Wednesday, November 17, 2010
Pontiac is out-of-business
DETROIT (AP) -- Pontiac, whose muscle cars drag-raced down boulevards, parked at drive-ins and roared across movie screens, is going out of business on Sunday.
The 84-year-old brand, moribund since General Motors decided to kill it last year as it collapsed into bankruptcy, had been in decline for years. It was undone by a combination of poor corporate strategy and changing driver tastes. On Oct. 31, GM's agreements with Pontiac dealers expire.
http://finance.yahoo.com/news/Pontiac-maker-of-muscle-cars-apf-2786184062.html?x=0&sec=topStories&pos=2&asset=&ccode=
The 84-year-old brand, moribund since General Motors decided to kill it last year as it collapsed into bankruptcy, had been in decline for years. It was undone by a combination of poor corporate strategy and changing driver tastes. On Oct. 31, GM's agreements with Pontiac dealers expire.
http://finance.yahoo.com/news/Pontiac-maker-of-muscle-cars-apf-2786184062.html?x=0&sec=topStories&pos=2&asset=&ccode=
Friday, April 23, 2010
Most Dallas County home values to decrease, stay same
Most Dallas County home values to decrease, stay same
07:32 AM CDT on Friday, April 23, 2010
By KEVIN KRAUSE / The Dallas Morning News
kkrause@dallasnews.com
For the second year in a row, most Dallas County residents will either see no change or a decrease in their home values.
When appraisal notices are mailed in about two weeks, only 20 percent of the roughly 360,000 residential properties reappraised this year will increase in value, according to the Dallas Central Appraisal District.
Sixty percent will lose value, while 20 percent will see no change. The roughly 280,000 residential properties that were not reappraised this year also will not change.
Last year, 55 percent of residential properties that were reappraised decreased in value.
"The market is not as bad as last year. But we're still seeing the lingering effects of foreclosures," said Cheryl Jordan, spokeswoman for the appraisal district.
While this is good news for most homeowners because it could mean lower tax bills, it's putting pressure on the budgets of local governments that rely on property tax revenue. Dallas County is expecting a $56 million shortfall, while the city of Dallas is anticipating nearly twice that.
Dallas County officials have planned for an overall drop in property values this year of 8 percent to 9 percent when the tax roll is certified in July. Last year, property values fell by a little more than 3 percent – the largest drop since 1992.
If the county is unable to close the budget gap, commissioners might consider a tax rate increase. That would mean higher property taxes for some homeowners even if their values don't change this year.
Jordan said state law requires the district to reappraise all properties in the county at least once every three years.
The appraisal district, she said, relies on an annual study of sales figures by the University of Texas at Dallas to target certain areas of the county where values appear to be too high or low.
Appraisal notices are being sent only to homes that were reappraised this year, regardless of whether there was a value change, she said.
Foreclosures' effect
In his presentation to Dallas County commissioners Tuesday, Chief Appraiser Ken Nolan said the southern part of the county still hasn't recovered from the wave of home foreclosures that hit last year.
Nolan also said affluent communities like Highland Park and University Park are now starting to see foreclosures for the first time, which he predicted will continue through 2011. Home values in those areas are expected to drop for the first time in 20 years, he told commissioners.
The Park Cities are littered with for-sale signs and vacant lots where houses were torn down to make way for mansions that were never built, he said. Those teardowns, which were rampant a few years ago, have come to a halt, Nolan said.
Holland Brown, a tax consultant with North Texas Property Tax Services in Dallas, said affluent homes didn't see many value reductions last year because there weren't as many sales; homes sat on the market longer.
Since the appraisal district relies on sales to set values, the true value of the homes is only now becoming known, as more sales occur, Brown said.
Chris Bawcom, another partner in the firm, said the majority of the 60 percent of homes that will decrease in value this year most likely hadn't been reappraised in a while. He said he thinks that as market conditions improve, most homes next year will see no value change.
"I think it will start to flatten out after this year," Bawcom said. "We won't see as many decreases."
