NOTE:
nothing on this page is to be considered official information;
opinions expressed are those of the webmaster.. NEWS WE THOUGHT
YOU'D LIKE
TO KNOW ABOUTAND THE HOUSING
PAGE INDEX Beginning thoughts...and a view fromoutsideor "across the pond." How about
the value of Snoopie's dog house - is that in decline, too? NEWS 2013
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.
Insight: Housing improvement
may herald return of U.S. workforce mobility
Reuters
By Steven C. Johnson and Margaret Chadbourn
May 13, 2013, 3:27am EDT
NEW YORK/WASHINGTON (Reuters) - When David Pendery, a corporate public
relations specialist, decided to move his family from Colorado to
Illinois this year for work, his biggest worry was whether he would be
able to sell his home quickly.
It took just three days.
"We certainly thought selling our house would take longer," said
Pendery, who started in February at Kerry Ingredients, a flavoring
provider for the food and beverage industries.
Pendery's experience may be on the extreme side, but his case may be a
sign of a revival in one of the historical advantages of the U.S. job
market: the ability of workers to go where the jobs are.
For much of the past five years, falling house prices effectively
locked people in their homes, since many were "underwater" - owing more
on their mortgages than they could raise by selling.
At the same time, double-digit unemployment across much of the nation
meant there were few jobs to move for anyway.
That may be changing. While far from their 2006 peak, home prices in
major metropolitan areas have been rising since early 2012. If that
persists, it should make it easier for Americans to move and for
employers to match job seekers with available jobs, lowering the
jobless rate and increasing overall economic productivity and growth.
"Until the real-estate market picked up, people wouldn't even consider
a move without the certainty that they could sell their homes," said
Jerry Funaro, vice president of global marketing for TRC Global
Solutions, a domestic and international relocation service based in
Milwaukee.
"Companies are now more inclined to make offers since we're seeing real
estate markets across the country coming back," he said. "Last year,
the pace of business started to improve and that momentum has continued
in 2013."
Housing added to growth last year for the first time since 2005, and
single-family home prices recently notched their biggest annual rise
since mid-2006.
Increased hiring, meanwhile, pushed the jobless rate down to 7.5
percent in April, its lowest in more than four years.
In 2013, employers have added an average of 196,000 jobs per month,
although economists say that is still too few to absorb the nearly 22
million Americans who have lost a job, been forced to accept a
part-time position or left the workforce altogether.
SERIOUS DETRIMENT
"The lack of housing mobility has been a serious detriment these last
few years and, frankly, is something we haven't seen much of since the
Great Depression," said Russell Price, senior economist at Ameriprise
Financial Services in Troy, Michigan.
The unemployment rate reached 10 percent in late 2009, the highest in
nearly three decades.
While mobility is not as robust as it was before the crisis, Price said
the economic cycle is "about at the point where these types of
structural employment problems start to fall away."
The U.S. Census Bureau found that the number of people who moved last
year rose to 35.6 million, pushing the overall mover rate to 12 percent
from 2011's record low of 11.6 percent, the first rise in four years.
Long-distance moves ticked up as well.
"It's not a huge gain, but when you consider that for two years, we've
had the lowest migration rates since World War II, any move up is good
news," said William Frey, a demographer at the Brookings Institution in
Washington.
Pendery said his job offer was a "phenomenal opportunity that I just
couldn't pass up," but said he feared a prolonged selling process in
Colorado would make a stressful cross-country move even more harried by
delaying the purchase of a new home.
"No firm is going to offer unlimited temporary housing, and you don't
want too much out-of-pocket expense," he said. It took about a month to
close on a new home in Rockford, Illinois.
According to the National Association of Realtors, it took on average
62 days to sell a home in March, compared to 91 days in March 2012.
REGIONAL VARIATIONS
Of course, housing is far from fully healed. More than 20 percent of
mortgages are still underwater and foreclosure rates remain elevated.
On average, home prices nationally are back at levels seen in the fall
of 2003 but well off their 2006 peak.
Not all regions are booming, either.
Hiring has been strong in energy-intensive industries in places such as
Texas and North Dakota, said Craig Selders, president of Paragon
Relocation, a global relocation firm.
"I myself moved from Houston to Dallas last year and was not worried at
all about selling my home," he said, noting Houston's oil and gas
sector is one of the country's hottest job markets.
Florida and Las Vegas, areas hit especially hard when the housing
bubble burst, still face challenges, several firms said.
And while U.S. growth picked up in the first three months of 2013, some
worry that higher payroll taxes and government spending cuts could slow
momentum in the second quarter.
That is keeping some firms "hesitant and cautious" about moving
workers, said Richard Smith, chairman and CEO of Realogy, owner of the
Danbury, Connecticut-based global relocation firm Cartus, which saw a 4
percent decline in relocations in the first quarter.
Companies "are still relocating employees but perhaps not as robustly
as they would otherwise," Smith said on a recent conference call with
investors. Cartus did see a 10 percent jump in broker referrals,
suggesting things may be improving.
SKILLS MATTER
Tight bank lending standards, cost-of-living variations and a rise in
two-earner families also present difficulties for job seekers, said
Ellie Sullivan, vice president of consulting at Weichert Relocation
Resources in Morris Plains, New Jersey.
Chirag Shah, 29, a radiation oncologist, moved to St. Louis last June
when his residency at a Detroit hospital ended but pulled up roots
again this year when he and his wife decided prices in the upscale St.
Louis suburbs of LaDue and Clayton were too high.
"A single-family detached home in a good school system was bordering on
$700,000 to $800,000," said Shah, who took a new job in Akron, Ohio,
and moved in with family in Cleveland while he hunts for a house. He's
still paying rent in St. Louis and Detroit, where his wife is finishing
her own medical training.
One of Sullivan's corporate clients has tried to address all of this by
luring potential employees with cash for down payments on new homes.
"But these are critical new hires, really high potential talent. That's
not a trend for your average Joe."
Indeed, Joshua Shapiro, chief U.S. economist at MFR, a New York global
consulting firm, noted that a lot of recent hiring has been
concentrated in low-wage industries such as retail, health care and
hospitality as well as temporary employment.
"These are not exactly positions that get people to say, 'Oh wow, I
have this fantastic $7-an-hour job with no benefits, I think I'll sell
my house and move across the country,'" he said.
But Sullivan said things are moving in the right direction.
"We are starting to see a pickup in activity, especially among new
hires," she said. I don't know if it's contributing to hiring across
the board, but I do think it improves mobility, because employees are
not tethered to their houses." When Hope Tramples Truth
By ROGER SCRUTON, Opinion, NYTIMES
March 24, 2013
"...It is easy to trace disasters, in retrospect, to the bursts of
unfounded optimism that gave rise to them. We can trace the subprime
mortgage crisis to President Carter’s Community Reinvestment Act of
1977, which required lenders to override all considerations of prudence
and fiscal rectitude in the pursuit of an impossible goal."
NUMBERS DON'T
LIE - THEY JUST GET MANIPULATED, OR AS MARK TWAIN SAID..."Figures often beguile me," he wrote,
"particularly when I have the arranging of them myself; in which case
the remark attributed to Disraeli would often apply with justice and
force: 'There are three kinds of lies: lies, damned lies, and
statistics.'" Link
to story
WHAT
WAS THAT QUOTE AGAIN? Having taught
statistics in graduate school, and having to have taken it twice
(during my professional planner's course work as well as later at a
different educational establishmen for my PhD) I note that the use of
"median" has signifigance as well as the time gap between the two "
indicators of wealth-type" statistics below, taken from other articles
in this series. In the case of another measure of potential
"advantage" - graduate education statistics - in a recent U.S. Census -
the town with the top spot on the list was not from Fairfield County.
A lack of affordable housing has hit
renters in Connecticut particularly hard over the past few
years, according to an annual report released Tuesday.
The report, HousingInCT2012, published by the Hartford
affordable-housing advocacy group Partnership for Strong Communities,
said that while single-family home prices have declined significantly
since the state's housing bubble burst in 2007, renters are facing
higher costs. It now takes an annual family income of $49,000 to afford
a typical two-bedroom apartment in the state, according to the report,
up from $29,000 less than a decade ago.
Rents in the state are now the sixth-highest in the nation, the report
said, but builders have done little to respond to rental needs. The
state recorded the lowest level of housing built per capita in the
nation last year.
"The lack of production translated into insufficient supply to meet a
growing demand for rental housing," according to the report.
The result has been rising rental costs and a growing problem for
renters, with 52 percent paying more than 30 percent of their incomes
last year for housing. That's up from just 36.5 percent shelling out
the same share of their incomes for rent in 2000.
"More renters are burdened by their home costs, and fewer
municipalities across Connecticut have significant stocks of affordable
housing options," according to the report.
In fact, only 29 of the state's cities and towns have
affordable-housing stock that reached or exceeded the 10 percent
threshold last year. A year previously, 31 of the state's 169
municipalities had reached the threshold. At the same time, the
percentage of renters in the state is rising, going from 30 percent to
33 percent of households in just the past two years.
"That's not just temporary; it's structural," said David Fink, policy
director for the Partnership for Strong Communities, in a phone
interview. "The overarching issue in the state ... is that it seems
like the housing we have is not the housing we're going to need."
Fink pointed out that many homeowners are burdened by their current
properties, despite a drop in real estate prices of nearly 20 percent
during the last few years. The report said 36.1 percent of state
homeowners paid more than 30 percent of their incomes for housing last
year, up from 23.9 percent at the beginning of the millennium. In
Fink's view, both older and younger Connecticut residents are going to
be forced over the next few years to reconsider their housing options.
Older residents, burdened by taxes and heating costs, will be looking
for smaller, more efficient homes near downtowns, while young workers,
facing education debts averaging $25,000, are going the be looking for
similar living arrangements.
"The market always gets what it wants," Fink said. "The question is who
is going to give the market what it wants."
Fink said local communities such as Old Saybrook, East Lyme and New
London are doing just that, allowing for denser, more affordable
housing. Stonington has cleared the way for 14 affordable units in a
44-unit development off Route 1. Others, such as Ledyard, Montville,
North Stonington and Preston, seem to be following suit, he said.
"It's healthier, and some towns are beginning to figure it out," Fink
said. "If the towns allow a little more density, allow smaller units -
energy efficient, near transit - then suddenly you have a real product
to sell for your town."
Fink said towns promoting the types of living arrangements that people
crave will be the ones that maintain the mix of ages and abilities
needed to promote a thriving community full of potential teachers,
police officers, firefighters and other sought-after workers.
"It's just a matter of people recognizing (that) four years ago, when
the markets crashed, the whole world changed," Fink said. "And the
housing market changed along with it." Banks have reduced Connecticut
mortgages by $185 million
Ana Radelat, CT MIRROR
November 20, 2012
Washington -- Five of the biggest U.S. banks have reduced the mortgages
of struggling Connecticut homeowners by nearly $185 million, according
to the latest report by a national settlement monitor.
The loan forgiveness is a result of a $26 billion settlement between
Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally
Financial and the Justice Department and dozens of state attorneys
general, including George Jepsen of Connecticut, who was a chief
negotiator.
"We're succeeding beyond what we expected," Jepsen said.
The banks agreed to the settlement after they were accused of
fraudulent conduct that included "robo-signing" foreclosure documents.
According to a report released Monday by Joseph Smith, the settlement's
monitor, banks are cutting an average of $96,000 from mortgages held by
Connecticut homeowners. To qualify, a mortgage must be "underwater," or
larger than a house is worth.
About 2,500 Connecticut homeowners have already been helped, and 1,600
to 1,700 are "in the pipeline" for loan modifications, and other types
of debt forgiveness, Jepsen said.
Nationally, more than 309,000 borrowers received some form of mortgage
relief between March 1 and Sept. 30, Smith's report said.
"The relief the banks have reported is encouraging," he said in a
statement.
Jepsen said if the banks continue the loan modifications, the total sum
of relief received by Connecticut borrowers will "significantly exceed
our estimates."
But they will account for a fraction of the mortgages in Connecticut
currently underwater. Zillow.com, the real estate tracking company,
found there were more than 156,000 of them in the state as of Sept. 30.
Nevertheless, Jepsen said the banks have decided to "aggressively
implement" the settlement due to "enlightened self-interest." They
realize it's better to "take a 20 or 25 percent haircut" than to
implement a costly foreclosure, he said.
Banks can be 'uncooperative'
Victoria Gowlis, a housing councilor for Catholic Charities in Norwalk,
said the settlement has helped many who have come to her for help.
"It's keeping them in their homes at a reduced mortgage and sometimes a
reduced interest rate," she said.
But she disagreed with Jepsen that banks are eager to write down
mortgages for her clients.
"It's very difficult," she said. "Some are very uncooperative."
Other housing advocates have criticized the settlement because
homeowners who borrowed from other lenders, including Freddie Mac and
Fannie Mae, can't apply for a reduction of their mortgages.
"They are of the mind that if you can't help all of them, you can't
help any of them," Jepsen said.
Another aspect of the mortgage settlement has also been criticized:
Homeowners who have already lost their homes to foreclosure are
eligible for only a $1,600 compensation payment.
"It's rough justice, it's a token," Jepsen concedes.
But he said all of the homeowners who suffered foreclosure in
Connecticut had defaulted on their loans, and that no one in good
standing lost their homes. Those who have lost their homes will be able
to apply for the compensation payments in January.
The settlement also gave Connecticut $27 million to spend on counseling
and other help to homeowners. According to Connecticut's Office of
Policy and Management, more than $21 million of that money has been
spent on the state's Emergency Mortgage Assistance Program, which helps
the unemployed and underemployed make their mortgage payments.
The five banks involved in the settlement must also adhere to new
lending standards.
That will be a big help, said Jeff Gentes, an attorney with the
Connecticut Fair Housing Center.
Gentes said Connecticut is among the states that has sent the most
complaints to the monitor about noncompliance of these new standards, a
sign that housing councilors and others are serious about their roles
as watchdogs over the banks.
Buying House Before The Bust Leaves Family Mortgage Underwater,
But
They Have Plenty Of Company Nearly 25% Of
Single-Family Homes, Condos With Mortgages Have Loans Exceeding Value
Of Property
By KENNETH R. GOSSELIN, kgosselin@courant.com
8:48 p.m. EDT, September 1, 2012
Joe and Siobhan DeGray thought they were doing everything right
when they bought their Newington house in 2007: They found a modest,
two-bedroom starter that they planned to stay in for a few years, then
sell and buy a bigger home as their family grew.
Five years later, their family is larger — by two — but the rest of
their plan fell apart. The housing recession has pushed the value of
their home $26,000 below what they owe on their mortgage. The couple
would have to ante up the difference to sell the property and pay off
their loan.
They're stuck.
"We could afford a larger home," Joe DeGray says. "We just can't afford
to sell this one."
Sign Up For Traffic Text Alerts
The DeGrays are among the owners of 169,000 residential properties in
Connecticut who have "underwater" mortgages — home loans that exceed
the value of the property — as of June 30, according to a report from
zillow.com, the real estate tracking company. That is nearly 25
percent, or one in four, of all single-family houses and condominiums
with a mortgage.
That makes it hard to sell homes, and it could take years for some of
the properties to right themselves.
Job growth in the state, key to a housing recovery, is expected to
remain weak through 2013, according to a forecast last week. Home sales
have edged up, but prices still remain weak. And when sale prices begin
moving up consistently, it could be a slow slog, maybe as little as 2
percent a year, compared with 5 percent or more in a healthy market,
economists say.
Underwater mortgages are affecting a broad spectrum of homeowners, from
those teetering on foreclosure to those who are up to date on mortgage
payments.
"It affects not only those who don't have the wherewithal, but those
who have good jobs, have savings, have opportunities for new jobs, new
homes, a growing family," said Ronald F. Van Winkle, an economist and
town manager of West Hartford. "Their home has a penalty on it. It
keeps people from making normal economic decisions because they don't
want to take a loss."
Being underwater isn't necessarily a problem if you don't want to sell
or refinance, but it can crimp plans for how much you can tap into
equity to pay college bills or fund retirement plans, Van Winkle said.
"Maybe you don't retire because you don't have the equity," Van Winkle
said. "It changes economic decisions not just on the house, but your
lifestyle. It affects all aspects of a person's life."
The roots of the trouble stretch back a decade — a tangle of loose
lending, predatory lending, borrowers simply overextending themselves
to get that dream house right away, and, for some, like the DeGrays,
bad timing.
The DeGrays bought in early 2007, just as the housing market started
coming off its peak. They could easily afford the 1,200-square-foot
house on Joe's salary as a physical therapist and manager of the office
where he works, and on Siobhan's pay as an eighth-grade English teacher.
Now, the DeGrays regret not renting, as they watch friends who
benefited from the home price declines buy houses, helping some them
move into homes the DeGrays themselves long to live in.
"We loved this house," Joe DeGray says, "but now we are starting to
hate it."
More Trouble Ahead?
The percentage of home mortgages underwater in Connecticut has eased
since the beginning of this year, according to zillow.com, but still
remains above the levels of a year ago. Among all states, Connecticut,
at 25 percent, ranks 31st, well below the worst-hit state: Nevada, at
65 percent. Nationally, levels stand at 31 percent.
Zillow.com's report includes all mortgage debt on a property, including
home equity loans and lines of credit. It calculates the difference
between mortgage debt and home values using computer models based, in
part, on market sales activity.
"Connecticut is doing slightly better than the nation as a whole,"
Svenja M. Gudell, senior economist at zillow.com, said. "It's still up
there. One out of four with a mortgage underwater, that is significant
and nothing to take lightly."
Gudell said Connecticut's profile is more worrisome than some states
because 51 percent of underwater properties include additional debt
beyond the first mortgage. And the volume of underwater mortgages that
are seriously delinquent or in foreclosure stood at 11.2 percent in
June, according to zillow.com, higher than the nation as a whole —
pointing to the potential for more foreclosures to come.
Foreclosures and "short sales" — in which a lender agrees to accept
less than what is owed on a property — contribute to holding back a
recovery in prices because they sell for low prices
Across Connecticut, all counties had levels of underwater mortgages in
June that were higher than a year ago, though there has been some
improvement since the start of this year. Hartford County stood at 22
percent as of June 30, compared with 20.5 percent a year earlier and 23
percent at the beginning of this year.
In Connecticut, a little more than half of all properties with
underwater mortgages were below their home values by 1 percent to 20
percent, according to zillow.com. Another quarter of the properties
were under by 21 percent to 40 percent.
Underwater mortgages raise concerns not only for borrowers — and their
ability to refinance or sell — but for neighboring properties, said
Jeff Gentes, managing attorney for foreclosure prevention at the
Connecticut Fair Housing Center in Hartford.
Properties in disrepair eventually sell for less, especially if sold in
a foreclosure or a short sale. That can hold down values of similar
properties in the surrounding areas.
Property owners may neglect needed repairs, with the thought being,
"Why am I going to spend money on the house? Once I'm done, I'm still
going to be 75 grand in the hole," Gentes said.
An Exit Strategy
The DeGrays closed on their house on Feb. 26, 2007, three months before
they were married and just as the local housing market was coming off
its peak. Today, they owe about $216,000.
In April 2011, as the couple were expecting their second child, they
listed the house for $224,000 and within a month, dropped it to
$209,000.
"At that time, we still owed more than $221,000, and we calculated that
$209,000 was the lowest we could sell if for and still cover the
remainder of the mortgage, Realtor fees and closing fees," Siobhan
DeGray said.
The couple has been whittling away at their principal, adding an extra
$100 a month to their $1,733 monthly payment, which includes insurance
and property tax escrow.
The DeGrays' 1912 colonial sat on the market for five months with no
offers. Meanwhile, similarly sized homes in Newington and surrounding
towns such as Wethersfield were selling for between $175,000 and
$185,000. They pulled the house off the market in October, as the birth
of their daughter, Angela, now 9 months old, drew near.
Meanwhile, the family was running out of space fast. They moved
furniture out of their dining room to make a play area for Samantha,
now 2. The furniture included Siobhan's favorite pieces: a hutch and
sideboard that was a wedding gift. Friends are now using it in their
home.
"We thought, 'Do we want a dining room or a place for our kids to
play?'" Siobhan DeGray said. The furniture looks nice in their friends'
house, but, she says, "I should be using it. It's frustrating."
Expanding into the basement isn't an option. The ceiling is just 6 feet
high, and when Joe DeGray stands up, his head is between the rafters.
The DeGrays were hopeful when the government reached a $25 billion
settlement with five major mortgage servicers, including theirs, Bank
of America, that included help for borrowers who were underwater. They
were disappointed to learn that the settlement didn't cover FHA loans
like theirs.
Sitting on their back deck last week, the DeGrays watched Samantha as
she rolled a ball almost as big as she is and, later, colored in a
book. They said they were considering putting the house on the market
in May for either sale or rent. If the house rents, they would move
into Siobhan's parents' house in Wethersfield, wait six months to
establish a rental history, then start looking for house.
They said they won't consider letting the house fall into foreclosure
or seeking a short sale. It would be too damaging to their credit.
The couple said they aren't looking for sympathy. They know they are
lucky to have a home and good-paying jobs. They just want to move on to
a bigger home that they can afford.
"We didn't think, five years later, with a dog and two kids that we'd
still be here," Siobhan DeGray said.
STIMULATED
YET?
Bi-partisan request: Coburn, Baucus, Levin, Grassley and Hatch
want a review of
the program.
Tax cheats got $1.4 billion
in stimulus loans
By Stephen Dinan, The Washington Times
27 June 2012
Wednesday, June 27, 2012 Tax cheats were given $1.4 billion in
government-backed mortgage loans under President Obama's economic
stimulus, and the government doled out at least an additional $27
million in tax credits to delinquents who took the first-time-homebuyer
tax break, according to a government audit released Wednesday.
Under government rules, delinquent taxpayers are supposed to be
ineligible for the mortgage insurance program unless they have reached
a repayment agreement with the Internal Revenue Service. But the
Federal Housing Administration didn't have the right controls to weed
out bad applications, said the Government Accountability Office,
Congress' chief investigative arm.
That meant FHA insured $1.4 billion in mortgages for 6,327 borrowers
who collectively owed $77.6 million in unpaid taxes, or an average of
more than $12,000 each.
The auditors said that as a category, the tax cheats had foreclosure
rates up to three times as high as other borrowers, which meant the
delinquent taxpayers exposed the government to even greater risks.
"In the name of 'stimulus,' the federal government gave mortgage
insurance to thousands of people we knew were tax cheats and had a bad
track record paying their debts," said Sen. Tom Coburn, Oklahoma
Republican, who joined a bipartisan group of other lawmakers to request
the investigation. "The federal government needlessly put taxpayers on
the line to help tax cheats buy homes. Congress needs to ensure that
tax cheats are no longer allowed to take advantage of FHA programs."
In addition to the mortgages, the auditors found that more than half of
the tax-delinquent borrowers claimed the first-time-homebuyers' credit,
worth up to $8,000.
GAO said there is no prohibition against someone claiming the credit,
even though they still have unpaid tax bills. The credit is refundable,
meaning taxpayers can get a check back from the government if the
benefit exceeds their liability. IRS rules generally call for the
agency to subtract any unpaid taxes from the refund, but in three of
the nine cases that GAO analyzed in depth, it said the taxpayers had
declared bankruptcy, meaning the IRS was prevented from docking the
refunds.
The report was the GAO's second study looking at tax cheats and the
stimulus.
In the first report, GAO said thousands of contracts and grants were
paid out under the American Recovery and Reinvestment Act to those with
unpaid tax bills.
Mr. Obama pushed the $831 billion economic stimulus in early 2009 as a
means of bolstering the faltering economy, and promised to use strict
controls to cut fraud and abuse. At its peak in mid-2010, it was
responsible for as many as 3.6 million jobs, but could have funded as
few as 700,000, according to the Congressional Budget Office.
Part of the Recovery Act was aimed at shoring up the housing market,
which included the first-time-homebuyer tax credit and the mortgage
assistance, which let the FHA insure loans at a higher rate in
high-cost housing markets.
About 1.7 million individuals claimed the tax credit, while FHA insured
more than $20 billion in mortgages for 87,000 homeowners, thanks to the
Recovery Act provisions.
Under a White House policy, buyers who are delinquent on their federal
taxes are not supposed to receive the mortgage assistance, unless they
have worked out a repayment agreement with the IRS. But FHA rules don't
prod private lenders to ask for that information, and the FHA doesn't
have a system to work with the IRS to get that information.
Mr. Coburn joined Sens. Max Baucus, Montana Democrat; Carl Levin,
Michigan Democrat; Chuck Grassley, Iowa Republican; and Orrin G. Hatch,
Utah Republican, to request a review of the program.
"The stimulus-spending program was ill-conceived, with far too little
oversight," Mr. Grassley said. "It shouldn't surprise anyone,
unfortunately, that tax dollars have gone to tax cheats. It's another
one of many negative consequences of writing checks without enough
checks and balances."
Compounding the matter, those with tax problems are more likely to end
up in foreclosure. Nearly a third of mortgage holders with unpaid taxes
were "seriously delinquent" on their payments, and 6.3 percent had been
foreclosed - a rate nearly three times higher than homeowners who were
paid up with the IRS.
The Department of Housing and Urban Development accepted the report and
will work with the IRS to try to get access to information that would
help it cull tax cheats, Carol J. Galante, an acting assistant
secretary, said in the department's official response.
She said they also will try to clarify FHA rules so lenders are clear
about the eligibility requirements for loans. Ally’s Mortgage Unit, ResCap,
Files
for Bankruptcy
By MICHAEL J. DE LA MERCED, NYTIMES "Dealbook"
May 14, 2012, 7:47 am
The mortgage unit of Ally Financial filed for bankruptcy on Monday
morning, a move aimed at removing the lender’s biggest obstacle to its
turnaround efforts.
The division, Residential Capital, sought Chapter 11 protection in
federal court in Manhattan. In a news release, ResCap emphasized it
would continue its daily operations without interruption, including
servicing home loans.
ResCap has cast a long shadow over its parent company. The unit was
considered a primary reason Ally failed the Federal Reserve’s stress
test of banks earlier this year.
The mortgage division’s long-awaited filing could lift the biggest
weight from Ally, which has sought to focus on its profitable bank and
auto finance operations. ResCap’s filing is meant to end years of
payouts, totaling billions of dollars, aimed at keeping the business
afloat.
It could also allow the lender to reconsider going public, helping the
federal government to shed some of its 74 percent stake. The Treasury
Department injected about $17 billion into the company, previously
known as GMAC, through three rounds of investments. It is still owed
about $12 billion.
Timothy G. Massad, the Treasury Department’s assistant secretary for
financial stability, said in a statement: “While it is unfortunate that
a Chapter 11 filing became necessary for ResCap, we believe that this
action puts taxpayers in a stronger position to continue recovering
their investment in Ally Financial.”
The division will be kept afloat during its bankruptcy case by a $1.45
billion loan arranged by Barclays and a $150 million credit line from
Ally.
“Since we are owned by the government, and our shareholders are
American taxpayers, putting billions of dollars into a marginal
business didn’t make a lot of sense,” Michael A. Carpenter, Ally’s
chief executive, told DealBook in an interview by phone.
As part of the transaction, the Fortress Investment Group will bid more
than $2.4 billion for most of ResCap’s assets, while Ally will bid for
a $1.6 billion portfolio of mortgages. The two offers will essentially
kick off a court-supervised auction of the mortgage division’s assets,
which could ultimately raise more than the expected $4 billion in
proceeds.
In an unusual move, Ally and ResCap said they had reached a global
settlement of claims between the two. Under the terms of the agreement,
Ally will provide its subsidiary with $750 million in cash to help the
unit pay for potential legal claims.
The pact is aimed at cutting off any argument that Ally should cover
legal claims at the subsidiary. The lender is expected to contend that
ResCap has long operated as an independent unit, with its own board,
and that the settlement should shield it from any additional payouts.
To help smooth out the bankruptcy proceedings, ResCap has reached
agreements with a group of bondholders that currently owns about $781
million of the unit’s debt, as well as plaintiffs suing the business
over 290 mortgage-backed securities put together by ResCap.
Ally has long identified ResCap as one of its biggest problems. The
mortgage unit, formally created in 2005, became one of the biggest
subprime mortgage lenders in the country and was hit especially hard by
the financial crisis.
Under Mr. Carpenter, a former senior executive at Citigroup, Ally has
largely rebounded by focusing on its popular online lending arm and
remaining a major lender to car dealers. Last month, it reported that
first-quarter net income had more than doubled, to $310 million.
Ally added on Monday that, with ResCap now in Chapter 11, it would
pursue a potential sale or spinoff of its international operations,
which include businesses in Canada, Europe and South America.
It is meant to generate proceeds to help pay down the firm’s
obligations to the federal government. Freed from obligations tied to
ResCap, Ally may be free to pursue an initial public offering, a sale
to a private equity firm or some other kind of transaction.
“We are committed to repaying the U.S. taxpayer,” Mr. Carpenter said.
He later added, “The company that remains will be a powerhouse.” Now an official in the Malloy Administration, former First Selectman had this to say on
the subject of Fairfield affordable housing efforts. Developer slams town's lack of
affordable housing
Genevieve Reilly, CT POST
Published 10:42 p.m., Thursday, April 19, 2012
FAIRFIELD -- An affordable housing developer is not only
challenging the Town Plan and Zoning Commission's recent denial of its
application to build an apartment complex on Fairchild Avenue, but
demanding that Fairfield not be allocated any future federal
block-grant funding because its commitment to affordable housing is
"disingenuous."
The TPZ on March 27 unanimously denied the application from Garden
Homes Management to build a 54-unit rental complex that would allot 27
units for low-income renters.
Eight units in the building would be set aside for people earning less
than 60 percent of the statewide median income, $36,120, and another
eight units would be reserved for people earning between 60 percent and
80 percent of the statewide median, or up to $44,950. Another eight
units would be reserved for "very low income" people earning less than
50 percent of the statewide median, or $30,100, and three units for
people with "extremely low income" earning less than 30 percent, or
$18,100, of the statewide median income.
In a letter to Gary R. Reisine, the director of community planning and
development for the federal Department of Housing and Urban
Development, Garden Homes President Richard Freedman said HUD should
withhold future block grants funds for Fairfield because the town's
application for such money has been "disingenuous and misleading."
Freedman cites remarks made by TPZ Commissioner James Kennelly during
the public hearing on the Garden Homes application as he responded to
statements outlining the project's affordable units directly in
response to the need expressed in the strategic plan submitted to HUD
by the town as a condition of receiving its Community Development
grants.
According to a transcript of Kennelly's remarks at the hearing,
provided by Freedman, the TPZ member said: "The town of Fairfield in
its efforts to get that pot of CDBG money from the federal government
knows what the federal government wants to hear about these issues,
especially towns that do have a deficit. Because (in) a very taxophobic
community if there is any way to find federal dollars to bring in to
fix Penfield Pavilion instead of me paying 97 bucks more a month then
we're going to write glowing calls for low-income housing to the
federal government to get the CDBG money. At the end of the day that's
not present at all in our regulations. What you're describing, those
ideals expressed in that application certainly aren't here."
Economic Development Director Mark Barnhart referred any calls for
comment about the town's federal grant application to Town Attorney
Stanton Lesser. Lesser said he had no comment because of the pending
litigation, but added he will meet with the TPZ in the near future.
The town's strategic plan states that a lack of affordable housing is
an issue in Fairfield and one of the objectives is to increase the
supply and availability of rental housing "particularly for extremely
low and very low income residents, through the acquisition and/or
rehabilitation of existing multi-family units." It further states that
"decent, affordable" rental units are a "high priority need for
extremely low and very low income renters in all categories."
In his letter, Freedman said town officials dismissed Kennelly's
comments as "the off-hand remarks of one person." But Freedman said no
other commissioner took exception to the comments, nor did any vote in
favor of the application for the apartment complex. He said several
commissioners repeatedly referred to the project as low income housing.
"One commissioner even saw fit to argue with me when I corrected his
terminology, telling him it was affordable housing," Freedman writes.
He said HUD should give any future Fairfield block grant money to
communities with a demonstrated commitment to providing more affordable
housing. "... I can only conclude that Fairfield's block-grant
application is disingenuous and misleading," Freedman's letter states.
He said of the 22 municipalities in Connecticut that receive federal
block grants, Fairfield has the lowest percentage of affordable units
-- 2 percent -- as measured by the state. The next lowest community,
Greenwich, has 5 percent.
According to the legal appeal of the TPZ's rejection of the project,
the developer said the commission failed to give any valid or proper
reason for the denial, the decision was not supported by the evidence
and is contrary to the interests and needs of the community for
additional affordable housing.
Good,
Stable Housing Gives Students A Big Lift
Hartford Courant (other opinion)
Howard Rifken
February 12, 2012
From Jackson Laboratory to the First Five, from transit investment to
deficit reduction and preschool education — with a large helping of
storm management — Gov. Dannel P. Malloy hasn't slept much during his
first year in office.
Now, he's made the largest investment in housing creation and
preservation in decades, and has declared 2012 the year of education.
These two goals demonstrate the governor's less visible, but equally
vital, ability to make connections between policy areas and develop
coordinated solutions.
The governor has made sure housing is part of the discussion on
transit-oriented development around rail and bus stations; on the
Department of Children and Families' effort to improve our child
welfare system; and on both mental health and correction policies to
improve outcomes and cut recidivism.
The link between housing and education centers on these questions: Can
thoughtful reforms to enhance learning between 9 a.m. and 3 p.m. close
the gap on their own? If children return to a home between 3 p.m. and 9
a.m. that is overcrowded, unaffordable, substandard and located in an
overburdened school district and community with few services, will the
classroom progress be sustainable?
Heather Schwartz, a RAND Corp. researcher found in 2009 that when
low-income students in Montgomery County, Md., were able to live in a
community with many services and a school district with more resources
— because the county had a program that provided affordable homes in
high-income neighborhoods — they raised their reading and math scores,
narrowing the achievement gap considerably.
That option — affordable homes in many municipalities with
high-resource schools and neighborhoods with everything from soccer
leagues to fresh food access — isn't widely available to Connecticut's
low-income residents. Ten percent of the housing stock is affordable in
only 31 of the state's 169 municipalities and they tend to have the
most overburdened school districts and lowest-quality, though still
expensive, homes. The other 138 towns are out of sight and out of reach.
Why are affordable homes necessary for school success? Because more
than half the 400,000 renting households in the state must pay 30
percent or more of their income for housing. That leaves little for
food, clothing, health care and other necessities. Kids in these
households don't necessarily have warm coats for school, their own
bedroom to do homework, a hot meal for dinner or breakfast, and a home
free of mold, dust mites and other allergens.
For the 112,000 renting households that earn less than 50 percent of
the median income and spend more than half that meager income on rent,
the situation is worse. They live in a perpetual state of anxiety that
they will be homeless, there is little food in the house, and parents
have to work too many hours to supervise homework or recreation.
When kids move during the school year — 23 percent in urban districts,
5 percent in suburban schools — they fall behind and are more likely to
fail. Research shows highly mobile children underperform in reading and
math and are more likely to exhibit behavioral problems.
No one is suggesting families living in the state's 31 poorer school
districts and municipalities must move to the suburbs. Their families,
friends and cultural touchstones are in the cities.
That is why we should provide a choice. They, like the fortunate among
us, should be able to move to the communities and schools that work
best for their children. How many of our kids might not have prospered
had we been unable to choose the districts that best met their
particular needs?
On the other hand, we must also improve the schools, and the housing
options, available in our urban centers. There are proven strategies to
accomplish that goal.
Problems can't be solved in a vacuum. Traffic congestion? Create mass
transit, put homes near it, and you'll get cars off the road. The
achievement gap? Fix 9 a.m. to 3 p.m. But don't forget about 3 p.m. to
9 a.m.
Howard G. Rifkin, former deputy state
treasurer and counsel to Gov. William A. O'Neill, is executive director
of The Partnership for Strong Communities, a housing policy
organization based in Hartford. Heather Schwartz will speak a forum on
housing and the achievement gap at 9 a.m. Thursday at The Lyceum at 227
Lawrence St., Hartford. For information, email Laura Bachman,
laura@pschousing.org. Weston
reval coming up...
Drop in housing values to affect municipal budgets Frank Juliano, Staff Writer, CT POST
Published 04:41 p.m., Saturday, January 21, 2012
State to revive
incentive-based
affordable housing program Caitlin Emma, CT MIRROR October 27, 2011
With the need for affordable housing on the rise, along with rental
prices and family homelessness, the state Office of Policy and
Management plans to reinvigorate a program that provides incentives for
municipalities to create low-cost residential units.
Dimple Desai, OPM's community development director, said the agency is
in the beginning stages of revitalizing the HOMEConnecticut Program
with about $1 million left in remaining funds from 2008.
Created by the General Assembly in 2007, HOMEConnecticut took affect in
April 2008, and served as a voluntary, incentive-based land use program
for municipalities looking to build more low-to-moderate income
housing. The General Assembly originally allocated $4 million for
HOMEConnecticut, and the program began as housing prices peaked during
the first half of 2007.
"People weren’t able to afford housing in Connecticut and towns were
recognizing that they needed to be proactive," said David Fink, policy
and communications director for the Partnership for Strong Communities.
The state handed out $2 million in planning grants of up to $50,000
each to interested municipalities in April 2008, only to watch the
housing market bottom out five months later. The state needed to cut
spending and former Gov. M. Jodi Rell rescinded about $1 million from
HOMEConnecticut.
"When Rell rescinded the money, the signal to the municipalities was,
'What happened to this?'" Fink said. "I think [Gov. Dannel P.]Malloy
has recognized that the program is very flexible."
Fink said OPM began to reconsider HOMEConnecticut when Malloy took
office in early 2011. Desai said five municipalities already received
approval for grants, including Old Saybrook, Sharon, Torrington, East
Lyme and New London. Simsbury, Oxford, Windham, Branford and Berlin
have shown interest in the program, as well.
Old Saybrook First Selectman Michael Pace said the $50,000 grant is
being used to try to preserve the population of youth and young
professionals in Old Saybrook.
"The housing prices were starting to drive young people out," he said.
"I thought we needed to take a look and see what we could do to
preserve housing that we thought was attainable."
Towns like Old Saybrook that choose to create more affordable housing
through HOMEConnecticut can create an Incentive Housing Zone by meeting
two requirements. Twenty percent of the units in the zone must be
affordable for those at 80% of the area median income, and the housing
must meet density requirements of six single-family, 10 townhouses or
duplexes, or 20 multifamily units per acre.
Towns can then qualify for planning grant and incentives of up to
$2,000 for each unit allowed to be built in an IHZ, and up to $2,000
for every multifamily unit building permit issued or up to $5,000 for
every single-family building permit issued. Towns may use the incentive
money for any purpose.
Pace said the town is using the funds to promote construction of Ferry
Crossing, a 5.6 acre development of 16 rental units for those
with low to moderate incomes. Construction for the development broke
ground in May. He said the development will help fill Old Saybrook's
lack of affordable housing, which he discovered drove many families to
live in motels.
"Now I think the state is using us as a model," he said.
Fink said HOMEConnecticut serves as a step toward meeting new economic
and demographic needs in a changing market after the burst of the
housing bubble. He said banks will make smaller loans and people will
need to provide bigger down payments on property, pushing the housing
market in a new direction.
"Both demographically and economically the market is demanding more,
dense, smaller units," he said. "Builders are building smaller so it's
easier to afford the down payment, heating cost and transportation
costs. That’s what the market is demanding now and that’s why a program
like HOMEConnecticut is attractive."
The program remains in its beginning stages, however. Harry Smith of
the Office of Planning and Development in New London said the city
adopted an IHZ totaling 73 acres in different areas of the city, but no
plans for construction exist yet.
"I think it’s just a function of the market here," he said. "Nothing’s
been proposed over the last few months."
Demand for affordable housing remains high in some of Connecticut's
poorest cities, as well. Hartford's Housing Authority reported at least
a year-long wait or more for any of their Low Income Public Housing
programs that serve the elderly, disabled and families.
Tim Regan, supervisor of the Intake Department for New Haven's Housing
Authority, said about 5,000 people are waiting for all Low Income
Housing Programs in the city. He said elderly and disabled people wait
about 2 to 3 years and some families have been waiting since 2007.
Outside
Cleveland, Snapshots of
Poverty’s Surge in the Suburbs
NYTIMES
By SABRINA TAVERNISE
October 24, 2011
PARMA HEIGHTS, Ohio — The poor population in America’s suburbs — long a
symbol of a stable and prosperous American middle class — rose by more
than half after 2000, forcing suburban communities across the country
to re-evaluate their identities and how they serve their populations.
The increase in the suburbs was 53 percent, compared with 26 percent in
cities. The recession accelerated the pace: two-thirds of the new
suburban poor were added from 2007 to 2010.
“The growth has been stunning,” said Elizabeth Kneebone, a senior
researcher at the Brookings Institution, who conducted the analysis of
census data. “For the first time, more than half of the metropolitan
poor live in suburban areas.”
As a result, suburban municipalities — once concerned with policing,
putting out fires and repairing roads — are confronting a new set of
issues, namely how to help poor residents without the array of social
programs that cities have, and how to get those residents to services
without public transportation. Many suburbs are facing these challenges
with the tightest budgets in years.
