, but now a 42-year-old single mother is looking for love where everyone else’s heart is breaking: the real- estate market.

After a year of trying to sell her four-bedroom home and eight years of singledom, Deven Trabosh is offering her Florida home and a shot at marrying her on the Internet.

"Marry a Princess Lost in America," Trabosh wrote in the ads she posted on eBay and Craigslist last week. She describes a life of romance and travel and a home that features vaulted ceilings, upgraded tile and a soaking tub in a gated community with a pool and tennis courts.

"I’m struggling . . . I don’t want to lose my house, and I want to find somebody," said Trabosh, who changed her name in the ad to Traboscia to keep people from finding her in the phone book. "So I came up with this dream plan because I’ve always dreamt about being a fairy-tale princess."

Read the rest of this entry »

In January of 2007, Doom was reporting that a mortgage lender that had gone out of business had apparently left files and computers in the office.  Our principal worry at the time was the potential theft of personal data.  John however, pointed out another problem with sloppy paperwork earlier this week to me:

Looks like that blizzard of paperwork and files (electronic and otherwise) lost in the meltdown of the subprime originators could conceivably come back to bite bondholders in a way we didn’t anticipate. The short story is that default servicing gets problematical if you’ve lost all the paperwork on a mortgage, and this happened a lot in the chaos of crumbling initiators and over-complicated structured finance.

The quote below from this OpEdNews story also suggests that there could be horrible problems in Q-election with their QSPEs. Once again the story from years back about Fannie’s sloppiness with SFAS 140 is rearing its ugly head.

Here’s the OpEdNews article:

"The investors have another problem: the delay in assigning particular mortgages to particular investors means there was no "true sale"of the security (the home) at the time of securitization. A true sale of the collateral is a legal requirement for forming a valid security (a secured interest in the property as opposed to simply a debt obligation backed by collateral). As a result, the investors may have trouble proving they have any interest in the property, secured or unsecured.

This is not an uncommon problem.  Back in February Bloomberg reported:

Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven’t been able to prove they own the mortgages. The confusion is another headache for U.S. Treasury Secretary Henry Paulson as he revises rules for packaging mortgages into securities.

“I think it’s going to become pretty hairy,” said Josh Rosner, managing director at the New York-based investment research firm Graham Fisher & Co. “Regulators appear to have ignored this, given the size and scope of the problem.”

So who is hurt when these foreclosures don’t go through? According to the OpEdNews:

Read the rest of this entry »

On our masthead is the quote from Churchill "A nation that forgets it’s past is doomed to repeat it."  By extension we could add "A nation that doesn’t learn from the mistakes of other nations is doomed to repeat their mistakes."

An article from today’s Vancouver Sun should sound familiar to Doomers.  It is discussing how the Victoria housing market is cooling- and the article could have been lifted from a 2006 Arizona Republic, Las Vegas Review Journal, Sacramento Bee, etc. [Bubbleheads know the cast of characters]

VICTORIA — Real estate sales are down in the provincial capital. The number of sales and the total value are lower, and the real estate industry is seeing signs that Victoria’s housing boom is over.

 "We are definitely seeing a shift in the marketplace, although it’s certainly not a time for panic," said Victoria Real Estate Board president Tony Joe. "For people hoping home values will be plummeting any time in the future, I don’t think that’s going to be happening any time soon."

Joe said the market has been cool so far in 2008, but that’s in comparison to 2007, an "exceptionally busy year when we exceeded all the numbers." "We’re also looking over the last five or six years and what we’re finding is things are just coming back to normal," he said.

Compare that to this 2006 USA Today article discussing the Phoenix market:

Read the rest of this entry »