Coppell, an affluent suburb in the northwest part of the county, is generally the only place where new homes are being built, Nolan told commissioners this week. He said residents there should expect value increases this year.
But overall, home building in the county has slowed substantially. Residential building permits are down 46 percent this year, Nolan said.
Relief to some
For homeowners who have endured years of value increases, the news of falling appraisals again this year is a relief. In 2008, preliminary values rose about 13 percent. In 2007, the increase was 20 percent.
But for property owners trying to sell their property, the static or falling values aren't good news.
The decreased values don't mean there will be fewer protests this year. Many people are expected to protest, arguing their home value should have decreased or didn't decrease enough.
"We decreased a lot of values last year. But people still came in and said it's not enough," Jordan said.
The ability of homeowners to protest online for the first time this year is expected to drive that increase in value challenges, officials said.
While the worst may be over soon for the residential market, damage to commercial properties has yet to be seen, officials said.
Nolan told commissioners that commercial property values will decrease between 5 percent and 15 percent. He said he won't know for sure until owners present evidence during the summer protest season.
And the market could worsen if the expected wave of commercial foreclosures materializes, Nolan said.
BY THE NUMBERS: REAPPRAISALS
The Dallas Central Appraisal District is required to reappraise properties at least once every three years. Of the residential properties looked at this year, most will decrease in value or see no change, similar to last year.
RESIDENTIAL
Total accounts: 640,000
Reappraisal notices to be mailed this year: 360,000
Value decrease: 60 percent
No change: 20 percent
Value increase: 20 percent
COMMERCIAL
Total accounts: 73,000
Reappraisal notices to be mailed this year: 42,000
Value decrease: 10 percent
No change: 80 percent
Value increase: 10 percent
NOTE: Numbers are approximate.
SOURCE: Dallas Central Appraisal District
http://www.dallasnews.com/sharedcontent/dws/dn/yahoolatestnews/stories/042310dnmetdcad.41986f2.html
07:32 AM CDT on Friday, April 23, 2010
By KEVIN KRAUSE / The Dallas Morning News
kkrause@dallasnews.com
For the second year in a row, most Dallas County residents will either see no change or a decrease in their home values.
When appraisal notices are mailed in about two weeks, only 20 percent of the roughly 360,000 residential properties reappraised this year will increase in value, according to the Dallas Central Appraisal District.
Sixty percent will lose value, while 20 percent will see no change. The roughly 280,000 residential properties that were not reappraised this year also will not change.
Last year, 55 percent of residential properties that were reappraised decreased in value.
"The market is not as bad as last year. But we're still seeing the lingering effects of foreclosures," said Cheryl Jordan, spokeswoman for the appraisal district.
While this is good news for most homeowners because it could mean lower tax bills, it's putting pressure on the budgets of local governments that rely on property tax revenue. Dallas County is expecting a $56 million shortfall, while the city of Dallas is anticipating nearly twice that.
Dallas County officials have planned for an overall drop in property values this year of 8 percent to 9 percent when the tax roll is certified in July. Last year, property values fell by a little more than 3 percent – the largest drop since 1992.
If the county is unable to close the budget gap, commissioners might consider a tax rate increase. That would mean higher property taxes for some homeowners even if their values don't change this year.
Jordan said state law requires the district to reappraise all properties in the county at least once every three years.
The appraisal district, she said, relies on an annual study of sales figures by the University of Texas at Dallas to target certain areas of the county where values appear to be too high or low.
Appraisal notices are being sent only to homes that were reappraised this year, regardless of whether there was a value change, she said.
Foreclosures' effect
In his presentation to Dallas County commissioners Tuesday, Chief Appraiser Ken Nolan said the southern part of the county still hasn't recovered from the wave of home foreclosures that hit last year.
Nolan also said affluent communities like Highland Park and University Park are now starting to see foreclosures for the first time, which he predicted will continue through 2011. Home values in those areas are expected to drop for the first time in 20 years, he told commissioners.