“The whole political class is just getting the memo that Ozzie and
Harriet don’t live here anymore,” said Edward Hill, dean of the Levin
College of Urban Affairs at Cleveland State University.
This shift has helped redefine the image of the suburbs. “The suburbs
were always a place of opportunity — a better school, a bigger house, a
better job,” said Scott Allard, an associate professor at the
University of Chicago who focuses on social welfare policy and poverty.
“Today, that’s not as true as the popular mythology would have us
believe.”
Since 2000, the poverty roll has increased by five million in the
suburbs, with large rises in metropolitan areas as different as
Colorado Springs and Greensboro, N.C. Over the decade, Midwestern
suburbs ranked high; recently, the rise has been sharpest in
communities the housing collapse hit the hardest, like Cape Coral,
Fla., and Riverside, Calif., according to the Brookings analysis.
Nearly 60 percent of Cleveland’s poor, once concentrated in its urban
core, now live in its suburbs, up from 46 percent in 2000. Nationwide,
55 percent of the poor population in metropolitan areas is now in the
suburbs, up from 49 percent.
Poverty is new in Parma Heights, a quiet suburb of cul-de-sacs and
clipped lawns, and asking for help can be hard. The Parma Heights Food
Pantry, which began serving several dozen families a month in 2006, and
now helps 260, draws a stream of casualties from the moribund economy.
Many never needed food relief before.
Like Mary W., 59, who has worked all her life, most recently at a tire
company in Cleveland, and was always the one to remind colleagues to
donate to charity. Now she is the one who receives it.
When she first came to the pantry, “I cried my eyes out,” said Mary,
who asked that her last name not be used because she did not want her
children to know about her financial troubles.
At Vineyard Community Church in Wickliffe, another Cleveland suburb,
Brent Paulson, the pastor, said he had to post an employee in the
driveway the day the church’s food bank was open to coax people inside,
they were so ashamed to ask for help.
In a sign of just how far the economic distress had spread, one
volunteer saw his former boss come to the pantry, Mr. Paulson said.
The Cleveland Food Bank, which serves six counties, doubled its
distribution between 2005 and 2010. “There’s this sense of surprise,”
said Anne Goodman, the director, “this feeling that this has got to be
a mistake. It has got to be a bad dream.”
Calls to the United Way social services hot line from suburban areas in
northeast Ohio more than doubled from 2005 to 2010, outstripping the
increase in cities. “We are seeing a rise in need in places we never
expected it,” said Stephen Wertheim, director of the hotline, First
Call for Help.
Poverty has been growing in the suburbs for years — along with the
population. But the 53 percent increase in poverty far outstripped the
14 percent population increase in the past decade, speeding the change
in their status as upper-middle-class enclaves. They have been
attracting immigrants following construction jobs and families from
cities seeking inexpensive housing as suburbs aged.
Federal vouchers to get poor people into private housing also
contributed, Ms. Kneebone said. Cleveland was No. 15 among the
country’s top 100 metropolitan areas for increase in suburban share of
vouchers.
Urban problems have appeared. In Penn Hills, a suburb of Pittsburgh
where people have always driven, poor residents walking near yards and
bus stops have created trouble with litter, said Alexandra Murphy, a
Princeton doctoral student studying suburban poverty.
Warrensville Heights, a suburb southeast of Cleveland, was pristine
when Fran Matthews moved there in 1987, with good schools, manicured
lawns and middle-class neighbors, she said. Now for-sale signs dot
overgrown yards. Break-ins are on the rise, though crime is still far
lower than in the city. Over all, the suburban poverty rate — 11.4
percent in 2010 — is still far below the city rate of 20.9 percent,
according to Ms. Kneebone.
“Now when you come home, you have to look around before you get out of
the car,” Ms. Matthews said.
The changes have affected the school system, she said, and her grandson
now attends a charter school in Cleveland.
The double punch of the recession and the foreclosure crisis — which
hit Cleveland and its suburbs particularly hard — has dragged
middle-class people down the income ladder. As defined by the Census
Bureau, the poverty line for a family of four was $22,314 last year.
“This community is middle class, but right on the line,” said Brad
Sellers, a retired professional basketball player who grew up in
Warrensville Heights and is running for mayor. “Any dramatic downturn
can send you over the edge.”
The unemployment rate among black Americans was 16 percent in
September, according to the Bureau of Labor Statistics — nearly double
the national rate, a painful statistic in a suburb that is majority
black.
“Where’s that 9 percent?” Mr. Sellers asked. “Not here.”
Some communities resist the idea that poverty exists. When Ann George,
who runs the Parma Heights pantry with stalwart volunteers, speaks at
churches and community gatherings, “I see the skepticism on people’s
faces,” she said. “They say, ‘This is Parma Heights, not Cleveland.’ ”
Other suburbs are adapting. In Maple Heights, Mayor Jeffrey Lansky
embraced the idea of a food bank, setting aside a space for it in 2008
and having the Fire Department help renovate it. The Cuyahoga County
Public Library now runs after-school homework centers with snacks from
the food bank, aimed at the growing population of poor children.
Edward FitzGerald, the executive of Cuyahoga County, argued that the
increase in the suburban poor population could help lead to a
fundamental change in local government. For years Cleveland had most of
the population — and resources — but policy should reflect the flip in
favor of the county, he said.
And with the state slashing funds, counties and the suburbs they
contain will have to ramp up social services and economic development
on their own, many for the first time.
“You’re talking about governing systems that have never really done
this before,” Mr. FitzGerald said. FOLLOW
THIS ISSUE!
From the complex and national to the hyper-local - read story below...
Housing Authority
tenant
rep refuses to
cede post after move to Stamford
Greenwich TIME
Neil Vigdor, Staff Writer
Published 10:42 p.m., Saturday, September 17, 2011
The lone tenant representative on the board of the Greenwich Housing
Authority is refusing to relinquish her post despite moving to
Stamford, which a fellow commissioner contends should preclude her from
serving.
Republican Sam Romeo raised objections at the board's most recent
meeting to Democrat Laura Murphy retaining her seat as a commissioner
of the Housing Authority, which runs 761 low- to middle-income units on
15 properties in Greenwich. Murphy resided for many years in
public housing at Armstrong Court in Chickahominy, but relocated to
Stamford in June after buying a home there, according to George
Yankowich, the board's chairman. That arrangement is unacceptable
to Romeo, the newest of the five
Housing Authority commissioners.
"You've got to be a resident of the town of Greenwich," Romeo said in
an interview. "She doesn't even live in our town. You should resign."
Murphy dismissed questions on the matter when reached by Greenwich Time.
"Technically, this is a dead issue," said Murphy, who declined to
comment further.
Yankowich characterized Murphy as a valuable contributor to the board
in the approximately five years that she has served. Murphy was
reappointed to the board about a year ago, which would leave four more
years in her current term.
"Clearly, she says she bought a house in Stamford," Yankowich said.
"Her goal was to move out of public housing and into private housing. I
think it's admirable that she was able to do it."
Yankowich added that Murphy had expressed a desire to continue her
involvement.
"She's done a lot of work over the last five years," said Yankowich, a
Republican. "She would have loved to stay in town but the economics are
the economics. She's still giving us the same perspective."
Romeo questioned whether it is appropriate for Murphy to serve when she
no longer is part of the constituency of Housing Authority residents,
however.
"That doesn't cut it. What perspective is that?" Romeo said. "How can
you vote on Greenwich matters when you don't have any connection to
Greenwich? I have three or four people in public housing who wanted
that seat."
Fellow Republican Bernadette Settelmeyer noted that Murphy's mother
lives at McKinney Terrace, a public housing complex in Byram.
"My preference is that we have an actual tenant to represent that spot,
I but feel that Laura will play a positive role until we find that
candidate," Settelmeyer said.
The tenant representative on the board is traditionally filled by a
resident of public housing or a recipient of federal Section 8 vouchers
for private housing in town. Romeo provided the newspaper with a
copy of Section 8-41 of the Connecticut General Statutes, which deals
with public housing authorities.
"The chief executive officer shall appoint five persons who are
residents of said municipality as commissioners of the authority,
except that where the authority operates more than three thousand units
the chief executive officer may appoint two additional persons who are
residents of the municipality," the section reads.
An analysis by the Housing Authority's legal counsel, Greenwich lawyer
Lou Pittocco, arrived at a different conclusion, according to
Yankowich. Pittocco not only checked the state statutes but
consulted with the U.S. Department of Housing and Urban Development,
Yankowich said.
"In essence, what he said is that she's not qualified to be
reappointed, but there's nothing that says she can't continue on if
she's so disposed," Yankowich said.
Yankowich maintained that public housing tenants still have ample
opportunity to make sure their voices are heard and that their
interests are represented.
"I don't think it's creating a sense of isolation by not having her
living at Armstrong Court," he said of Murphy. S.F.: New homeless on street as
others
find housing
Kevin Fagan, S.F. Chronicle Staff Writer
Thursday, May 19, 2011
Forced into the streets by the economic downturn, hundreds of newly
homeless people have been showing up in San Francisco - in cars and
camper vans. Crushed by the same pressures, the number of
families
without homes has also gone up, according to San Francisco's latest
biennial homeless count, to be released today. The increases come
even
as the city has managed to reduce the number of hard-core people living
for years on the streets, a reduction that has kept the overall
homeless population in check.
"It could have been a lot worse if we hadn't created so much supportive
housing" and secured federal funding for homeless families, said San
Francisco's homeless policy director, Dariush Kayhan.
"These bad economic times have created some challenges."
Overall count down
The new report, based on a count taken Jan. 27, shows that the city's
overall homeless population dropped less than 1 percent, from 6,514 in
2009 to 6,455 in 2011. A breakdown of that count, however, tells
a
more nuanced tale of newly homeless people hitting the street, while
the entrenched population found housing.
For instance, the number of single homeless people on the street -
those not with a family or in a shelter - actually shot up 48 percent,
from 1,269 in 2009 to 1,882 in 2011. But those people were staying on
the street for far less time than before. In 2009, 62 percent of
the
city's indigents fit the federal definition of chronically homeless -
basically, without housing for at least a year. That percentage has now
fallen to 33 percent - a reflection of city policies enacted in 2004
that called for replacing temporary shelters with permanent housing
that has counselors to help people find a job, kick drugs or alcohol,
or get help for mental problems.
In the past two years, 208 beds in shelters, temporary rooms or
drug-treatment programs were cut - but at the same time, 695 supportive
housing units were created.
Still panhandling
Homeless counts all went down by as much as 14 percent in the
traditional panhandling areas of the Tenderloin, mid-Market, Union
Square and Fisherman's Wharf. There, many of those asking for spare
change are now living inside but have been unable to change their
daytime habits, counselors and Kayhan said, making it hard to discern
the decline in homelessness.
But noticing the changing population is no problem in the one area that
saw a huge rise in homelessness: Bayview-Hunters Point. The homeless
count there shot up more than any other area - by 159 percent, from 444
in 2009 to 1,151 in 2011.
On some streets in the city's southeastern waterfront and industrial
neighborhoods, ramshackle vehicles with blankets on the windows for
privacy can be found bumper to bumper. The area has always been a draw
for the vehicular homeless, but there are more of them now.
Unlike the disheveled panhandlers whom many regard as the typical
homeless, those living in cars and vans are often either working or
looking for work.
Jobs hard to find
"There are more and more every day," said Gwendolyn Westbrook, director
of Mother Brown's Dining Room, the main homeless service center for
Bayview-Hunters Point. "It's people working at little jobs after they
lost big ones. They just can't afford a place to live. It's sad."
Kayhan said many of the new campers are coming from out of town to look
for work, creating a "modern-day carpetbagging phenomenon."
Peter Jones, 52, won't argue that point. He came to San Francisco a
year ago from Los Angeles to be near his daughter and look for a job,
and he never found an apartment he could afford. He parks his
camper-van along the southeastern waterfront and bicycles to a
warehouse job a few blocks away. He doesn't see how he can afford
a
place to live, so he's sticking to his van for now.
"The rents are insane in San Francisco," he said. "I may go back to
L.A."
Lee Frieder, 46, takes convention set-up jobs and sleeps in a camper
near Jones. What put him in the camper this past year was an argument
with his San Francisco roommate. He's saving his cash to move back
inside.
"Most of us are pretty functional out here," Frieder said. "These are
just hard times, so we're doing what we have to do."
Those same hard times pushed up the number of people in homeless
families by 15.7 percent, from 549 in 2009 to 635 in 2011. That rise
has been reflected nationally in federal housing reports showing the
tally of families in homeless shelters up 13 percent since 2007.
One reaction has been the Homeless Prevention and Rapid Rehousing
program, funded in 2010 as part of President Obama's stimulus package.
The goal is to find housing for recently homeless people quickly or to
keep them from losing their homes in the first place. San
Francisco
got $8.75 million to spend over three years, and so far the program has
supplied housing for 1,100 people in homeless or about-to-be-homeless
families.
Firsthand view
Mia Carter doesn't need any reports to convince her that the number of
homeless kids, moms and dads has shot up. She sees the proof at
the
Hamilton Family Shelter in the Tenderloin, where she lives with her
four young children and where every other unit is full. She hears it on
the street and at church when other moms tell her of doubling up with
their kids on relatives' couches.
"It's hard enough to be homeless, but homeless with children? You look
around, and we're everywhere," said Carter, 41. "The bad economy has
hit so many people in so many ways, it's amazing."
Without the added federal funding, the number of families without roofs
would have been greater, program managers said.
"Homeless families are different from your chronic population, and take
a different approach," said city Human Services Director Trent Rhorer.
"In the chronics, you find substance abuse, mental illness and other
factors that have put them on the street. But if a family is intact and
homeless, it's generally about income.
"That's where the rapid rehousing approach helps."
Same story elsewhere
Obama's homelessness policy director, Barbara Poppe, said San
Francisco's numbers are typical for the times.
Family homelessness numbers "in many communities are up slightly, and
they would have been much higher if not for the rapid rehousing
program," Poppe said. "And like in San Francisco, the chronic numbers
are down."
Paul Boden, organizing director of the Western Regional Advocacy
Project in San Francisco, praised the rapid rehousing efforts -
"nothing ends homelessness like a home," he said - but said the need
for permanent, affordable housing is more important.
"When the city says it has created hundreds of new supportive housing
units, most of them are just SROs (single room occupancy hotels) taken
out of the private market and put into these programs," Boden said.
"That means poorer people who were living there have to move out to
make room for the new thing. It's just shuffling people around."
S.F. homeless count for 2011:
General homeless population: 6,455 (down 59 from 6,514 in 2009)
In the street: 3,106 (up 397 from 2009)
In emergency shelters: 1,479 (down 37 from 2009)
In transitional housing: 796 (down 168 from 2009)
In jails: 317 (down 77 from 2009)
In hospitals: 169 (up 71 from 2009)
In treatment centers: 241 (down 52 from 2009)
In stabilization rooms: 202 (down 105 from 2009)
In resource centers: 145 (down 88 from 2009)
Administration Seeks Smaller
Federal
Role in Mortgages
NYTIMES
By SEWELL CHAN
February 11, 2011
WASHINGTON — The Obama administration released a broad outline on
Friday for the future of housing finance in the United States, calling
for a substantial reduction in government support for the mortgage
market but providing few concrete details about how it should be
accomplished.
In a 31-page report, the administration proposed that the two mortgage
lending giants, Fannie Mae and Freddie Mac, should be gradually
abolished within 10 years at most, and it gave Congress three options
for reducing the government’s role in supporting homeownership. It did
not recommend an option; instead, the document was intended to set
parameters for what is certain to be a heated and protracted debate.
“We need to wind down Fannie and Freddie substantially, and reduce the
government’s footprint in the housing market,” Treasury Secretary
Timothy F. Geithner said in a forum at the Brookings Institution
shortly after the report was released.
In presenting the three options, the administration is taking an
approach similar to the one adopted before the health care debate:
setting out broad principles but leaving some of the thorniest choices
to be decided by lawmakers.
The plan, jointly prepared by the Treasury Department and the
Department of Housing and Urban Development, aims to shrink the
government’s role in the mortgage market and “bring private capital
back to the mortgage market.”
Still, the administration excluded the possibility of completely
eliminating government support for the housing market — as some
free-market conservative Republicans have proposed. But officials said
the government’s role would almost certainly be reduced from what it
was before the financial crisis began in 2008.
Mr. Geithner called the document “a plan for fundamental reform,” but
emphasized that the process would take time because of the housing
market’s fragility.
“We are going to start the process of reform now, but we are going to
do it responsibly and carefully so that we support the recovery and the
process of repair of the housing market,” he said in a statement.
Republicans reacted cautiously to the new blueprint. Representative
Spencer T. Bachus, an Alabama Republican and the chairman of the House
Financial Services Committee, commended the administration for
including ideas from Republicans.
“However, what the administration offered today isn’t a plan to move us
forward, but rather a collection of options to consider,” Mr. Bachus
said in a statement. “What’s needed is a real plan, and we intend to
sit down with administration officials to find common ground.”
Under one option, the government’s historically dominant role in
insuring or guaranteeing mortgages would shrink substantially, and
would be limited to support for creditworthy borrowers with low and
moderate incomes. The other two options would preserve a role for the
government as an insurer of mortgages — but only in times of financial
turmoil, under one possibility.
Fannie and Freddie, which were placed in government conservatorship in
September 2008, along with the Federal Housing Administration currently
guarantee more than 90 percent of all new mortgages. The F.H.A. alone
guarantees about 30 percent, compared with a historical norm of roughly
10 percent to 15 percent.
The first option would limit the government’s role in insuring or
guaranteeing mortgages to programs targeted at creditworthy borrowers
with low or moderate incomes. It would let capital flow from housing to
other sectors of the economy, reduce systemic risk and minimize
taxpayer exposure to potential losses. Under this option, mortgages for
most Americans would be significantly more expensive.
“In particular, it may be more difficult for many Americans to afford
the traditional pre-payable, 30-year fixed-rate mortgage,” the report
noted. Smaller lenders and community banks would find it hard to
compete in the regular mortgage market.
The second option would provide a government backstop to ensure access
to credit during a housing crisis. In normal times, the government
would have a “minimal presence” in the mortgage market, but during
times of financial stress, it would “scale up.”
The government would set the fee that it would charge for guaranteeing
mortgages at a high enough level so that the guarantee would only be
desirable in the absence of private capital, or the government would
restrict the amount of public insurance sold to the private market in
normal times, but allow it to grow to stabilize the market during times
of strain.
The second option would give the government greater ability to soften
the blow of a housing downturn than the first, but the traditional
30-year, fixed-rate mortgage would still be more expensive than it is
now.
The final option would offer explicit government insurance for
securities backed by a targeted range of mortgages. Under this
approach, a group of private mortgage guarantors “that meet stringent
capital and oversight requirements” would guarantee securities backed
by mortgages that meet strict underwriting standards.
A government “reinsurer” would then insure the holders of those
securities, and would pay out only if the shareholders of the private
mortgage guarantors “have been entirely wiped out.” The government
would charge a premium for such insurance; the money would be used to
cover future claims and recoup losses. This final option would provide
the least expensive access to mortgage credit of the three choices,
though mortgage rates would probably still increase. But like the
current system, that option might result in artificially high housing
prices and expose the taxpayer to risks.
Mr. Geithner said the options represented a range between two
undesirable extremes.
“We do take the view that it would be fundamentally untenable for the
country to adopt a model where the government plays no role,” he said.
“We also feel it would not make sense for the country for the
government to, on an ongoing basis, be guaranteeing 80, 90 percent of
the mortgage market.”
Though many of the specifics needs to be hashed out, it seems that a
system of housing-market support dating to the New Deal will be
transformed.
“Going forward, the government’s primary role should be limited to
robust oversight and consumer protection, targeted assistance for low-
and moderate-income homeowners and renters, and carefully designed
support for market stability and crisis report,” the document states.
Mr. Geithner’s remarks at the Brookings forum elicited a variety of
responses from policy experts gathered there. While they disagreed on
the proper role of government support for housing, they agreed that the
emerging system was likely to be vastly different from what has
preceded it.
“I think we ought to be shifting the emphasis away from housing and
other forms of consumption and be laser-focused on two overriding
objectives of economic policy: increasing productivity growth and
broader sharing of the fruits of that growth across income groups,”
said Alice M. Rivlin, a former vice chairwoman of the Federal Reserve.
“And housing may not be the best set of policies to accomplish either
goal.”
But Peter J. Wallison, a prominent conservative critic of the existing
system, objected to the call by officials for continued government
support for private mortgage securitization.
“They do not yet accept the idea that any government backing for
housing finance will eventually result — as it has in the past — in a
disaster for taxpayers,” said Mr. Wallison, a fellow at the American
Enterprise Institute.
As long as only prime mortgages are securitized, he said, “we will not
need any government support other than for low-income borrowers through
the Federal Housing Administration.” Even then, he said, the support
should be on the government’s books (unlike the liabilities of Fannie
and Freddie) and should limit taxpayers’ exposure.
The Consumer Federation of America raised questions about the plan,
saying it would only shift control of the mortgage market to Wall
Street.
“The administration today has laid out a series of options that could
lead to the abandonment of a nearly 70-year commitment to affordable
homeownership by working American families,” said Barry Zigas, director
of housing policy for the organization. “American consumers need
policies that will foster affordable, long-term fixed rate mortgages,
as well as a stable supply of capital that will be available to lenders
of all sizes, including community banks and credit unions.” First area co-housing
project in the works New Haven REGISTER
By Angela Carter, Register Staff, acarter@nhregister.com Published: Monday, January 24, 2011
A group of state residents, mostly from Greater New Haven, are planning
what would be Connecticut’s first co-housing development, possibly in
Milford.
About a dozen adults, across six to seven families, are actively
recruiting other potential homeowners for Green Haven, a pre-planned
neighborhood that would be composed of 26 to 33 units, a fruit and
vegetable garden and a co-owned common house offering recreational
space, child care, a kitchen and dining room and library.
“It’s an intentional community, meaning that the people who live there
are choosing to live there with each other,” said Marie Pulito, one of
the planners. “It’s set up like a condominium in this country, in legal
terms.”
Pulito said the concept follows a Danish model and one of the things
making it unique is that future resident-owners also play the roles of
developers and investors. They will buy the parcel, design and oversee
construction of the individual homes and common house, seek local
land-use approvals and market the development.
Dick Margulis has been coordinating a social networking campaign, that
includes using Twitter and Facebook, and the group also can be reached
by e-mail. “We want a multi-generational community. What we have to do
is reach people where they are,” he said.
Margulis said anyone wanting additional information may call him at
203-389-4413, or send an e-mail to info@greenhavencohousing.org. The
group’s Facebook page is Green-Haven-Cohousing and its Twitter handle
is @greenhavencoho.
Organizers been meeting for about five years and have hired a housing
consultant, architect and lawyer. They’ve identified land at an address
Pulito did not disclose but said it is within two miles of the Milford
train station and near amenities such as a park and golf course.
Pulito said the diverse, multi-generational members share values but
not a common religion and live in places such as New Haven, Bethany,
Cheshire and the Norwalk area. They took a trip to Massachusetts to
visit co-housing communities there. Others can be found as near as New
York, and as far away as the Pacific Northwest.
“The first thing we did was learn something called formal consensus.
There’s no leader, everybody participates as equally as possible in
making decisions,” she said. “Anybody who has a concern, voices the
concern, and it goes on a list. The whole group addresses that concern
until the person feels better about it.”
Although it may take longer to reach a conclusion, everyone plays a
part in arriving at the final decision. “Nobody feels like they haven’t
been heard or decisions were railroaded through,” she said. The
values that Green Haven founders have established include preserving,
protecting and nurturing the environment and adopting practices that
minimize consumption of energy, water and other natural
resources. Pulito said they are striving to make homeownership
affordable and members are committed to cooperative work and
pedestrian-centered common spaces, with cars kept on the outskirts.
“Our values lead us through the decision-making process and they’re
going to help us attract people to our community,” she said. Wall Street drifts lower on
home price
and consumer data
YAHOO
By Chuck Mikolajczak
28 Dec. 2010
NEW YORK (Reuters) – U.S. stocks were little changed on Tuesday as
investors were reluctant to take large positions in either direction
and largely shrugged off weaker-than-expected data on consumer
confidence and home prices.
The S&P/Case-Shiller 20-city index
showed prices of U.S. single-family homes fell almost double the
expected pace in October. U.S. consumer confidence unexpectedly
deteriorated month over month in December, hurt by increasing worries
about the jobs market, according to a private report.
"Everybody has done what they need to do. The money that has been put
in place has been put in place until the end of the year -- in spite of
the fact we may get some modestly surprising data," said Peter Kenny,
managing director at Knight Equity Markets in Jersey City, New Jersey.
The Dow Jones industrial average (.DJI) dropped 5.79 points, or 0.05
percent, to 11,549.24. The Standard & Poor's 500 Index (.SPX) shed
0.58 points, or 0.05 percent, to 1,256.96. The Nasdaq Composite Index
(.IXIC) dipped 4.16 points, or 0.16 percent, to 2,663.11.
General Motors Co (GM.N) gained 2.2 percent to $35.37 after several
analysts initiated coverage of the automaker's shares, including
"overweight" ratings at Barclays Capital and Morgan Stanley.
Trading volumes, already light for the holiday season, were expected to
remain thin as the northeastern United States digs itself out from a
blizzard that disrupted air and rail travel at the end of the busy
Christmas weekend.
The blizzard pushed oil prices up to just below 26-month high struck
the previous session with U.S. crude for February up 27 cents at $91.27
a barrel.
Despite the weaker-than-expected consumer confidence data, holiday
sales offered further evidence of a returning consumer according to
several reports.
MannKind Corp (MNKD.O) jumped 7.9 percent to $8.60 after the
inhaled-insulin developer said the U.S. health regulator would not be
able to complete the review of Afrezza by December 29 and would require
about four more weeks. DEJA
VU ALL OVER AGAIN article
here... Countrywide redux?
NYPOST
Last Updated: 12:28 AM, October 9, 2012
Posted: 10:15 PM, October 8, 2012
Looks like Countrywide Financial may not have been the only bank with a
most-favored-borrower policy for members of Congress. As The
Post’s Carl Campanile reported yesterday, Rep. Steve Israel (D-L.I.)
had $93,000 worth of mortgage debt wiped out, courtesy of JPMorgan
Chase. That’s because the mortgage on his two-bedroom Dix Hills
house is higher than the home’s current value.
Under a program that has become increasingly popular as home values
have dropped, Israel and his wife (who are now divorcing) were able to
negotiate a “short sale” of their home.
That allowed the home, which they bought in 2004 for $580,000 and on
which they owe $553,000, to be sold for $460,000 — with the remaining
debt forgiven. Problem is, not everyone qualifies for the
program; the rejected rate is about one in four.
And though Israel — who chairs the Democratic Congressional Campaign
Committee — has substantial debts, he also has other fiscal assets,
including a Washington apartment.
Yes, short sales work to everyone’s advantage, including the mortgage
holder. But not everyone agrees that the congressman was a prime
candidate for the bailout. Not surprisingly, that includes
Republicans, who have asked the House Ethics Committee to
investigate. But beyond the obvious partisan blast during
election season, it’s a reasonable request: The deal raises many
questions.
Fact is, the Countrywide scandal — in which scores of top legislators
and other federal officials got ultra-favorable mortgage deals —
suggests that politicians have an inside track that isn’t available to
the general public.
That may be the case here, and it might not. But an investigation would
certainly clear the air. A ‘deadbeat’ bailout NYPOST By CHARLES GASPARINO Last Updated: 12:03 AM, February 10,
2012 Posted: 10:17 PM, February 9, 2012
It’s hard to imagine a
less-deserving group of victims: people who gambled during the housing
bubble by purchasing homes with borrowed money that they knew or should
have known they couldn’t afford, but who are now able to stay in the
homes they should have never bought because of what amounts to
paperwork errors on the part of the nation’s big banks.
But that’s essentially what went
down yesterday, thanks to the Obama administration’s latest re-election
gimmick — the nationwide mortgage-foreclosure settlement.
Everyone — from the president, to
officials at the Department of Housing and Urban Development, to at
least some of 49 state attorneys general who cobbled together the pact,
including New York’s Eric Schneiderman — took the all-too-familiar
class-warfare route in selling the deal to the public and national
media. They’d like us to believe that the nation’s largest banks are
finally paying for their bad behavior during the housing bubble and its
aftermath, when millions of Americans either lost or were in jeopardy
of losing their homes.
That’s because the banks will cough
up $26 billion for various abuses, including illegal foreclosures. Many
“victimized” home-owners will get relief, mostly in the form of
refinancing of underwater mortgages. So, they can stay in their homes,
at least for a while.
It’s such a win-win, the
administration is boasting, that even those people not part of the
specific victimized class will benefit because the deal creates a
stronger housing market. If banks can’t foreclose on properties, the
theory goes, they can’t depress housing prices more by selling these
properties on the cheap.
Problem is, almost all of the
“logic” behind the deal isn’t logic, but a combination of half truths
and outright lies. Even worse, the settlement will likely prolong the
housing slump and set the stage for it to happen again. Take the “victims,” who faced eviction
from their homes because of the banks’ supposedly corrupt foreclosure
practices. These home-owners didn’t really own their homes; many, in
fact, barely plunked down a downpayment for a mortgage.
By borrowing far more heavily than
what they could afford, they were also gambling that housing would keep
rising in value, defying basic rules of economics. Now they’re being rewarded for their
mistakes. Ironically, even the government officials who were part of
the deal have privately conceded that, with few exceptions, more than
95 percent of the so-called victims weren’t victims at all; they faced
imminent foreclosure because they were delinquent on their mortgage
payments — often for a year or more.
Or as banking analyst Dick Bove put
it: “What this settlement did was to help 1 million people who were
deadbeats.”
Why are these deadbeats getting
bailouts? Aside from election-year politics, at issue is the
foreclosure practice known as “robo signing” — a procedure in which
low-level bank employees, without direct authorization, approve
perfectly legal foreclosures on a bank’s behalf. The foreclosures themselves were legal;
the only apparent illegality is that the banks streamlined the
foreclosure process, with clerks signing the bank officer’s name on
legal documents.
But the worse part of the deal is
that it will prevent the housing market from recovering anytime soon
while sowing the seeds for another bubble. Much of the $26 billion will
be used to refinance underwater mortgages, in which borrowers are
either being forced out of their homes or face possible eviction
because they owe more than their homes are worth. All of which sounds harmless — until you
realize that foreclosures are a necessary ingredient to the housing
market’s recovery, because they allow prices to hit bottom and entice
people who can afford homes to buy them and bid up prices again.
So, the bailout does little more
than delay the pain because housing prices at some point must reflect
the market, with its glut of inventory in many areas. We’re also teaching a generation of
home-owners that there are no risks to their decisions because the
government will bail them out. If there are no consequences to risk,
why not just roll the dice again and again?
It’s tempting to see the mortgage
settlement in the broader context of the bailout mania that has swept
the country since the 2008 financial crisis. The auto companies and the
big banks got bailouts, so why shouldn’t homeowners?
But when will it end? Probably when
it isn’t an election year. U.S. to sue big
banks over mortgage securities: report
YAHOO
Reuters – September 2, 2011
WASHINGTON (Reuters) - The agency that oversees mortgage markets is
preparing to file suit against more than a dozen big banks, accusing
them of misrepresenting the quality of mortgages they packaged and sold
during the housing bubble, The New York Times reported on Thursday.
The Federal Housing Finance Agency, which oversees mortgage giants
Fannie Mae and Freddie Mac, is expected to file suit against Bank of
America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other
banks, the Times reported, citing three unidentified individuals
briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks last
year. They could be filed as early as Friday, the Times said, but if
not filed Friday it said the suits would come on Tuesday.
The government will argue the banks, which pooled the mortgages and
sold them as securities to investors, failed to perform due diligence
required under securities law and missed evidence that borrowers'
incomes were falsified or inflated, the Times reported.
Fannie Mae and Freddie Mac lost more than $30 billion, due partly to
their purchases of mortgage-backed securities, when the housing bubble
burst in late 2008. Those losses were covered mostly with taxpayers'
money.
The agency filed suit against UBS in July, seeking to recover at least
$900 million for taxpayers, and the individuals told the Times the new
suits would be similar in scope.
A spokesman for the Federal Housing Finance Agency was not immediately
available for comment.
The Times said Bank of America, JP Morgan and Goldman Sachs all
declined comment. A Deutsche Bank spokesman told the Times, "We can't
comment on a suit that we haven't seen and hasn't been filed yet."
The practice of subprime lending, wherein mortgage brokers lowered
their standards to entice homebuyers to take out large mortgages to buy
more expensive homes than they could afford, was a root cause of the
mortgage market implosion.
News of the suit could have a negative impact on stocks of the banks in
question on Friday. JPMorgan Chase, Bank of America and Goldman Sachs
are traded on the New York Stock Exchange, while Deutsche Bank is
traded on the German exchange.
S&P 500 stocks index futures were trading down 0.6 percent in Asia.
U.S. Treasury futures also ticked higher..
The Times report said investors fear that if banks are forced to pay
out billions for mortgages that defaulted, the suit could sap earnings
for years and contribute to further losses across the financial
services industry. Burning
down the house New York Post By GEORGE F. WILL Last Updated: 4:23 AM, July 3, 2011 Posted: 10:57 PM, July 2, 2011
“The louder he talked of his honor,
the faster we counted our spoons.”
— Emerson
The louder they talked about the
disadvantaged, the more money they made. And the more the financial
system tottered.
Who were they? Most explanations of
the financial calamity have been indecipherable to people not fluent in
the language of “credit default swaps” and “collateralized debt
obligations.” The calamity has lacked human faces. No more.
Put on asbestos mittens and pick up
“Reckless Endangerment,” the scalding new book by Gretchen Morgenson, a
New York Times columnist, and Joshua Rosner, a housing finance expert.
They will introduce you to James A. Johnson, an emblem of the
administrative state that liberals admire.
The book’s subtitle could be: “Cry
‘Compassion’ and Let Slip the Dogs of Cupidity.” Or: “How James Johnson
and Others (Mostly Democrats) Made the Great Recession.” The book is
another cautionary tale about government’s terrifying self-confidence.
It is, the authors say, “a story of what happens when Washington
decides, in its infinite wisdom, that every living, breathing citizen
should own a home.”
The 1977 Community Reinvestment Act
pressured banks to relax lending standards to dispense mortgages more
broadly across communities. In 1992, the Federal Reserve Bank of Boston
purported to identify racial discrimination in the application of
traditional lending standards to those, Morgenson and Rosner write,
“whose incomes, assets, or abilities to pay fell far below the
traditional homeowner spectrum.”
In 1994, Bill Clinton proposed
increasing homeownership through a “partnership” between government and
the private sector, principally orchestrated by Fannie Mae, a
“government-sponsored enterprise” (GSE). It became a perfect specimen
of what such “partnerships” (e.g., General Motors) usually involve:
Profits are private, losses are socialized.
There was a torrent of
compassion-speak: “Special care should be taken to ensure that
standards are appropriate to the economic culture of urban,
lower-income, and nontraditional consumers.” “Lack of credit history
should not be seen as a negative factor.” Government having decided to
dictate behavior that markets discouraged, the traditional relationship
between borrowers and lenders was revised. Lenders promoted reckless
borrowing, knowing they could offload risk to purchasers of bundled
loans, and especially to Fannie Mae. In 1994, subprime lending was $40
billion. In 1995, almost one in five mortgages was subprime. Four years
later such lending totaled $160 billion.
As housing prices soared, many giddy
owners stopped thinking of homes as retirement wealth and started using
them as sources of equity loans — up to $800 billion a year. This
fueled incontinent consumption.
Under Johnson, an important
Democratic operative, Fannie Mae became, Morgenson and Rosner say, “the
largest and most powerful financial institution in the world.” Its
power derived from the unstated certainty that the government would be
ultimately liable for Fannie’s obligations. This assumption and other
perquisites were subsidies to Fannie Mae and Freddie Mac worth an
estimated $7 billion a year. They retained about a third of this.
Morgenson and Rosner report that in
1998, when Fannie Mae’s lending hit $1 trillion, its top officials
began manipulating the company’s results to generate bonuses for
themselves. That year Johnson’s $1.9 million bonus brought his
compensation to $21 million. In nine years, Johnson received $100
million.
Fannie Mae’s political machine
dispensed campaign contributions, gave jobs to friends and relatives of
legislators, hired armies of lobbyists (even paying lobbyists not to
lobby against it), paid academics who wrote papers validating the
homeownership mania, and spread “charitable” contributions to housing
advocates across the congressional map.
By 2003, the government was involved
in financing almost half — $3.4 trillion — of the home-loan market. Not
coincidentally, by summer 2005, almost 40% of new subprime loans were
for amounts larger than the value of the properties.
Morgenson and Rosner find few
heroes, but two are Marvin Phaup and June O’Neill. These “digit-heads”
and “pencil brains” (a Fannie Mae spokesman’s idea of argument) with
the Congressional Budget Office resisted Fannie Mae pressure to kill a
report critical of the institution.
“Reckless Endangerment” is a study
of contemporary Washington, where showing “compassion” with other
people’s money pays off in the currency of political power, and
currency. Although Johnson left Fannie Mae years before his handiwork
helped produce the 2008 bonfire of wealth, he may be more responsible
for the debacle and its still-mounting devastations — of families,
endowments, etc. — than any other individual. If so, he may be more
culpable for the peacetime destruction of more wealth than any
individual in history.
Morgenson and Rosner report. You
decide. We've been concerned for some time... Who Is James Johnson? NYTIMES
By DAVID BROOKS June 16, 2011 Most political scandals involve
people who are not really enmeshed in the Washington establishment —
people like Representative Anthony Weiner or Representative William
Jefferson. Most scandals involve spectacularly bad behavior — like
posting pictures of your private parts on the Web or hiding $90,000 in
cash in your freezer.
But the most devastating scandal in
recent history involved dozens of the most respected members of the
Washington establishment. Their behavior was not out of the ordinary by
any means.
For that reason, the Fannie Mae
scandal is the most important political scandal since Watergate. It
helped sink the American economy. It has cost taxpayers about $153
billion, so far. It indicts patterns of behavior that are considered
normal and respectable in Washington.
The Fannie Mae scandal has gotten
relatively little media attention because many of the participants are
still powerful, admired and well connected. But Gretchen Morgenson, a
Times colleague, and the financial analyst Joshua Rosner have rectified
that, writing “Reckless Endangerment,” a brave book that exposes the
affair in clear and gripping form.
The story centers around James
Johnson, a Democratic sage with a raft of prestigious connections.
Appointed as chief executive of Fannie Mae in 1991, Johnson started an
aggressive effort to expand homeownership.
Back then, Fannie Mae could raise
money at low interest rates because the federal government implicitly
guaranteed its debt. In 1995, according to the Congressional Budget
Office, this implied guarantee netted the agency $7 billion. Instead of
using that money to help buyers, Johnson and other executives kept $2.1
billion for themselves and their shareholders. They used it to further
the cause — expanding their clout, their salaries and their bonuses.
They did the things that every special-interest group does to advance
its interests.
Fannie Mae co-opted relevant
activist groups, handing out money to Acorn, the Congressional Black
Caucus, the Congressional Hispanic Caucus and other groups that it
might need on its side.
Fannie ginned up Astroturf lobbying
campaigns. In 2000, for example, a bill was introduced that threatened
Fannie’s special status. The Coalition for Homeownership was formed and
letters poured into Congressional offices opposing the bill. Many
signatories of the letter had no idea their names had been used.
Fannie lavished campaign
contributions on members of Congress. Time and again experts would go
before some Congressional committee to warn that Fannie was lowering
borrowing standards and posing an enormous risk to taxpayers. Phalanxes
of congressmen would be mobilized to bludgeon the experts and kill
unfriendly legislation.
Fannie executives ginned up academic
studies. They created a foundation that spent tens of millions in
advertising. They spent enormous amounts of time and money capturing
the regulators who were supposed to police them.
Morgenson and Rosner write with
barely suppressed rage, as if great crimes are being committed. But
there are no crimes. This is how Washington works. Only two of the
characters in this tale come off as egregiously immoral. Johnson made
$100 million while supposedly helping the poor. Representative Barney
Frank, whose partner at the time worked for Fannie, was arrogantly
dismissive when anybody raised doubts about the stability of the whole
arrangement.
Most of the people were simply doing
what reputable figures do in service to a supposedly good cause.
Johnson roped in some of the most respected establishment names: Bill
Daley, Tom Donilan, Joseph Stiglitz, Dianne Feinstein, Kit Bond,
Franklin Raines, Larry Summers, Robert Zoellick, Ken Starr and so on.
Of course, it all came undone.
Underneath, Fannie was a cancer that helped spread risky behavior and
low standards across the housing industry. We all know what happened
next.
The scandal has sent the message
that the leadership class is fundamentally self-dealing. Leaders on the
center-right and center-left are always trying to create public-private
partnerships to spark socially productive activity. But the biggest
public-private partnership to date led to shameless self-enrichment and
disastrous results.
It has sent the message that we have
hit the moment of demosclerosis. Washington is home to a vertiginous
tangle of industry associations, activist groups, think tanks and
communications shops. These forces have overwhelmed the government that
was originally conceived by the founders.
The final message is that members of
the leadership class have done nothing to police themselves. The Wall
Street-Industry-Regulator-Lobbyist tangle is even more deeply enmeshed.
People may not like Michele
Bachmann, but when they finish “Reckless Endangerment” they will
understand why there is a market for politicians like her. They’ll
realize that if the existing leadership class doesn’t redefine “normal”
behavior, some pungent and colorful movement will sweep in and do it
for them.
Banks, SEC in
talks to settle mortgage charges: report
YAHOO
15 April 2011
(Reuters) – The securities regulator is in talks with major Wall Street
banks to settle fraud allegations relating to the sale of toxic
mortgage bonds to various investors that helped unleash the financial
crisis, the Wall Street Journal reported, citing sources familiar with
the matter.
The first settlement with the Securities and Exchange Commission (SEC)
could be reached as soon as next week, while some of the other deals
could take months to work out, the WSJ said.
SEC's negotiations with the banks include JPMorgan Chase, Citigroup
Inc, Morgan Stanley, Merrill Lynch, now an unit of Bank of America, and
UBS, according to the Journal.
The SEC hopes to reach a series of settlements with individual banks
over the sales of mortgage bonds, rather than a big industry wide deal,
the Journal said, citing people familiar with the matter.
The regulator's decision to go for individual settlements reflects
substantial differences in the nature of the civil fraud allegations
faced by each bank, the sources told the Journal.
All of the banks named in the report and the SEC declined to comment to
WSJ.
Spokesmen for JPMorgan and Bank of America Merrill Lynch declined to
comment on the Journal report to Reuters . All other parties could not
immediately be reached for comment outside regular U.S. business hours. At Legal Fringe, Empty Houses Go to
the
Needy
NYTIMES
By CATHARINE SKIPP and DAMIEN CAVE
November 8, 2010
NORTH LAUDERDALE, Fla. — Save Florida Homes Inc. and its owner, Mark
Guerette, have found foreclosed homes for several needy families here
in Broward County, and his tenants could not be more pleased. Fabian
Ferguson, his wife and two children now live a two-bedroom home they
have transformed from damaged and abandoned to full and cozy.
There is just one problem: Mr. Guerette is not the owner. Yet.
In a sign of the odd ingenuity that has grown from the real estate
collapse, he is banking on an 1869 Florida statute that says the bundle
of properties he has seized will be his if the owners do not claim them
within seven years.
A version of the same law was used in the 1850s to claim possession of
runaway slaves, though Mr. Guerette, 47, a clean-cut mortgage broker,
sees his efforts as heroic. “There are all these properties out there
that could be used for good,” he said.
The North Lauderdale authorities, though, see him as a crook. He is
scheduled to go on trial in December on fraud charges in a case that,
along with a handful of others in Florida and in other states, could
determine whether maintaining a property and paying taxes on it is
enough to lead to ownership.
Legal scholars say the concept is old — rooted in Renaissance England,
when agricultural land would sometimes go fallow, left untended by
long-lost heirs. But it is also common. All 50 states allow for
so-called adverse possession, with the time to forge a kind of
common-law marriage with property varying from a few years (in most
states) to several decades (in New Jersey).
The statute generally requires that properties be maintained openly and
continuously, which usually means paying property taxes and utility
bills.
It is not clear how many people are testing the idea, but lawyers say
that do-it-yourself possession cases have been popping up all over the
country — and, they note, these self-proclaimed owners play an odd role
in a real-estate mess that never seems to end. Though they may cringe
at the analogy, as squatters with bank accounts, these adverse
possessors are like leeches, and it can be difficult to tell at times
whether they are cleaning a wound already there, or making it worse.
Either way, Florida is where they thrive.
Many residents of the Sunshine State have grown accustomed to living
beside a home left vacant for years. Now hundreds of these mold-filled
caverns, their appliances long ago spirited off, are being claimed by
strangers.
“There are all kinds of ways the people try to manipulate the system to
their own financial gain,” said Jack McCabe, an independent real estate
analyst with McCabe Research and Consulting. “And you are going to see
it here because Florida is the capital of real estate fraud.”
Mr. Guerette, who now faces up to 15 years in prison, insists that his
business is legitimate and moral. He said he got started last year,
driving around working-class neighborhoods in Palm Beach and Broward
Counties, looking for a particular kind of home: not just those with
overgrown lawns and broken windows, but houses with a large orange
sticker from the county reading “public nuisance.”
The stickers signaled owners out of touch: the county or city was
unable to reach them.
Mr. Guerette filed court claims on around 100 of these properties,
which appear to be in the process of foreclosure. Then he chose 20 that
could be most easily renovated and sent letters to the owners and their
banks — presumably overwhelmed — to make them aware of his plans.
Florida does not require notification. One state lawmaker tried and
failed to close that loophole last year with a bill that never passed.
But it hardly mattered. Nineteen of the owners and their banks did not
respond, Mr. Guerette said.
So he set about fixing up the unclaimed properties. In some cases, he
just mowed the lawn and replaced stolen air conditioners or broken
windows; in other cases, like with Mr. Ferguson, he let tenants make
improvements in lieu of rent.
At his peak last year, he said he managed 17 homes with renters, some
of whom he found on Craigslist, others through a Christian ministry in
Margate, Fla.
Copies of leases show Mr. Guerette included an addendum noting that he
was not the legal owner. Tenants like Mr. Ferguson and his family, who
had been homeless before moving in last year and paying $289 a month,
see Mr. Guerette as a savior.
And neighbors generally agree. “There is no telling who was in and out
of that house,” said Rawle Thomas, who lives next door to Mr. Ferguson
and his family. “I like them, and I’d much rather have someone in there
than the house empty.”
In other cases, though, adverse possession has been more aggressive and
problematic. In Palm Beach County, Carl Heflin spent a year in jail
awaiting trial on fraud, trespassing and burglary charges. But after
accepting a plea agreement and the rejection of his adverse possession
claims, he was arrested again on charges of trying to collect back
rents on houses he had tried to possess.
“The whole time he was harassing us and threatened to burn the house
down with my kids in it,” said Misty Hall, a single mother of two who
rented a home from Mr. Heflin.
Sam Goren, city attorney for North Lauderdale, said any benefits were
outweighed by a simple fact that adverse possessors often overlook:
they are trespassing.
Michael Allan Wolf, a real estate expert at the University of Florida
law school, said adverse possessors also disrupt the chain of title.
Rightful owners end up having to evict tenants. The time between
foreclosure and legitimate resale may be extended.
Even when adverse possessors help stabilize neighborhoods, “It is not
an effective or efficient cure for the foreclosure crisis in Florida,”
Professor Wolf said.
Mr. Guerette says his goals are more charitable. After several
marriages, six children and some minor trouble with the law, he said,
he is now a born-again Christian who sees his new company as a way to
make an honest living, and solve a dire need.
His tenants confirmed that after he was arrested in April, he told them
they could stop paying rent. Even if he is not allowed to keep taking
homes, he said, why should needy people not be matched with homes left
to decay?
“There are over 4,000 homeless in Broward, and the number is growing
all the time,” he said. “I thought I could use these homes and put
people into them. It could be a good thing.”
As Andrew M. Cuomo campaigns for governor, he points to his leadership
of the Department of Housing and Urban Development during the Clinton
administration as proof he possesses the ability and vision needed to
lead New York out of its fiscal and political swamps.
Mr. Cuomo was housing secretary at a critical moment for the nation,
just as its subprime mortgage fever was beginning to spike. It was
during his tenure that the banking industry began to embrace predatory
loans, and these creations led to a housing bubble that badly damaged
America’s banks and nearly toppled its financial system.
An examination of Mr. Cuomo’s tenure atop the agency shows he was quick
to warn about Wall Street’s dangerous hunger for predatory subprime
loans — generally more expensive mortgages sold to people with poor
credit. He counseled caution when many influential players, including
the Federal Reserve and Congress, resisted any suggestion that they
slow the country’s stampede to home ownership.
He also called attention to a pernicious mortgage-broker incentive
payment that drove up interest rates for borrowers — secretly, in many
cases — and that helped put many home buyers into loans they later
found they could not afford.
And, in an effort to reverse decades of discrimination against blacks
and Latinos, Mr. Cuomo pushed the government-sponsored banks, Fannie
Mae and Freddie Mac, to buy more home loans taken out by poor and
working-class borrowers.
But when presented with chances to throttle back on the exploding
subprime market, guard against predatory lending and reel in mortgage
brokers and lenders, Mr. Cuomo several times faltered and backed down,
interviews and records show.
He did not heed local officials and others who wanted him to make
Fannie and Freddie publicly report details about the loans they bought.
And he chose not to impose penalties and other deterrents to ensure
that the giant public banks did not promote dangerous lending.
He also reversed himself, under heavy lobbying pressure from mortgage
brokers and bankers, on the arcane but costly mortgage-broker payments
known as yield spread premiums. These were lucrative bounties that
banks paid to brokers who found new clients; the unwitting borrowers
paid higher-than-market interest rates as a result.
Yield spread premiums fueled the subprime frenzy, according to official
post-mortems on the crisis.
Nearly every political leader whose hands touched the fiscal and
housing crises has had decisions scrutinized, actions questioned.
Already, Mr. Cuomo has heard such rumblings from supporters of his
likely Republican opponent, Rick A. Lazio, a former congressman.
Mr. Cuomo, whose tenure at HUD ended in early 2001, refused repeated
requests to talk about his experience running the nation’s housing
agency and how he wrestled with such policy questions. He gave no
reason for his reticence. Instead, his staff issued a statement, and
his former chief of staff at HUD, Howard B. Glaser, took the role of
surrogate for the candidate.
Mr. Glaser, now a consultant to the mortgage industry, produced an
inch-thick binder that sang Mr. Cuomo’s praises, attacked criticisms
and deflected blame. Its title: “The Myth of Andrew Cuomo and the
Subprime Crisis.”
Some people, particularly from the ideological right, argue that Mr.
Cuomo’s decisions helped set in motion the nation’s economic decline.
Such claims seem likely to grow louder as Congress takes up the
question of the future of Fannie Mae and Freddie Mac.
“Raising the affordable housing low- and moderate-income goal to 50
percent was the key initial step in setting Fannie and Freddie on a
path to insolvency,” said Peter J. Wallison, a conservative scholar who
sits on the Congressionally appointed Financial Crisis Inquiry
Commission, which was created in 2009.
That argument, the record suggests, seems overdrawn. The record shows
that the mortgages bought by Fannie and Freddie during Mr. Cuomo’s
tenure had low default rates. More broadly, if Mr. Cuomo was less
prescient and gutsy than he now claims, no one seriously argues he
deserves some outsize share of the blame for the subsequent collapse.
Far more powerful actors, including the finance industry, its various
regulators, two presidents and Congress, helped create the environment
and wrote the policies that caused it.
To a certain degree, the clock ran out on Mr. Cuomo’s reform ambitions;
within months, George W. Bush was president and Mr. Cuomo was looking
for work. And the worst lapses at HUD and at Fannie Mae, most experts
and regulators now agree, came years after Mr. Cuomo departed, as Bush
appointees set even higher and more perilous goals for personal home
ownership.
So the scorecard for Mr. Cuomo appears mixed. Had he acted tougher, and
perhaps risked more, he might well have forestalled or limited some of
the worst abuses. It could be argued, though, that doing so would have
required of him a degree of foresight lacking in nearly every national
leader of that time.
“If they had put something in with a lot of teeth, it would’ve changed
the world,” said Dwight Jaffee, a University of California, Berkeley,
economist who reported on the role of Fannie and Freddie to the
Financial Crisis Inquiry Commission. “But no one in 2000 that I know of
was thinking about that being necessary.”
Leaning Into a Fight
As the head of a department under near constant attack — at his
confirmation hearing, a Republican senator spoke of wanting to wipe HUD
off the map — Mr. Cuomo severely cut its budget and reshaped its
structure. He also won the removal of several of HUD’s most important
departments, although not the entire agency, as he had said, from an
official federal list of most-troubled government agencies. A practiced
political player, he changed public housing and homeless policy,
rewarded innovation and increased the number of housing vouchers for
the poor.
“Extinction was right there on the table,” said the current housing
secretary, Shaun Donovan, who had been a deputy assistant secretary
under Mr. Cuomo. “It’s pretty clear Cuomo helped save the agency.”
Mr. Cuomo’s style, always, was to lean into a fight. And when he was
appointed secretary in 1997, he saw an easy victory. He planned to
tackle one of the mortgage brokerage industry’s most abusive practices:
the yield spread premium, by which banks paid lucrative bounties to
mortgage brokers who found new clients.
“Too often consumers think the brokers are working for them,” Mr. Cuomo
warned. “In reality, they are working against them.”
By the time the mortgage crisis exploded, nearly 9 out of 10 brokered
subprime mortgages were saddled with these premiums, costing Americans
untold hundreds of millions of dollars.
But when Mr. Cuomo’s moment of decision came in March 1999, he proved
less than bold. Those who had identified the premiums as a true menace
wanted him to declare them illegal, and thus end them. Mr. Cuomo,
though, ultimately ruled that the practice was “not per se illegal.”
Those four words shocked advocates and undercut dozens of lawsuits
intended to end the practice and to protect home buyers.
Under his policy, Mr. Cuomo also did not require mortgage brokers to
disclose such payments to their customers.
The brokers were delighted. But others still harbor anger at Mr. Cuomo.
David Donaldson, an Alabama lawyer who filed a high-profile case
against the mortgage premiums, recently offered one word when asked his
opinion of the former HUD secretary: “Gutless.”
Mr. Donaldson said that at the time he thought he had found a
sympathetic ear in Gail Laster, the HUD general counsel. She supported
the idea of declaring the premiums illegal, he said.
“But she could only go so far, and I could only attribute that to one
person, because there was only one person above her,” Mr. Donaldson
said.
Mr. Glaser disputed that version of events. He said Ms. Laster “flatly
told Cuomo that HUD had no legal authority to ban Y.S.P.’s.”
Ms. Laster now works as a lawyer for the House Financial Services
Committee. She declined requests for a substantive interview.
Was she aware, Ms. Laster was asked by telephone, that Mr. Glaser had
placed the onus on her?
“That’s what they do now, isn’t it?” Ms. Laster said before hanging up.
Mr. Cuomo’s 1999 policy statement held that yield spread premiums could
be legal if mortgage brokers were paid a reasonable exchange for goods
or services. The policy, Mr. Donaldson said, eliminated the ability of
plaintiffs to bring class-action suits, a tactic he regarded as the
most effective way of challenging the premiums.
“If you’ve got to look at every loan and see if it’s reasonable, you
can’t have a class action,” he said.
If Mr. Cuomo’s decision disappointed them, it did not shock lawyers and
others involved in fighting the practice. Mortgage brokers had a
powerful lobby, with members in every Congressional district. Many
legislators in Congress would fight Mr. Cuomo if he moved on the
brokers.
“We’re setting these rules in a context of litigation, with Congress
standing ready to make changes if it didn’t like what we did,” said Mr.
Donovan, the current housing secretary.
Mr. Donaldson and other lawyers eventually hit upon a strategy to press
lawsuits even after Mr. Cuomo’s policy statement; in 2001, HUD, under
the Bush administration, slammed the door shut on those challenges as
well.
Howell E. Jackson, a Harvard law professor who argued for the abolition
of yield spread premiums, said a ban would have hit the industry hard,
and Mr. Cuomo apparently decided against picking that fight.
“In retrospect, HUD was mistaken,” he said. The premiums “really fueled
mortgage brokers, and consumers could never understand it. And it
really fueled the boom.”
For some advocates for borrowers, the concept was all too simple. “It’s
a kickback, and Cuomo did nothing to prevent that,” said Bruce Marks,
chief executive of the Neighborhood Assistance Corporation of America.
“That one thing would’ve had a huge impact on preventing the subprime
crisis that we are in now.”
Congress finally outlawed yield spread premiums in July. The financial
reform legislation forbids mortgage originators to charge fees linked
to anything other than the principal amount of a loan.
Taking On Fannie Mae
Homeownership had jumped during the Clinton administration, to 65.4
percent in 1997, when Mr. Cuomo took charge, from 63.7 percent in 1993.
The ambitious new HUD secretary wanted to keep the number rising.
But Mr. Cuomo quickly learned the HUD secretary was not the most
powerful housing player in Washington. If he wanted to push
homeownership, particularly for low- and middle-income Americans, he
had to tackle Fannie Mae, with its considerable political muscle.
He decided to set the affordable housing goals high, at a fat, round 50
percent of the companies’ business volume. His tactics were not
terribly subtle. The agency commissioned and trumpeted a report showing
that Fannie’s new automated-underwriting system disproportionately
screened out minority borrowers. This infuriated Fannie Mae’s chairman,
Franklin Raines, who is black.
When Fannie Mae resisted HUD’s demand that it produce millions of loan
records, Mr. Cuomo’s agency sent a referral letter to the Justice
Department, accusing Fannie’s vice chairwoman, Jamie S. Gorelick, of
having violated the False Claims Act. Ms. Gorelick, a former deputy
attorney general, was said to have been enraged. The Justice Department
did not pursue the matter. She declined to comment for this article.
But the government banks were on board. More loans would be made. And
the evidence shows that Mr. Cuomo’s higher goals did not force Fannie
and Freddie to make riskier mortgages. In his report to the Financial
Crisis Inquiry Commission, Professor Jaffee, the Berkeley economist,
showed that default rates for mortgages bought by Fannie and Freddie
from 2000 to 2003, under Mr. Cuomo’s goals, were low and declined as
the foreclosure crisis grew.
After 2004, by contrast, when the Bush administration announced an even
steeper increase in the housing goals, Fannie and Freddie began buying
large quantities of poor-quality loans, and the default rates shot
higher and higher.
“Look at the timing,” said Mr. Donovan, the current HUD secretary.
“Fannie and Freddie didn’t start buying these truly bad loans for years
until after Andrew left.”
Faulted on Safeguards
Where Mr. Cuomo can be faulted, according to some analyses, is that
while in office he did not put in place the kinds of requirements and
safeguards that might have prevented what would become Fannie and
Freddie’s mad push into ever riskier loans, or that could have at least
limited their impact.
After all, by 1999, when Mr. Cuomo signaled his intention to raise the
goals, both Fannie and Freddie had made their subprime ambitions well
known, introducing no-down-payment products, openly talking of
capturing half the market and alarming some top aides to Mr. Cuomo.
Indeed, some critics say that Fannie and Freddie appeared to use Mr.
Cuomo’s well-intentioned goals as political cover for getting into the
lucrative subprime market.
“I believe it was simple avarice,” Professor Jaffee said of Fannie and
Freddie’s true ambitions. “ ‘We can buy these mortgages, make lots of
money, and we’ll be rich, and if it works out badly the government can
take us over.’ ”
Some consumer groups pleaded with Mr. Cuomo to prohibit Fannie and
Freddie from buying predatory loans altogether, or at least to impose
penalties. And they urged him to require a public accounting of Fannie
and Freddie’s loans, to see if they were including abusive mortgages in
claiming credit toward achieving the goals. In effect, the public could
have examined the loans the banks were making and sounded the alarm.
“I could tell you, loan by loan, what Bank of America was generating in
a neighborhood,” said Dan Immergluck, a professor of housing policy at
Georgia Tech. “I could not get that for” Fannie and Freddie.
Speaking of Fannie Mae and Freddie Mac, called government-sponsored
enterprises, he said: “I wanted the public to know what kind of loans
the GSEs were buying and investing in. And we didn’t want the subprime
stuff to count toward the housing goals. I think the general conclusion
is that it did.”
But Mr. Cuomo refused to install the measures, and in the end, HUD and
Mr. Cuomo sided with Fannie and Freddie, arguing in October 2000 that
demands for more transparency would impose “an undue additional burden.”
Asked why HUD had not required more detailed data reporting, Mr. Glaser
said, “It was too big a piece to chew off in this rule.”
Professor Immergluck offered a simpler explanation: “They just didn’t
want to do it.”
In fairness to Mr. Cuomo, even consumer advocates who wanted him to
build transparency and stronger safeguards into the housing goals say
it would have been unrealistic to have expected much more from him.
“It would’ve taken a person of tremendous courage and political juice
to be able to effect more protection,” said Margot Saunders, a lawyer
for the National Consumer Law Center. “He could’ve done more, but not a
whole lot more.”
Mr. Cuomo did speak out more loudly and presciently on the question of
predatory lending by private mortgage companies. He held hearings
across the country, and warned — a bit ahead of his time — of the
danger in Wall Street’s growing investment in the subprime market.
In June 2000, HUD and the Treasury issued a report on predatory
lending. It recommended bolstering disclosure requirements, enhancing
consumer protections against high-interest loans and curtailing
prepayment penalties.
It was a fairly powerful report. But it required Congressional and
Federal Reserve action, and when Vice President Al Gore lost the 2000
election to Mr. Bush, Mr. Cuomo was out of a job.
“He wrote what I think is the definitive report on solutions,” said
Judith Kennedy, president of the National Association of Affordable
Housing Lenders. “Whereupon they lost the administration.”
PHOTO OF CONGRESSMAN HIMES SPEAKING ON GUN CONTROL "GSE"
is bureaucrat-speak for "government sponsored entities" not "gun
shooting excess"
Ex-Wall Streeter Himes expects role in GSE
reform
Greenwich TIME
Charles J. Lewis, Hearst Newspapers
Published: 09:04 p.m., Saturday, February 12, 2011
WASHINGTON -- Rep. Jim Himes, D-Conn., a veteran of Wall Street and
housing finance, says he hopes to play a major role in the reform of
Fannie Mae and Freddie Mac, the two failed government-sponsored
companies that have helped home buyers get mortgages but that are now
in government custody.
Last week, the Obama administration urged Congress to consider various
options on reforming the two companies, which have cost taxpayers $154
billion so far, making them the most expensive bailout in the financial
crisis.
That puts the problem smack in Himes' bailiwick as a member of the
House subcommittee on capital markets and government-sponsored
enterprises where, despite his junior status as a second-term House
member and a member of the Democratic minority, Himes said he hopes "to
play a really active role.
"Having spent my non-political career in finance and housing, I am well
positioned to help out on this issue, he said in an interview. "This is
a highly technical area -- but so are financial derivatives. And my
experience in derivatives during my first term shows that if you have
some expertise and people trust you, they will come and seek your views.
Himes spent 12 years with Goldman Sachs, the Wall Street giant, before
joining Enterprise Community Partners, a non-profit, where he worked on
financing housing units in the greater New York area.
As a freshman, Himes worked on the Dodd-Frank financial reform bill
that established a regulatory structure for derivatives, the
often-complex securities that rely on the value of other assets such as
mortgages.
Rep. Maxine Waters, D-Calif., the top Democrat on the panel, said her
subcommittee "is the right place for Himes. He comes to the table,
given his professional background, extremely knowledgeable about the
capital markets and our complex financial system."
The White House recommendations to Congress on the future of Fannie Mae
and Freddie Mac were infused with political caution reminiscent of the
administration's approach to health care reform, in effect tossing the
problem to Congress and urging the lawmakers to follow some general
principles.
One of those principles is to end up "winding down the two firms, the
Federal National Mortgage Association (Fannie Mae) and the Federal Home
Loan Mortgage Corporation (Freddie Mac.)
Both companies held congressionally-approved corporate charters but
were stockholder-owned, a rare hybrid. Hence, they are known as
"government-sponsored enterprises," or GSEs.
Their mission is to provide financing to mortgage lenders by buying
their mortgages and reselling them or bundling them into new securities.
They got off the track five years ago when, competing with Wall Street
firms to build and sell mortgage-backed securities, the GSEs lowered
their standards and began investing in low-quality mortgages.
When the housing market tanked and mortgage defaults soared, the two
GSEs holding billions of dollars of mortgages or mortgage-related
securities were on the cusp of bankruptcy in 2008 when Congress and the
Bush administration enacted legislation that put the two companies in
federal conservatorship and empowered the Treasury Department to plow
financial support into the GSEs so they could honor their debts and
their guarantees.
They were not only too big to fail -- they're too big to just shut down.
The White House report on the future of the GSEs said, "We must proceed
carefully with reform to ensure government support is withdrawn at a
pace that doesn't undermine economic recovery.
The Obama administration said it will work with federal regulators to
gradually reduce the GSEs role and encourage private capital to play
the biggest role in housing finance.
In the meantime, the White House said Fannie Mae and Freddie Mac should
only invest in mortgages that have at least a 10 percent down payment
and to avoid loans for more expensive homes. The current ceiling is
$417,000 nationally, but Congress approved emergency measures two years
ago to raise the limits to more than $700,000 in high-cost areas. That
ceiling is scheduled to dip to $625,000 in October.
Himes says one unexpected outcome of the emerging debate in Congress
may be the embrace by Republican lawmakers of a government role in the
mortgage market.
Traditional 30-year fixed rate mortgages "are as American as apple pie,
they are the cornerstone of a family's ability to build wealth over
time, Himes said. But lenders don't want to hold on to those mortgages
-- they want to sell them. That goal could be significantly jeopardized
if the government provided no backup or liquidity at all, he said.
That has been the role of Fannie and Freddie. "Eliminating that role
would be an extraordinarily drastic step, Himes said.
The Republican majority in the House "needs to understand that the
public likes the 30-year fixed rate mortgage and that there will have
to be some sort of entity that encourages that practice by buying those
mortgages from lenders. Obama seeks new design for housing, Fannie/Freddie
YAHOO
By Kevin Drawbaugh and David Lawder
17 August 2010
WASHINGTON (Reuters) – The Obama administration called for "fundamental
change" at Fannie Mae and Freddie Mac, but a long, politically
explosive debate lies ahead on the future of the bailed-out mortgage
giants and housing policy that affects millions of Americans and
billions in investment.
U.S. Treasury Secretary Timothy Geithner on Tuesday raised basic
questions about the government's long-standing role in subsidizing the
$10.7 trillion housing market and supporting the historic "American
dream" of home ownership. Critically for both homebuyers and
investors, he backed some form of government guarantee for mortgages.
Geithner said a key question was whether the private sector could
provide insurance or guarantees as part of a new home financing regime
with enough safeguards to avoid another mortgage meltdown.
"It is not tenable to leave in place the system we have today,"
Geithner said.
"The challenge is to make sure than any government guarantee is priced
to cover the risk of losses, and structured, to minimize taxpayer
exposure," he told housing industry leaders at a conference convened by
the Treasury almost two years after the government seized Fannie Mae
and Freddie Mac to save them from collapse.
Since then, the two firms -- once lobbying heavyweights able to crush
attempts at reform on Capitol Hill -- have received nearly $150 billion
in taxpayer bailout money and have been placed in conservatorship,
sharply restricting their past activities.
"We will not support returning Fannie and Freddie to the role they
played before conservatorship, where they took market share from
private competitors while enjoying the perception of government
support," Geithner said.
"We will not support a return to the system where private gains are
subsidized by taxpayer losses."
The conference, including some of the mortgage sector's top lenders and
investors, was billed as a "listening session" to help the
administration develop an overhaul plan by January. It comes amid
signs of persistent weakness in housing markets -- an issue that could
weigh on voters headed to the polls in November.
Housing starts rose in July from a downwardly revised level in June but
the pace of new construction was much weaker than forecast and permits
for future building fell to their lowest level in more than a year,
according to a U.S. Commerce Department report on Tuesday.
"NO CLEAR CONSENSUS"-GEITHNER
"It's safe to say there's no clear consensus yet on how best to design
a new system. But this administration will side with those who want
fundamental change," Geithner said.
With Congress focused on elections in November, federal spending
coffers depleted and nerves on edge about avoiding another housing
crash, lawmakers looked unlikely to take on a housing finance overhaul
until 2011, analysts said. Enthusiasm in some quarters for
removing government from housing finance was certain to collide with
the political reality that housing subsides, such as the mortgage
interest deduction, are deeply entrenched in U.S. economic life.
"It is clear that the government should continue to play a very large
role in the housing market," said Mark Zandi, chief economist at
Moody's Analytics and a conference participant.
At the same time, he said, "The housing market is, in my view,
over-subsidized ... We're not getting our money's worth ... It's key
for us to scale back the subsidies."
The problems and costs of Fannie Mae and Freddie Mac were not addressed
in the sweeping Wall Street reform legislation approved by the U.S.
Congress in July -- a yawning gap in the Democratic bill that
Republicans have sharply criticized. Bank and mortgage-backed
securities investors are watching warily as the administration weighs
options, ranging from full nationalization at one extreme to
privatization with no government support at the other, and alternatives
in between.
GUARANTEE ESSENTIAL-PIMCO'S GROSS
A government guarantee is considered essential to at least one major
investor -- Bill Gross, co-founder of bond-trading firm Pacific
Investment Management Co. He said that a government guarantee is needed
to keep mortgages affordable.
"The concept of guarantees is crucial to the liquidity and to the cost
of home financing," Gross said, calling it unrealistic to assume the
private market could step in and replace Fannie Mae and Freddie Mac as
providers of home mortgage liquidity. "It won't work," he said.
"Without government guarantees, mortgage rates would be hundreds --
hundreds of basis points higher, resulting in a moribund housing market
for years."
Shaun Donovan, secretary of Housing and Urban Development, told the
conference that the government's "footprint" in housing finance needs
to be much smaller than it is today.
Fannie and Freddie and the Federal Housing Administration now back 90
percent of new U.S. home mortgages, he added.
The stubborn housing slump was likely to weigh on the minds of voters
already concerned about a sluggish economy heading into November
elections.
Across America, the average congressional district has more than 9
percent of its mortgages delinquent by 90 days or more, according to a
study by Deutsche Bank. That's more than 2-1/2 times the delinquency
rate on election day in 2008. The next di$a$ter
NYPOST
By STEPHEN B. MEISTER
Last Updated: 1:02 AM, May 18, 2010
Posted: 12:20 AM, May 18, 2010
The Federal Housing Administration, which insures home mortgages, not
only failed to learn the lessons of the subprime meltdown, it's been
doubling down on failure. As a result, this taxpayer-backed agency is
headed for disaster.
In 2006, the FHA insured just 3 percent of home mortgages; today, it
insures one of every three. Together with Fannie and Freddie, the FHA
is putting the risk for the entire, $11 trillion US home-mortgage
market on the back of the American taxpayer.
How did that happen? Simple. Private lenders responded to the bursting
of the housing bubble and the subprime (and now prime) mortgage crisis
by toughening their underwriting standards. Meanwhile, the FHA has
stubbornly refused to touch the most basic standard -- the down payment
requirement.
Private-mortgage lenders now require 10 to 20 percent down payments.
But a strapped homebuyer can still get the FHA to insure his mortgage
with as little as 3.5 percent down.
Since the average residential-brokerage commission is 6 percent, that
means someone can buy a home by investing about half of what the broker
makes on the sale -- and get the US government to insure his mortgage.
FHA Commissioner David Stevens doesn't even propose touching this basic
error; his only "fixes" are peripheral, raising the FHA insurance
premium (from 1.75 percent to 2.25 percent) and requiring somewhat
higher down payments (10 percent) from borrowers with very low credit
scores.
Meanwhile, the agency is bleeding. As defaults have skyrocketed among
FHA-insured mortgages, the FHA's capital reserves have dwindled to
about a quarter of the congressionally mandated minimums. As of Sept.
30, the FHA's capital reserves stood at $3.6 billion, about half a
percent of the value of the mortgages it insures, down 72 percent from
a year earlier.
Yes, the FHA has other accounts it can tap -- but if its
capital-reserve fund falls below zero, the FHA can get funded directly
from the Treasury without having to ask Congress for more money.
At the end of February, the "seriously delinquent" rate for FHA-insured
mortgages spiked to 7.5 percent, up from 6.2 percent a year earlier.
And FHA default rates are far higher in some cities. At the end of
2009, they were at 18 percent in Punta Gorda, Fla.; 15.6 percent in
Flint, Mich.; 15.1 percent in Fort Meyers-Cape Coral, Fla. and 15
percent in Elkart-Goshen, Ind.
Apart from insuring one in every three mortgage loans taken out to buy
homes, the FHA also now insures one in five refinancings.
And President Obama recently announced that he'll use FHA insurance to
enable upper-income homeowners who are underwater but still current on
their mortgages to refinance. While Obama claims that the cost of this
program will be limited to the $50 billion he has earmarked as bribes
to convince lenders to accept a reduction in the principal owed to them
on underwater mortgages, the real cost will come down the road when the
FHA-insured refinancings go into default.
Thanks to the FHA, subprime-mortgage lending is alive and well. And
thanks to Obama's latest program, private-mortgage investors will be
able to pick the riskiest of their not-yet-defaulted underwater loans,
and get them off their books and onto the FHA's.
The agency's home page says "FHA.com -- another American Dream comes
true." In fact, it's building a new American night mare -- by
continuing the toxic policies that produced the housing bubble and the
subprime crisis, and putting the taxpayers on the hook for it. Expect
the FHA to be the next big bailout.
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.”
Ireland's housing collapse now becoming a literal one
Publication: The Day
By FINBARR FLYNN Bloomberg News
Published 07/29/2012 12:00 AM
Updated 07/26/2012 04:46 PM
Dublin - Ireland is opting for bulldozers rather than bankers as it
starts to clear the legacy of the housing boom whose collapse brought
the economy to its knees.
About 1,850 housing developments, unfinished after the bubble burst in
2008, pockmark the Irish landscape, according to government figures.
This week, Ireland's National Asset Management Agency, the state agency
set up in 2009 to purge banks of their most toxic commercial property
loans, started the destruction of an apartment block for the first time.
"There'll be some places where the most sensible decision that can be
made will be to demolish," Housing Minister Jan O'Sullivan said in an
interview in her Dublin office. "If nobody wants to live in them, then
the most practical thing to do possibly will be to demolish what is
there."
The so-called ghost estates are the most visible scar left by Western
Europe's worst real-estate crash, which led Ireland to follow Greece in
seeking international financial help. In all, about 15 percent of Irish
homes are vacant, the country's statistics agency estimates.
The death of a two-year-old who wandered into an unfinished development
in February underscored the problem of leaving the estates empty. The
building in Longford in central Ireland was bulldozed on Wednesday on
safety grounds after a sewage-related explosion in a home on the site.
"The people that bought into a dream inherited a nightmare," said Peggy
Nolan, a local lawmaker in Longford. "The taxpayers have paid enough,
as far as I am concerned, shame on these developers."
About 553,000 houses were built in the 10 years through 2005 in the
country of about 4.5 million people, as homebuilding expanded at twice
the pace of the rest of Europe. About 294,000 homes now lie empty, as
prices halved. In Dublin, prices have dropped 64 percent from the 2007
market peak, according to Irish real estate agent Lisney.
The asset agency, known as NAMA controls or is linked to about 10
percent of estates. The agency this week demolished a 12-unit apartment
block at the Gleann Riada, about 115 kilometers (72 miles) from Dublin.
O'Sullivan is drawing together developers, local authorities, banks,
NAMA and residents to formulate "site resolution plans" for each
estate. The government envisages that "substantially completed"
developments will be finished and potentially sold or used for social
housing, O'Sullivan said. Others will be demolished and returned for
farming.
The plan is to "get rid of this blot on our landscape, and this blot on
our communities," she said.
I-BBC
PERSPECTIVE 2010 HERE
24 August 2010 Last updated at 11:19 ET
US existing home sales drop to 10-year
low
Sales of existing homes in the US plunged 27.2% in July compared with
June to their lowest level in more than 10 years, figures suggest.
Home sales completed in the month stood at an annualised rate of 3.83
million, according to the National Association of Realtors (NAR).
The main reason for the drop was the end of tax credits designed to
boost sales, the body said.
US Economy
* US home sales drop to 10-year low
* Fed takes step to boost recovery
* US sees 131,000 jobs lost in July
* US economic growth slows to 2.4%
Despite that, the figures added to fears about the US economic recovery.
Apprehension about weak housing figures pushed Wall Street lower in
early trading and confirmation of the record low sales in the form of
the NAR report sent shares down further.
The main Dow Jones index fell by 122 points, or 1.2%, to 10,052.18.
"I think [the July figure] is just suggestive of an economy that is
definitely slowing down," said Cary Leahey at Decision Economics.
"Unfortunately it is a situation where we can't have a meaningful
recovery without a meaningful consumer recovery, and we can't have a
meaningful consumer recovery without a recovery in housing."
Greg Salvaggio at Tempus Consulting said: "There is really nothing good
that can be said about these numbers."
Tax credits
The NAR presents monthly sales figures as an annualised rate. This
represents what the total number of sales for a year would be if the
relative pace for that month were maintained for 12 consecutive months.
Home sales in July were at their lowest level since the NAR began
collating its existing homes sales figures in 1999, and were 25% lower
than in the same month a year earlier.
July was also the third month in a row that sales have fallen.
The drop in sales coincides with the end of tax credits for homebuyers,
which expired in May.
"Consumers rationally jumped into the market before the deadline for
the tax credit expired," said Lawrence Yun, the NAR's chief economist.
"Since May, after the deadline, contract signings have been notably
lower and a pause period for home sales is likely to last through
September."
However, he said that lending conditions in the housing market meant
sales could pick up.
"Given the rock-bottom mortgage interest rates and historically high
housing affordability conditions, the pace of a sales recovery could
pick up quickly, provided the economy consistently adds jobs."
Slowing growth
However, many economists are rather gloomy about the US jobs market.
The US economy shed 131,000 jobs in July, the second month in a row
that jobs had been lost.
Recent figures also showed that economic growth in the US slowed
between April and June, with GDP growing by an annualised rate of 2.4%
compared with 3.7% in the previous quarter.
Weaker-than-expected retail sales figures for July also added to
concerns over the strength of the recovery of the world's largest
economy.
Ghost estates testify to Irish boom and bust Page last updated at 13:42 GMT, Friday, 30
April 2010 14:42 UK
One in five Irish homes is unoccupied
By Paul Henley , BBC News, Republic of Ireland
David McWilliams is the man who coined the phrase "ghost
estate" when he wrote about the first signs of a disastrous over-build
in Ireland back in 2006.
Now, it is a concept the whole country is depressingly
familiar with. Most Irish people have one on their doorstep - an ugly
reminder, says the economist and broadcaster, of wounded national
pride.
"Emotionally, we have all taken a battering," he says. "Like
every infectious virus, the housing boom got into our pores. You could
feel it.
"You'd go to the pub and people would be talking about what
house they'd bought. And now a lot of people, myself included, think
'God, we were conned'."
'Emotional thing'
Mr McWilliams paints Ireland's history as one of "economic
failure".
"So to have risen so quickly and seemingly in the right
direction and then to have that pulled away from us," he says, "it's
more of an emotional thing than a financial thing."
There are 621 ghost estates across Ireland now, a legacy of
those hopeful years. One in five Irish homes is unoccupied.
If the country immediately used them to house every person on
the social housing list, there would still be hundreds of thousands
left over.
The obvious question of who people imagined would live in all
these new-builds makes Irish people wince now.
But hindsight is a wonderful thing. Only a few years ago,
developers feeding money into local government coffers were getting
free rein to build row upon row of five-bedroom detached houses on the
green outskirts of towns nobody had even thought of commuting from
before.
'Raised eyebrows'
Banks were throwing money at members of the public who saw
these houses either as an escape to a better lifestyle or an investment
route to riches.
Builders from eastern Europe were working overtime to create
homes, the value of which was sometimes three times what it is now.
People thought... that
this golden goose would continue to lay golden eggs for ever
Green Party minister Ciaran Cuffe
As the slump set in, the immigrant workers went back home,
the banks ceased lending on the scale that had fuelled the frenzy and
the market disappeared.
Property supply had become completely divorced from property
demand.
County Leitrim alone would have needed about 590 new houses
between 2006 and 2009 to accommodate its population growth. It got
2,945.
The resulting mess is currently being addressed by a
nationwide audit of empty and unfinished housing.
It has raised eyebrows that precise numbers are not already
clear, even to the local councils who gave planning permission for the
homes in the first place.
'Everyone was buzzing'
Ciaran Cuffe is the Green Party minister of state in charge
of the audit.
"It's one heck of a challenge", he says, "because we have the
legacy of many years of poor planning, and an economy that was
overheated, paid far too much attention to construction and was more
interested in the quantity than the quality of homes".
He says Ireland's perceived wealth was part of the problem.
"I think there was a view that demand would continue
indefinitely at a time when we had very high levels of immigration.
"People thought the housing was needed not only for the
people of Ireland but also for others that had come here, and that this
golden goose would continue to lay golden eggs for ever."
People are looking
around and saying - 'what happened? Was that us?'
Economist David McWilliams
Nobody expects the majority of Ireland's surplus new housing
simply to be ploughed down by the bulldozers now.
But Mr Cuffe admits some of the recent headlines in the Irish
press on the subject are not completely wide of the mark.
"I certainly think demolition could be part of the solution
in cases where we have housing estates that are unoccupied, that are
miles away from where people want to live and that were badly built in
the first place."
And indeed, many of Ireland's ghost estates are in the
unlikeliest, most isolated places.