The Park Cities are littered with for-sale signs and vacant lots where houses were torn down to make way for mansions that were never built, he said. Those teardowns, which were rampant a few years ago, have come to a halt, Nolan said.
Holland Brown, a tax consultant with North Texas Property Tax Services in Dallas, said affluent homes didn't see many value reductions last year because there weren't as many sales; homes sat on the market longer.
Since the appraisal district relies on sales to set values, the true value of the homes is only now becoming known, as more sales occur, Brown said.
Chris Bawcom, another partner in the firm, said the majority of the 60 percent of homes that will decrease in value this year most likely hadn't been reappraised in a while. He said he thinks that as market conditions improve, most homes next year will see no value change.
"I think it will start to flatten out after this year," Bawcom said. "We won't see as many decreases."
Coppell, an affluent suburb in the northwest part of the county, is generally the only place where new homes are being built, Nolan told commissioners this week. He said residents there should expect value increases this year.
But overall, home building in the county has slowed substantially. Residential building permits are down 46 percent this year, Nolan said.
Relief to some
For homeowners who have endured years of value increases, the news of falling appraisals again this year is a relief. In 2008, preliminary values rose about 13 percent. In 2007, the increase was 20 percent.
But for property owners trying to sell their property, the static or falling values aren't good news.
The decreased values don't mean there will be fewer protests this year. Many people are expected to protest, arguing their home value should have decreased or didn't decrease enough.
"We decreased a lot of values last year. But people still came in and said it's not enough," Jordan said.
The ability of homeowners to protest online for the first time this year is expected to drive that increase in value challenges, officials said.
While the worst may be over soon for the residential market, damage to commercial properties has yet to be seen, officials said.
Nolan told commissioners that commercial property values will decrease between 5 percent and 15 percent. He said he won't know for sure until owners present evidence during the summer protest season.
And the market could worsen if the expected wave of commercial foreclosures materializes, Nolan said.
BY THE NUMBERS: REAPPRAISALS
The Dallas Central Appraisal District is required to reappraise properties at least once every three years. Of the residential properties looked at this year, most will decrease in value or see no change, similar to last year.
RESIDENTIAL
Total accounts: 640,000
Reappraisal notices to be mailed this year: 360,000
Value decrease: 60 percent
No change: 20 percent
Value increase: 20 percent
COMMERCIAL
Total accounts: 73,000
Reappraisal notices to be mailed this year: 42,000
Value decrease: 10 percent
No change: 80 percent
Value increase: 10 percent
NOTE: Numbers are approximate.
SOURCE: Dallas Central Appraisal District
http://www.dallasnews.com/sharedcontent/dws/dn/yahoolatestnews/stories/042310dnmetdcad.41986f2.html
Tuesday, April 20, 2010
Fannie Mae says unsold homes are slowing recovery
Tuesday, April 20, 2010
ECONOMY
Fannie: Excess homes weighing on recovery
Fannie Mae's economic and mortgage market analysis group said Monday that the housing market is stabilizing but that excess inventory continues to hinder a recovery.
The D.C.-based mortgage giant released a report that projects economic growth of 3.1 percent for 2010. Doug Duncan, Fannie's chief economist, said the unwinding of programs such as mortgage-backed securities are evidence of viability for the industry without federal aid.
New-home sales are at record lows and will remain slow, Fannie said, but it pointed to signs of recovery in existing-home sales.
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/19/AR2010041905368.html?wprss=rss_business
ECONOMY
Fannie: Excess homes weighing on recovery
Fannie Mae's economic and mortgage market analysis group said Monday that the housing market is stabilizing but that excess inventory continues to hinder a recovery.
The D.C.-based mortgage giant released a report that projects economic growth of 3.1 percent for 2010. Doug Duncan, Fannie's chief economist, said the unwinding of programs such as mortgage-backed securities are evidence of viability for the industry without federal aid.
New-home sales are at record lows and will remain slow, Fannie said, but it pointed to signs of recovery in existing-home sales.