It is strange, looking down vast rows of immaculate
new-builds, taking in their optimistically-planted front gardens and
peering through curtain-less windows into unwanted granite-topped
fitted kitchens, to comprehend the fact that they might never be
occupied.
Mr McWilliams says the whole of Ireland is having to come to
terms with what he compares to a collective addiction.
"Everyone took the property drug at the same time", he says,
"everyone was up at the same time, everyone was buzzing.
"Now we are all in the middle of this huge comedown. And
people are looking around and saying - 'what happened? Was that us?'
And then we look at our bank statements and we realise - 'yes, it was'".
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.”
Rise in Household Debt Might Be Sign of a Strengthening Recovery By ANNIE LOWREY, NYTIMES
October 26, 2012
WASHINGTON — For the first time since the Great Recession hit, American
households are taking on more debt than they are shedding, an epochal
shift that might augur a more resilient recovery.
For two of the last three quarters, American households’ total
outstanding borrowing on things like credit cards, mortgages and auto
loans has increased after falling for 14 consecutive quarters before
then. Some economists even see an end to the long, hard process of
deleveraging — as they refer to the cutting of debt relative to income
or the nation’s economic output. That process, they say, has been a
central reason for the extraordinary sluggishness of the recovery.
“We’re at an inflection point,” said Kevin Logan, the chief United
States economist for HSBC. “Debt is less of a burden” for households,
he said.
Closely watched economic figures released Friday underscore households’
nascent sense of strength. Despite tepid growth and still-high
unemployment, consumer confidence has soared to a five-year high,
according to a survey by Thomson Reuters and the University of
Michigan. And economic growth numbers for the third quarter showed
household spending picking up pace as well.
The drop in overall debt is in no small part because of foreclosures,
delinquencies and write-offs by lenders which are slowing but not
stopping. But the struggle to pay down old debts might not prove such a
drag on economic growth in the future.
“We’re not getting a tail wind. We’re losing a head wind,” said Mark
Zandi, chief economist at Moody’s Analytics, who said of the
deleveraging process for households and businesses, “It’s basically
over.”
Experts estimated that the overall level of debt, compared with income
or economic output, would continue to fall for the next one to three
years — with the earliest prediction for the end of deleveraging coming
in mid-2013 and the latest at the end of 2015.
“By just about any metric, we’ve made a huge dent in a significant
problem, but I don’t think we’re finished yet,” said Liz Ann Sonders,
the chief investment strategist for Charles Schwab & Company. “The
distinction is that deleveraging will no longer be a big drag on the
economy, like in the first couple years after the crisis.”
In the run-up to the recession, American households took on trillions
of dollars of debt that they could not easily afford, given tepid rates
of wage growth. The collapse of the real-estate bubble and ravages of
the recession have forced them to pay down or prompted lenders to write
off more than $1 trillion of it, according to Federal Reserve data.
Still saddled with heavy debt burdens during the weak recovery,
millions of American households cut back spending on food, cars and
other goods. On top of that, relatively few families have been willing
or able to take out loans or lines of credit. Thus, the proportion of
household debt to personal income has fallen to its lowest level since
the mid-2000s from its recessionary-era peak.
Now, with the economy more stable and interest rates at generational
lows, Americans might finally feel more comfortable taking out a loan
on a new car or putting money down on a mortgaged home. With their
finances more in balance, workers might start spending less of their
paychecks paying off old loans and more on leisure or household goods.
Given the importance of consumer spending to the American economy,
those changes might translate into a more resilient economy, analysts
said.
“Consumer spending still drives 65 to 70 percent of G.D.P. growth,”
Susan Lund, the director of research at the McKinsey Global Institute,
said. “When deleveraging is over and housing picks up a bit, those two
factors are going to be strong engines for the United States economy.”
American households’ biggest debt burden is in mortgages, given that a
home is far and away the largest purchase the average family ever
makes. As the foreclosure crisis grinds on, the total amount of
outstanding mortgage debt continues to fall, Federal Reserve data
shows, though more slowly than earlier in the recession.
A broader turnaround in the housing market, which seems to be in its
early stages, might be helping to buoy consumers’ confidence,
economists said, as the combination of low interest rates, thawing
credit conditions and an aggressive effort by the Federal Reserve has
helped to put a floor under falling home prices.
“The Fed is redoubling its efforts to ease financial conditions right
when the economy is getting into a better position, a position where
it’s more likely to respond to that easing of financial conditions,”
Paul Sheard, chief global economist at Standard & Poor’s, said.
“Those two things are dovetailing” and will help households in the
future, he said.
Other parts of the household debt and spending picture are looking
brighter as well, economists said. A September report by Equifax, a
consumer credit reporting agency, showed that the total value of auto
lending jumped nearly 14 percent year over last year, with sales of new
cars and light trucks climbing sharply. In the first half of 2012,
Americans took out more car loans than they had since 2007, before the
financial crisis hit.
The trends look likely to continue, Equifax said. “The average age of
cars on the road today in the U.S. is the highest ever recorded and
consumers are ready to replace these older vehicles,” Amy Crews Cutts,
Equifax’s chief economist, said in a statement. “The financial picture
has improved sufficiently that we are seeing auto lending markets
become facilitators rather than obstacles.”
Americans have also improved their personal balance sheets by slashing
their outstanding credit card debt to $855 billion today from more than
$1 trillion in 2008, according to Federal Reserve data. But student
debt has continued its inexorable march higher, a “worrisome” trend
that economists say could stop young workers from starting new
households or could eat into their spending on other goods and services.
How Americans feel about debt and credit in after the recession might
determine how much debt they ultimately shed, Ms. Lund of McKinsey
said. “The Great Depression scarred an entire generation,” affecting
how households borrowed and spent for decades, she said. “We don’t yet
know whether consumer behavior has been fundamentally changed by this
crisis or not.” Construction spending jumps 2.7
percent in April
YAHOO
By MARTIN CRUTSINGER, AP Economics Writer
1 June 2010
WASHINGTON – Construction activity surged in April by the largest
amount in nearly a decade. The unexpected gains could mean the
hardest-hit sector of the economy is starting to recover.
Construction shot up 2.7 percent last month compared to March, the
Commerce Department said Tuesday. It was the biggest one-month
improvement since August 2000.
Housing
construction jumped by 4.4 percent to a seasonally adjusted annual rate
of $263 billion. Home construction has been helped by home buyer tax
credits that expired at the end of April. Economists are concerned
about the durability of the housing recovery now that the tax credits
have expired.
Nonresidential construction rose 1.7 percent in April to an annual rate
of $302.7 billion. That marked the first advance in this category since
March 2009. The strength in April came from gains in private sector
work on communications projects and power generation facilities.
Construction of office buildings and the category that includes
shopping centers fell in April.
Commercial building projects have suffered as the weak economy has
resulted in rising loan defaults and banks have tightened up on lending
standards. That has made it harder for developers to get financing.
In another sign of strength, the government revised the March
performance to show a gain of 0.4 percent, double the 0.2 percent
increase initially reported.
Government spending rose 2.4 percent in April to $303.3 billion. State
and local spending increased 2.3 percent and federal spending rose 2.9
percent. This category is being helped by the government's economic
stimulus program but those projects are starting to wind down.
Weakness in construction has been a major drag on the economy as it
tries to mount a sustained recovery from the deepest recession since
the 1930s. PRICES
Most homes
being built new lately are multifamily units for rentals...prices going
down for new homes?
New-home sales on the rebound, increasing 11.1 percent in March By STEVE GOLDSTEIN MarketWatch Article published Apr 26, 2011
Sales of new homes rose 11.1 percent in March, the Commerce Department
said Monday, marking a mild improvement from the worst-ever showing as
the dampening effect of winter storms and an expiring California tax
credit wore off.
The still-bleak reading of a seasonally adjusted annual rate of 300,000
represented a 21.9 percent nosedive from March 2010 levels.
However, the level beat a MarketWatch-compiled economist estimate of
290,000, and February's low reading of 250,000 was revised up to
270,000. Analysts had attributed February's weakness in part to
winter storms that depressed figures in the East and the Midwest, as
well as the expiration of a California tax credit. The data in March
bore out that view.
Sales in the Northeast jumped 66.7 percent, those in the Midwest
improved 12.9 percent and those in the West increased 25.9 percent,
while sales in the South edged 0.6 percent lower.
"With March sales gaining in every region except the South, the data
are another reminder that activity readings in January/February were
restrained by severe weather. Builder sentiment data and mortgage
purchase applications have shown no collapse or subsequent surge," said
Steven Wieting, an economist at Citi.
But by region, sales are between 9.1 percent and 34 percent worse than
the same period last year. The still-high unemployment rate, a glut of
cheaper existing homes on the market and the large number of underwater
mortgages have all combined to depress the market for new homes.
"Distressed sales continue to rob demand from new home sales and
construction activity," said Yelena Shulyatyeva, an economist at BNP
Paribas.
On a three-month moving average, which reduces the month-to-month
variance in the hugely volatile release, sales fell to a 294,000 rate
from 305,000. The March reading has a margin of error of 21.7 percent,
the Commerce Department said. The median sales price rose 2.9
percent to $213,800 from an upwardly revised $207,700 in February,
though they are 4.9 percent below selling prices from March 2010.
The average sales price actually fell 3.8 percent to $246,800, as the
number of houses sold in the $400,000-to-$499,000 range dropped to 4
percent of the total from 9 percent of February's total. At the
end of March, 183,000 houses were up for sale, representing a supply of
7.3 months at the current sales rate, down from a supply of 8.2 months
in February.
Inventories are now at the smallest level since 1967 after a
"relentless slide," said David Resler, chief economist of Nomura
Securities International.
"This lean supply of unsold homes may give builders some hope (however
faint) that a pickup in sales will require new construction," he said.
Home prices fall for 8th month in
February: S&P/Case YAHOO
26 April 2011
NEW YORK (Reuters) – U.S.
single-family home prices fell for an eighth straight month in
February, inching closer to an April 2009 trough, a closely watched
survey said on Tuesday.
The S&P/Case Shiller composite
index of 20 metropolitan areas declined 0.2 percent in February from
January on a seasonally adjusted basis, slightly better than
economists' median forecast for a drop of 0.3 percent.
The 20-city composite index was at
139.27, holding just a hair above its 2009 low of 139.26. Average home
prices across the United States are back to levels where they were in
the summer of 2003. Prices
in the 20 cities have fallen 3.3 percent year over year, in line with
expectations.
"There is very little, if any, good
news about housing. Prices continue to weaken, trends in sales and
construction are disappointing," David Blitzer, chairman of the Index
Committee at S&P Indices, said in a statement.
"Recent data on existing-home sales,
housing starts, foreclosure activity and employment confirm that we are
still in a slow recovery."
The glut of houses up for sale has
kept prices low and the market has struggled to regain traction since a
home buyer tax credit expired last spring. Other data in the last week has suggested
some stabilization in the market with sales of new and existing homes
rising in March.
Financial markets were unchanged by
the Case-Shiller data on Tuesday, with U.S. stock index futures
pointing to a higher open with investors focused on earnings from major
companies. Home
prices fell in August, near lows YAHOO
By Julie Haviv
26 October 2010
NEW YORK (Reuters) – Prices of
single-family homes fell for a second straight month in August,
hovering around recent lows after the expiration of popular homebuyer
tax credits, according a Standard & Poor's/Case-Shiller home price
report on Tuesday.
The S&P/Case Shiller composite
index of 20 metropolitan areas declined 0.3 percent in August from July
on a seasonally adjusted basis where a Reuters poll of economists
forecast a drop of 0.2 percent. The dip followed a seasonally adjusted
decline of 0.2 percent in July.
S&P, which publishes the
indexes, also said home prices in the 20 cities index rose 1.7 percent
from August 2009, a slower annual pace than the 3.2 percent increase in
July.
Unadjusted for seasonal impact, the
20-city index fell 0.2 percent after a 0.6 percent July gain. A 0.2
percent rise was expected.
"A disappointing report. Home prices
broadly declined in August. Seventeen of the 20 cities and both
composites saw a weakening in year-over-year figures, as compared to
July, indicating that the housing market continues to bounce along the
recent lows," David M. Blitzer, chairman of the index committee at
Standard & Poor's, said in a statement.
"Over the last four months both the
10- and 20-City Composites show slowing growth, after sustaining
consistent gains since their April 2009 troughs," he said.
Blitzer said the housing market
appears to have stabilized at new lows.
"At this time, it does not seem that
any of the markets are hanging on to the temporary momentum caused by
the homebuyers' tax credits," he said.
The housing market has been
struggling since home buyer tax credits expired earlier this year. To
take advantage of the tax credits, buyers had to sign purchase
contracts by April 30. Contracts originally had to close by June 30,
but that was extended by three months.
Cary Leahey, economist at Decision
Economics in New York, said the problem right now is the potential
shadow inventory of foreclosures. With a flood of foreclosures, which
typically sell at steep discounts, in the pipeline, home prices will
likely remain depressed for some time.
"If you believe that you can't have
a vibrant economy without a vibrant housing market, then you have to
deal with the foreclosure problem," he said.
Home prices in August reflect
conditions before banks temporarily halted foreclosures due to
questionable documentation. Home prices may benefit from fewer
foreclosures in the mix, but any rise should prove to be temporary.
As of August 2010, average home
prices across the United States are back to the levels where they were
in late 2003 and early 2004, S&P said. Supply and demand as relates to prices
- our introduction of this basic economic theory.
Housing isn’t close to stabilizing Commentary: Shadow
inventory paints a more dismal outlook By Keith Jurow is a Minyanville.com
contributor Sept. 22, 2010, 10:48 a.m. EDT
BRIDGEPORT, Conn. (MarketWatch) — Much has been written about the
so-called “shadow inventory” since the term was first coined a few
years ago.
Some analysts and commentators have argued about whether it even
exists. Let’s take an in-depth look at this shadow inventory and see
whether it really is a threat to housing markets around the country.
Shadow inventory defined
Rather than joining the dispute about what the term actually means,
I’ll simply define it in this way: The “Shadow Inventory” is comprised
of all those distressed residential properties (other than MLS
listings) which we know will almost certainly be coming onto the market
in the not-too-distant future.
MLS foreclosures — the tip of the
iceberg
The starting point in discussing the shadow inventory has to be homes
actually on MLS listings around the country. With the plunge in home
sales starting in July, the number of listings has risen substantially
since the spring. For example, California listings are up 25% since
April.
The percentage of total listings that are bank-owned properties has
declined over the last year, while the percentage of short-sale
listings has risen tremendously during the same period. For example,
short sales comprised 40% of all active listings in Sacramento County
in August. The following table from data supplied by ZipRealty shows
this soaring number of short-sale listings.
Because of the sharp climb in short-sale listings, roughly 30% of all
July home sales in California, Arizona, and Nevada were short sales,
according to Inside Mortgage Finance. It also reported that nationwide,
closed short sales have climbed from roughly 45,000 in January to
nearly 100,000 in June.
With regard to shadow inventory, the key question is how many
foreclosed and repossessed properties are now either in the inventory
of banks or held on behalf of residential mortgage-backed securities
investors whose loans they service. Estimates start at about 500,000
and go up from there. One highly reputable data provider with a huge
database of first mortgage liens has been reporting an REO inventory in
excess of 1 million since last summer. Whatever the number is, it seems
clear that the vast majority of these properties aren’t currently on
the market.
Defaulted properties heading for
resale market
In addition to repossessed properties held off the market, the shadow
inventory includes all the homes that have been placed into default —
the first stage of foreclosure proceedings. According to Lender
Processing Services’s July Mortgage Monitor report, there are now 2.02
million properties in default. This number hasn’t declined in the past
year in spite of more than 1 million trial mortgage modifications. Read
Minyanville’s “Federal Reserve Slowly Killing Mortgage Market.”
In many of the worst bubble metros, the number of homes in default has
been climbing in the last year. Take a look at the soaring number of
defaults in the Las Vegas metro area in this graph from
ForeclosureRadar. In spite of the huge number of foreclosed homes that
have been sold by the banks in the Las Vegas area, the volume of new
foreclosure actions continues to rise. See chart with Las Vegas
defaults.
While many of these defaulted properties throughout the nation will
escape foreclosure by means of a short sale, the rest will move on to
foreclosure proceedings and eventual trustee sale to a third party or
repossession by the lender.
Overwhelmed by the number of defaulted properties, banks have stretched
out the time between the beginning of mortgage delinquency and formal
foreclosure to an incredible average of 469 days -- more than 15
months. Since these homeowners in default are living in their house
without making mortgage payments, that’s a way to build up a sizable
pile of cash. Read Minyanville’s “What to Do With Fannie and Freddie?”
Delinquent homeowners — the number
just keeps growing
You could argue that the shadow inventory is the total of repossessed
homes not yet on the market and defaulted homes that will move into
foreclosure. However, there’s also the matter of homes which are
seriously delinquent in mortgage payments. Why? The homeowner can cure
the delinquency by paying the arrears before the home goes into default.
The problem is that the cure rate for these seriously delinquent
mortgages is almost zero. See the chart here.
If this were early 2005, one could claim that 40% of homeowners who
were delinquent 90 days or longer would eventually bring the mortgage
current. But the cure rate has plunged along with home prices. As early
as one year ago, the cure rate had dropped to almost zero. A
delinquency of 90 days now means almost certain foreclosure or short
sale.
How many homeowners are now seriously delinquent by 90 days or more? To
answer that, we turn to Lender Processing Services and its massive
database of roughly 34 million first mortgages. Their monthly Mortgage
Monitor provides a detailed table of non-performing first liens. Here’s
what the July non-performing loan count looks like.
At the end of July, the number of residential first mortgages that were
delinquent by 90 days or more stood at 2.47 million. While the figure
has declined from a record 3.06 million in January of this year, this
is due almost entirely to the mortgages that were placed in trial
modification by the banks. While in modification, they’re no longer
considered delinquent. We know from the cure rate chart shown earlier
that nearly all of these seriously delinquent mortgages are headed for
the resale market either through a short sale or foreclosure.
To these 90-day delinquencies we need to add first mortgages that are
delinquent for at least 60 days. The chart above reports 761,000 of
these 60-day delinquencies. The cure chart shows us that the vast
majority of these delinquent properties will also end up on the resale
market.
Finally, we must also include those mortgages that are newly delinquent
for 30 days. That number has been stuck at roughly 1.8 million for the
last three months. Now, you may question the inclusion of these newly
delinquent loans. Keep in mind, though, that the vast majority of those
homeowners who become 30 days delinquent have been delinquent before,
according to Lender Processing Services figures. The cure rate chart
shows us that only 30% of those borrowers who go into arrears by at
least 30 days will cure the loan without lapsing into delinquency again
and eventually falling into default.
Concentration of the shadow inventory in 25 major metros
It’s very important to understand that this enormous shadow inventory
of distressed properties that will eventually be thrown onto the resale
market is heavily concentrated in a limited number of metros. According
to data provided by Lender Processing Services, 52% of the nationwide
90-day delinquencies and 58% of the defaults are concentrated in 25
major metros. The table shows this concentration.
If you look carefully at the distressed property figures for the top
four metros, you’ll see that the number of residences that will be
pouring onto their housing markets in the next one to two years is
enormous. Anyone who thinks that prices have bottomed in the Miami, New
York, Los Angeles, or Chicago metro areas had better take a good, hard
look at these statistics.
Tallying up the shadow inventory
An incredible 14% of the nearly 54 million first liens in the country
are now either delinquent or in default. This chart from the Calculated
Risk blog shows the steady growth since 2005.
To come up with a total for the shadow inventory, let’s first add the
total number of loans in default to those delinquent 90 days or more
since we know that these loans are headed for foreclosure or a short
sale. That comes to 4.5 million properties. Based on the cure rate for
loans delinquent at least 60 days, we’ll add 95% of those 60-day
delinquencies. That is an additional 723,000 residences. For the same
reason, we’ll add 70% of those delinquent for at least 30 days — 1.25
million properties.
And, of course, let’s not forget the REOs that haven’t yet been placed
on MLS listings by the bank servicers. We’ll be conservative and
estimate them at 500,000.
Adding all of these together, we come up with a total of roughly 6.97
million residences that are almost certainly going to be thrown onto
the resale market as distressed properties at some point in the
not-too-distant future. This massive number of homes will put enormous
downward pressure on sale prices. To believe that prices are firming
now is to completely ignore this shadow inventory. Ignore it at your
own risk. Read Minyanville’s “Housing Isn’t Really Dead.”
A new
housing development in Lathrop
in 2006. One in eight houses in the town are now in some stage of
foreclosure at left.
2012 brings a new plan to help the banks get out from under bad loans,
and in the process, assist those most deeping underwater. Campaign's
excuse reportage?
Cautious Moves on Foreclosures Haunting Obama By BINYAMIN APPELBAUM, NYTIMES August
19, 2012 WASHINGTON — After inheriting the
worst economic downturn since the Great Depression, President Obama
poured vast amounts of money into efforts to stabilize the financial
system, rescue the auto industry and revive the economy.
But he tried to finesse the cleanup
of the housing crash, rejecting unpopular proposals for a broad bailout
of homeowners facing foreclosure in favor of a limited aid program —
and a bet that a recovering economy would take care of the rest.
During his first two years in
office, Mr. Obama and his advisers repeatedly affirmed this carefully
calibrated strategy, leaving unspent hundreds of billions of dollars
that Congress had allocated to buy mortgage loans, even as millions of
people lost their homes and the economic recovery stalled somewhere
between crisis and prosperity.
The nation’s painfully slow pace of
growth is now the primary threat to Mr. Obama’s bid for a second term,
and some economists and political allies say the cautious response to
the housing crisis was the administration’s most significant mistake.
The bailouts of banks and automakers are now widely regarded as crucial
steps in arresting the recession, while the depressed housing market
remains a millstone.
“They were not aggressive in taking
the steps that could have been taken,” said Representative Zoe Lofgren,
chairwoman of the California Democratic caucus. “And as a consequence
they did not interrupt the catastrophic spiral downward in our economy.”
Mr. Obama insisted the government
should help only “responsible borrowers,” and his administration
offered aid to fewer than half of those facing foreclosure, excluding
landlords, owners of big-ticket homes and those judged to have
excessive debts.
He decided to rely on mortgage
companies to modify unaffordable loans rather than have the government
take control by purchasing the loans, the approach advocated by his
chief political rivals in the 2008 presidential race, Hillary Rodham
Clinton and John McCain.
The administration did not push for
legislation to make mortgage companies help borrowers. The financial
incentives it offered were often insufficient. And it responded slowly
to warnings, including those in letters homeowners sent to Mr. Obama,
that companies were not cooperating.
The result was a plan that failed to
meet even its own modest goals, data shows. Mr. Obama said in Arizona a
few weeks after taking office that the government would help “as many
as three to four million homeowners to modify the terms of their
mortgages to avoid foreclosure.” As of May, 4.3 million people had
applied for aid, but only one million had received government-sponsored
modifications, according to the most recent data. About a third of
those turned away lost their homes, were facing foreclosure or filed
for bankruptcy.
In June 2011, Mr. Obama conceded
that his administration had not done enough. “And so,” he said, “we’re
going back to the drawing board.”
The government has since enriched
incentives for companies and found new ways to press them to take
action. More people are getting help, and the housing market has
finally begun to recover, leading some of the president’s allies to
wonder what might have been.
“If the program they have now had
been used at the beginning, it would have had a tremendous impact,”
said John Taylor, chief executive of the National Community
Reinvestment Coalition, an umbrella group for housing advocates.
But it is impossible to know whether
a more forceful response would have produced better results.
Administration officials argue that the missed opportunity was
relatively small because mortgage companies were unprepared to help
homeowners even if the government had pushed harder — and the
government was unprepared to take the companies’ place.
“We operated at the frontier of what
was possible,” Treasury Secretary Timothy F. Geithner, whose department
oversaw the housing plan, said in a statement. “These programs helped
millions stay in their homes and millions more refinance to take
advantage of lower interest rates.”
Help Wanted
The president gets a purple file
each day holding 10 letters selected from the thousands that arrive at
the White House. Almost as soon as the administration started its
housing plan, he began to see complaints.
“I get letters every day,” Mr. Obama
said at a June 2009 news conference, “from people who say, ‘You know, I
appreciate that you put out this mortgage program, but the bank is
still not letting me modify my mortgage, and I’m about to lose my
home.’ And then I’ve got to call my staff and team and find out why
isn’t it working for these folks, and can we adjust it, can we tweak
it, can we make it more aggressive.”
Some of the letters came from people
the administration was not trying to help. But in Arizona the president
had also made promises that the government was not ready to keep.
Mr. Obama had emphasized that
borrowers with financial problems could get mortgage modifications even
before missing a payment. But the administration did not define
eligibility for that kind of pre-emptive aid, and more than 4,000
people called the Treasury Department during the first year to complain
they had been turned away on the grounds they had not missed a payment.
People who lost their jobs generally
could not qualify for modifications, but more than 18 months would pass
before the White House persuaded mortgage companies to let people skip
a few payments while looking for work.
And there were unsettling stories
about mortgage companies repeatedly losing paperwork, rejecting
qualified applicants and, with surprising frequency, foreclosing on the
very customers they had just agreed to help.
The president’s advisers, including
Mr. Geithner and Lawrence H. Summers, then director of the National
Economic Council, played down the significance of these anecdotes. They
saw no evidence of widespread problems, and besides, the broader
strategy was working: the recession ended in June 2009, and housing
prices posted the first monthly increase in three years.
In late July, eager to claim credit,
the president bounded onto a high school stage in Raleigh, N.C.
“We knew that ending our immediate
economic crisis would require ending the housing crisis, where it
began, or at least slowing down the pace of foreclosures,” he said. “We
didn’t stop every foreclosure. We couldn’t help every single homeowner
who had gotten overextended, but folks who could make their payments
with a little bit of help, we were able to keep them in their homes.”
The celebration was premature. By
the end of 2009 only 66,465 borrowers had received government-backed
mortgage modifications, and the pace of foreclosures continued to rise:
more than 900,000 homes in 2009 and more than a million in 2010, more
homes than in any American city save New York.
Peter P. Swire, Mr. Obama’s special
assistant for economic policy in 2009 and 2010, said both the
administration’s successes in repairing financial markets and its
shortcomings in helping homeowners could be traced to the president’s
reliance on Mr. Geithner and Mr. Summers.
“They were the most experienced
financial crisis team that you could have,” said Mr. Swire, an Ohio
State University law professor. “But when you have economists like
Larry Summers working on things — well, Larry Summers is a
macroeconomist. He’s not a case worker.”
Mr. Summers declined to comment on
the record, but other current and former officials echoed Mr.
Geithner’s view that the administration had done well under the
circumstances. Some said they underestimated the complexity of helping
millions of people. Some said they tried too hard at first to protect
taxpayers from unnecessary losses. But they agreed that the most
important problem was beyond their control: the mortgage industry was
set up either to collect payments or to foreclose, and it was not ready
to help people.
“They were bad at their jobs to
start with, and they had just gone through this process where they
fired lots of people,” said Michael S. Barr, a former assistant
Treasury secretary who served as Mr. Geithner’s chief housing aide in
2009 and 2010. “The only surprise was that they were even more screwed
up than the high level of screwiness that we expected.”
Let Them Eat
Carrots
Former Representative Jim Marshall,
a centrist Georgia Democrat who lost his House seat in 2010, was a
staunch advocate of the administration’s economic policies. He
supported the banking bailout. He opposed a similar bailout for
homeowners.
The administration made just one
mistake, he said in a recent interview: it failed to rewrite the
bankruptcy code.
Congressional Democrats wanted to
change the law to permit “cramdown” — a term that meant letting
bankruptcy courts cut mortgage debts — to put pressure on mortgage
companies to modify loans and to provide a backup plan for borrowers
who could not get the help they needed.
“There was another way to deal with
this, and that is what I supported: forcing the banks to deal with
this,” Mr. Marshall said. “It would have been better for the economy
and lots of different neighborhoods and people owning houses in those
neighborhoods.”
Mr. Obama sponsored cramdown
legislation as a senator, endorsed it as a presidential candidate and
called on Congress to pass it in the Arizona speech.
But he also repeatedly pressed the
pause button. When proponents sought to add a cramdown to the Emergency
Economic Stabilization Act in September 2008, Mr. Obama, who had flown
back to Washington from the campaign trail, persuaded them to postpone
the “partisan” effort as an example to Republicans, who said the
measure would violate existing contracts.
In February 2009, after Mr. Obama
became president, the White House asked Democrats not to attach the
measure to the American Recovery and Reinvestment Act, fearing it would
cost votes. In March, a watered-down version finally passed the House,
but the mortgage industry rallied opposition to block it in the Senate.
Some officials said the White House
had tried and failed. But other officials and participants, including
Mr. Marshall, said it simply was not a priority.
“There wasn’t enough political
capital, time or energy,” said Mr. Barr, the former Treasury deputy.
Mortgage companies, mostly owned by
large banks, had ample resources to improve their treatment of troubled
borrowers. But in the absence of any significant threat of punitive
government action, they made little progress.
“Here we are in 2011, looking at
high levels of foreclosures on the horizon, looking at significant
failures in process, and nothing much has changed,” Sarah Bloom Raskin,
a Federal Reserve governor, said at a housing finance conference in
February 2011.
“It seems to me we have reached the
point where this sign of failure is hindering our economy’s ability to
rebound.”
How Far a
Trillion Goes
A stone-faced building just north of
the Capitol testifies to the federal response to the last national
housing crash in the 1930s. The block-long office building housed the
Home Owners’ Loan Corporation, which bought and refinanced roughly 20
percent of outstanding mortgages, most within two years of its creation
in 1933, to help a million families avoid foreclosure. It even turned a
modest profit before closing in 1951.
Mr. McCain surprised Mr. Obama
during their second debate in October 2008 when he proposed investing
$300 billion in such a program, echoing prominent Democrats. Some
economists argued that debt reduction would hasten recovery not just by
preventing foreclosures, but by spurring consumer spending, the
nation’s primary economic activity.
Mr. Obama, leading in the polls,
dismissed the idea as a “risky” giveaway to mortgage companies.
“Taxpayers shouldn’t be asked to pick up the tab for the very folks who
helped to create this crisis,” he said at a rally two days later in
Dayton, Ohio.
After the election, top economic
advisers led by Mr. Summers told the president-elect that debt
reduction was not the best policy. Mr. Obama hoped to secure about $1.1
trillion from Congress to arrest the recession — a stimulus package of
about $750 billion and the second half of the $700 billion Troubled
Asset Relief Program bailout fund Congress had created in September. In
a blueprint delivered at a mid-December meeting in Chicago, the
advisers recommended that nearly all of the money be used to stabilize
the financial system and for a package of tax cuts and government
spending programs. That, they said, would stimulate growth more than
paying down mortgage debts and hoping homeowners spent their savings.
Mr. Geithner told Mr. Obama that if
even if an additional $100 billion were available, he still would not
spend it on housing.
As for foreclosures, the advisers
said more modest forms of aid would work just as well in most cases.
Indeed, some economists argued that debt reduction would
counterproductively persuade other borrowers to stop making payments in
pursuit of a better deal.
But the decision ultimately was
political. Mr. Obama and his advisers were convinced that even in the
depths of an unyielding crisis, most Americans did not want their
neighbors rescued at public expense. Several cited the response to the
Arizona speech — including the televised diatribe by a CNBC
personality, Rick Santelli, that helped give rise to the Tea Party — as
proof that they were wise not to do more.
“There’s a lot of risk aversion in
Washington,” said James B. Lockhart III, who participated in some
discussions as director of the Federal Housing Finance Agency,
administrator of Fannie Mae and Freddie Mac, “and I don’t think anybody
knew how bad it was going to get.”
End of the
Beginning
Eighteen months later, the
administration’s hopes for a rapid economic recovery had faded. By
summer 2010, it knew that the recession had been deeper than initially
understood and that the effects of the financial crisis were lingering
longer than expected. The housing market still showed no signs of life.
Frustrated allies — including
Congressional Democrats and liberal advocacy groups not normally
focused on housing, like the National Council of La Raza — were
shouting for new action to prevent foreclosures.
Still the White House held firm to
its strategy. “The most important thing I can do right now to keep
people in their homes is to make sure the economy is growing,” the
president said in Albuquerque in September 2010. “That’s probably the
thing that’s going to strengthen the housing market the most over the
next couple of years.”
Two days later, an important
deadline passed quietly. The $700 billion bailout fund Congress had
created in 2008 expired. The administration could no longer use the
money to finance new programs even if it wanted to. It had left more
than $300 billion unspent.
In November, Democrats lost control
of the House, further constraining the administration’s ability to
address the housing crisis.
And right about then, in the fall of
2010, Mr. Obama began to reconsider. The frustrated president told his
advisers that what they were doing was not good enough. He told them to
revisit old ideas and to find new ones.
Mr. Obama was particularly incensed
by mounting evidence that mortgage companies were breaking the law in
some foreclosure cases. There was also new research underscoring the
costs of foreclosures and the benefits of measures like debt reduction.
But perhaps most important was the
simple reality that housing, left to fester, had become Mr. Obama’s
biggest economic problem.
At a virtual town hall in April
2011, Mark Zuckerberg of Facebook read a question that began, “The
housing crisis will not go away.”
The president, perched on a stool,
listened gravely and nodded. “Well, it’s a good question,” he said,
“and I’ll be honest with you — this is probably the biggest drag on the
economy right now.”
Mortgage Plan Gives Billions to Homeowners, but With Exceptions By NELSON D. SCHWARTZ and
JULIE CRESWELL, NYTIMES February
9, 2012 As state and federal authorities
announced the details of their $26 billion mortgage settlement with big
banks on Thursday, millions of American homeowners were hoping that
this time they would finally get relief.
Some, like Jessica Cooper of Toledo,
Ohio, will discover the program’s limitations.
Since she was laid off in June 2009,
Ms. Cooper and her husband have been pressing Bank of America to modify
the terms of the $112,000 mortgage on their home. But because the loan
is owned by the Federal Housing Administration, it is not covered.
Similarly, Carlos Sandoval de Leon has been seeking a break from Wells
Fargo on the $662,000 he owes on a Brooklyn brownstone. But because
that mortgage is held by a private investor, it too falls outside the
scope of the agreement, which mostly covers loans held by the banks
themselves.
The bulk of the settlement, about
$20 billion, would go to one million American homeowners who would have
their mortgage debts reduced or their loans refinanced at a lower
interest rate. It also includes $1.5 billion for roughly 750,000 people
who lost their homes to foreclosure between 2008 and 2011, with each
receiving between $1,500 and $2,000.
Economists do not expect a big boost
for the economy, in part because the banks have three years to
distribute the aid. Some experts questioned whether the accord would do
much to stabilize the housing market and its glut of millions of
foreclosed homes.
Critics also pointed to the fact
that millions of mortgages owned by the government’s housing finance
agencies, Fannie Mae and Freddie Mac, would not be covered under the
deal, excluding about half the nation’s mortgages.
“The effect of this settlement will
be catalytic,” Shaun Donovan, the secretary of Housing and Urban
Development, said in an interview.
He predicted it would spur more loan
modifications through existing government programs as well as principal
reductions — when loan debt is written down for borrowers who owe more
than their home is worth — as well as additional mortgage relief
provided by banks.
“We do believe there should be
principal reduction at Fannie Mae and Freddie Mac,” he added. “We’ve
been disappointed that this hasn’t happened thus far.” He said the
government had proposed incentives for Fannie and Freddie to cut loan
balances under an existing program, and the two mortgage giants were
studying the idea.
Advocates for homeowners facing
foreclosure expressed cautious optimism after the settlement was
announced Thursday morning in Washington. “We’re hopeful,” said Joseph
Sant, a lawyer at Staten Island Legal Services’ homeowner defense
project. “But we had a lot of programs that are good on paper. What
will make the difference is that it’s vigorously enforced.”
President Obama declared the deal
the largest federal-state settlement in the nation’s history.
“No compensation, no amount of
money, no measure of justice is enough to make it right for a family
who’s had their piece of the American dream wrongly taken from them,”
he said. “And no action, no matter how meaningful, is going to by
itself entirely heal the housing market. But this settlement is a
start.”
Homeowners in two states — Florida
and California — will reap more than half of the $26 billion
settlement, a reflection of the disproportionate number of loans that
are delinquent or exceed the value of the underlying property there,
government regulators said.
The amounts from individual banks
were linked to their share of the servicing market. The biggest, Bank
of America, would provide $11.8 billion, followed by $5.4 billion from
Wells Fargo, $5.3 billion from JPMorgan Chase, $2.2 billion from
Citigroup and $310 million from Ally. Bank of America would contribute
an additional $1 billion for Federal Housing Administration loans.
And if nine other major mortgage
servicers join the pact, a possibility that is now under discussion
with the government, the total package could rise to $30 billion.
Banks stocks were mixed in trading
Thursday, but shares of Bank of America rose 0.62 percent to $8.18, its
highest level since September. Much of the money to pay for the
settlement has already been reserved, and investors expect the
settlement to remove at least one legal worry for Bank of America.
More than just an attempt to aid
consumers and stabilize the housing market, government officials cast
the settlement as an effort to finally hold banks accountable for their
misdeeds, more than three years after the mortgage collapse brought on
a full-scale financial crisis.
The deal is about “righting the
wrongs that led to the housing market collapse,” said Eric H. Holder
Jr., the United States attorney general. “With this settlement, we
recover precious taxpayer resources, fix a broken system and lay a
groundwork for a better future.”
The agreement does not release banks
from a variety of other suspected misdeeds. Regulators and prosecutors
could still pursue allegations of fraud in the process by which those
loans were made, known as origination, and the packaging of those
mortgages into securities sold to investors by the big banks.
“We’re going to keep at it until we
hold those who broke the law fully accountable,” Mr. Obama said. The
agreement also imposes new standards that banks will have to follow as
they deal with distressed homeowners. Mr. Donovan said the settlement
would “force the banks to clean up their acts. No more lost paperwork,
no more excuses, no more runaround.”
Though some mortgage advocates
praised the settlement as a needed step in the right direction,
Katherine Porter, a law professor at University of California Irvine,
was more skeptical.
“We have to look at this as being a
modest settlement even thought the number itself, the $26 billion, is
an eye-popping number,” said Ms. Porter. “There are millions of people
who have lost their homes and this settlement will only affect a
relatively small number of them.”
She was also surprises at the time —
three years — that the servicers were being given to put the settlement
into effect.
“That reflects to me a lack of
urgency. That the banks don’t think it is urgent or they still haven’t
gotten the staff, technology, ethos or platforms set up to help people
quickly,” said Ms. Porter.
“That three-year window makes me
really nervous because a lot of people could be out of their homes by
then.”
What is more, other critics are
raising questions about so-called moral hazard, the danger that more
relief encourages homeowners to default in the hopes of getting aid.
News of the settlement also reignited resentment from homeowners who
are current on their payments, and have shunned government aid.
Some state attorneys general closely
involved with the settlement acknowledged that it provided only a small
amount of restitution to individuals who lost their homes in
foreclosures, even though they said their investigations uncovered
rampant evidence of robo-signing and enormous problems with the
servicing aspects of the loans.
“This agreement is more important
for the foreclosures we’re hoping to prevent,” said Roy Cooper, the
attorney general for North Carolina.
For homeowners like the Coopers and
Mr. de Leon there is still hope, even if it won’t come through
Thursday’s settlement. Both Bank of America and Wells Fargo said
Thursday they were exploring other options that could prevent
foreclosure. State foreclosure rates
plunge since
December By Lee Howard Day Staff Writer Article
published Feb 11, 2011 While national foreclosures held
steady month-to-month, Connecticut's filings dropped 25 percent between
December and January, according to new statistics released Thursday.
And foreclosure activity in the
state last month was down more than 62 percent from January of last
year, according to numbers reported by California-based RealtyTrac.
This placed the state's foreclosure rate of 1 in every 1,727 housing
units as among the best nationally, with a ranking of No. 39.
Nationwide, 1 in every 497 housing
units received a foreclosure notice in January. The national
foreclosure totals were up 1 percent from December but down 17 percent
compared with January of last year.
"We've now seen three straight
months with fewer than 300,000 properties receiving foreclosure
filings, following 20 straight months where the total exceeded
300,000," said James Saccacio, chief executive officer of RealtyTrac,
in a statement. "Unfortunately this is less a sign of a robust housing
recovery and more a sign that lenders have become bogged down in
reviewing procedures, resubmitting paperwork and formulating legal
arguments related to accusations of improper foreclosure processing."
Only 47 homes in New London County
were cited in foreclosure filings last month, and 15 of them were in
Norwich. Groton and
Ledyard accounted for five each.
The region's foreclosure filings of
1 in every 2,457 housing units was lower than the state average. And
its total foreclosures fell far below New Haven County's 249, Hartford
County's 219 and Fairfield County's 189.
California, Florida, Michigan,
Arizona and Texas had the highest number of foreclosure filings
nationwide last month.
Earlier this year, RealtyTrac
predicted that foreclosure filings this year nationwide would likely
top 2010's record total of 3.8 million. Foreclosures
may have hit bottom in region Rate still
going up, but worst cases declining
By Lee Howard New London Day Staff Writer
Article published Dec 6, 2010
Foreclosure rates in the Norwich-New London area
continue to rise, but serious mortgage delinquencies are declining,
leading some to predict that the worst of the housing crisis locally
may be over.
"Unless there's another big hit in the economy, I think we're at the
bottom," said Barbara Crouch, a former housing counselor for
Norwich-based Catholic Charities who still does volunteer work for the
organization.
New data from the real estate tracker CoreLogic show that September's
local foreclosure rate of 2.87 percent is up nearly a third from a 2.19
percent rate during the same month last year. Despite the increase, the
Norwich-New London area still has lower foreclosure rates than
Connecticut and the nation as a whole. Crouch pointed to another
key
piece of data: The percentage of mortgages 90 days or more delinquent,
while up from last year, has shown a slow but steady decline over the
past six months.
Crouch, finance director for the Town of Griswold and a former bank
officer, said she looks at the numbers for mortgages 30, 60 and 90 days
delinquent, because they are a bellwether of future foreclosures. And
what she's seeing now gives her hope for 2011. She said the
foreclosure numbers in Connecticut are actually a bit inflated these
days, because they compare a time when the state was actively trying to
stall home takeovers to a period when banks are trying to push
paperwork through as quickly as possible.
"It seems as if everyone who could have possibly lost their home has
done so," she said.
Jeff Gentes, foreclosure-prevention staff attorney at the Connecticut
Fair Housing Center, is not quite as optimistic as Crouch about
foreclosures in the region, but he doesn't expect any sort of spike in
2011. The foreclosure situation could get better, he added, with
the
passage of a $1 billion federal program that offers direct help from
the U.S. Department of Housing and Urban Development of up to $50,000
per homeowner for those in danger of losing their homes. He said nearly
$33 million already has been allocated to Connecticut residents under
the Emergency Homeowners' Loan Program, which might help up to 1,000
families avoid foreclosure.
Assistance is available for up to two years, and the loans can be
forgiven if residents are able to stay in their homes for five years or
more, Gentes said.
"That's real assistance," he added.
But Gentes and Crouch both worry that the region's reliance on
employment at local casinos could keep the spigot of foreclosures
flowing - especially if Foxwoods and Mohegan Sun are forced to compete
with gaming in Massachusetts. Gentes added that foreclosures
could
also be affected by Mashantucket Pequot tribal members losing their
stipends from gaming revenues after the first of the year.
"These things that you read about are going to translate into economic
hardship," he said. "I think the housing market is going to be flat for
another five years."
The good news, according to Crouch, is that Catholic Charities is
seeing a decline in the number of people seeking housing counseling.
Yet this might be the best time to look into a mortgage modification,
she said, because banks are wary of holding onto real estate in an era
of wobbly values, especially in distressed areas such as Norwich and
New London.
"The deals are easier, and the banks have their systems in place now,"
she said.
Those involved in the foreclosure process, though, say the state's
foreclosure mediation program has not been terribly effective in
forestalling housing delinquencies. The mediations may delay
foreclosures for a few months, according to Crouch and others, but
banks usually end up deciding that homeowners will still not be able to
afford their mortgages, even with a modification.
"I've never met anyone who got a good mediation," said New London
attorney Matthew Berger. Don’t
Just Tell Us. Show Us That You Can Foreclose. NYTIMES
By GRETCHEN MORGENSON November
27, 2010 AFTER examining their foreclosure
practices for flaws in mortgage documentation and other procedures,
many of the nation’s largest banks have resumed — or will soon resume —
trying to evict defaulted borrowers. JPMorgan Chase, for example, told
investors this month that it had extensively reviewed its foreclosure
controls, trained personnel in the unit and started new procedures to
ensure that all legal requirements would be met when it moves to seize
a property in default.
“If we find any foreclosures in
error, we will fix them,” JPMorgan Chase said.
But while banks may have booted a
few robo-signers and tightened up some lax procedures, one question at
the heart of the foreclosure mess refuses to go away: whether
institutions trying to take back a property can prove they even have
the right to foreclose at all. Some in the industry believe that
questions about this issue — known as “legal standing” — are trivial.
They say it’s just a gambit by borrowers’ lawyers to throw sand in the
foreclosure machine. Nine times out of 10, bankers say, the right
institutions are foreclosing on the right borrowers.
Maybe so. But the United States
Trustee Program, the unit of the Justice Department charged with
overseeing the integrity of the nation’s bankruptcy courts, is taking a
different view. The unit is stepping up its scrutiny of the veracity of
banks’ claims against borrowers, and its approach is evident in two
cases in federal bankruptcy court in Atlanta. In both cases, Donald F. Walton, the
United States trustee for the region, has intervened, filing motions
contending that the banks trying to foreclose have not shown they have
the right to do so.
The matters involve borrowers
operating under Chapter 13 bankruptcy plans overseen by the court in
the Northern District of Georgia. In both cases, the banks have filed
motions with the bankruptcy court to remove the automatic foreclosure
stay that results when a court confirms a debtor’s Chapter 13 repayment
plan. If the stay is removed, the banks can foreclose. In one case, the borrower had her Chapter
13 plan confirmed by the court early last month. About two weeks later,
Wells Fargo asked the court for relief from the stay so that it could
foreclose.
Responding on Nov. 16, Mr. Walton
asked the court to deny the bank’s request because it had failed to
produce any facts showing that it was entitled to foreclose — either as
the holder of the underlying note or as the agent for the holder.
The other case involves a
couple who had their Chapter 13 plan confirmed by the court in March
2009. A month ago, Chase Home Finance, a unit of JPMorgan Chase, asked
the court for relief from the automatic stay so that it could start
foreclosure proceedings.
Again, Mr. Walton objected, asking
the court to deny the request on the same grounds as argued in the
Wells Fargo matter — in this case, that Chase hadn’t proved that it
controlled the note on the property. Jane Limprecht, a spokeswoman for the
trustee program, confirmed that it was ratcheting up its scrutiny on
banks’ foreclosure practices.
“The United States Trustee Program
is engaged in an enhanced review of mortgage servicer filings in
bankruptcy cases to help ensure the accuracy of the claim to
repayment,” she said. She declined to comment on specific filings.
A Chase spokesman said the bank is
the holder of the note in the Georgia case, giving it standing to file
the motion. A
spokeswoman for Wells Fargo said that in its case, it is the trustee of
a mortgage security that contains the loan, not the servicer. In its
capacity as the trustee for mortgage loans serviced by others, it says
it expects those servicers to abide by all required laws, processes and
procedures. Howard D.
Rothbloom, a lawyer in Atlanta who represents borrowers in bankruptcy,
welcomed the actions by Mr. Walton and said he believes they show a sea
change in the United States trustee’s thinking on the foreclosure mess.
“Until now, what we had was
homeowners complaining about a lack of due process,” Mr. Rothbloom
said. “Now you have the federal government complaining about the abuse
of the judicial process. That’s really what was missing before.”
The judges overseeing these matters
have not yet ruled on the banks’ or the trustee’s requests. And Wells
Fargo and Chase may indeed be able to persuade the trustee that their
filings were proper. But
the trustee’s intervention in these matters indicates that it wants
banks to show the courts that they have the right to foreclose, rather
than simply telling them they do. That had been the custom, after all.
Now, Mr. Walton’s motions may serve as a warning to banks that they
need to be better prepared if they want to foreclose on a borrower.
“For years, the trustee would always
take the creditors’ side,” Mr. Rothbloom said. “My strong opinion is
the U.S. trustee’s perspective is that they exist to stop borrowers
from cheating banks. Perhaps they are coming to the realization that
banks can also cheat borrowers.”
FEDERAL trustees in other parts of
the country have also intervened in borrower cases, but many of these
actions have been related to questionable foreclosure fees or to
dubious legal or documentation practices. The shift to a broader focus
on the issue of standing suggests that the courts may no longer accept
at face value the banks’ arguments that they have the right to
foreclose or represent the institution that does. David Shaev, a lawyer in New York who
works with troubled borrowers, says the United States trustee there has
also intervened in one of his cases, taking up the issue of a bank’s
right to foreclose.
In his experience, Mr. Shaev said:
“The attorneys who represent the banks invariably state that they will
get the collateral file for us and prove that the banks had possession
of the documents at the appropriate time. But then when we review the
file it doesn’t show that at all.”
As many large banks renew their
foreclosure efforts, Mr. Rothbloom says he hopes that the United States
trustee will bring about a comprehensive change in bank practices.
“I’ve gotten resolutions for clients
in individual cases, but I’m just a flea on the tail of an elephant,”
he said. “Resolutions of individual cases don’t bring about systemic
change.”
And systemic change is precisely
what’s needed. Bankers
Ignored Signs of Trouble on Foreclosures
By ERIC DASH and NELSON D. SCHWARTZ, NYTIMES
October 14, 2010 (TIMES corrected mistake from Oct. 13th)
At JPMorgan Chase & Company, they were derided as “Burger King
kids” — walk-in hires who were so inexperienced they barely knew what a
mortgage was. At Citigroup and GMAC, dotting the i’s and crossing
the
t’s on home foreclosures was outsourced to frazzled workers who
sometimes tossed the paperwork into the garbage. And at Litton
Loan
Servicing, an arm of Goldman Sachs, employees processed foreclosure
documents so quickly that they barely had time to see what they were
signing.
“I don’t know the ins and outs of the loan,” a Litton employee said in
a deposition last year. “I’m not a loan officer.”
As the furor grows over lenders’ efforts to sidestep legal rules in
their zeal to reclaim homes from delinquent borrowers, these and other
banks insist that they have been overwhelmed by the housing
collapse.
But interviews with bank employees, executives and federal regulators
suggest that this mess was years in the making and came as little
surprise to industry insiders and government officials. The issue
gained new urgency on Wednesday, when all 50 state attorneys general
announced that they would investigate foreclosure practices. That news
came on the same day that JPMorgan Chase acknowledged that it had not
used the nation’s largest electronic mortgage tracking system, MERS,
since 2008.
That system has been faulted for losing documents and other sloppy
practices. The root of today’s problems goes back to the boom
years,
when home prices were soaring and banks pursued profit while paying
less attention to the business of mortgage servicing, or collecting and
processing monthly payments from homeowners. Banks spent billions
of
dollars in the good times to build vast mortgage machines that made new
loans, bundled them into securities and sold those investments
worldwide. Lowly servicing became an afterthought. Even after the
housing bubble began to burst, many of these operations languished with
inadequate staffing and outmoded technology, despite warnings from
regulators.
When borrowers began to default in droves, banks found themselves in a
never-ending game of catch-up, unable to devote enough manpower to
modify, or ease the terms of, loans to millions of customers on the
verge of losing their homes. Now banks are ill-equipped to deal the
foreclosure process.
“We waited and waited and waited for wide-scale loan modifications,”
said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance
Corporation, one of the first government officials to call on the
industry to take action. “They never owned up to all the problems
leading to the mortgage crisis. They have always downplayed it.”
In recent weeks, revelations that mortgage servicers failed to
accurately document the seizure and sale of tens of thousands of homes
have caused a public uproar and prompted lenders like Bank of America,
JPMorgan Chase and Ally Bank, which is owned by GMAC, to halt
foreclosures in many states. Even before the political outcry,
many of
the banks shifted employees into their mortgage servicing units and
beefed up hiring. Wells Fargo, for instance, has nearly doubled the
number of workers in its mortgage modification unit over the last year,
to about 17,000, while Citigroup added some 2,000 employees since 2007,
bringing the total to 5,000.
“We believe we responded appropriately to staff up to meet the
increased volume,” said Mark Rodgers, a spokesman for Citigroup.
Some industry executives add that they’re committed to helping
homeowners but concede they were slow to ramp up. “In hindsight, we
were all slow to jump on the issue,” said Michael J. Heid, co-president
of at Wells Fargo Home Mortgage. “When you think about what it costs to
add 10,000 people, that is a substantial investment in time and money
along with the computers, training and system changes involved.”
Other officials say as foreclosures were beginning to spike as early as
2007, no one could have imagined how rapidly they would reach their
current level. About 11.5 percent of borrowers are in default today, up
from 5.7 percent from two years earlier.
“The systems were not ever that great to begin with, but you didn’t
have that much strain on them,” said Jim Miller, who previously oversaw
the mortgage servicing units for troubled borrowers at Citigroup, Chase
and Capitol One. “I don’t think anybody anticipated this thing getting
as bad as it did.”
Almost overnight, what had been a factorylike business that relied on
workers with high school educations to process monthly payments needed
to come up with a custom-made operation that could solve the problems
of individual homeowners. Gregory Hebner, the president of the MOS
Group, a California loan modification company that works closely with
service companies, likened it to transforming McDonald’s into a gourmet
eatery. “You are already in chase mode, and you never catch up,” he
said.
To make matters worse, the banks had few financial incentives to invest
in their servicing operations, several former executives said. A
mortgage generates an annual fee equal to only about 0.25 percent of
the loan’s total value, or about $500 a year on a typical $200,000
mortgage. That revenue evaporates once a loan becomes delinquent, while
the cost of a foreclosure can easily reach $2,500 and devour the meager
profits generated from handling healthy loans.
“Investment in people, training, and technology — all that costs them a
lot of money, and they have no incentive to staff up,” said Taj Bindra,
who oversaw Washington Mutual’s large mortgage servicing unit from 2004
to 2006.
And even when banks did begin hiring to deal with the avalanche of
defaults, they often turned to workers with minimal qualifications or
work experience, employees a former JPMorgan executive characterized as
the “Burger King kids.” In many cases, the banks outsourced their
foreclosure operations to law firms like that of David J. Stern, of
Florida, which served clients like Citigroup, GMAC and others. Mr.
Stern hired outsourcing firms in Guam and the Philippines to help.
The result was chaos, said Tammie Lou Kapusta, a former employee of Mr.
Stern’s who was deposed by the Florida attorney general’s office last
month. “The girls would come out on the floor not knowing what they
were doing,” she said. “Mortgages would get placed in different files.
They would get thrown out. There was just no real organization when it
came to the original documents.”
Citigroup and GMAC say they are no longer giving any new work to Mr.
Stern’s firm.
In some cases, even steps that were supposed to ease the situation,
like the federal program aimed at helping homeowners modify their
mortgages to reduce what they owed, had actually contributed to the
mess. Loan servicing companies complain that bureaucratic requirements
are constantly changed by Washington, forcing them to overhaul an
already byzantine process that involves nearly 250 steps.
This article
has been revised to reflect the following correction:
Correction:
October 14, 2010
A photo caption
with an earlier version of this article referred incorrectly to
documents related to foreclosures. They are depositions from
robosigners, not lawsuits. Banks
seize 288K homes in Q3, but challenges await YAHOO
By ALEX VEIGA, AP Real Estate Writer
14 October 2010
LOS ANGELES – Lenders seized more
U.S. homes this summer than in any three-month stretch since the
housing market began to bust in 2006. But many of the foreclosures may
be challenged in court later because of allegations that banks evicted
people without reading the documents.
A total of 288,345 properties were
lost to foreclosure in the July-September quarter, according to data
released Thursday by RealtyTrac Inc., a foreclosure listing service.
That's up from nearly 270,000 in the second quarter, the previous high
point in the firm's records dating back to 2005. Banks have seized more than 816,000 homes
through the first nine months of the year and had been on pace to seize
1.2 million by the end of 2010. But fewer are expected now that several
major lenders have suspended foreclosures and sales of repossessed
homes until they can sort out the foreclosure-documents mess.
On Wednesday, officials in 50 states
and the District of Columbia launched a joint investigation into the
matter. Rick Sharga, a
senior vice president at RealtyTrac, noted that legal challenges are
likely. But he doubts many will be successful in overturning
foreclosures. He said he expects foreclosures to resume and predicts
about 1 million homes will be taken back this year.
"The bottom line is not that those
properties won't be repossessed," Sharga said. "They simply won't be
repossessed as quickly. We're simply delaying the inevitable."
Experts say if lenders resume
foreclosures in a couple of months or so, the delay will amount to a
temporary lull followed by a spike in home repossessions early next
year. But if the
crisis drags on for months and more lenders stop seizing homes, the
foreclosure delays could last well into next year. That could have a
severe effect on home sales and prices. A freeze in foreclosure sales between now
and December by a majority of lenders could amount to removing 30
percent of all home sales for that period, Sharga suggests.
"You would virtually guarantee that
tens of thousands of properties would miss going to market in time for
the spring, which is the peak buying season for real estate," Sharga
said.
Nearly 600,000 bank-owned homes are
not yet on the market, according to RealtyTrac. The states most affected by the
foreclosure freeze accounted for 40 percent of all foreclosure activity
in the third quarter and 36 percent of homes taken back by lenders, the
firm estimates. Sales of homes by lenders made up 18 percent of all
U.S. home sales in September, the firm said.
Other experts say delays from the
foreclosure documents problem won't end up having a huge impact on home
sales or housing values.
Foreclosed homes that would have
been sold by lenders now will be sold seven or eight months from now,
and prices will start going declining about 3 percent to 4 percent
nationally, on average, when those sales take place, said Andres
Carbacho-Burgos, an economist at Moody's Economy.com. That's good news if you're a homeowner
looking to sell in the near term, because there won't be as much
competition from deeply discounted foreclosed properties,
Carbacho-Burgos said.
"But if you were looking to sell
further down the line, that's not so good news," he said.
Economic woes, such as unemployment
or reduced income, continue to be the main catalysts for foreclosures
this year. While bank
repossessions rose in the third quarter, new defaults continued to
decline. Some 269,647
properties received default notices, the first step in the foreclosure
process, down 1 percent from the second quarter and down 21 percent
from the same period last year, according to RealtyTrac, which tracks
notices for defaults, scheduled home auctions and home repossessions.
In all, 930,437 homeowners received
a foreclosure-related warning between July and September, up nearly 4
percent from the second quarter but down 1 percent from the same period
last year, RealtyTrac said. The latest tally translates to one in 139
U.S. homes.
Blumenthal
To Co-Lead Nationwide Foreclosure Robo-Signing Inquiry
By KENNETH R. GOSSELIN, kgosselin@courant.com
12:38 PM EDT, October 13, 2010
Connecticut Attorney General Richard Blumenthal will help lead a
50-state investigation of foreclosure document signing practices in
which major banks and servicers allegedly approved affadivits without
reading them or verifying their accuracy.
Blumenthal is one of 12 state
attorneys general on the executive committee that will lead the
nationwide inquiry. The nationwide probe was announced today.
Mortgage servicers, including
GMAC/Ally, Bank of America and JPMorgan Chase, have acknowledged filing
possibly fraudulent paperwork in foreclosures across the country. The
affidavits — typically listing a borrower's total debt in the
foreclosure — were affirmed by "robo-signers," some of which spent less
than a minute on each document.
"Our powerful multi-state
investigation will hold big banks accountable, determining how and why
they broke the law," Blumenthal said today. "At best, banks engage in
careless negligence, at worst, outright fraud. We will fight to find
out what happened, when and why, seeking fair and appropriate remedies
for consumers."
Blumenthal is running for U.S.
Senate, but will be attorney general until early January regardless of
the outcome of that election.
Blumenthal also is seeking a 60-day
freeze on all home foreclosures in Connecticut in the wake of the
widening scandal. The courts could decide later this week if they have
the power to do that.
The nationwide probe, includes
attorneys general in 49 of the states and bank regulators, will focus
on whether mortgage company employees made false statements or
preparted documents improperly.
Although there have been no firm
estimates on how many foreclosures may have been affected by the
practice, it could have impacted, by some estimates, hundreds of
thousands of homeowners. In Connecticut, thousands of foreclosures
could have been affected, some local foreclosure attorneys have
estimated.
Not all the documents affirmed by
robo-signers are necessarily inaccurate. But the affidavits typically
also contain the phrase "I am personally familiar with the books and
records" of the borrower. The affidavit is then signed and notarized as
an official court document.
The speed at which the documents
were signed could not have allowed the robo-signer to become familiar
with the case, some have argued.
"This group has the backing of
nearly every state in the nation to get to the bottom of this
foreclosure mess," Iowa Attorney General Tom Miller, who is leading the
probe.
Four large lenders already have
halted questionable foreclosures after evidence emerged that bank
employees processed thousands of foreclosure documents without reading
them. Other banks have not done so, saying they did nothing wrong.
Officials
in 50 states launch foreclosure probe YAHOO
By ALAN ZIBEL, AP Real Estate Writer
13 October 2010
WASHINGTON – Officials in 50 states
and the District of Columbia have launched a joint investigation into
allegations that mortgage companies mishandled documents and broke laws
in foreclosing on hundreds of thousands of homeowners.
The states' attorneys general and
bank regulators will examine whether mortgage company employees made
false statements or prepared documents improperly.
Alabama initially did not sign on to
the investigation. It reversed course after the joint statement was
released.
Attorneys general have taken the
lead in responding to a nationwide scandal that's called into question
the accuracy and legitimacy of documents that lenders relied on to
evict people from the homes. Employees of four large lenders have
acknowledged in depositions that they signed off on foreclosure
documents without reading them.
The allegations raise the
possibility that foreclosure proceedings nationwide could be subject to
legal challenge. Some foreclosures could be overturned. More than 2.5
million homes have been lost to foreclosure since the recession started
in December 2007, according to RealtyTrac Inc.
The state officials said they intend
to use their investigation to fix the problems that surfaced in the
mortgage industry.
"This is not simply about a glitch
in paperwork," said Iowa Attorney General Tom Miller, who is leading
the probe. "It's also about some companies violating the law and many
people losing their homes."
Ally Financial Inc.'s GMAC Mortgage
Unit, Bank of America and JPMorgan Chase & Co. already have halted
some questionable foreclosures. Other banks, including Citigroup Inc.
and Wells Fargo & Co. have not stopped processing foreclosures,
saying they did nothing wrong.
In a joint statement, the officials
said they would review evidence that legal documents were signed by
mortgage company employees who "did not have personal knowledge of the
facts asserted in the documents. They also said that many of those
documents appear to have been signed without a notary public witnessing
that signature — a violation of most state laws.
"What we have seen are not mere
technicalities," said Ohio Attorney General Richard Cordray. "This is
about the private property rights of homeowners facing foreclosure and
the integrity of our court system, which cannot enter judgments based
on fraudulent evidence."
Mortgage giant halts
foreclosures in 23 states. Ally’s mortgage
business says ‘corrective action’ may be needed By Alistair Barr, MarketWatch
Sept. 20, 2010, 11:25 a.m. EDT
SAN FRANCISCO (MarketWatch) -- Ally Financial’s mortgage business is
halting foreclosures in 23 states because the company may need to take
“corrective action” on some of the transactions.
GMAC Mortgage, part of Ally, told brokers and agents to stop
foreclosures in Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico,
New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania,
South Carolina, South Dakota, Vermont and Wisconsin.
GMAC Mortgage will also suspend sales of homes that it’s already
foreclosed on. The company will extend the closing date on these sales
by 30 days. Buyers can cancel purchases and get their deposit back.
GMAC Mortgage said it may need to take “corrective action” on some
foreclosures in the 23 states, according to a memo it sent to brokers
and agents.
Bloomberg News reported the memo earlier on Monday. Jim Olecki, a
spokesman at Ally, said the memo was accurate. State
foreclosures down 22 percent in August DAY
Associated Press Article published Sep 16,
2010
Hartford (AP) — A new report says foreclosure filings in Connecticut
plummeted 22 percent from July to August, while the state's ranking on
the national list dropped nine spots to No. 32.
The report released Wednesday by the foreclosure tracking firm
RealtyTrac says foreclosure filings in Connecticut fell from 2,319 in
July to 1,796 in August, but whether the state numbers have peaked
isn't clear.
Foreclosure filing increases in the state slowed in April. The numbers
dropped in May and June, but increased substantially in July.
The August numbers translated to a foreclosure filings rate of one in
every 804 households in Connecticut, much better than the national
average of one in every 381 households.
Nevada has the worst rate, with one in 84 households having a filing. Homes
lost to
foreclosure on track for 1M in 2010
New London DAY
Associated Press
Article published Jul 15, 2010
LOS ANGELES (AP) — More than 1 million American households are likely
to lose their homes to foreclosure this year, as lenders work their way
through a huge backlog of borrowers who have fallen behind on their
loans.
Nearly 528,000 homes were taken over by lenders in the first six months
of the year, a rate that is on track to eclipse the more than 900,000
homes repossessed in 2009, according to data released Thursday by
RealtyTrac Inc., a foreclosure listing service.
"That would be unprecedented," said Rick Sharga, a senior vice
president at RealtyTrac.
By comparison, lenders have historically taken over about 100,000 homes
a year, Sharga said.
The surge in home repossessions reflects the dynamic of a foreclosure
crisis that has shown signs of leveling off in recent months, but
remains a crippling drag on the housing market.
The pace at which new homes falling behind in payments and entering the
foreclosure process has slowed as banks continue to let delinquent
borrowers stay longer in their homes rather than adding to the glut of
foreclosed properties on the market. At the same time, lenders have
stepped up repossessions in an effort to clear out the backlog of
distressed inventory on their books.
The number of households facing foreclosure in the first half of the
year climbed 8 percent versus the same period last year, but dropped 5
percent from the last six months of 2009, according to RealtyTrac,
which tracks notices for defaults, scheduled home auctions and home
repossessions.
In all, about 1.7 million homeowners received a foreclosure-related
warning between January and June. That translates to one in 78 U.S.
homes.
Foreclosure notices posted monthly declines in April, May and June, but
Sharga said one shouldn't read too much into that.
"The banks are really sort of controlling or managing the dial on how
fast these things get processed so they can ultimately manage the
inventory of distressed assets on the market," he said.
On average, it takes about 15 months for a home loan to go from being
30 days late to the property being foreclosed and sold, according to
Lender Processing Services Inc., which tracks mortgages.
Assuming the U.S. economy doesn't worsen, aggravating the foreclosure
crisis, Sharga projects it will take lenders through 2013 to resolve
the backlog of distressed properties that have on their books right now.
And a new wave of foreclosures could be coming in the second half of
the year, especially if the unemployment rate remains high,
mortgage-assistance programs fail, and the economy doesn't improve fast
enough to lift home sales.
The prospect of lenders taking over more than a million homes this year
is likely to push housing values down, experts say.
Foreclosed homes are typically sold at steep discounts, lowering the
value of surrounding properties.
"The downward pressure from foreclosures will persist and prices will
be very weak well into 2012," said Celia Chen, senior director of
Moody's Economy.com.
She projects home prices will fall as much as 6 percent over the next
12 months from where they were in the first-quarter.
Economic woes, such as unemployment or reduced income, continue to be
the main catalysts for foreclosures this year. Initially, lax lending
standards were the culprit. Now, homeowners with good credit who took
out conventional, fixed-rate loans are the fastest growing group of
foreclosures.
There are more than 7.3 million home loans in some stage of
delinquency, according to Lender Processing Services. Lenders are
offering to help some homeowners modify their loans. But many borrowers
can't qualify or they are falling back into default. The Obama
administration's $75 billion foreclosure prevention effort has made
only a small dent in the problem.
More than a third of the 1.2 million borrowers who have enrolled in the
mortgage modification program have dropped out. That compares with
about 27 percent who have received permanent loan modifications and are
making payments on time.
Among states, Nevada posted the highest foreclosure rate in the first
half of the year. One in every 17 households there received a
foreclosure notice. However, foreclosures there are down 6 percent from
a year earlier.
Arizona, Florida, California and Utah were next among states with the
highest foreclosure rates. Rounding out the top 10 were Georgia,
Michigan, Idaho, Illinois and Colorado. More borrowers
exit Obama mortgage help plan
YAHOO
By ALAN ZIBEL, AP Real Estate Writer
21 June 2010
WASHINGTON – A growing number of homeowners who sought help from the
Obama administration's main mortgage aid program are in danger of
losing their homes.
About 436,000 borrowers have dropped out of the $75 billion plan as of
last month, the Treasury Department said Monday.
That's about 35 percent of the 1.24 million who enrolled since March
2009 and exceeds the number of homeowners who are getting help through
the program. And nearly 155,000 of those who fell out of the program
did so in the past month.
The result could be a new wave of foreclosures that could weaken the
housing market and hold back the broader economic recovery.
Most of those homeowners were rejected during a trial period lasting at
least three months. More than 6,300 dropped out after having their
loans modified.
Another 340,000 homeowners, or 27 percent of those who started the
program, have received permanent loan modifications and are making
payments on time.
Experts say more borrowers are likely to drop out in the coming months.
Some homeowners who owe more on their loans than their properties are
worth are likely to conclude that paying an oversized mortgage simply
isn't worth the cost.
Even after their loans are modified, many borrowers are simply stuck
with too much debt — from car loans to home equity loans to credit
cards.
"The majority of these modifications aren't going to be successful,"
said Wayne Yamano, vice president of John Burns Real Estate Consulting,
a research firm in Irvine, Calif. "Even after the permanent
modification, you're still looking at a very high debt burden."
Obama administration officials contend that borrowers are still getting
help — even if they fail to qualify for the program. The administration
published statistics showing that nearly half of borrowers who fell out
of the program received an alternative loan modification from their
lender. About 7 percent fell into foreclosure.
Another option is a short sale — one in which banks agree to let
borrowers sell their homes for less than they owe on their mortgage.
A short sale results in a less severe hit to a borrower's credit score,
and is better for communities because homes are less likely to be
vandalized or fall into disrepair. To encourage more of those sales,
the Obama administration is giving $3,000 for moving expenses to
homeowners who complete such a sale or agree to turn over the deed of
the property to the lender.
The program is designed to lower borrowers' monthly payments by
reducing their mortgage rates to as low as 2 percent for five years and
extending loan terms to as long as 40 years. Mortgage companies get up
to $75 billion in taxpayer incentives to reduce borrowers' monthly
payments. Mortgage
delinquencies rise in 4th quarter
DAY
By EILEEN AJ CONNELLY AP Personal Finance Writer
Article published Feb 17, 2010
The percentage of homeowners late with mortgage payments hit another
record during the last three months of 2009, and the pace at which they
fell behind took a turn for the worse, a new report says.
For the fourth quarter, 6.89 percent of mortgage payments were 60 or
more days past due, according to credit reporting agency TransUnion.
That's up from 4.58 percent in the final three months of 2008. The
previous record delinquency rate was 6.25 percent in the third quarter
of 2009.
The latest report marked the 12th consecutive quarter, equal to three
full years, that delinquency rates have risen from the previous
year.
More worrisome was that the quarter-to-quarter trend swung higher after
declining in each of the previous three quarters. The
fourth-quarter
uptick was in part due normal seasonal spending shifts, said FJ
Guarrera, vice president of TransUnion's financial services business
unit. Consumers are more likely to have trouble paying bills during the
last few months of the year, as they run low on cash because of holiday
spending.
But even accounting for normal season patterns, there is some reason to
be concerned about the pace of increase moving higher, Guarrera said.
"To see continuing growth in the first quarter would certainly raise an
eyebrow," he said.
He noted that many homeowners still have adjustable rate mortgages
written in late 2006 or early 2007 due to reset to higher rates in
coming months. That could drive foreclosures even higher, especially in
areas where home prices have fallen to the point where values are lower
than mortgages. "We're not out of the woods yet," Guarrera said.
The delinquency rate stayed highest in Nevada, at 16.2 percent, and
Florida, at 14.9 percent. Arizona and California, states hit by the
housing crisis, were third and fourth, at 11.3 percent and 11 percent,
respectively. The highest growth rates compared with the third
quarter
were in the District of Columbia, Louisiana and Delaware. The
lowest
delinquencies remain in North Dakota, at 1.8 percent, and South Dakota,
at 2.5 percent.
There were some bright spots in the report. While no states that showed
delinquency rate improvement in the fourth quarter, TransUnion said
there were improvements in the areas around 38 cities. That reflects
other signs that the economic recovery will be tied to local housing
prices and unemployment rates, TransUnion said.
The average national mortgage debt per borrower also increased to
$193,690 in the latest quarter from $192,789 in the fourth quarter of
2008. "We've said all along that home values have got to improve in
order to see some stabilization in terms of mortgage delinquencies,"
Guarrera said. An increase in the amount of the average mortgage debt
indicates rising home prices.
TransUnion expects foreclosures to continue rising throughout this
year, peaking between 7.5 percent and 8 percent. The situation will be
worst in Nevada, where as many as one in five mortgage borrowers may be
delinquent by the middle of the year.
Slumburbia NYTIMES By TIMOTHY EGAN February 10, 2010, 9:30 pm LATHROP, Calif. — Drive along foreclosure
alley, through new planned communities that look like tile-roofed
versions of a 21st century ghost town, and you see what happens when
people gamble with houses instead of casino chips.
Dirty flags advertise rock-bottom
discounts on empty starter mansions. On the ground, foreclosure signs
are tagged with gang graffiti. Empty lots are untended, cratered with
mud puddles from the winter storms that have hammered California’s San
Joaquin Valley.
Nobody is home in the cities of the
future.
In a decade, they saw real property
defy reality in real time in these insta-neighborhoods that sprouted in
what had been some of the world’s most productive farmland.
In places like Lathrop, Manteca and
Tracy, population nearly doubled in 10 years, and home prices tripled.
After inhaling all this real estate helium, some developers and their
apologists in urban planning circles hailed the boom as the new America
at the far exurban fringe. Every citizen a homeowner! Half-acre lots
for all! No credit, no problem!
Others saw it as the residential
embodiment of the Edward Abbey line that “growth for the sake of growth
is the ideology of the cancer cell.”
Now median home prices have fallen
from $500,000 to $150,000 — among the most precipitous drops in the
nation — and still the houses sit empty, spooky and see-through,
waiting on demography and psychology to catch up.
In strip malls where tenants seem to
last no longer than the life cycle of a gold fish, the bottom-feeders
have moved in. “Coming soon: Cigarette City,” reads one sign here in
Lathrop, near a “Cash Advance” outlet.
Take a pulse: How can a community
possibly be healthy when one in eight houses are in some stage of
foreclosure? How can a town attract new people when the crime rate has
spiked well above the national average? How can a family dream, or even
save, when unemployment hovers around 16 percent?
Yet if these staggered exurbs, about
two hours inland from San Francisco, were an illness, they would not
quite be Abbey’s cancer. Though sick, foreclosure alley is not
terminal. This is not Detroit with sunshine. It will be reborn, remade,
inhabited. The question is: as what?
Nationwide, a record 2.8 million
homes received foreclosure notices last year — up 119 percent from two
years ago. Just under 5 million homeowners — 1 in 10 mortgages — owe
more than their houses are worth. The impulse is to walk away.
Surrender. And many have.
What they leave behind, along with
the gang presence, the vandalism and the absence of vested owners, is a
slum. A new slum. In an influential article in the Atlantic in 2008,
the writer Christopher B. Leinberger predicted that the catastrophic
collapse of the new home market could turn many of today’s McMansions
into tenements.
I’m not sure of that. After several
days in foreclosure alley, this broad swath of the Central Valley that
has been rated by some economists as the most stressed region during
the Great Recession, I can’t see such apocalyptic forecasts coming true.
Yes, huge developments are empty,
with rising crime at the edges, and thousands of homes owned by banks
that can’t unload them even at fire-sale prices.
But through it all, the country
churns and expands, unlike most other Western democracies. That great
American natural resource — tomorrow — will have to save the suburban
slums.
Through immigration and high birth
rates, the United States is expected to add another 100 million people
by 2050. If you don’t believe me, consider that we’ve added 105 million
people since 1970. This is more than the population of France. More
than Italy. More than Germany. Currently, we have a net gain of one
person every 13 seconds.
At some point, the market will
settle on proper pricing levels. At its peak, only 11 percent of the
people in this valley could afford the median home price.
In the meantime, during these low,
ragged years, a few lessons about urban planning can be picked from the
stucco pile.
One is that, at least here in
California, the outlying cities themselves encouraged the boom, spurred
by the state’s broken tax system. Hemmed in by property tax
limitations, cities were compelled to increase revenue by the easiest
route: expanding urban boundaries. They let developers plow up walnut
groves and vineyards and places that were supposed to be strawberry
fields forever to pay for services demanded by new school parents and
park users.
Second, look at the cities with
stable and recovering home markets. On this coast, San Francisco,
Portland, Seattle and San Diego come to mind. All of these cities have
fairly strict development codes, trying to hem in their excess sprawl.
Developers, many of them, hate these restrictions. They said the
coastal cities would eventually price the middle class out, and start
to empty.
It hasn’t happened. Just the
opposite. The developers’ favorite role models, the laissez faire
free-for-alls — Las Vegas, the Phoenix metro area, South Florida, this
valley — are the most troubled, the suburban slums.
Come see: this is what happens when
money and market, alone, guide the way we live.
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. Gov't unveils plan to shrink
some home
loans
YAHOO
By ALAN ZIBEL, AP Real Estate
26 March 2010
WASHINGTON – After months of criticism that it hasn't done enough to
prevent foreclosures, the Obama administration is announcing a plan to
reduce the amount some troubled borrowers owe on their home loans.
The multifaceted effort will let people who owe more on their mortgages
than their properties are worth get new loans backed by the Federal
Housing Administration, a government agency that insures home loans
against default.
That would be funded by $14 billion from the administration's existing
$75 billion foreclosure-prevention program. But it could spark
criticism that the government is shouldering too much risk by taking on
bad loans made during the housing boom. In addition, their existing
mortgage companies will be able to receive incentives to lower their
principal balances.
The program also includes assistance to help unemployed homeowners keep
paying their mortgages.
The plan is the latest effort by the Obama administration to tackle the
foreclosure crisis which has continued to grow under its watch. Home
foreclosures have soared despite the administration's effort to prevent
foreclosures, a complex and problem-plagued endeavor involving more
than 100 mortgage companies. Only 170,000 homeowners have completed
that process out of 1.1 million who began it over the past year.
"We remain dubious about government mortgage modification efforts,"
wrote Jaret Seiberg, an analyst with Concept Capital's Washington
Research Group. "So far none have lived up to expectations and we see
little reason to believe the latest effort will turn out any different."
The plan announced Friday will also require the mortgage companies
participating in the administration's existing foreclosure prevention
program to consider slashing the amount borrowers owe. They will get
incentive payments if they do so.
It also includes three to six months of temporary aid for borrowers who
have lost their jobs. And there will be additional payments designed to
give banks an incentive to reduce payments or eliminate second
mortgages such as home equity loans — a problem that has blocked many
loan modifications.
The four big holders of second mortgages — Citigroup Inc., Bank of
America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. —
have now joined the government's program to modify second mortgages.
That program was delayed for months but with Citi on board, the major
players in the industry are now on board.
Critics have complained that the Obama administration has done little
until now to encourage banks to cut borrowers' principal balances on
their primary loans. Nearly one in every three homeowners with a
mortgage are "under water" — they owe more than their property is worth
— according to Moody's Economy.com.
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
Should be a leading indicator...??? New-home
purchases fall, 2011 worst ever for sales
YAHOO
Associated Press
By DEREK KRAVITZ
26 January 2012
WASHINGTON (AP) — Fewer Americans bought new homes in December. The
decline made 2011 the worst year for new-home sales on records dating
back nearly half a century.
The Commerce Department said Thursday new-home sales fell 2.2 percent
last month to a seasonally adjusted annual pace of 307,000. The pace is
less than half the 700,000 that economists say must be sold in a
healthy economy.
About 302,000 new homes were sold last year. That's less than the
323,000 sold in 2010, making last year's sales the worst on records
dating back to 1963. And it coincides with a report last week that said
2011 was the weakest year for single-family home construction on record.
The median sales prices for new homes dropped in December to $210,300.
Builders continued to slash price to stay competitive in the depressed
market.
Still, sales of new homes rose in the final quarter of 2011, supporting
other signs of a slow turnaround that began at the end of the year.
Sales of previously occupied homes rose in December for a third
straight month. Mortgage rates have never been lower. Homebuilders are
slightly more hopeful because more people are saying they might
consider buying this year. And home construction picked up in the final
quarter of last year.
"Although this decline was unexpected, it does not change the story
that housing has likely bottomed," said Jennifer H. Lee, senior
economist at BMO Capital Markets.
Ian Shepherdson, chief economist at High Frequency Economics, said
easier lending requirements, historically low mortgage rates and
improved hiring all point to consistent, albeit slow, rises in sales in
the coming months.
"A sustained rise in new home sales is imminent," he said.
"Homebuilders say so too, and they should know."
Hiring is critical to a housing rebound. The unemployment rate fell in
December to its lowest level in nearly three years after the sixth
straight month of solid job growth. Economists caution that
housing is a long way from fully recovering. Builders have stopped
working on many projects because it's been hard for them to get
financing or to compete with cheaper resale homes. For many Americans,
buying a home remains too big a risk more than four years after the
housing bubble burst.
Though new-home sales represent less than 10 percent of the housing
market, they have an outsize impact on the economy. Each home built
creates an average of three jobs for a year and generates about $90,000
in tax revenue, according to the National Association of Home Builders.
A key reason for the dismal 2011 sales is that builders must compete
with foreclosures and short sales — when lenders accept less for a
house than what is owed on the mortgage
Builders ended 2011 with a third straight year of dismal home
construction and the worst on record for single-family home building.
But in a hopeful sign, single-family home construction, which makes up
70 percent of the market, increased in each of the last three months. New home
sales plunge to record low in
February
YAHOO
23 March 2011
WASHINGTON (Reuters) – New single-family home sales unexpectedly fell
in February to hit a record low and prices were the lowest since
December 2003, showing the housing market slide was deepening.
The Commerce Department said on Wednesday sales dropped 16.9 percent to
a seasonally adjusted 250,000 unit annual rate, the lowest since
records began in 1963, after an upwardly revised 301,000-unit pace in
January.
Sales plunged to all-time lows in three of the four regions last month.
Economists polled by Reuters had forecast new home sales edging up to a
290,000-unit pace last month from a previously reported 284,000 unit
rate.
"It's been a disappointing February for home sales and there are no
signs of a turnaround," said Kurt Karl, chief U.S. economist at Swiss
Re in New York.
"We're going to have a continuing slowdown in the next few months, but
people will start to feel better in the second half of the year and
construction and sales should do better later this year and into next
year."
U.S. stock indexes fell on the data, while government debt prices rose
marginally. The dollar was little changed.
Compared to February last year sales were down 28 percent.
An oversupply of homes exacerbated by an increasing flood of properties
falling into foreclosure is frustrating recovery in the housing market.
Data on Monday showed a steep drop in sales of previously owned homes
in February, with prices tumbling to a near nine-year low.
HOUSE PRICES PLUNGE
The median sales price for a new home plunged 13.9 percent last month
to $202,100, the lowest since December 2003. Compared with February
last year, the median price fell 8.9 percent. Persistent price declines
could dampen hopes of a pick-up in sales during spring.
In the face of stiff competition from foreclosed properties, which
typically sell well below market value, builders are holding back on
new construction.
At February's sales pace, the supply of new homes on the market rose to
8.9 months' worth, the highest since August, from 7.4 months' worth in
January.
There were 186,000 new homes available for sale last month, matching
the prior month's inventory. That was still the smallest supply of home
since 1967.
Despite lean inventories, new home sales will likely continue to bounce
along the bottom for a while until the glut of previously owned homes
is whittled down. New home sales account for less than 10 percent of
overall sales.
According to the National Association of Realtors, new home prices have
been running 45 percent higher than existing home prices, a premium
that is historically about 15 percent, indicating previously owned
homes are selling well below the cost of construction.
Separately, the Mortgage Bankers Association said applications for home
loans rebounded 2.7 percent last week. New-home sales plunge 33 pct with
tax
credits gone YAHOO
By ALAN ZIBEL, AP Real Estate Writer
23 June 2010
WASHINGTON – Sales of new homes collapsed in May, sinking 33 percent to
the lowest level on record as potential buyers stopped shopping for
homes once they could no longer receive government tax credits.
The bleak report from the Commerce Department is the first sign of how
the end of federal tax credits could weigh on the nation's housing
market.
The credits expired April 30. That's when a new-home buyer would have
had to sign a contract to qualify.
"We fear that the appetite to buy a home has disappeared alongside the
tax credit," Paul Dales, U.S. economist with Capital Economics," wrote
in a note. "After all, unemployment remains high, job security is low
and credit conditions are tight."
New-home sales in May fell from April to a seasonally adjusted annual
sales pace of 300,000, the government said Wednesday. That was the
slowest sales pace on records dating back to 1963. And it's the largest
monthly drop on record. Sales have now sunk 78 percent from their peak
in July 2005.
Analysts were startled by the depth of the sales drop.
"We all knew there would be a housing hangover from the expiration of
the tax credit," wrote Mike Larson, real estate and interest rate
analyst at Weiss Research. "But this decline takes your breath away."
Economists surveyed by Thomson Reuters had expected a May sales pace of
410,000. April's sales pace was revised downward to 446,000.
The government offered an $8,000 credit for first-time buyers. Current
homeowners who buy and move into another property could receive up to
$6,500.
New-home sales fell nationwide from April's levels. They dropped 53
percent from a month earlier in the West and 33 percent in the
Northeast. Sales in the South dropped 25 percent. The Midwest posted a
24 percent decline.
Builders have sharply scaled back construction in the face of a severe
housing market bust. The number of new homes up for sale in March fell
0.5 percent to 213,000, the lowest level in nearly 40 years. But due to
the sluggish sales pace in May, it would still take 8.5 months to
exhaust that supply, above a healthy level of about six months.
The median sales price in May was $200,900. That was down 9.6 percent
from a year earlier and down 1 percent from April.
New-homes sales made up about 7 percent of the housing market last
year. That's down from about 15 percent before the bust.
The drop in new-home sales means fewer jobs in the construction
industry, which normally powers economic recoveries but has remained
lackluster this time.
Each new home built creates, on average, the equivalent of three jobs
for a year and generates about $90,000 in taxes paid to local and
federal authorities, according to the National Association of Home
Builders. The impact is felt across multiple industries, from makers of
faucets and dishwashers to lumber yards. New home sales hit record low in January
YAHOO
By MARTIN CRUTSINGER, AP Economics Writer
Feb. 24, 2010
WASHINGTON – Sales of new homes plunged to a record low in January,
underscoring the formidable challenges facing the housing industry as
it tries to recover from the worst slump in decades.
The Commerce Department reported Wednesday that new home sales dropped
11.2 percent last month to a seasonally adjusted annual sales pace of
309,000 units, the lowest level on records going back nearly a half
century. The big drop was a surprise to economists who had expected
sales would rise about 5 percent over December's pace.
The January decline will heighten fears about the fledgling recovery in
housing. Economists were already worried that an improvement in sales
in the second half of last year could falter as various government
support programs are withdrawn.
The sales decline in January marked the third straight monthly drop
following decreases of 3.9 percent in December and 9.5 percent in
November.
January's weakness was evident in all regions except the Midwest, where
sales posted a 2.1 percent increase. Sales were down 35 percent in the
Northeast, 12 percent in the West and almost 10 percent in the South.
The drop in sales pushed the median sales price down to $203.500. That
was down 5.6 percent from December's median sales price of $215,600,
and off 2.4 percent from year-ago prices.
New home sales for all of 2009 had fallen by almost 23 percent to
374,000, the worst year on record. The National Association of Home
Builders is forecasting that sales will rise to more than 500,000 sales
this year, an improvement from 2009 but still far below the boom years
of 2003 through 2006 when builders clocked more than 1 million new home
sales per year.
The unexpectedly large drop in January activity will increase concerns
that the housing rebound could falter in coming months as the
government withdraws the support it has used to try to bolster the
housing market, which stood at the epicenter of the country's overall
recession, the worst downturn since the 1930s.
A $1.25 trillion program from the Federal Reserve which has held down
mortgage rates is set to end March 31 and tax credits to bolster home
buying are scheduled to expire at the end of April.
First-time home buyers could qualify for a credit of up to $8,000 while
homeowners who have lived in their current properties for at least five
years could claim a tax credit of up to $6,500 if they decided to move
into another home.
Though the overall economy started growing again this past summer,
economists are worried because unemployment remains high. This weakness
is causing consumers to shy away spending, especially on big-ticket
items such as homes.
The Conference Board reported Tuesday that its Consumer Confidence
Index fell almost 11 points to 46 in February, pushing the index down
to its lowest reading since last April. At 46, the index is a long way
from the 90 reading that economists generally view as depicting healthy
consumer attitudes. 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.
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.
U.S.
HOME
SALES
- EXISTING HOMES We
note this report - not about Weston - but still of interest in
this subject...
Connecticut home sale prices show biggest decline in nation Keith M. Phaneuf, CT MIRROR
August 28, 2012
Connecticut is leading the nation in declining home prices, one of just
eight states to lose ground in the second quarter of this year,
according to a new federal report.
And Fairfield County took a particularly strong hit, with prices down
more than 8 percent from 2011, according to new numbers released by the
Connecticut Association of Realtors.
While median prices for single-family homes rose nationally by 3
percent during the second quarter -- compared with the same period in
2011 -- in Connecticut they fell by 4.7 percent, according to the
latest House Price Index prepared by the Federal Housing Finance Agency.
Condominium sales prices here dropped by 7.7 percent in the second
quarter.
The quarterly index is developed using data from mortgage transactions
overseen by the Federal Home Loan Mortgage Corp. and the Federal
National Mortgage Association, commonly known as Freddie Mac and Fannie
Mae, respectively.
The Connecticut Realtors released a report, prepared by Prudential
Connecticut Realty, that showed Fairfield County took one of the
biggest hits, with median prices for single-family homes down 8.2
percent in the second quarter, compared with 2011.
"The upper end of the market, referred to as the top 10 percent in
price, has softened a great deal in the last year," the Prudential
report states. "Many towns in Connecticut saw fewer luxury sales by as
much as 25 percent to 100 percent."
The report adds that 80 percent of the sales in Greenwich have been
below $3 million, which represents "a significant change in the market."
"Clearly this is tied to the economy," said Joseph McGee, vice
president for public policy with the Business Council of Fairfield
County. "Our employment numbers are still down and jobs and the economy
drive the price of housing."
A former state economic development commissioner, McGee praised Gov.
Dannel P. Malloy for his "First Five" program and other initiatives
that provide assistance to companies looking to relocate or expand in
Connecticut.
McGee added that there is a silver lining to the latest housing price
numbers, even though serious issues remain to be addressed. "I think
some of the housing probably was overpriced and needed to settle back
down," he said, "so that is a good thing."
Brian Durand, spokesman for Malloy's chief budget and policy agency,
the Office of Policy and Management, said Tuesday said given that
Fairfield County has "some of the highest average home values in the
country, it's no surprise that taken as a percentage Connecticut can be
subject to larger swings in any given quarter."
"What matters most is that we're taking real steps to improve the
economy and our housing market over the long term," Durand added.
"Connecticut had the ninth fastest growing economy last year, adding
more than 23,500 private sector jobs. New housing permits are up nearly
39 percent so far this year. And, this administration has added
more than $275 million in support for state housing initiatives."
New Haven County saw an 8.9 percent drop. But while the median home
sales price there was $204,000 in the second quarter, the median price
in Fairfield County was $490,000.
Five other counties also saw median prices drop for single-family home
sales including: Litchfield, down 6.5 percent; Hartford, 3.6 percent;
Tolland, 1.8 percent; Windham, 1.5 percent; and Middlesex, down 0.9
percent.
New London County recorded the only increase during the second-quarter,
with single-family home sales prices up 2.4 percent over 2011.
Robert Kennedy, executive vice president of the Connecticut Association
of Realtors, said a "wide disparity in housing prices" is just one of
several factors affecting the state's recovery.
"It is more important, however, to look at the big picture, and that is
the fact that the housing market is a vital part of the overall economy
that must be supported," Kennedy added. "As we look towards the
November elections, it is more important than ever that we consider the
policies and platforms espoused by candidates and incumbents. Do they
support increased taxes on home purchases that can stand in the way of
home sales and purchases? And do they support reforms and regulation of
the mortgage industry that would prevent another collapse of the
housing market?"
"It's easy to misconstrue numbers like these, so let's put them in
context," Durand added. While some areas of the country saw small gains
in the last quarter, the market in the Northeast did not."
Several of Connecticut's neighbors were among the eight states to
experience declining prices during the second quarter. Massachusetts
was down 1.1 percent, Rhode Island down 1 percent and New York and New
Jersey both down 0.8 percent.
Other states recording declines were: Delaware, 3.4 percent; Oklahoma,
0.4 percent; and Pennsylvania, 0.3 percent.
The list of rising home sales prices was topped by Arizona at nearly 13
percent, followed by Idaho at 8.7 percent and Florida at 7.4 percent. October
existing home sales rise 1.4 percent
YAHOO
21 November 2011
WASHINGTON (Reuters) – U.S. existing home sales unexpectedly rose in
October as low interest rates for mortgages and rising rents led more
homebuyers into the market, the National Association of Realtors said
on Monday.
Sales climbed 1.4 percent to an annual rate of 4.97 million units from
September's revised rate of 4.90 million, the NAR said. Forecasters in
a Reuters poll had expected the annual rate to fall to 4.8 million.
Despite the modest increase in sales, the median sales price for
existing homes was 4.7 percent lower in October than it was a year
earlier.
NAR chief economist Lawrence Yun said the increase in sales comes amid
"several improving factors that generally lead to higher home sales
such as job creation, rising rents and high affordability conditions."
The U.S. Federal Reserve has held short-term interest rates at nearly
zero since 2008 and has expanded its balance sheet in a bid to get
credit to businesses and households.
That has helped bring mortgage rates to near-record lows.
Still, while many other sectors of the economy have found their feet,
housing continues to lag abysmally, held back by high rates of
foreclosure and homes that have dropped dramatically in value.
Home sales tumble, prices near 9-year
low
YAHOO
By Lucia Mutikani
WASHINGTON (Reuters) – Sales of previously owned U.S. homes plunged in
February and prices hit their lowest level in nearly nine years,
implying a housing market recovery was still a long way off.
The National Association of Realtors said on Monday sales fell 9.6
percent month over month to an annual rate of 4.88 million units,
snapping three straight months of gains. The percentage decline was the
largest since July.
The weak sales were the latest evidence of the malaise in the housing
sector and confirmed it would remain outside the strengthening and
broadening economic recovery.
"The housing market is still very depressed and a major drag on the
economy, especially household net worth," said Chris Christopher, a
senior economist at IHS Global Insight in Lexington, Massachusetts.
Economists had expected a decline of only 4 percent to a 5.15
million-unit pace. The actual drop was greater than even the most
pessimistic forecast in a Reuters survey of 53 economists.
Analysts said harsh winter weather in January could have curbed
February sales. Existing home sales are measured when contracts are
closed and last month's sales decline was telegraphed by a drop in
January's pending contracts.
The Realtors' group also said tight credit conditions and home
appraisals that fell short of agreed-upon selling prices weighed on
sales.
U.S. financial markets largely ignored the data. U.S. stocks rose
sharply, partly on news of a bid by AT&T for Deutsche Telekom AG's
T-Mobile USA and growing hopes Japan would get its nuclear crisis under
control.
Prices for U.S. government debt fell after the Treasury said it would
begin selling $142 billion in mortgage-backed securities it had
acquired to help tame the financial crisis. The dollar rose against the
yen on intervention fears.
PLUNGING PRICES A WORRY
Though economists cautiously hope an improving labor market will lift
home sales in the months ahead, plunging house prices could throw a
spanner in the works.
NAR said the median home price dropped 5.2 percent in February from a
year earlier to $156,100, the lowest since April 2002, in a sign of the
relentless downward pressure on prices from a market flooded with
foreclosure sales.
"If the price declines persist, even with the job market recovery, that
could hamper recovery in the housing market," the trade group's chief
economist, Lawrence Yun, said.
A glut of homes on the market and a flood of foreclosures are holding
back a recovery in the housing sector, whose collapse helped to tip the
U.S. economy into its worst recession since the 1930s.
Data last week showed a plunge in housing starts and the government on
Wednesday is expected report a marginal rise in new single family homes
in February. Home resales make up more than 90 percent of national
sales and economists said they would continue to weigh on new home
sales and building.
Foreclosures and short sales, which typically occur below market value,
accounted for 39 percent of transactions in February, the highest since
April 2009, up from 37 percent the prior month, the trade group said.
All-cash purchases made up a record 33 percent of transactions in
February.
According to the Realtors' group, new home prices have been running 45
percent higher than existing home prices, a premium that is
historically about 15 percent, indicating previously owned homes are
selling well below the cost of construction.
At February's sales pace, the supply of existing homes represented an
8.6 months' supply, up from 7.5 in January. A supply of between six and
seven months is generally considered ideal, with higher readings
pointing to lower house prices.
"Inventory is still high, about a third higher than it was
pre-recession. We are not going to see any bounce back in new home
sales until the inventory of existing home sales gets worked down,"
said Steve Blitz, a senior economist at ITG Investment Research in New
York.
"We don't even know what the inventory is. We see a visible supply but
then there is a shadow supply that comes on and off the market
depending on the time of the year. It's still a morbid market on
national level."
Sales last month fell across the board, with multifamily dwellings
declining 10 percent and single-family home units dropping 9.6 percent.
Compared with February last year, overall sales were down 2.8 percent.
While sales plunged in all regions last month, economists said the
pattern was likely to become less uniform in the months ahead, with
regions where the labor market is fairly strong showing more life than
others. 2010 weakest year for home sales
since 1997 By MARTIN CRUTSINGER, AP Economics Writer
20 January 2011
WASHINGTON – The number of people who bought previously owned homes
last year fell to the lowest level in 13 years. But home sales in
December jumped to fastest pace in seven months.
The National Association of Realtors says sales dropped 4.8 percent to
4.91 million units in 2010. That was slightly lower than 2008, which
had been the weakest level since 1997.
Home prices have been depressed by a record number of foreclosures and
high unemployment. Many potential buyers held off on purchases last
year, fearful that prices hadn't bottomed out yet.
The poor year for sales ended strong in December. Buyers snapped up
homes at a seasonally adjusted annual rate of 5.28 million units, an
increase of 12.8 percent from November and the strongest sales pace
since last May.
Still, many economists believe it will take years for sales to rise to
a normal level of around 6 million units a year. And some say 2011 will
be even weaker than last year because more foreclosures are expected
and home prices are likely to keep falling through the first six months
of the year.
The foreclosure crisis has left a glut of unsold houses on the market.
That has played a major role in lowering home prices.
For December, the inventory of unsold homes stood at an 8.1 months
supply, down from 9.5 months supply in November. That represents the
amount of time it would take to sell the remaining supply of homes on
the market at the December sales pace. A normal inventory supply is six
months.
Even historically low mortgage rates have done little to boost the
sales.
The average rate on a 30-year fixed mortgage rose to 4.74 percent this
week from 4.71 percent the previous week, Freddie Mac said Thursday.
The average rate on the 15-year loan, a popular refinance option,
slipped to 4.05 percent from 4.08 percent.
The 30-year loan rate reached a 40-year low of 4.17 percent in
November, and the 15-year mortgage rate fell to 3.57 percent, the
lowest level on records dating back to 1991.
For December, sales were up in all parts of the country with the
strongest gain a 16.7 percent increase in the West. Sales rose 13
percent in the Northeast, 10.1 percent in the South and 11 percent in
the Midwest.
The median price for a home sold in December was $168,800, down 1
percent from a year ago. Existing home sales surged in
December YAHOO
20 January 2011
WASHINGTON (Reuters) – U.S. home resales jumped more than expected in
December despite bad weather as sellers cut prices, offering some hope
for a sector that has been struggling to recover from its worst slump
in modern history.
Existing home sales soared 12.3 percent to an annual rate of 5.28
million units, the National Association of Realtors said on Thursday,
far surpassing forecasts for a rise to 4.85 million. Sales were down
2.9 percent compared to a year earlier.
A jump in mortgage rates may have forced some buyers into the market by
raising concern of even further increases, said Lawrence Yun, chief
economist at the NAR. Yun said he expects 2011 sales to total around
5.2 million units, with prices remaining stable.
Sales peaked above 7 million units in September 2005, as the housing
bubble reached fever pitch. They hit a 15-year low below 4 million
units in mid-2010 after the market collapsed, triggering a widespread
financial crisis.
Median home prices fell to $168,800, down from $170,200 in November and
the lowest since February 2010. That was in part because properties
considered "distressed" accounted for 36 percent of sales, up from 33
percent in November.
The U.S. economy has been growing for over a year, having emerged from
its deepest recession in generations in the summer of 2009. Gross
domestic product expanded 2.6 percent in the third quarter, not enough
to put a significant dent on the nation's elevated 9.4 percent jobless
rate.
A weak job market could thwart housing activity further by denting
consumer confidence. Still, jobless claims dropped more than
anticipated in a separate report from the Labor Department, an
encouraging sign that conditions are improving. 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.
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
New
Home Construction In Connecticut Sees Another Gain In July
Hartford Cournat
By Kenneth R. Gosselin On August 24, 2012
Permits issued for new housing units in Connecticut rose again in July,
pushing totals so far this year nearly 40 percent higher than the same
period in 2011, according to a new report today.
The new construction provides a bit of relief from last year when
residential building hit its lowest levels in decades, as housing
struggled to stabilize.
Towns and cities issued permits for 2,092 single-family houses,
condominiums and apartment units for the first seven months of the
year, according to the state Department of Economic and Community
Development. That represents a 39-percent increase from the 1,508 units
approved by local building officials for the same period a year ago.
Even so, this year’s pace is still well behind the 6,000 to 8,000 units
that real estate experts consider to be a healthy residential building
market. Construction is being held back, at least in part, by weak
demand, although sales have picked up in recent months.
Permits have increased each month this year, with the exception of
March, which was flat. In July, the number of permits rose 31 percent,
to 375 from 258 a year ago.
A little over half of the new units were single-family houses.
The report is based on a monthly survey by the U.S. Census of 128 towns
and cities in Connecticut. Once a year, all towns report annual
numbers. The monthly report typically have reflected closely the
results of the annual count. 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
Post tax-credit incentive, permits down.
U.S. Housing Starts Up 15% in September
NYTIMES
By THE ASSOCIATED PRESS
October 17, 2012
WASHINGTON (AP) — U.S. builders started construction on homes in
September at the fastest rate since July 2008 and made plans to build
even more homes in the coming months. The gains show the housing
recovery is strengthening and could help the economy grow.
The Commerce Department said Wednesday that home construction rose 15
percent last month to a seasonally adjusted annual rate of 872,000.
Single-family construction rose 11 percent to the fastest rate in four
years. Apartment building increased 25.1 percent.
Applications for building permits, a sign of future construction,
jumped nearly 12 percent to an annual rate of 894,000, also the highest
since July 2008.
"If there was any doubt that the housing market was undergoing a
recovery, even a modest one in the face of the terrible 2008 decline,
those doubts should be erased by now," said Dan Greenhaus, chief global
strategist at BTIG.
The construction rate has increased by more than 38 percent over the
past 12 months.
Housing starts are now 82.5 percent above the recession low rate of
478,000 hit in April 2009. That's still well short of the 1.5 million
that economists consider healthy and far below the more than 2 million
built in 2007 — the peak of the housing boom. But the steady upward
trend suggests builders believe the housing rebound is durable.
"This is a good report," said Patrick Newport, U.S. economist at HIS
Global Insight. "It is telling us that the housing market is improving
and there is no reason to think that this will not continue going
forward."
Record-low mortgage rates, stable price increases and a limited supply
of previously occupied homes have made newly built homes more
attractive to buyers. Builder confidence is at a six-year high,
according to a survey released Tuesday by the National Association of
Home Builders. And the Federal Reserve's aggressive policies could push
long-term interest rates even lower, making home-buying affordable for
the foreseeable future.
Newport said housing starts should total 750,000 for the year. He
expects starts will climb to 950,000 next year and 1.27 million in
2014. By 2015, he said home construction should reach more than 1.5
million.
He also predicts that housing will add about 0.25 percent to overall
economic growth this year. If that forecast proves accurate, it will be
the first year that housing has been a positive factor for economic
growth in five years.
"The rest of the economy is still struggling but housing is doing
better because as the population grows, we need new houses to meet that
demand," Newport said.
Sales of new homes were up nearly 28 percent in August compared with
the same month last year. Even with the gains, sales remain near
depressed levels. Economists say more jobs and better pay are needed to
help accelerate sales.
Though new homes represent less than 20 percent of the housing sales
market, they have an outsize impact on the economy. Each home built
creates an average of three jobs for a year and generates about $90,000
in tax revenue, according to data from the home builders group.
Construction activity rose in three of the nation's four regions. The
biggest increases came in the West and South. Housing starts increased
by nearly 20 percent in both regions. Construction of new homes and
apartments rose 6.7 percent in the Midwest. Housing starts fell 5.1
percent in the Northeast. Analysis: U.S. rental demand lifts housing
sector
YAHOO
By Margaret Chadbourn
27 Dec. 2011
(Reuters) - Brian Keith is busier than ever as the architecture firm he
works for rushes to wrap up work on a 300-unit apartment complex in
Dallas. The project is one of dozens the firm, JHP Architecture,
has on its hands -- a surge of business driven by a rise in demand in
the United States for rental properties. The increased demand has
forced JHP to expand, and it expects to keep hiring at least through
the first quarter.
"We're seeing overall work come back and there's a backlog of contracts
to go through," said Keith, director of urban design and planning at
JHP. "There's strong interest in multi-family units and plenty of
pent-up demand."
With U.S. unemployment at a lofty 8.6 percent, home foreclosures rising
and property prices under pressure, more and more Americans have given
up the dream of owning, opting instead to rent, a shift that is
remaking the face of the U.S. housing industry. The percentage of
Americans who own their home dropped from a peak of 69.2 percent in
late 2004 to a 13-year low of 65.9 percent in the second quarter. It
edged up to 66.3 percent in the third quarter of this year.
On the flip side, the percentage of rental properties that are empty
fell to 9.8 percent in the third quarter from 10.3 percent a year
earlier. In a recent report, Oliver Chang, an analyst at Morgan
Stanley, dubbed 2012 "The Year of the Landlord."
"Rents are rising, vacancies are falling, household formations are
growing and rental supply is limited," the Morgan Stanley report
stated. "We believe the demand for rental properties will continue to
grow."
Groundbreaking for new housing jumped 9.3 percent in November to the
highest level in 19 months, fueling optimism that the battered housing
market was regaining its footing. The gains, however, were almost
solely in multifamily housing. Groundbreaking for structures with five
or more units shot up more than 30 percent from October to now stand at
nearly double the year-ago level. Prices reflect the shift in
demand. Rental costs are up 2.4 percent over the last year, compared
with an increase of just 0.6 percent in 2010.
Steve Blitz, senior economist at ITG Investment Research, says the lure
of higher returns is spurring the development of apartment buildings.
He argued the next "boom" in residential construction has already
started.
"The reason rents were rising is that through the past 15 years there
has been an under-building of rental properties because typical renters
were increasingly able to garner cheap financing to buy a house," he
wrote in a research note.
While the rise in demand is great news for builders and developers, it
remains unclear what the pick-up in homebuilding will mean for the
economy as a whole.
"Residential construction will be a plus to GDP in 2012, but house
price declines will be a negative. So net, net housing will be neutral
or a small drag on the economy," said Mark Zandi, chief economist at
Moody's Analytics.
At its peak at the end of 2005, homebuilding accounted for about 6.2
percent of overall economic activity. Now, it is only about 2.4
percent. U.S. housing starts in April 2009 hit their lowest level
on records dating to January 1959. While multifamily starts have given
them a lift, 2011 may be the weakest year ever for construction of
single-family homes.
"Business is slightly down from last year," said Bill Zach, a
third-generation homebuilder. His family business, the Zach Building
Co. in the Milwaukee, Wisconsin, area, is mainly focused on
single-family units.
To Zach, that his firm is still in business when so many of his
competitors have gone bust represents some success.
"It used to be my competition was every guy that owned a pick-up truck
and called himself a builder. Hundreds of them," Zach said. "That's no
longer the case, those guys are dropping by the wayside."
But there are signs of a turn and signals that the housing market may
be close to finding a bottom. The Architecture Billings Index, a
gauge of future construction, picked up last month, breaking above the
50 level to signal growth in billings. And the stock of
homebuilders, as measured by a Dow Jones index, has shot up more than
30 percent since early October.
"Residential construction is finally beginning to rise from its
post-recession lows," said Joseph Lavorgna, chief U.S. economist for
Deutsche Bank. "The true test for starts and (building) permits, as
well as most of the sales metrics, will come during the spring buying
season." June
housing starts at 6-month high
YAHOO
Reuters
By Lucia Mutikani
19 July 2011
WASHINGTON (Reuters) - Housing starts scaled a six-month high in June
and permits for future construction unexpectedly increased, a
government report showed on Tuesday, partly reflecting growing demand
for rental apartments.
The Commerce Department said housing starts increased 14.6 percent to a
seasonally adjusted annual rate of 629,000 units, the highest level
since January, as ground breaking for multi-family units soared 30.4
percent. But May's starts were revised down to a 549,000 unit
pace, which was previously reported as a 560,000 unit rate.
Economists polled by Reuters had forecast housing starts rising to a
575,000-unit rate. Compared to June last year, residential construction
was up 16.7 percent. U.S. stock index futures extended gains
after the housing data, while government debt prices extended losses.
The dollar pared losses against the yen. Despite the June
increase, the housing starts rate remains less than a third of the peak
it reached during the housing boom.
"In the grand scheme of things, it's nice to see it jump higher, but it
doesn't take us out of the range we've been in," said David Mann,
senior currency strategist, Standard Chartered in New York. "So there's
still an extremely long way to go before we can be sure there's a
serious recovery underway."
Residential construction accounts for about 2.4 percent of gross
domestic product and indications are that it remained a drag in the
second quarter after shrinking at a 2.0 percent annual rate in the
first three months of 2011. The government will release its first
estimate for second-quarter gross domestic product on July 29.
Growth estimates for the April-June quarter currently range between 1
percent and 2.3 percent. The economy grew at a 1.9 percent pace in the
first three months of the year.
An overhang of previously owned homes on the market has left builders
with little appetite to break ground on new projects and is frustrating
the housing sector's recovery two years after the end of the 2007-09
recession. Previously owned homes are currently selling well
below their cost of construction as a deluge of foreclosed properties
continues to depress prices. Data on Wednesday is expected to
show that existing home sales rose 2.9 percent to a 4.90 million unit
pace in June, according to a Reuters survey, but not enough to whittle
down bloated inventory.
Confronted with plummeting home values, Americans are shunning home
ownership, pushing up demand for rentals. That has resulted in a
rise in groundbreaking for multi-family homes in recent months and is
helping construction to stabilize. A survey on Monday showed
sentiment among home builders edged up in July from a nine-month low in
June, but they saw no increase in prospective buyers.
Last month, housing starts for multi-family homes soared 30.4 percent
to a 176,000-unit rate, while single-family home construction -- which
accounts for the largest portion of the market -- increased 9.4 percent
to a 453,000-unit pace. New building permits rose 2.5 percent to
a 624,000-unit pace last month. Economists had expected overall
building permits in June to edge down to a 600,000-unit pace.
Permits were boosted by a 6.9 percent rise in the multi-family segment.
Permits for the construction of buildings with five units and more
increased 8.2 percent to their highest level since October 2008.
Permits to build single-family homes edged up 0.2 percent.
New home completions fell 1.7 percent to 535,000 units in June.
Housing starts, permits rebound in March
YAHOO
19 April 2011
WASHINGTON (Reuters) – U.S. housing starts and permits for future home
construction rose more than expected in March, snapping back from the
prior month's winter weather depressed levels, government data showed
on Tuesday.
The Commerce Department said housing starts rose 7.2 percent to a
seasonally adjusted annual rate of 549,000 units. February's starts
were revised up to a 512,000-unit pace from the previously reported
rate of 479,000 units.
Economists polled by Reuters had forecast housing starts rising to a
520,000-unit rate. Compared to March last year, residential
construction was down 13.4 percent.
Still, the bounce back in residential construction does not signal
recovery as an over- supply of homes continues to discourage builders
from embarking on new projects.
"It's mainly a rebound from previous month's decline. We still think
the housing market is very weak, and the high inventory is still
depressing sales and prices," said Sireen Harajli, an economist at
Credit Agricole Corporate & Investment Bank in New York.
"We hope to see some signs of improvement toward the end of the year,
but we won't see substantial improvement until 2012."
U.S. stock index futures were steady at higher levels, while government
debt prices were steady at lower levels. The dollar held at lower
levels versus the euro.
Home builders' sentiment slipped a notch in April, the National
Association of Home Builders said on Monday, with builders viewing
sales conditions now and in the next six months as unfavorable.
Residential construction was likely a drag on economic growth in the
first quarter after making a modest contribution in the last three
months of 2010. Home building accounts for about 2.4 percent of gross
domestic product.
Groundbreaking last month was lifted by a 5.8 percent rise in volatile
multifamily homes. Single-family home construction increased 7.7
percent.
New building permits advanced 11.2 percent to a 594,000-unit pace last
month, rebounding from February's record low 534,000 units. Economist
had expected overall building permits to rise to a 540,000-unit pace in
March.
Permits
were propped up last month by a 25.2 percent jump in the multifamily
segment. Permits to construct buildings with five or more units rose to
their highest level since January 2009 -- likely reflecting growing
demand for rental properties.
Permits to build single-family homes rose 5.7 percent. However, new
home completions dropped 14.2 percent to a record low 509,000 units in
March. 2010 was second worst year for home
building
DAY
By MARTIN CRUTSINGER AP Economics Writer
Article published Jan 20, 2011
U.S. homebuilders are coming off their two worst years in more than a
half-century, and the outlook for this year is only slightly better.
Economists say it could take three more years before the industry
begins building homes at a healthy rate. In the meantime, the housing
downturn is dragging on the broader economy, with one-quarter of the
jobs lost since the recession began in the construction field.
Builders normally help lead the economy out of a recession.
Construction projects fuel growth and that leads to more hiring.
But a year and a half after the recession officially ended, builders
are struggling to compete in markets flooded with unsold homes - many
of them foreclosures that are depressing prices.
"Housing in the past has always been one of the key drivers getting the
economy back on track. It is not going to happen this time because
there is a huge glut of homes out there," said Patrick Newport, U.S.
economist at IHS Global Insight.
Homebuilders broke ground on a total of 587,600 homes in 2010, just
slightly better than the 554,000 started in 2009, the Commerce
Department reported Wednesday Those are the lowest annual totals on
records dating back to 1959.
And the pace is getting worse. The Commerce Department reported
Wednesday that builders started work at a seasonally adjusted annual
rate of 529,000 new homes and apartments last month. That's a drop of
4.3 percent from November and the slowest pace since October 2009.
A big reason for the decline is that people are buying fewer
single-family homes, which represent nearly 80 percent of the market.
Single-family home construction fell 9 percent to an annual rate of
417,000 units in December.
In a healthy economy, homebuilders break ground on more than 1.5
million units a year.
Newport said he doesn't expect that level of home construction until
2014. He expects builders will start work on 685,000 homes this year,
1.09 million units in 2012, and 1.43 million in 2013.
Many potential buyers are holding off, worried that home prices haven't
bottomed out yet. A record 1 million homes were lost to foreclosure
last year and that is weighing on prices. Foreclosure tracker
RealtyTrac Inc. predicts 1.2 million homes will be repossessed this
year.
Builders are having a hard time competing with the depressed prices,
and that has led to fewer construction jobs.
Nearly 1.9 million construction jobs have vanished since the recession
began in December 2007. That's 26 percent of the 7.2 million jobs lost
during that period.
Each new home built creates, on average, the equivalent of three jobs
for a year and generates about $90,000 in taxes, according to the
National Association of Home Builders.
Homebuilders' stock shares fell in afternoon trading. Lennar Corp.,
D.R. Horton and PulteGroup shares all dropped by nearly 3 percent.
Building permits, considered a good barometer for future activity, rose
16.7 percent in December to a seasonally adjusted annual rate of
635,000, the best pace since March.
But builders pulled more permits in California, New York and
Pennsylvania ahead of code changes in 2011 - a factor that likely
influenced the spike.
"Some builders went ahead in December with projects to beat the
change," said Jennifer Lee, an analyst at BMO Capital Markets. Lee
points out that the biggest gains were in the Northeast, which was up
80.6 percent, and the West, up 43.9 percent.
Housing construction fell in all parts of the country in December
except the West where activity surged 45.8 percent. Construction
dropped 38.4 percent in the Midwest and was down 24.7 percent in the
Northeast and 2.2 percent in the South. Severe winter weather likely
affected activity in the Northeast and Midwest.
Home construction jumps
10.5 pct in August
By ALAN ZIBEL, AP Real Estate Writer
21 September 2010
WASHINGTON – Home construction increased last month and applications
for building permits also grew. The gains were driven mainly by
apartment and condominium construction, not the much larger
single-family homes sector. Construction of new homes and
apartments rose 10.5 percent in August
from a month earlier to a seasonally adjusted annual rate of 598,000,
the Commerce Department said Tuesday. That's the highest level since
April.
Pulling the figures up was a 32 percent monthly increase in the
condominium and apartment market, a small portion of the market.
Single-family homes, which represented about 73 percent of the market
in August, grew more than 4 percent.
Housing starts are up 25 percent from their bottom in April 2009. But
they remain 74 percent below their peak in January 2006. Single-family
housing starts are up 11 percent from their low point in January 2009,
but down 78 percent from their peak in January 2006. Builders are
struggling with weak demand for new homes caused by high
unemployment and a glut of foreclosed homes on the market. They
benefited in the spring from federal tax credits, but those expired in
April.
Paul Dales, U.S. economist with Capital Economics, said the high number
of vacant homes, mounting expectations of renewed price falls and
economic constraints on households will continue to weigh on the
industry.
"Homebuilding activity remains at an astoundingly weak level," Dales
said, adding that construction has to be more than double current
levels for the market to be considered healthy.
Building permit applications, a sign of future activity, grew by nearly
2 percent to an annual rate of 569,000. Lennar Corp., a major
builder based in Miami, said Monday the number of
buyers signing agreements to purchase its homes fell 15 percent from a
year ago in the three months ended August 31.
"It's been a tough summer," said Stuart Miller, Lennar's chief
executive. on a conference call with investors Monday. "As we've gone
into September, we're seeing a little bit of pickup in our traffic, but
that shouldn't be cause to have a sigh of relief at this point."
Construction activity rose 34 percent in the West and was up 22 percent
in the Midwest and 7 percent in the South. However, construction fell
by 24 percent in the Northeast. On Monday, the National
Association of Home Builders said its monthly
index of builders' sentiment was unchanged in September at 13. The
index has now been at the lowest level since March 2009 for two
straight months. Home construction sinks, building
permits down YAHOO
By ALAN ZIBEL, AP Real Estate Writer
16 June 2010
WASHINGTON – Home construction plunged last month to the lowest level
since December as builders scaled back without a federal tax credit to
lure buyers. Building permits also fell, a sign the construction
industry won't fuel the economic recovery.
The Commerce Department said Wednesday that construction of new homes
and apartments fell 10 percent from a month earlier to a seasonally
adjusted annual rate of 593,000. April's figure was revised downward to
659,000.
The results were driven by a 17 percent decline in the single-family
market, which had benefited earlier in the year from federal tax
credits of up to $8,000. It was the largest monthly drop in
single-family construction since January 1991.
Applications for new building permits, a sign of future activity, also
fell. They sank 5.9 percent to an annual rate of 574,000, the lowest
level in a year.
The report missed Wall Street expectations by a wide margin. Economists
surveyed by Thomson Reuters had predicted that housing construction
would only fall to seasonally adjusted annual rate of 650,000 and had
forecast that building permit applications would increase to an annual
rate of 630,000.
In a typical economic recovery, the construction sector provides much
of the fuel. But that hasn't happened this time. Developers are trying
to sell a glut of homes built during the boom years. And they must
compete against foreclosed homes selling at deep discounts.
Homebuilders are feeling less confident in the recovery now that
government incentives for buyers have expired. The National Association
of Home Builders said Tuesday its housing market index fell in June
after two straight months of increases.
Builders had been more optimistic earlier in the year when buyers could
take advantage of tax credits of up to $8,000. Those incentives expired
on April 30, although buyers with signed contracts have until June 30
to complete their purchases.
Experts anticipate home sales will slow in the second half of this
year. In addition, high unemployment and tight mortgage lending. Housing construction up 2.8 percent
in January YAHOO
By MARTIN CRUTSINGER, AP Economics Writer
Feb. 17, 2010
WASHINGTON – Housing construction
posted a better-than-expected increase in January which pushed activity
to the highest level in six months. The solid gain raised hopes that
the construction industry is beginning to mount a sustained rebound
from its worst slump in decades.
The Commerce Department said
Wednesday that construction of new homes and apartments rose 2.8
percent last month to a seasonally adjusted annual rate of 591,000
units. That was better than the 580,000 annual pace that economists
were forecasting.
Applications for building permits,
considered a good barometer of future activity, fell 4.9 percent to a
rate of 621,000, but that was after two months of large increases.
In another sign of strength,
Wednesday's report revised up activity in December to show builders
were starting construction at an annual pace of 575,000 units during
that month, much stronger than the 557,000 originally reported. Even
with the upward revision, activity fell a slight 0.7 percent in
December, a dip that was blamed on severe weather in many parts of the
country that depressed construction activity.
Economists are hoping that housing
is beginning to recover and a rebound in this area will help support
the economy as it struggles to mount a sustained recovery from the
deepest recession since the 1930s.
In a separate report suggesting
strength, the Federal Reserve said industrial production rose 0.9
percent in January, the seventh consecutive monthly increase.
January's numbers rose in all three
major categories: manufacturing, mining and energy utilities. That is
the first such show of strength since August 2009.
Manufacturing rose 1.0 percent,
while mining and utilities each gained 0.7 percent, the report said.
In the housing report, the strength
last month was led by a 10 percent jump in activity in the Northeast
and an 8.9 percent increase in the West. Construction was up a smaller
1 percent in the South and 3.2 percent in the Midwest.
The strength in January pushed
construction activity up by 21.1 percent from the pace in January 2009.
Last month's building rate the fastest pace since July.
Construction of single-family homes
rose by 1.5 percent to a seasonally adjusted annual rate of 484,000
units while construction of multi-family units increased 9.2 percent to
an annual rate of 107,000 units.
The National Association of Home
Builders said Tuesday that its housing market index rose by two points
to 17 in February after having fallen for two consecutive months.
That increase in sentiment was
likely influenced by a number of favorable developments including a
report earlier this month that the nation's unemployment rate fell in
January to 9.7 percent, still high, but lower than the 10 percent of
the previous month.
In other favorable developments,
mortgage rates are hovering around 5 percent, pushed down by a Federal
Reserve program to buy mortgage-backed securities. And builders say
they are also seeing a boost in the demand for homes coming from a
government stimulus program. That program provides tax credits of up to
$8,000 for first-time home buyers and up to $6,500 for current
homeowners who decide to move.
Bob Jones, chairman of the home
builders, said builders were "slightly more optimistic that the housing
recovery is finally beginning to take root." 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?
Home sales soar while condos sputter
Publication: The Day
By Lee Howard
Published 08/10/2012 12:00 AM
Updated 08/09/2012 11:52 PM
The sales totals and prices for homes in New London County continued to
increase in June, while the condominium market remained mired in a
summer slump.
Sales of single-family homes in the region soared 21.3 percent in June
compared with the same month last year, according to the latest figures
from The Warren Group, publisher of The Commercial Record. Prices also
rose, from $210,000 last year to $220,000 this year.
The local numbers exceeded results in the rest of the state, which saw
stagnant sales of single-family homes and a slightly lower median price
than Connecticut recorded last year.
In all, 2,532 homes were sold in the state this June, compared with
2,521 for the same month last year. The median price statewide,
however, declined from $278,000 to $265,000 over the same period.
"It looks like the market lost some momentum in June," said Timothy M.
Warren Jr., chief executive of The Warren Group, in a statement.
"Median prices have continued to decline this year, and the trend is
expected to continue until home sales put up stronger numbers."
Single-family sales in New London County are bucking statewide trends,
showing a nearly 5 percent improvement in June compared to the same
month a year ago. Year-to-date prices are up even more, climbing more
than 8 percent compared with last year's median.
But condominium sales locally are moving in the other direction,
falling 37.5 percent in June compared with the same month last year.
The median price also fell, from $146,000 last June to $126,500 in the
same period this year.
But median condo prices in New London County so far this year are up
nearly 7 percent. This year's median so far is $155,000, compared with
$145,000 at the same time last year.
Condo sales nationwide have been affected by stricter Federal Housing
Administration guidelines. Housing recovery varies town-by-town in
region; Analysis
shows real estate prices will return to peak levels faster in East Lyme
than in New London
By Lee Howard Day Staff Writer
Article published Jan 2, 2012
Real estate prices in Voluntown, Franklin, East Lyme, Colchester and
Old Lyme are expected to recover more quickly than in other New London
County communities, some of which will likely have to wait a decade or
more to see values return to their peak years in 2005-2007, according
to a new analysis.
The analysis, by Les Bray of Sound Investment Consultants in
Stonington, also showed that Franklin, Voluntown, Colchester, Lyme and
East Lyme homeowners - all of whom have seen median values dip less
than 20 percent - were not hurt as badly by the current downturn as
residents of other towns in the region.
Seven towns have lost between 20 and 30 percent of their median home
values when comparing today's sales to the peak years, and nine
municipalities - led by Griswold, at nearly 40 percent - saw even more
reductions.
"The big problem we've got right now is an awful lot of properties
today are worth less than what people paid for them," Bray said in a
telephone interview.
But that's not to say that real estate hasn't been good for many
others. Bray's analysis shows that when median prices today are
compared to values in 2000, every town in the region - led by
Stonington, with a nearly 90 percent increase - saw price appreciations.
"There are some parallels to the way a stock behaves," Bray said. "If
you buy and hold, you should be OK; if you buy at the peak, you're
going to have troubles for a while."
Bray said Voluntown's home prices are on track to return to peak values
by 2014, while Franklin will have to wait until 2015; East Lyme, 2016;
Colchester, 2017, and Old Lyme, 2018. Seven other municipalities,
including Norwich and New London, won't see prices return to peak
levels until 2025 or beyond, according to Bray.
Bray's analysis is somewhat optimistic, since it assumes that the
region is at the low point for real estate prices and that values will
proceed up during next few years at the average pace seen between 2000
and 2011.
"I don't expect that prices are at the bottom," Bray said. "The
declines will be less than they have been but they are still going to
be there."
But Catherine Duprey, president of the Eastern Connecticut Association
of Realtors and owner of Duprey Real Estate in Pomfret Center, said she
has seen indications that the local market is on the upswing. Pending
sales are rising both nationally and locally, she said, a good
indication that 2012 will be an improvement over 2011.
"2011 definitely was a challenging year," she said. "We're still
dealing with short sales and foreclosures on the market."
She said agents also continue to face employment concerns - most
notably, according to Bray, at pharmaceutical giant Pfizer Inc. - as
well as a glut of bank-owned properties on the market.
"The buyers are definitely cautious," she said. "They want to see every
house out there in their price range."
But with rentals hard to find and growing more expensive, Duprey said
she has seen the market for multifamily homes picking up. And the
affordability factor can't be denied, she added, with Connecticut
Housing Finance Authority loans available as low as 3.5 percent.
Pent-up demand, she said, will eventually spark a recovery.
"I put a house on the market last week, and it's already under
deposit," Duprey said. "It's like the good old days."
High-priced
homes dip in value Greenwich 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.
The latest numbers suggest we're finally at the beginning of the end
of the housing correction -- no thanks to Washington.
Last Thursday's numbers from Realtytrac seemed like bad news. In
August, foreclosure auctions hit their second-highest monthly total in
the report's history: 147,003, up 9 percent over the month before and
up 2 percent over August last year. That's 7 percent below the peak
month, March of this year.
And the immediate precursor to foreclosure sales -- bank repossessions
-- hit their all-time high in August: 95,364, up just 3 percent over
July but 25 percent over August 2009. That makes the ninth straight
month repos have increased on a year-over-year basis. But foreclosure
is a pipeline -- and those numbers are the outflow end of it.
On the inflow end, things are slower. August saw 96,469 default or
foreclosure notices go out, a 1 percent drop from July and a 30 percent
fall from August 2009. And that marks the seventh straight month new
foreclosures have fallen on a year-over-year basis. This trend --
increased "outflow" and slightly reduced "inflow" foreclosure activity
-- means that lenders and loan servicers are 1) giving up on modifying
mortgages when the borrower can't pay, and instead repossessing homes
and auctioning them off, but also 2) trying to manage the foreclosure
pipeline to minimize the downward pressure on home prices.
Why isn't this bad news? For starters, a multiyear tidal wave of
foreclosure sales has been inevitable ever since the housing bubble
burst: Too many people had mortgages they couldn't afford to pay,
mortgages with a face value higher than the home's new market price.
There's never been any way for prices to start heading back up until
they first find their bottom -- which won't happen until those bad
mortgages are cleared away.
President Obama's $75 billion mortgage-modification program was always
going to be a huge failure -- you just can't keep people in homes they
can't afford -- but now the markets are admitting it.
Those who'll lose their homes will go through a disruptive and painful
process. But they actually lost their investment long ago, when the
bubble burst. Once they lose their homes, they're finally free of the
crushing burden of making payments on mortgages they'll never pay off.
They can rent comparable housing at a far lower monthly cost -- and
some may be able to buy a new home at a reduced price, using the record
low interest rates now available.
That is, the foreclosure process -- which has a few years to go -- will
reduce the housing costs for millions of underwater homeowners. People
who owe more on a house than it's worth will, except in rare cases, be
free of the debt. According to research analytics firm CoreLogic, 11
million households -- 23 percent of homeowners with mortgages -- have
negative equity in their homes. (The total negative equity is a
stunning $766 billion.)
Of course, there are losers -- homeowners with small or no mortgages
will lose equity as prices drop to absorb millions of foreclosure
sales, and mortgage lenders will finally be forced to take the
write-offs the mark-to-market accounting rules required them to take
long ago.
But, again, those losses can't be avoided. They're the result of bad
policy dating back to the early Clinton years that created the housing
bubble. Price reductions, however, won't be uniform. Foreclosure
activity is concentrated. According to Realtytrac, just five states --
California, Michigan, Florida, Arizona and Illinois -- account for more
than half of all US foreclosure activity.
The real worry is future taxpayer losses -- because Obama, in trying to
prevent the inevitable, has effectively nationalized the $11 trillion
US home-mortgage market. Between Fannie Mae, Freddie Mac and the
Federal Housing Administration, Uncle Sam now holds or insures 96
percent of all new mortgage loans.
Obama's efforts to "help" by keeping people in unaffordable mortgages,
and otherwise propping up housing prices have failed. Instead, he's
only prolonged the pain for underwater borrowers, forced them to spend
their money to pay interest to banks on uncollectible debts that
should've been written off long ago -- and increased housing losses and
transferred them to the taxpayers. Bottom line: The housing markets are
finally doing what's been inevitable ever since the bubble burst --
clearing out the bad mortgages so we can find a bottom. Washington's
efforts to avoid the pain have only kept the patient in the hospital --
a great expense to the taxpayers. Give it up, Mr. President.
2 New Programs Planned to Help
Homeowners
NYTIMES
By THE ASSOCIATED PRESS
August 29, 2010; Filed at 9:28 a.m. ET
WASHINGTON (AP) -- The Obama administration's top housing official says
several new programs are in the works to help try to revive the housing
market.
Housing and Urban Development Secretary Shaun Donovan said in an
interview aired Sunday that his department in the coming weeks will
roll out an FHA refinancing program to help borrowers whose mortgages
exceed the market value of their homes. He also said the department
will launch ''an emergency homeowners loan program'' to help people who
are unemployed keep their homes.
Donovan, on CNN's ''State of the Union,'' said a drop in July home
sales was expected with the end of the housing tax credit, but that the
decline was ''clearly worse than we expected.'' He said ''it's too
early to say'' if the credit will be revived. Nearly 50% quit Obama mortgage
program. Foreclosures may
rise as relief plan falters DAY
By MARTIN CRUTSINGER AP Economics Writer Article
published Aug 21, 2010
Nearly half of the homeowners who enrolled in the Obama
administration's flagship mortgage-relief program have fallen out.
A new report issued Friday by the Treasury Department said that
approximately 630,000 people who had tried to get their monthly
mortgage payments lowered through the effort have been cut loose
through July. That's about 48 percent of the 1.3 million homeowners who
had enrolled since March 2009. That is up from more than 40 percent
through June.
The report suggests foreclosures could rise in the second half of the
year and weaken the ailing housing market, analysts say.
Another 421,804, or 32.3 percent of those who started the program, have
received permanent loan modifications and are making their payments on
time.
Many borrowers have complained that the program is a bureaucratic
nightmare. They say banks often lose their documents and then claim
borrowers did not send back the necessary paperwork.
The banking industry said borrowers weren't sending back their
paperwork. They also have accused the Obama administration of initially
pressuring them to sign up borrowers without insisting first on proof
of their income. When banks later moved to collect the
information, many troubled homeowners were disqualified or dropped out.
Obama officials dispute that they pressured banks. They have defended
the program, saying lenders are making more significant cuts to
borrowers' monthly payments than before the program was launched.
And some of the largest mortgage companies in the program have offered
alternative programs to those who fell out.
The Obama plan was designed to help people in financial trouble by
lowering their monthly mortgage payments. Homeowners who qualify can
receive an interest rate as low as 2 percent for five years and a
longer repayment period. Price drop effect? Not much impact from repeat
buyer credit
YAHOO
By ADRIAN SAINZ, AP Real Estate Writer
Feb. 28, 2010
It sounded like a great idea three months ago: Hand homeowners a $6,500
tax credit to find a new place to live, giving a thrust of energy to
the housing market's recovery.
So far, people are staying put.
In November, the federal government extended a tax credit of up to
$8,000 for people who hadn't owned a home for three years. This credit
had helped boost home sales last summer and fall. Seeking to build on
that momentum, the government added a new credit of up to $6,500 for
current homeowners, hoping it would transform them into house-hunters
this winter and spring. But real estate agents around the country
say the credit is doing little to elevate sales. Reasons vary.
The unemployment rate is still near 10 percent and consumer confidence
is falling. Home prices have stabilized in some markets, but are still
a third below their 2006 peak. Droves of people who want to sell are
stuck because their home is worth less than they paid for it. Harsh
winter weather has Americans shoveling driveways instead of preparing
their home for buyer visits.
"No one is saying, `I need to buy something before it expires,'" said
Tim Surratt, an agent with Greenwood King Properties in Houston.
The tax credit for current homeowners was intended to help stabilize
prices and bolster the economy, but the housing market remains
vulnerable. Sales of both new and previously occupied homes dropped in
January, and the Mortgage Bankers Association's index of loan
applications recently hit a 12 1/2-year low. Also, the percentage
of current homeowners looking to buy was nearly flat from January to
February, according to a poll of 1,500 real estate agents by Campbell
Communications and Inside Mortgage Finance.
The Obama administration has pumped billions into the housing market,
hoping it will lead the nation out of its economic doldrums. Efforts to
modify loans facing foreclosure have largely failed. So, hundreds of
thousands of discounted homes will hit the market this year, stressing
a market desperate to balance high supply with sluggish demand.
"You've got a really big problem that requires big guns, and the tax
credit is just not big enough," said Roberton Williams, senior fellow
at the Tax Policy Center in Washington.
Agents believe the credit's true test will come in the spring, the
busiest home-buying season. Concerns about high unemployment could keep
buyers on the fence.
"If you don't have a job, you're not going to be able to buy a new
house," said Deborah Farmer, owner of StarLight Realty in Tampa, Fla. Another
problem is that homeowners, in many cases, will need to sell their
current home to afford a new one and claim the credit on tax returns.
That's a major issue for borrowers who owe more than their home is
worth. Nearly one-in-three homeowners with a mortgage is currently in
that situation, according to Moody's Economy.com.
Also, $6,500 may not mean much to a buyer with enough equity to sell a
property and afford another home. The savings will hardly dent down
payments or moving costs. Most sellers employ real estate agents who
typically receive 6 percent of the sales price. For a home sold
at the national median sales price of $164,700, the agent's commission
is $9,882. There goes the $6,500, and then some.
Economists argue that a tax credit is rarely the sole motivation for a
home purchase. Many believe tax credits just accelerate sales that
would have happened anyway, leading to a drop off once that demand is
exhausted. And, bad weather in much of the country this winter
has stymied home buying.
So far, the credit "is hardly registering on the economic Richter
scale," said Patrick Newport, an economist with IHS Global Insight.
Real estate agents hope that the tax credit will lure more buyers as
its approaches its April deadline. Both tax breaks are expected to
create an estimated 600,000 additional home sales this year, the
Realtors group said. The group hasn't broken down an estimate for
first-time buyers and existing homeowners.
The Realtors group has produced radio spots touting both credits as an
"opportunity of a lifetime." With mortgage rates at around 5 percent,
and home prices remaining affordable in many cities, one would think
adding a tax credit would send sales skyward.
But that's not the case.
The Realtors group said the true stimulus effect of both tax credits,
and the estimated sales they could create this year, will be on local
economies. Each home sale contributes $63,000 on average to an
area's economy, the Realtors group claims. That includes real estate
agent commissions, title company fees, insurance, and purchases like
furniture and appliances.
"That's the stimulus effect that the housing market usually has in
leading the country out of a recession," said Walter Molony, spokesman
for the Realtors group.
To qualify for the $6,500 credit, buyers must have owned and lived in
the same home for five consecutive years out of the past eight. They
must sign a contract by April 30 and close before June 30. Lawmakers
can extend both tax credits, but it's not clear if they will.
The home's purchase price can't exceed $800,000, and it must be used as
a main residence. The income limit for single taxpayers is $125,000;
for a married couple, it's $225,000.
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? Rising tide of lowered prices sinks mortgages? U.S.
Asks New York Landlords for Vacant
Apartments to House Displaced Families
By CHARLES V. BAGLI, NYTIMES
November 11, 2012
City, state and federal officials are trying to assemble a pool of
vacant apartments in New York City that could supplement the city’s
shelter system in housing hundreds if not thousands of families
displaced by storm damage and power outages. Although many people
have clung to their homes despite having neither heat nor hot water,
particularly in city housing projects in Coney Island and the
Rockaways, officials are worried that another wave of people will seek
shelter as temperatures fall and they can no longer bear the cold.
“There’s a huge fear that folks are going to be displaced for the
medium and long term,” said Mathew M. Wambua, the city’s housing
commissioner. “We feel a real imperative to have something in place
when the second surge comes.”
Officials have discussed a variety of ways to accelerate rebuilding,
including using modular housing. But meetings in New York last week
involving city and state officials focused on creating a clearinghouse
that would match displaced families with vacant apartments.
At a meeting in Manhattan on Wednesday evening, Shaun Donovan, the
federal Secretary of Housing and Urban Development, told real estate
executives, “You really need to help out,” according to one executive
who was present. The meeting, real estate executives said, was one
element of a White House rebuilding program that President Obama is
expected to announce on Thursday in Manhattan for New York, New Jersey
and possibly Connecticut.
Developers and landlords expressed a willingness to pitch in, but they
also raised some issues that needed to be addressed first. That led to
lengthy meetings on Thursday between state and city officials and
members of the Real Estate Board of New York, the Rent Stabilization
Association and the state Association for Affordable Housing.
They discussed creating a system by which people who apply to the
Federal Emergency Management Agency for housing could be matched with
landlords who have vacant apartments. The tenants would pay rent
directly with a FEMA voucher, or obtain an apartment through an agency
like the Red Cross.
In the New York area, FEMA provides about $1,800 a month in rental
assistance for up to 18 months. That would cover most housing in
Brooklyn and Queens, but developers said it would fall short of
covering many units in Manhattan. The need for temporary housing
remains, even in Manhattan, where the heating and electrical systems in
complexes like Knickerbocker Village on the Lower East Side were
swamped with seawater. Electricity was restored to most apartments in
that complex until an electrical fire cut power again.
Landlords raised a series of statutory and legal hurdles that would
have to be overcome. In apartments that operate under the state’s rent
stabilization laws, there is no provision for short-term tenants. Some
building owners asked whether the government would indemnify them for
apartment damages or legal costs if they were forced to evict a tenant.
“People want to do the right thing,” said Charles Dorego, senior vice
president of Glenwood Management, a major Manhattan landlord, who
attended the meetings on behalf of the Real Estate Board. “But they
don’t want to inherit a pig in a poke. They asked for indemnity,
although I don’t see how a government agency can do that.”
By Friday afternoon, officials had developed a proposal that they were
beginning to circulate within the real estate industry and hope to
unveil soon. A spokesman for Mr. Donovan said they were on a fast
track to devise a creative solution to the housing disaster, but they
were not ready to announce any specifics.
It is unclear how many apartments might be included in the pool, given
that the city’s vacancy rate is in the low single digits. Some
landlords in Brooklyn and Queens called the Rent Stabilization
Association on Monday offering apartments for families forced out of
their homes. But by Thursday, they said many of those units were now
occupied.
Richard LeFrak, whose family owns more than 10,000 apartments in New
York and New Jersey, said he had no vacant units, after moving nearly
150 families from their damaged first-floor apartments. His buildings
suffered “tens of millions of dollars in damage from the storm,”
especially in Sheepshead Bay, Brooklyn, and Jersey City. “We’re so
tight now,” Mr. LeFrak said.
HUD Secretary Concedes Obstacles to Home Ownership
NYTIMES
By THE ASSOCIATED PRESS
July 3, 2011
WASHINGTON (AP) — Housing Secretary Shaun Donovan says he thinks it's
unlikely that home prices will continue to drop and calls it a good
time to buy a home. Donovan acknowledges that officials must find
ways to provide access to home ownership that doesn't require a 20
percent down payment. Donovan warns that officials must not
"overcorrect" the problems that led to the housing crisis. He says the
federal government can't go so far in the other direction of housing
regulation that it effectively denies new housing for deserving people
with good credit ratings.
The housing secretary says the Obama administration has made progress
in resuscitating the housing market but acknowledges that "we are not
where we need to be."
Donovan spoke Sunday on CNN's "State of the Union." 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
HOUSING FOR YOUNGER GENERATION
From Pew Research sample - fine print is sampling error. And then
there is the Foreclosure
boom...Fannie
May/Freddie Mac 2012 revised rules... College
Loans, High Rent In State Trap
A Generation At Home
Hartford Courant
Susan Campbell
9:09 AM EDT, April 10, 2012
This wasn't what Raymond Guarino planned. The 22-year-old New
Britain man went to culinary school — and even studied in Italy as part
of his coursework. And then he came back to Connecticut to work at a
school and share his father's apartment while he pays off debt.
For such a young generation, the twentysomethings have accumulated a
lot of nicknames: "Generation Stuck," the "Go-Nowheres" and the
"Failures to Launch" among them.
But whatever the moniker, many young adults are putting off home
ownership and, sometimes, even apartments of their own. Staggering
student loans push economic independence off, and here in Connecticut,
that phenomenon is exacerbated by prohibitively high housing costs.
Young people find themselves negotiating life back home with the
parents — and, not incidentally, redefining the American Dream.
A report released in March by the Connecticut Housing Coalition —– with
the National Low Income Housing Coalition — said that to afford a
modest, two-bedroom apartment, a Connecticut resident must make $23.58
an hour. By way of comparison, minimum wage in Connecticut is $8.25.
Once again, the Stamford-Norwalk metropolitan area, where renters must
earn $34.02 an hour, is among the most expensive rental markets in the
country. This year, it ranks in front of New York, Honolulu, and
Boston. The Danbury area is ninth in the country.
In Connecticut, that puts a decent apartment out of reach for many
young adults, said David Fink, Partnership for Strong Communities
policy director. According to the U.S. Department of Housing and Urban
Development, fair market rent for a two-bedroom apartment in the
Hartford area is $1,145 a month and in the New Haven area $1,352.
"Does that mean they're not renting a place?" said Fink. "Are they
thinking, 'If I can't go to the movie or drink with my friends, I'll
live at home?' The difficulty for these kids is that they're totally
screwed." Fink says he has memorized one number for talks he gives
about the state's future: In Connecticut, 26 percent of renting
households make less than 50 percent of the median income.
"These people are this close to homelessness," he said. "Their
carburetor goes, they fix it, and miss the rent. Do they stay here
where there aren't a lot of jobs? Do they try their luck in New York?
Denver?"
A November U.S. Census Bureau report said that the percentage of men
aged 25 to 34 living in their parents' home rose from 14 percent in
2005 to 19 percent in 2011; for women, that percentage went from 8
percent to 10 percent over the same period. Among men aged 18 to 24, 59
percent lived in their parents' home in 2011, up from 53 percent in
2005. During that same period, 50 percent of women lived in their
parents' home in 2011, up from 46 percent. (College students living in
a dorm are counted as living in their parents' homes, so they're part
of these statistics.)
Meanwhile, according to a recent Federal Reserve study, between 1999
and 2001, 17 percent of 29- to 34-year-olds acquired a first-time
mortgage. Between 2009-2011, just 9 percent did, said Fink.
Betsy Crum is executive director of the Connecticut Housing Coalition,
and this is not just theory to her. Guarino is one of her four
children, all of whom are in their 20s.
"I completely understand this," said Crum. "Sometimes they live with
me. Sometimes they live with their dad, and sometimes — in the case of
the 26-year-old son — they live with six other guys and a girlfriend in
a house they pay $2,000 a month for. There is this difficult
demographic; a lot of kids with a lot of talent and hope and potential
are finding they have to adjust their hopes."
Back in high school, Breyonne Golding, 26, of Hartford, found the best
schools for urban and community studies, and then she chose both
college (University of Connecticut) and grad school (Ohio State
University) based on the financial package each offered. She doesn't
have a credit card, and now she's out of school and working as an
assistant in the office of Hartford's chief operating officer. She's
focused on repaying school debt, which hovers around $20,000. (The
average college student graduates with roughly $25,000 in loans.
Nationwide, student debt is more than $1 trillion and growing,
according to the Consumer Financial Protection Bureau.)
The job's excellent. Golding is never bored, and financially, at least,
coming home made sense, but ...
"I am extremely lucky," says Golding. "I went to school and grad school
for free, and I took out loans to live for graduate school." She'd
intended to live at home for a year and pay off her debt but, she said,
"Life happens."
While Golding appreciates her parents' hospitality, "it's definitely
difficult. You're talking living on my own for eight years, and then
coming back to live with your parents in the same room where you were a
teenager. But it's their house and so I can't expect to come in there
and say 'These are my rules.' They're doing me a favor and it's a big
adjustment but that motivates me more to do what I need to do to go
back on my own."
For Guarino, home ownership isn't even on his radar, partly because he
intends to one day live in a city, not the suburbs.That doesn't keep
him from wondering about his place in the economic landscape.
"Every once in a while, I take a step back and look at it, and I have a
bit of crisis: I'm 22, I'm an adult now, and I do sometimes feel a
little upset about it. I should be further on," he said.
But it's not all doom and gloom. Guarino is working as a special
education paraprofessional. He loves the job and intends to return to
school for an education degree — even though that will increase his
debt and perhaps move his independence day further off. He just had his
school contract renewed. He's back for another year. Decaying apartments symptom of
housing
crisis
YAHOO
By SAMANTHA GROSS, Associated Press Writer
Feb. 21, 2010
NEW YORK – There was no heat or hot water, so for weeks Mary Fountain
would fill a bowl and put it in the microwave, then strip off her extra
layers to sponge herself clean.
Upstairs, her longtime neighbor, 70-year-old Gearaldine Davis, peers
skeptically out at her balcony, hesitant to step onto the cracked
concrete. The last time the city inspector came by, he told her he was
afraid to walk out there.
This Bronx apartment building, where city housing violations have
increased from 82 to nearly 600 in 16 months, is among thousands of
rental properties from Los Angeles to Harlem showing a creeping decay
as housing values collapse and funds for repairs dry up.
As landlords find themselves owing more than their properties are
worth, some have simply walked away, leaving garbage to pile up. Others
have disappeared into bankruptcy, with unpaid utility bills. Some have
tried to reduce their losses by neglecting basic maintenance.
"There are 100,000 apartments teetering on the edge" in New York City
alone, said Harold Shultz, senior fellow at the Citizens Housing and
Planning Council. "And depending upon the way various winds blow, they
could fall over."
Across the country, multifamily mortgages covering 340,000 apartment
units and worth an estimated $28.8 billion were delinquent or in
foreclosure at the end of 2009 — more than 18 times the sum from two
years earlier — according to Real Capital Analytics.
Earlier this month, a Congressional report warned that the
deterioration of these properties could drag down the value of the
surrounding neighborhoods. In New York, where these troubled
investments centered on gentrifying areas of the Bronx and Harlem,
advocates worry the problems could deliver lasting blows to
neighborhoods that have long struggled.
Of New York City's 1 million rent-stabilized apartments, more than
one-tenth are facing severe financial distress, says Rafael Cestero,
commissioner of the city Department of Housing Preservation and
Development. Of those, more than one-quarter have deteriorated visibly
since the beginning of the downturn.
In much of the country the phrase "affordable housing" brings to mind
government-owned housing projects relegated to the poor. But in pricey
New York City, government-regulated rental apartments have long been a
path to survival for middle-class workers.
The owners of the largest of the city's affordable-housing complexes,
Stuyvesant Town and Peter Cooper Village, recently gave up the
11,000-unit property when they couldn't make their mortgage payments.
At 1520 Sedgwick Ave. in the Bronx, Davis can remember a time when the
building was gleaming, when there were palm trees and telephones in the
lobby for residents. In the 1970s, DJ Kool Herc spun records in the
community room here, which officials later called the birthplace of
hip-hop.
Now, the shine is gone. The community room door is locked. And Davis
recently got down on her knees to find every crack in her apartment and
stuff them with steel wool to keep out the rats.
Back downstairs, Fountain chides her 12-year-old granddaughter for
venturing through the hallways alone. The Fire Department is here every
day, it seems, to rescue people trapped in the creaky elevators. And
the temperamental lock on the front door has made the stairwells a
gathering place for shady characters.
But both women feel that leaving isn't an option.
"Where am I going to go? Stay in the river?" Davis said, gesturing
toward the waterway outside the building. "I don't have money ... I pay
rent before I buy food because I know I've got to have a place to stay."
The building's owners have already racked up housing violations on two
other Bronx affordable-housing properties and let them go into
foreclosure. For now, 1520 Sedgwick remains on the market, city housing
officials say. A lawyer for Mark Karasick, one of the owners, did not
return a call for comment.
In Chandler, Ariz., the landscape is different, but the story is
similar.
The Phoenix suburb was home to some of the 25 properties that Bethany
Holdings Group LLC abandoned in California, Arizona, Texas and Colorado.
Trash began piling up on the properties; the pools were covered with
green scum. If the city hadn't stepped in, the water would have stopped
running, said Daniel Anderson, the city's senior code inspector.
Midland Loan Services Inc., which hired the receiver who took over
about a dozen of the Bethany properties, did not return a call seeking
comment. The listed number for Bethany Holdings has been disconnected.
In East Palo Alto, Calif., creditors are in the process of foreclosing
on more than half of the city's rental units. Maintenance, repairs and
security suffered at the 1,800 apartments until the city and
court-appointed receiver David Wald stepped in, said Wald. A message
left for Page Mill Properties LLC, which controlled the properties, was
not returned.
In Washington, D.C., The Urban Institute estimates that 2,500 of the
city's renter-occupied housing units were in foreclosure in July —
double the number two years earlier. In Los Angeles, housing officials
put the number at 5,900 last year, more than triple the 2007 figure. In
Chicago, 1-in-8 apartment units in multifamily buildings no longer
generate enough revenue to cover operating expenses, according to a
DePaul University study.
In the hopes of rescuing some buildings, New York City has put aside
$750 million to help renovate and refinance properties that are under
water. Cestero says he wants to avoid a repeat of the 1970s and 1980s,
when financial distress faced by apartment buildings eventually led to
the deterioration and abandonment of neighborhoods.
Earlier this month, a judge ordered the foreclosure sale of the
1,232-unit Riverton Houses in Harlem, which drew many black veterans
and their families when it was built in the 1940s. Now, residents are
worried about what the future holds for their tree-lined community.
Tatequa Aridi, 22, reminisces about growing up in the same apartment
that his grandparents lived in. All his neighbors know him, he says,
adding that he wants to make sure nothing will force his family to
leave.
A neighbor, Yolanda Sapp, says she finds the uncertainty frightening.
"I like my apartment. I like my neighbors," she says. "I don't know how
this is going to affect us."
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 give municipalities incentive
payments for zoning for and building each unit and an “education cost
reimbursement” for every child who ends up living in the housing built.
William Cibes, chairman of HOMEConnecticut, told legislators the
program, once begun, would more than pay for itself by bringing in $2
of sales and income tax revenue for every $1 spent.
What used to be a Fairfield County problem, Cibes told legislators, is
now a statewide one. Housing prices in Connecticut have increased by 64
percent since 2000, three-and-a-half times faster than wages, he said.
In 157 of the state's 169 cities and towns, the 2005 median household
income could not purchase a house at the median sale price.
Connecticut has lost a higher percentage of college-educated people
between the ages of 25 and 34 in the past six years than any other
state in the union, Cibes said. And fully half of the occupations in
the state don't pay enough to rent a two-bedroom apartment, he said.
•••••
The impact on business, advocates said, is severe. New employers won't
come to the state if there's no place their employees can afford to
live.
And old employers are leaving.
“Housing must be affordable, or workers will leave, and businesses will
follow,” said Nicholas Perna, an economist with Webster Bank, who said
he had analyzed the proposed program and found its economic assumptions
reasonable.
The program, he said, “has a good chance of creating the housing we
need to support job growth of 20,000 jobs a year.”
Even if the program only achieved half that goal, Perna said, the
program would break even.
“This General Assembly cannot afford not to take action,” he said. “If
this General Assembly does not quickly correct the housing
affordability problem facing the state, we will lose the young workers
we need to replace an aging work force and shrink the labor pool we
need to attract or keep business here.”
And the problem will only worsen, Perna said, as economic projections
suggest housing prices will continue to rise by 2.7 percent a year
through 2010.
James J. Finley Jr., executive director-designate for the Connecticut
Conference of Municipalities, endorsed the proposal, pointing out that
municipalities “can't find teachers, public safety workers, laborers or
road crews” because those people are being priced out of the housing
market.
He predicted the program would work because it is voluntary, allowing
municipalities to choose whether to participate, and because it gives
the municipalities control over the “location, appearance and amount of
the new housing.”
Further, Finley said, “it offers an opportunity to remake
neighborhoods, town centers, old mills and abandoned or underutilized
commercial facilities.”
Liz Verna, president of Verna Builders of Wallingford, said developers
would jump at the chance to build affordable housing if it were
profitable.
•••••
The big hurdle in most municipalities has been restrictive zoning
requiring a certain quantity of land per unit, she said. Because land
in Connecticut is so expensive, builders must build large single homes
to realize a profit.
But if builders were allowed to build more densely, and sell four out
of five units for market price, “we will easily be able to build under
this bill,” she said.
“I would welcome the opportunity to work with any municipality, to
choose locations, set design standards and make these homes
complementary to adjacent neighborhoods,” Verna said.
If builders start building “starter homes,” Feliciano said, it will
give young families that first rung on the ladder, where they can buy
into the housing market and, as their income grows, move up.
If not, he said, who will buy all those $500,000 homes when those young
families have moved to South Carolina, Arizona or Texas?
“Nobody's going to be here to purchase those $500,000 homes that so
many people have built equity up in,” Feliciano said. “So you're going
to see another generation, the baby-boomer generation, having trouble
selling these homes. Retirement for these individuals is going to be
more and more difficult. They're going to have to work longer because
there will be no one to buy their home.”
HOMEConnecticut
proposes state fund towns that help promote affordable homes
ROB VARNON rvarnon@ctpost.com
Article Last Updated: 02/22/2007 04:39:01 AM EST
The state's largest residential building association is backing the use
of state funds to push for more affordable housing.
The Homebuilders Association of Connecticut, which represents more than
1,300 builders, said Wednesday it supports HOMEConnecticut, an
initiative to create incentives to build homes people who don't make
six-figure salaries can afford.
The Legislature's Select Committee on Housing will hold a hearing
Friday on House Bill 7149 that includes the HOMEConnecticut plan.
Home Builders Association Executive Vice President William Ethier said
builders recognize there is demand for what is now being called "work
force housing," but the policies of towns and the prices for land make
building affordable homes a far too risky business move.
Hartford-based Partnership for Strong Communities created the
initiative which would allow municipalities to designate certain areas
as affordable housing zones, where builders could create more homes in
smaller areas that younger families and workers could afford. The state
would send the towns money in phases as the property is developed. The
zone could be established for existing neighborhoods that need to be
rehabilitated as well. It would be completely voluntary to create such
zones.
None of the money would go to builders.
Ethier said builders like the idea because they hope it will eliminate
some of the delays in the zoning approval process which plague many
building projects. He said it can take years to get the permits to
build a 10-home subdivision in some towns, even though the builder is
using the land for what it is zoned for.
"It should not take so long to get it done," he said. The plan would
not change the permitting process, but Ethier said if the zone is
adopted there would be less opposition to building there.
Ethier said builders are also prevented from building affordable homes
because many municipalities have gone to two-acre zoning for a
single-family home. A single house on two-acres is not going to be a
starter home, Ethier said.
The proposal would allow up to six single-family homes per acre or
building apartments or townhouses, he said.
Fairfield First Selectman Kenneth Flatto said he has heard only
a brief
description of the plan, but the density of the development it calls
for concerns him because it might harm the quality of life.
But dealing with the question of affordable housing is a pressing
problem, he said, adding Fairfield has undertaken two affordable
housing projects recently, including one that sold single-family houses
in the town for about $230,000, or almost half the market rate. Why the
state should get involved in what appears to be a free market issue is
simple, according to Partnership for Strong Communities Policy Director
David Fink.
"You can't just have a state that has rich people in it," he said.
While there are people who have no problem buying homes and paying
rising health care and energy costs, the people who mow lawns, cut hair
and provide much of the services these people depend upon, can't afford
to live here anymore, Fink said.
Partnership for Strong Communities' research shows that families
earning median income can't afford to buy a home at the median sales
price in 157 of the state's 169 municipalities.
The Partnership has connected the high price of housing and other
living expenses as contributing to an exodus of 20- to 34-year-olds.
The state has lost more people in this age group since 1990 than any
other in the nation.
The Partnership also noted that housing prices rose 63 percent between
2000 and 2005 but wages only increased 18.5 percent during that period.
He said the program will allow builders to sell 80 percent of the homes
in a zone at market rate and the remaining 20 percent at a capped rate
that only people making median income or 80 percent more than median
income will be allowed to buy.
Builders have said they would be able to make up the losses from the
fixed rate sales from the market rate sales.
Fink said gains in sales, income and other taxes will cover the
expenses of the program. What
If No One Was Home?
Hartford Courant editorial
February 18, 2007
Here's a startling statistic that demands attention, brought to you by
a coalition of smart people committed to increasing the amount of
affordable housing in Connecticut: In 2005, a family earning the median
income couldn't qualify for a mortgage on a median-priced home in 157
of the state's 169 towns.
Lack of diverse housing is everyone's problem. Even the most affluent
homeowner in the toniest suburb is affected by the decline in housing
that is driving out working families, young professionals and the
elderly. Without affordable housing - either starter homes or rentals -
there will be fewer workers performing services that everyone needs,
fewer jobs available, fewer dollars spent on goods and services, and
higher taxes. Without more residences near transportation centers,
traffic gridlock will only get worse.
Since 2000, despite pumping billions into higher education to reverse a
brain drain, Connecticut has lost a higher percentage of adults ages
25-34 than any other state. That's partly because housing costs have
risen 63.3 percent while wages went up 18.5 percent. The labor pool is
shrinking and the housing supply is low. Most of the building taking
place involves large, single-family suburban homes that contribute to
sprawl, or over-55 housing.
This, says the coalition HOMEConnecticut, is a recipe for economic
failure if not disaster.
The best minds in business, banking, academia, land use, housing and
government have come up with a long-term strategy, based on one in
Massachusetts, to reverse these negative trends. They say it will
generate $2 for every dollar spent on their proposed program. Who could
ignore that?
Legislators owe the coalition's plan a serious look. It covers lots of
ground. It would increase housing by 63,000 units, both single- and
multifamily, over 15 years, 20 percent of it affordable for people
earning 80 percent of the median. It would provide incentives for
building in special zones that allow denser development, bringing down
costs to developers and preventing sprawl. Bonuses would be paid by the
state to towns for added infrastructure and any additional educational
costs that new housing creates.
Best of all, the program is voluntary, an important consideration in a
state with a strong tradition of home rule. Towns would get to decide
where to build housing. They would get technical and planning
assistance and the ability to control design standards.
The existing affordable housing law enacted in 1989 has not produced
the desired results. The coalition's proposal fits the agenda of Gov.
M. Jodi Rell, particularly her creation of an Office for Responsible
Growth, proposed budget incentives for transit-oriented development and
goals to create more housing.
Why not get moving on it? Housing Carrots
And Sticks: A way to create affordable housing in
Connecticut that doesn't club municipalities over the head.
By Day Staff Writer
Published on 2/4/2007
Home Connecticut, an affordable-housing coalition, has introduced a
plan that merits the legislature's consideration as Connecticut
grapples with the facts of a worsening housing situation: rising costs,
the loss of young workers to other states and labor shortages.
The plan is modeled after one in Massachusetts. The program is aimed at
getting cities and towns to create special “overlay” zones, in which
developers could build housing developments with higher densities at a
more affordable cost to buyers and renters. To entice communities to do
this, the plan would offer financial incentives, including grants to
compensate for added education costs from children in the new housing.
The state would make rental assistance available to help developers
target a portion of the housing to low-income families.
As with the Massachusetts plan, enacted in 2004, Home Connecticut's
proposal links the issue of affordable housing with smart growth, the
land-use doctrine of encouraging development in built-up areas, where
services and good transportation are already available. The state would
use its bonding authority to create a Housing Trust Fund for gap
financing for developers.
Home Connecticut claims that in 15 years, the plan could produce more
than 60,000 units of affordable apartments and single-family homes, and
that state tax revenues would more than cover the expense to the state,
which the group estimates would rise to $143 million in the 15th year
and then begin to fall off.
While it's difficult to predict the future of such an approach based on
the Massachusetts plan, which is in is infancy, the Home Connecticut
proposal looks more promising than the failed affordable housing law
that's already on the books. That law pits developers against towns and
towns against developers by enabling the builders to appeal denials of
affordable housing plans to the Superior Court with the burden of proof
resting with the municipalities.
The law has been more of a wedge to enable developers to build in
unsuitable places than a useful tool to produce real affordable
housing. A Middletown developer has employed the law in an attempt to
build hundreds of units of housing in the environmentally sensitive
section of Oswegatchie Hills in East Lyme.
The Massachusetts plan follows an even more draconian measure, referred
to as the “anti-snob zoning law,” which enabled developers to override
local zoning with affordable-housing plans. The state passed that law
in 1969 in a veiled attempt to integrate suburbs racially following a
decade of urban unrest. It had mixed results and remained, like
Connecticut's law, controversial.
Financial incentives effective
The carrot in the form of financial incentives appears better suited to
Connecticut, with its long tradition of home rule and current reliance
on the property tax to pay for schools and other local expenses.
Someday soon the state may discover a solution to that inequity, but
meantime, the state would address the problem by helping with
educational expenses that arise from new housing. That burden has
encouraged many communities to use their zoning powers to zone out
families with children, a shortsighted and potentially destructive path
to take.
Healthy communities need young people, to staff their schools, police
departments, volunteer fire departments and businesses. They need
affordable places to live and jobs to keep its young people from
fleeing, a situation that makes matters worse as businesses choose not
to locate in the state because of labor shortages.
The housing problem doesn't exist in isolation, as Massachusetts found.
The status quo of building expensive housing in suburbs and rural areas
has damaged the environment by consuming farmland and open space. It
has stood in the way of economic growth, and the reliance on the
automobile that it encouraged has stunted the growth of public
transportation.
Connecticut is beginning to smarten up and see how all these issues are
connected. This understanding is evidenced in the Office of Responsible
Growth, which Gov. M. Jodi Rell created last year by executive order.
Both that office and the legislature should look into this plan to
advance an agenda that will enable productive young people to continue
to live in the state.
So what's up this "short" Session? More
details/teeth, etc. for bill passed at the "long" Session of 2007?
AN ACT CONCERNING HOUSING
DEVELOPMENT ZONES http://www.cga.ct.gov/2008/TOB/H/2008HB-05634-R00-HB.htm Office
of Legislative Research* site
links don't work too well on Christmas Eve day - my last-minute wish
for Xmas is that Santa fix them! It looked to me as if the
technician working on the OLR site didn't get to check the links on the
December 5 report on important issues (rxcept the very first
one)...specifically, OLR
reports I was interested in: using GOOGLE, I managed to
find my way to the reports via "cut & paste" technique! I was
looking for the background to see if this Massachusetts
law had been researched in CT yet...
Every year, legislative leaders ask
the Office of Legislative Research (OLR)
to identify and provide brief descriptions of important issues that the
General Assembly may face in the coming session.
This report represents the
professional, nonpartisan views of staff in OLR, the Office of Fiscal
Analysis (OFA), and the Legislative Commissioners' Office (LCO) of
possible upcoming legislative issues. It does not represent staff
suggestions or recommendations. We identified issues based on interim
studies; research requests; nonconfidential discussions with
legislators, other legislative participants, and executive branch
agencies; and subject matter knowledge.
OLR compiled this report on the
major issues for the 2007 session in consultation with OFA and LCO. Except for the
Appropriations Committee issue description, which was provided by OFA,
the issue descriptions below were written by OLR analysts.
We list the issues according to the
committee in whose jurisdiction they primarily fall. Since more than
one committee may consider aspects of the same issue, descriptions may
overlap. Where appropriate, we provide links to OLR reports and other
on-line documents that provide additional information about particular
issues. The OLR Reports can also be found on the Office of Legislative
Research website, (http://www.cga.ct.gov/olr/).
Please contact OLR for additional information about these or other
potential issues." Even the Federal
Government talks the talk! http://www.epa.gov/smartgrowth/
From the Massachusetts General
Statutes (below) and the Massachusetts website..."smart
growth"
SMART GROWTH ZONING AND HOUSING PRODUCTION, Chapter 40R, Section
6(a) 11...Housing density in a
proposed district shall not over burden infrastructure as it exists or
may be practicably upgraded in light of anticipated density and other
uses to be retained in the district. Some other sections of the
Massachusetts law:
CHAPTER 40R. SMART
GROWTH ZONING AND HOUSING PRODUCTION - (below are parts of the
Massachusetts laws on the subject).
Chapter 40R: Section 2. Definitions
Section 2. As used in this chapter, the following words shall
have the following meanings:
"Affordable housing'', housing affordable to and occupied by
individuals and families whose annual income is less than 80 per cent
of the areawide median income as determined by the United States
Department of Housing and Urban Development. Affordability shall be
assured for a period of not less than 30 years through the use of an
affordable housing restriction as defined in section 31 of chapter 184.
"Approved smart growth zoning district'', a smart growth zoning
district that has been adopted by a city or town and approved by the
department in accordance with this chapter and the regulations of the
department, so as to be eligible for the receipt of financial and other
incentives. The department may revoke its approval if the obligations
of the city or town are not met.
"Approving authority'', a unit of municipal government
designated by the city or town to review projects and issue approvals
under section 11.
"Comprehensive housing plan'', a plan to be prepared by each
city or town that provides an assessment of the housing needs within a
city or town and describes specific strategies to address these needs,
in accordance with regulations of the department.
[ Definition of "Density bonus payment'' effective until February 24,
2005. For text effective February 24, 2005, see below.]
"Density bonus payment'', a one-time payment to a municipality
from the trust fund established in section 35BB of chapter 10 for each
housing unit of new construction that is created in a smart growth
zoning district.
[ Definition of "Density bonus payment'' as amended by 2005, 6, Sec. 5
effective February 24, 2005. For text effective until February 24,
2005, see above.]
"Density bonus payment'', a one-time payment to a municipality
from the trust fund, established in section 35AA of chapter 10 for each
housing unit of new construction that is created in a smart growth
zoning district.
"Department'', the department of housing and community
development.
"Developable land area'', that area within an approved smart
growth zoning district that can be feasibly developed into residential
or mixed use development determined in accordance with regulations of
the department. Developable land area shall not include: (1) land area
that is already substantially developed, including existing parks and
dedicated, perpetual open space within such substantially developed
portion; (2) open space designated by the city or town as provided in
section 6; or (3) areas exceeding 1/2 acre of contiguous land that are
unsuitable for development because of topographic features or for
environmental reasons, such as wetlands.
It shall include the land area occupied by or associated with
underutilized residential, commercial, industrial or institutional
buildings or uses that have the potential to be recycled or converted
into residential or mixed use developments as determined in accordance
with regulations of the department.
"Eligible locations'', (1) areas near transit stations,
including rapid transit, commuter rail and bus and ferry terminals; (2)
areas of concentrated development, including town and city centers,
other existing commercial districts in cities and towns, and existing
rural village districts; or (3) areas that by virtue of their
infrastructure, transportation access, existing underutilized
facilities, and/or location make highly suitable locations for
residential or mixed use smart growth zoning districts.
"Historic district'', a district in a city or town characterized
by the unique historic quality of the buildings within the district,
and in which exterior changes to all buildings and the construction of
new buildings are subject to special architectural and design
guidelines as voted by the city or town pursuant to state law.
"Letter of eligibility'', a letter to a city or town to be
issued by the department within 60 days of receiving a complete and
approvable application from a city or town for approval of a smart
growth zoning district.
"Mixed use development'', a development containing a mix of some
or all of multi-family residential, single-family residential,
commercial, institutional, industrial and other uses, all conceived,
planned and integrated to create vibrant, workable, livable and
attractive neighborhoods.
"Multi-family housing'', apartment or condominium units in
buildings which contain or will contain more than 3 such units.
"New construction'', construction of new housing units, the
substantial rehabilitation of existing buildings or the conversion to
residential use of existing buildings to create additional housing
units, to the extent those units could not have been constructed or
converted under the underlying zoning.
"Open space'', shall include, but not be limited to, land to
protect existing and future well fields, aquifers, and recharge areas,
watershed land, agricultural land, grasslands, fields, forest land,
fresh and salt water marshes and other wetlands, ocean, river, stream,
lake and pond frontage, beaches, dunes, and other coastal lands, lands
to protect scenic vistas, land for wildlife or nature preserve and land
for recreational use.
"Project'', a proposed residential or mixed-use development
within a smart growth zoning district.
"Smart growth zoning district'', a zoning district adopted by a
city or town under this chapter that is superimposed over 1 or more
zoning districts in an eligible location, within which a developer may
elect to either develop a project in accordance with requirements of
the smart growth zoning district ordinance or by-law, or develop a
project in accordance with requirements of the underlying zoning
district.
"Smart growth zoning district certificate of compliance'', a
written certification by the department in accordance with section 7.
[ Definition of "Trust fund'' effective until February 24, 2005. For
text effective February 24, 2005, see below.]
"Trust fund'', the smart growth housing trust fund established
by section 35BB of chapter 10.
[ Definition of "Trust fund'' as amended by 2005, 6, Sec. 6 effective
February 24, 2005. For text effective until February 24, 2005, see
above.]
"Trust fund'', the Smart Growth Housing Trust Fund, established
by section 35AA of chapter 10.
Chapter 40R: Section 3. Smart growth
zoning district
Section 3. In its zoning ordinance or by-law, a city or town may adopt
a smart growth zoning district in an eligible location and may include
adjacent areas that are served by existing infrastructure and
utilities, and that have pedestrian access to at least 1 destination of
frequent use, such as schools, civic facilities, places of commercial
or business use, places of employment, recreation or transit stations.
A smart growth zoning district ordinance or by-law, or any amendment to
or repeal of such ordinance or by-law, shall be adopted in accordance
with section 5 of chapter 40A.
In creating such a district, a city or town may include qualifying
areas within development districts approved by the economic assistance
coordinating council pursuant to chapter 40Q or any area approved by a
city or town as an urban center housing tax-increment financing zone
pursuant to section 60 of chapter 40. In smart growth zoning districts,
a city or town shall zone for primary residential use as of right and
may also permit business, commercial or other uses consistent with
primary residential use.
Chapter 40R: Section 14. Repayment
Section 14. The department shall require the cities and towns, if
within 3 years no construction has been started within the smart growth
zoning district, to repay to the department all monies paid to the city
or town under this chapter for said smart growth zone. The 3 years
shall commence on the date of the payment of the zoning incentive
payment for said smart growth zoning district. All monies returned to
the department under this section shall be returned to the trust fund.
Foreclosure A Weak Spot in Affordable Housing Plan; Nonprofit
sees work
on house go for naught
DAY
By Elaine Stoll
Published on 2/12/2007
New London — When the nonprofit organization H.O.P.E. purchases and
restores dilapidated houses for sale at below-market rates, the houses
come with deed restrictions for the purchasers — who are first-time
homebuyers of low or moderate income. H.O.P.E. caps the sales prices to
keep the properties affordable for 30 years, and owners of H.O.P.E.
houses cannot sell them except to others of low or moderate income.
But deed restrictions do not survive foreclosure proceedings, and last
month came the first-ever foreclosure of a H.O.P.E. property: a house
at 16 Brewer St. that was restored six years ago for $157,000.
Originally sold by H.O.P.E. in February 2001 for $108,500, the Brewer
Street house sold for $206,747 in a transaction recorded last month at
City Hall, all affordability requirements forever waived.
“We don't want to see that happen again,” Executive Director Marilyn
Graham said. Now H.O.P.E. is considering new restrictions aimed at
preventing future foreclosures and protecting the organization's
investment in affordable housing.
The nonprofit can reduce the risk of future foreclosures by limiting
the ability of an owner of a H.O.P.E. house to take out a second
mortgage that he or she may not be able to afford, said H.O.P.E. board
Chairman Eric Janney, a real estate attorney in Groton. H.O.P.E. could
add a deed restriction to ban outright secondary financing or to
require that any such financing be approved in advance by H.O.P.E., he
said.
Other options include forbidding an owner to secure secondary financing
for a specified number of years, or allowing a second mortgage only up
to an amount limited by the value of the first mortgage or the sales
price of the house.
Such measures could protect the investment of time and resources
H.O.P.E. makes in restoring houses and protect the availability of
affordable housing, Janney said. It could also help protect the owners
of H.O.P.E. properties from “getting in over their head with secondary
financing” or falling victim to “predatory lending” — mortgage offers
that may include excessive fees, high interest rates, prepayment
penalties and other practices that can put a borrower deeper into debt,
he said.
“As soon as you purchase a house, your mailbox gets flooded with
refinance offers,” Janney said.
•••••
That was the case for Dorie Anderson, who purchased the house at 16
Brewer St. from H.O.P.E. in 2001. She recently spoke to The Day, she
said, so that others might learn from her experience. After she
moved into the house, Anderson would regularly receive unsolicited
offers from mortgage companies, she said. She threw the offers away,
unopened, until her financial situation changed dramatically.
After four years of sending in her mortgage payments on time, a
preexisting injury worsened and left her unable to work steadily, she
said. Then, a year ago, she was unable to work at all.
“I didn't want to lose my house,” Anderson said. Prior to
purchasing the house from H.O.P.E., Anderson had spent time in a
shelter and then lived in Section 8 subsidized housing, she said.
“I knew what it was like to be homeless. I didn't want to be homeless
again,” she said.
Anderson opened a refinancing offer “out of desperation,” she said. She
came to trust a “relentless” loan officer who called regularly to ask
how she was doing, she said, and she took out a mortgage from Equihome
Mortgage Corp. of New Jersey for $187,000, more than twice her original
mortgage amount of $91,800. Anderson alleges that she was misled
about the terms and risks of the Equihome mortgage. When she inquired
about what would happen if she fell behind on payments, the loan
officer told her not to worry and that missed payments could be repaid
at the end of the mortgage's 30-year term, she said.
Anderson also said that it appears the loan officer exaggerated some
information, such as the value of the property, in order to qualify her
for the mortgage. Still, she said she could have avoided ending
up with an unaffordable mortgage if she had undertaken the refinancing
process more carefully.
“I didn't do my homework,” she said. She did not call a number of
banks to find the best offer, hire an attorney to review the mortgage
documents or require that the lender explain all the terms of the loan
in laymen's terms so that she knew exactly what she was getting into —
all things she would advise anyone contemplating a mortgage to do, she
said.
“Never, ever think they have your own best interest at heart,” she said
of mortgage lenders.
Within the next few weeks, Anderson will have to move out of the house,
though she has faith that someday she will again become a homeowner.
For now, though, “if you ask me where I'm going, I don't know,” she
said.
•••••
Equihome Mortgage Corp. President Ray Caprio said in a telephone
interview that the company runs predatory lending compliance checks on
all of its loans. “There was no predatory lending,” Caprio said.
The loan officer who worked with Anderson is no longer an employee of
Equihome Mortgage Corp., Caprio said. But, he said, “For her to believe
you don't have to make the payments ... I have never heard of that.”
Because another company, Option One Mortgage Loan Trust, underwrote the
loan that Equihome Mortgage Corp. originated, Anderson's loan passed
both companies' approval processes, Caprio said. Caprio said he
tells his loan officers, “If you wouldn't do this loan for your mother,
I don't want it done.”
•••••
Two other area nonprofit homebuilders, Eastern Connecticut Housing
Opportunities (ECHO) and Alderhouse Residential Communities, have not
seen any of their former properties go into foreclosure.
“That doesn't mean they don't have second mortgages,” said ECHO
President Peter Battles.
Neither organization has the kind of restriction H.O.P.E. may adopt,
said Battles and Alderhouse President James Dunn, but both said they
might consider a similar measure if foreclosure becomes a problem.
“Now that the issue has reared its ugly head, we should see if it is
something we should or can adopt,” Dunn said. But he cautioned that a
restriction on second mortgages could have unintended consequences,
like preventing a homeowner from getting a loan to finish an unfinished
third floor or to borrow against their home equity to help pay for a
child's college tuition.
“Before we would make a decision like that, we would have to look at it
very closely,” Dunn said.
`Who Is Middle Class?" [Page 1, Nov. 27]. Middle
Class Is Easy To Spot If You Try
December 2, 2006
Well, as long as The Courant is asking, I guess we are being
given an opportunity to tell our elected officials exactly what being
middle class is. Those officials certainly aren't it.
Middle class is both adults of the home schlepping to work in their
Chevy, Ford or Saturn sedans, working 9 to 6 and getting a 3 percent
raise at the end of the year (but only if their performance merits
one). It's somehow budgeting that 3 percent into the monthly changes in
cable, gas, oil and food costs, increased medical insurance premiums
(while getting decreased coverage) and the arbitrary town council
decision to raise property taxes because it cannot work within its own
budget.
Middle class is living in your 1,500-square-foot home built in 1982 and
not having work done that it needs because your budget doesn't allow
for it.
It's a family of four camping in a used trailer instead of going to
Disney World for a week (unless they've saved for three years to get
there). Middle class is going to sleep at night wondering how the heck
we'll pay for two children to go to college so they have a shot at
being upper class and loving what they do day in and day out.
Middle class is paying for politicians and government employees' use of
personal cars and the gas that goes in them. Middle class is me and the
neighbors on both sides of me.
Tell the politicians, CEOs and the people who do the studies to open
their office doors and see the people in the cubicles. They are the
middle class, and sleeping at night is probably a little harder for
them because they are bearing the brunt of the burden. Raising the
minimum wage isn't going to help them. Giving the oil company a tax
break isn't going to help them and allowing Medicare to negotiate rates
for seniors isn't going to help them.
I don't have the answers for the Democrats, but I can already see the
writing on the wall. While their words may be different than their
predecessors', the result will be the same. We will still bear the
brunt of the burden placed on all of us because we are middle class.
Allison St. Pierre
Rocky Hill
Perhaps a thorough examination of the various classes in the
United States would clarify the more accurate situation.
While we were sleeping, various members of the middle class slid into
the billionaire class.
More recently, many in the middle class dropped into the poverty class.
The listing of luxuries is superficially impressive: cellphones,
computers, cable TV, cars, homeownership, microwaves and three or more
bathrooms. Not explored is the choking amount of credit card debt and
mortgages.
There is no statistic for the number of those in the poverty class who
have disappeared into the destitute class, and that is reprehensible.
Ann Bandazian
Canterbury
Affordable housing programs get $3M Stamford ADVOCATE
By Tobin A. Coleman
Published June 21 2006
A Stamford nonprofit affordable housing developer yesterday was awarded
the largest share --Ênearly a third -- of the first $10 million
in grants from the state's Housing Trust Fund.
Housing Development Fund Inc. was given $3 million for two affordable
housing programs, one that helps individuals and families qualify for
first-time mortgages and another that helps developers finance
apartments to rent them at below-market rates. Governor M. Jodi
Rell yesterday announced that seven applicants will split the initial
$10 million from the Housing Trust Fund.
"The $100 million Housing Trust Fund was created to address the
critical need for more affordable housing in Connecticut," Rell said in
a statement. "Today's announcement signals the start of these funds
'hitting the streets' and making a real difference in the lives of
Connecticut workers and their families."
The $100 million in state grants will be delivered during a five-year
period. They are given to groups that promote affordable housing
through loans and grants to individuals and developers. The fund is
administered by the state Department of Economic and Community
Development.
The Housing Development Fund plans to use $1 million of the grant for
its program that helps families trying to move from rental homes make a
down payment on their first houses.
"We take them through that whole process," Housing Development Fund
Executive Director Joan Carty said in a telephone interview. "Part of
the process is counseling them about what level of mortgage they
qualify for, given household income and whatever savings they have."
The program gives homeowners a no-interest loan, usually $7,000 to
$15,000, enough for them to qualify to buy the home they seek. When the
home is sold, the loan is repaid and the money is lent to the next home
buyer. Carty said the state grant will allow Housing Development
Fund to help 60 to 70 additional families in the program.
The other Housing Development Fund program will receive $1.85 million.
The program will allow affordable housing developers to rent units to
cover the difference between what banks will lend and the funds needed
to start a project that would charge below-market rents.
"This allows the economics of some multifamily projects to work," Carty
said. Some projects are already under consideration in Norwalk,
Bridgeport and Danbury, she said.
The final $150,000 of the grant will help the organization cover
administrative costs. Report:
Workers can't afford local housing By MEGHAN BARR, Hour Staff Writer
May 31, 2006
REGION — Residents have complained for years that it costs a pretty
penny to live in Norwalk, and evidence of rising prices surfaced last
week in a grim report about the lack of affordable housing in
Connecticut.
Norwalk ranked eighth on a list of the top 20 towns with the largest
gap between median income and how much a home buyer needs to qualify
for a mortgage based on median sales prices, according to a report
released by HOMEConnecticut, an initiative of the Hartford-based
Partnership for Strong Communities. Norwalk's gap falls in at nearly
$92,000; just behind Wilton's $109,000 disparity.
"It's certainly something that we're aware of, and it has existed for a
number of years, and it seems to be getting worse," said Curtis Law,
executive director of the Norwalk Housing Authority. "Of course there's
a great deal of interest, rightfully so, in how we can provide housing
for that group of individuals who probably do not own housing in this
area."
Topping the list was Greenwich, which has a $367,000 gap, followed by
New Canaan, Westport and Darien. Stamford marked the only large city
with a greater gap than Norwalk, listed as $128,000.
"I don't care how rich the town is, you still need teachers,
firefighters, the clerk at the dry cleaner's, the auto mechanic," said
David Fink, policy director for the Partnership for Strong Communities.
"The difficulty is that those people just have much less opportunity to
live in town."
Many families earning the median income in 157 of the state's 169
municipalities cannot qualify for a mortgage to buy a home at current
median sales prices, HOMEConnecticut reported, thanks to a 63.6-percent
increase in state housing costs between 2000 and 2005 that has
outstripped wage increases.
Today the median sales price of a Connecticut home is $300,000. A
steady exodus of the state's youngest generation, those aged 25 to 34,
has swelled to become the largest loss of that age group in any state
since 1990.
Longtime Norwalk Hospital employee Cheryl Horner, 36, numbers among the
city's cache of displaced young residents. Horner was forced to move to
Milford, where housing is cheaper, when she became pregnant with her
first child a year and a half ago and needed an extra bedroom. Her
husband, Charlie, is employed by Norwalk Public Schools as a custodian.
Their combined salaries did not generate enough income to allow them to
live in Norwalk, where Horner was born and raised.
"It's getting to be where a lot of people are moving out," Horner said.
"At the hospital, I would say that out of 10 people, four probably live
in Norwalk. I'm in the payroll department, but even a lot of nurses
commute from other areas like Milford, Newtown and Danbury."
Unwilling to give up their jobs, Horner and her husband make the long
commute to Norwalk every morning, which can take up to two hours in bad
traffic.
"Oh, it's horrible. The baby goes to daycare in Norwalk, and it's
getting to be an expense to travel, with the gas prices going up,"
Horner said. "It's almost like, all right, I have to start looking for
a job up my way. But I'm really not ready to do it."
The departure of working-class employees like Horner is just one
negative consequence of expensive housing, according to
HOMEConnecticut, the coalition of housing groups, banks and business
leaders that is waging a campaign to help decrease the cost of living
throughout the state.
Norwalk may suffer more than other towns with a gap between housing
prices and average income because it is surrounded by wealthy suburban
communities, Fink pointed out.
"Unfortunately for Norwalk, it's harder and harder to find a place to
live nearby," Fink said. "Someone's not going to want to drive 50 miles
from an affordable town to come work in Norwalk. If they do, it's only
because employers in town are offering enormous salaries to get them to
come here."
HOMEConnecticut plans to spend the summer and fall educating
policymakers and others about the state's affordable-housing problem,
the Associated Press reported. It also plans to research what types of
housing are needed, how much, and where.
Yet the effort to expand the scope of affordable housing to privileged
communities has been met with considerable resistance thus far. The
town of Wilton has waged an eight-year battle to keep AvalonBay Inc.
from constructing a 100-unit affordable housing facility on Danbury
Road, citing health and safety issues.
Though an October 2000 state statute required municipalities to offer
at least 10 percent of affordable housing as "affordable," only 3
percent of Wilton's total housing currently meets that definition.
In the dispute's latest development, Wilton's Planning and Zoning
Commission filed a petition for an appeal that would overturn a state
superior court decision granting AvalonBay permission to break ground
on the new apartments.
"Why would a company like AvalonBay put together a site plan that was
unsafe for children or school buses?" said Timothy Hollister, the
defense lawyer who is representing AvalonBay. "If you think about it,
it's sort of counterintuitive because, ultimately, they're going to
want to rent these places out. If someone accuses us of putting
together an unsafe site plan, you have to wonder if that makes any
logical sense."
Marianne Dubuque, the attorney representing the town of Wilton in the
dispute, did not return phone calls seeking comment.
The opposition to affordable housing is rooted in a stigma attached to
the concept, Fink said.
"I think people are operating under a misconception about affordable
housing," he said. "I think they view a stereotype that used to exist,
when we used to build the 'projects': Ugly, poorly constructed housing,
often put in the wrong place."
Affordable housing of today's standards is beautifully designed to
enhance a given neighborhood, Fink said.
The Norwalk Housing Authority is currently awaiting a state review of
its request to develop an 80-unit affordable housing site near the
Colonial Village housing complex.
"Until we begin to build some housing, the problem is going to
continue," Law said. Coalition
Says Too Many People Can't Afford Homes In State
2:31 PM EDT, May 24, 2006
Associated Press
HARTFORD, Conn. -- A coalition of housing groups, banks and business
leaders said today it plans to find ways to help Connecticut residents
afford to buy homes, saying too many are being priced out of the
red-hot housing market.
According to HOMEConnecticut, an initiative of the Hartford-based
Partnership for Strong Communities, many families earning the median
income in 157 of Connecticut's 169 cities and towns cannot qualify for
a mortgage to buy a home at today's median prices.
"This is no longer a Fairfield County issue. This is a statewide
issue," said John Rathgeber, president of the Connecticut Business and
Industry Association.
Housing costs across the state increased 63.6 percent between 2000 and
2005, according to HOMEConnecticut, outstripping wage increases.
Meanwhile, Connecticut has lost more workers ages 20 to 34 since 1990
than any other state, the group said.
William Cibes, a former state budget director, said the state's high
housing costs are hurting many businesses. Companies won't come to
Connecticut or won't stay because their employees can't afford to live
here, he said.
"We are losing our labor force," he said. "It puts us in a poor
comparable position to attract businesses and jobs."
The median sales price for a home in Connecticut is $300,000, the
organization's officials said. Cibes said the gap between median
incomes and home prices have made it harder for average working people,
such as teachers and firefighters, to afford housing throughout the
state.
HOMEConnecticut plans to spend the summer and fall educating
policy-makers and others about the state's affordable housing problem.
They also plan to research what types of housing are needed, how much,
and where it is most needed.
The group also hopes to come up with a list of proposed solutions for
the General Assembly, which reconvenes in January.
State studying N. Stamford luxury home plan
Stamford ADVOCATE
By Vesna Jaksic Published November 10 2005
STAMFORD -- The state Department of Public
Health is taking a closer look at plans to build luxury homes on
Erskine Road in response to concerns raised by state Sen. William
Nickerson, R-Greenwich.
Nickerson said the move is significant, but the project's consultant
saw it as typical response to political pressure.
The state Department of Environmental Protection has
jurisdiction over the project, which calls for a community, rather than
individual, septic system on the North Stamford site. While
agreeing with the DEP's preliminary approval of a permit for water
discharge in connection with the septic system, the state health
department said this week it plans to examine the impact on the Mianus
River watershed.
Nickerson saw the step as good news for the plan's opponents, who
include neighbors and officials from Greenwich and Stamford.
"Previously, the department of Public Health has been, can I say,
sitting in the wings, and now they have stepped up to center stage and
put forward a whole series of concerns regarding the project," said
Nickerson, who spoke against the project during a recent public hearing.
But Richard Redniss, a land-use consultant for the developer, Donsis
LLC of Greenwich, said the DPH only got involved "now that all this
political pressure has been brought."
"They basically said they do defer to the DEP but that they'll take a
careful look," Redniss said of the state health officials' recent
involvement.
The project, which has been at the center of a public debate for more
than a year, calls for 24 luxury cluster homes to be built on a 74-acre
site along Erskine Road. The plan would leave 50 acres of open land,
half of which would be donated to the Stamford Land Conservation Trust.
The DPH cannot approve or disapprove the project but may issue an
advisory opinion. A letter sent Monday from a state health official has
been accepted as part of a hearing on the project, said Jennifer Perry
Zmijewski, a sanitary engineer at the DEP.
The three-page letter said health officials plan to focus on a series
of issues that may affect public water drinking supply, including the
layout and density of the proposed homes; the possible impact of the
loss of vegetation on water runoff; the opportunities to implement
low-impact development techniques to protect the watershed; and the
establishment of buffer zones to protect critical areas.
The department also said it plans to review development plans in order
to comment on the project's impact on the Mianus River watershed.
Gerald Iwan, chief of the drinking water section for the state health
department, said the letter was not meant to undermine the DEP's
jurisdiction over the project, but provide expertise from state health
officials.
'"We certainly would want to support the regulatory role of the DEP in
this and we believe they did a very good job in reviewing the report,"
he said. "But because it's a direct watershed . . . we are saying
certain suggestions should be taken under consideration."
The DEP has jurisdiction because the project involves the discharge of
more than 5,000 gallons of sewage a day.
Under the plan, about 17,000 gallons of sewage flow would be discharged
into the Mianus River watershed. The DEP has issued preliminary
approval on the discharge permit, saying the plans comply with
standards such as water quality, the size and capacity of the sewage
treatment system as well as monitoring and maintenance requirements.
A DEP hearing officer, who accepted public comment until Monday, will
issue a recommendation on the discharge permit. The department's
commissioner will make the final decision.
Rachael Sunny, a DEP spokeswoman, said: "It is not our policy to
speculate as to when we'll be issuing a recommendation."
Nickerson said he worries that some of the open space could be used as
an alternative if the septic system fails. But Redniss said there are
no plans to do that. A reserve system is built into the plan, he said,
which was required for preliminary approval.
The Zoning Board approved the Lake Windermere project in June and the
Board of Representatives voted in September to allow it to proceed.
Erskine Road resident Gail Okun has filed lawsuits against the project.
She and other opponents have raised many concerns, including the
potential impact on public water supply, the loss of 2-acre residential
zoning, the adequacy of monitoring plans and worries about the proposed
septic system.
Can you build new with apartment?
A turn-down in Weston, probably, under present zoning.
Neighbors oppose Homeland Street 'affordable’ project Andrew Brophy, CT POST
Updated 07:13 p.m., Thursday, May 24, 2012
FAIRFIELD -- More than 100 Stratfield neighborhood residents turned out
at a public hearing Tuesday night to oppose a Cheshire man who
acknowledged that he plans to use the state's affordable housing law to
build on Homeland Street after a previous attempt was denied.
James Sakonchick told the Town Plan and Zoning Commission that he wants
to build a house on the property, but to do that, he has to include an
apartment that will be classified as "affordable" housing under state
income-eligibility criteria.
"You're using 8-30g to go around the current local zoning?" commission
member James Kennelly asked, referring to the state's affordable
housing statute.
Sakonchick replied, "You could say that. Yes."
Nearly a dozen neighbors argued against Sakonchick's plan to build a
two-family house, two-car garage and an apartment on 5,000 square feet
of land, saying the proposal would be too dense for the site and
wouldn't be in character with surrounding houses. They also said nearby
streets don't have sidewalks, and more traffic could pose a danger to
children who walk and play in the street.
"It's just one tiny little parcel, and, with that, he's trying to do
something that's out of harmony with the comprehensive plan," said
Lukas Thomas of Merritt Street.
Marcy Spolyar, of Brookridge Avenue, said she got neighborhood
youngsters to petition to have a school bus stop moved from Brookridge
Avenue and Homeland Street because the intersection is too dangerous.
Deborah Blanchard of Homeland Street said the method by which
Sakonchick is trying to build the house, garage and apartment --
through the creation of a new zoning classification of land and
changing zoning regulations for that new classification -- could affect
other properties as well. "If this (commission) allows this change to
go through, it could happen in any part of Fairfield -- Greenfield
Hill, The Ridge, the beach area and Southport, changing the entire
neighborhoods in Fairfield," she said.
Nearly 200 Stratfield residents signed petitions against Sakonchick's
proposal.
Town zoning regulations require houses in that neighborhood to be on
lots that are at least 9,375 square feet, though some houses are on
5,000-square-foot lots because that used to be the minimum lot size.
Other houses are on 5,000-square-foot lots because the town's Zoning
Board of Appeals approved waivers to the current minimum lot size.
Sakonchick believes he and his son, Brian Sakonchick, own two separate
lots of 5,000 square feet on Homeland Street, but town zoning officials
disagree. They said the property at 206 Homeland St., owned by James,
and 214 Homeland St., owned by Brian, merged into one
10,000-square-foot lot.
"The predecessor owner established his own occupancy as a
10,000-square-foot parcel. Once established and occupied as a single
parcel, it was our position to divide it required a variance," said
Assistant Town Planner James Wendt.
Sakonchick contends he had his son bought the properties through
separate deeds and the properties have been taxed separately "forever."
But Thomas, a real estate lawyer, said past deeds show a legal
description depicting a square with 100-foot sides and that he agreed
with Wendt's belief that the properties, if they had been separate in
the past, had merged. Sakonchick, who unsuccessfully tried to replace
the pool with a single-family house in March, said he most recently
decided to get rid of the pool and replace it with a two-story house,
two-car garage and an apartment above the garage that would be rented
as affordable housing.
"I'm trying to do the smallest development I can to make this
development compatible with the neighborhood, so a person walking on
the street couldn't tell there was a set-aside unit in that dwelling,"
Sakonchick said, referring to the 500-square-foot apartment that would
be above the proposed garage. He said his proposed development would
not create a health or safety problem.
But Gerry Alessi, a commission member, said Sakonchick's request to
establish a "Homelands Opportunity District" and adopt new zoning
regulations for that district would affect more than the Sakonchicks'
property. "By making this change that you're proposing, you could
basically add 10,000 people to this town," Alessi said to boisterous
applause.
"When it happens, it happens. Somebody should have told him when he
bought the property that it's one lot," Thomas said.
Thomas said Sakonchick's application was defective anyway because it
does not show traffic circulation and his proposed zoning regulations
appear "ambiguous" and "inconsistent."
Seth Baratz, a commission member, said, "Other properties could apply
to get this new zone."
Thomas argued that Sakonchick's affordable housing set-aside wasn't
anywhere near the 33 percent Sakonchick claimed when the calculation is
based on square footage instead of dwelling units, due,
in part, to a swimming pool built at 206 Homeland St. and a porch that
crossed from 214 Homeland St. onto 206 Homeland St.
Bryan LeClerc, the TPZ chairman, said the intent of the state's
affordable housing law is to have "consistent units" among those
classified as market-rate and those classified as affordable.
Several commission members questioned the method by which Sakonchick
was attempting to build on the 206 Homeland St. lot, saying he could
have sought waivers from the Zoning Board of Appeals or just filed a
straightforward affordable housing application without the "Homelands
Opportunity District." Sakonchick said he didn't think the ZBA would
approve his plan to build a house at 206 Homeland St. and that he
thought his current application had the best chance of success.
Donald Conetta of Homeland Street questioned the need for an affordable
housing development on Homeland Street, saying homes in Stratfield had
become much more affordable over the past six or seven years because of
the housing market slump and low interest rates.
Not everyone who wanted to speak on the application got the chance
before the commission reached its 11 p.m. curfew, and the hearing was
continued to a date and time to be announced. More Darien officials to
review affordable housing plan By Lauren Klein,
Stamford ADVOCATE Published November 1 2005
DARIEN -- A
proposal to build affordable senior
housing on a piece of prime waterfront property will be reviewed
tonight by town planning and zoning officials.
Christopher and Margaret Stefanoni filed the application on Sept. 23 to
turn their 77 Nearwater Lane home on 1.05 acres into a 20-unit house
for senior citizens 62 or older. Fourteen units will be market
rate and six will be affordable housing
units. The six units would provide a 20 percent increase in
affordable housing
in the town and would help meet state standards, Christopher Stefanoni
said.
Nearwater Lane is zoned for one-family housing. Because
the project includes affordable housing, it is exempt from zoning
regulations, according to the state's affordable housing statute.
In response to the application, two Nearwater Lane neighbors wrote
letters to the Planning & Zoning Commission raising concerns that
the project would cause environmental, sewage and traffic problems for
the surrounding area that includes Hindley Elementary School and Holly
Pond.
"There must be a better site if there is a demand,"
wrote Ian Duncan in an Oct. 5 letter urging the Planning & Zoning
Commission to reject the proposal.
The Stefanonis' application
addresses certain environmental concerns by including letters from the
Environmental Protection Commission, which state that, with the
exception of a 10-foot right-of-way crossing a neighbor's property,
none of the property is on wetlands.
Stefanoni said the project is important because the town is remiss in
providing affordable housing. Less than 2 percent of the town's
nearly 6,800 houses meet the state's
affordable housing requirement, according to the state Department of
Economic and Community Development.
In Connecticut,
municipalities that do not fulfill a state mandate that 10 percent of
their housing units meet state affordability standards face lawsuits
when city planners reject housing developments that include
below-market-rate units.
"We're doing privately what the state
asked the town to do publicly a long time ago," Stefanoni said. "Darien
is 99 percent developed but we need to make room for affordable
housing."
The affordable units would have the same
construction quality as the market-rate units, according to the
application. The prices are designed for households with incomes at
certain levels below the median income for the area or the state,
whichever is less.
The 2005 median income for the Stamford-Norwalk area is $111,600. For
the state, it is $77,100.
In the past 10 years, four affordable housing projects were presented
to the Planning and Zoning Commission, including the AvalonBay
apartments, said Jeremy Ginsberg, Darien's director of Planning and
Zoning. Stefanoni said one neighbor, who he did not want to
identify, promised a "World War III" fight. Stefanoni said the neighbor
seemed most concerned that the type of people moving into the
affordable housing property might lower property values of the
surrounding homes.
"Why shouldn't affordable housing for
seniors be built in a beautiful location?" Stefanoni said. "Does it
have to be near the highway or the railroad tracks?"
Condo
plan stirs affordable housing
debate
Greenwich TIME
By Hoa Nguyen, Staff Writer Published October 24 2005
One
homeowner's plan to use state laws promoting
affordable housing as a way to win town approval for a
three-condominium project was born out of his frustration with zoning
laws, he said.
But whether Jim O'Brien's move will encourage other property owners to
follow in his footsteps is questionable, according to lawyers and other
developers, who said building in Greenwich's real estate market can be
prohibitively expensive for affordable housing.
"It's relatively isolated in today's environment," lawyer John Tesei
said of O'Brien's plan. "There's no reason to do it. It's not something
that's going to happen overnight. It's not something that's cheap to
do. I see no run on it."
O'Brien, of 273 Valley Road in North Mianus, recently asked the town to
approve a project to raze his single-family house and replace it with
three condominiums. After a failed attempt in 2003 to gain approval to
build a two-family structure, he is back seeking town approval for a
proposal that includes one affordable housing unit.
He said
his plan for multifamily housing would not make things any different
than what now exists, with the busy Summer Rain sprinkler company and
the pair of multifamily structures across the street. But to make sure
the town will approve the proposal, he has designated one of the three
condominiums as an affordable housing unit. So far, no neighbors have
publicly opposed his plans.
By doing that, O'Brien is taking
advantage of a state statute that says a town cannot deny an affordable
housing project solely because of zoning regulations. Officials can
only turn it down to protect health, safety or other public interests.
In return, O'Brien can only sell or rent to people who must meet
maximum income limits, such as $50,031 for a two-person household.
Municipalities
where affordable housing comprises 10 percent or more of
its total real estate are exempt from the statute. Greenwich, with less
than 5 percent, does not qualify for the exemption. Affordable
housing laws have existed for years, yet only a few developments have
sprung from it, observers said, pointing to developments in Pemberwick
on Homestead Avenue, in Byram on Ritch Avenue and in Greenwich on
Prospect Street. The biggest reason is that affordable housing
does not pay, especially in Greenwich's market, developers said.
"People are driven by money and not for a love of affordable housing,
to save mankind," Tesei said. First, there are few parcels in
Greenwich that can support multifamily
housing in terms of having enough space for parking and other
amenities, developer Peter Lauridsen said.
"It's almost
impossible to find the sites," he said. "It's really few and far in
between. If you do find it, it's very expensive." Also,
because low-income residents can't pay much for their housing,
developers must seek their profits from building the market-rate units,
said Terry Mardula, acting co-executive director of the Greenwich
Housing Authority. The authority has used government grants to help
build affordable housing units in town.
"The affordable unit
has to be treated like it's gravy," Mardula said. "To go to court to
fight it to win is one thing, to make it worth your while is something
else. It's hard to be done, if you're counting on that affordable unit
to be a part of your profit." Receiving approval for dense
multifamily developments also is time-consuming because in many cases
the town, with support from neighborhood opponents, will deny the
proposal and take developers to court, said Lauridsen, adding that a
court battle often takes three years.
"From the developer's
standpoint, I don't think it's necessarily a home run," he said. "First
thing you do is buy it and gamble that you're going to win in court and
go through a three-year process." O'Brien's case is more
unusual than the typical affordable housing proposal because it
involves replacing a single-family house with three condominiums. Most
affordable housing projects include more than just one unit. What
may help O'Brien, who intends to keep one of the three condominiums, is
that he bought the parcel in 1979 for $90,000.
He will likely be able to afford building three units and selling only
one of them at market rates, developers said.
"If he gets the second unit at the full rate and breaks even on the
People thought... that
this golden goose would continue to lay golden eggs for ever 