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/19/AR2010041905368.html?wprss=rss_business
Why Texas is doing so much better economically than the rest of the nation.
Once a separate nation, Texas has recently been behaving more like an independent economic republic than a regular state. While it hasn't been immune to the problems plaguing the nation, the Texas housing market, employment rate, and overall economic growth are relatively strong. Chalk some of this up to accidents of geology and geography. But Texan prosperity also reflects the conscious efforts of a once-parochial place to embrace globalization.
On several measures of economic stress, Texas is doing quite well. The state unemployment rate is 8.2 percent—high, but still one many states would envy. (California's is 12.5 percent; Michigan's is 14.1 percent.) It entered recession later than the rest of the country—Texas was adding jobs through August 2008—and started slowly adding jobs again last fall, thanks mostly to its great position in the largely recession-proof energy industry.
The Texas housing market also has fared better than many. The mortgage delinquency rate (the portion of borrowers three months behind on payments) is 5.78 percent, compared with 8.78 nationwide, according to First American CoreLogic. That's partly because relaxed zoning codes and abundant land kept both price appreciation and speculation down. "House prices didn't experience a bubble in the same way as the rest of the nation," said Anil Kumar, senior economist at the Federal Reserve Bank of Dallas. But it's also because of two attributes not commonly associated with the Longhorn State: financial restraint and comparatively strong regulation. Unlike many of its neighbors, Texas has state laws that prohibited consumers from using home-equity lines of credit to increase borrowing to more than 80 percent of the value of their homes. The upshot: Dallas housing prices have fallen only 7 percent from their 2007 peak, according to the Case-Shiller index.
As it has for decades, energy is driving Texas' economy. But it's not because the state's wells are gushing crude. In November 2009, Texas wells produced 1.08 million barrels per day, about half as much as they did in the late 1980s. In recent years, natural gas has been undergoing a renaissance. The state's production rose about 35 percent between 2004 and 2008. And Texas has received a big boost from a different, renewable source of energy: wind.
In this area, Texas' size and history of independence has enabled it to jump-start a new industry. The state has its own electricity grid, which is not connected to neighboring states. That has allowed it to move swiftly and decisively in deregulating power markets, building new transmission lines, and pursuing alternative sources. "We can build transmission lines without federal jurisdiction and without consulting other states," said Paul Sadler, executive director of the Austin-based Wind Coalition. Ramping up wind power nationally would require connecting energy fields—the windswept, sparsely populated plains—to population centers on the coasts and in the Midwest. Texas' grid already connects the plains of West Texas with consumers in Dallas, Austin, San Antonio, and Houston. Texas recently surpassed 10,000 megawatts of capacity, the most by far of any state and enough to power 3 million homes, Sadler says. Wind energy is also powering employment—creating more than 10,000 jobs so far. And it and has attracted foreign companies, including Danish turbine maker Vestas, Spanish renewable-energy giant Iberdrola, and Shell.
Texas today is more suburban engineer than urban cowboy, more Michael Dell than J.R. Ewing. Austin, home to the University of Texas, the state government, and Dell Computer, has a 7 percent unemployment rate. Yes, ExxonMobil is based in Irving.* But the state's energy complex is increasingly focused more on services and technology than on intuition and wildcatting. And it is selling those services into the global oil patch. Russian, Persian Gulf, and African oil developers now come to Houston for equipment, engineering, and software.
While its political leaders may occasionally flirt with secession, Texas thrives on connection. It surpassed California several years ago as the nation's largest exporting state. Manufactured goods like electronics, chemicals, and machinery account for a bigger chunk of Texas' exports than petroleum does. In the first two months of 2010, exports of stuff made in Texas rose 24.3 percent, to $29 billion, from 2009. That's about 10 percent of the nation's total exports. There are more than 700,000 Texan jobs geared to manufacturing goods for export, according to Patrick Jankowski, vice president of research at the Greater Houston Partnership. "A lot of it is capital goods that the Asian, Latin American, and African [countries] are using to build their economies."
Thanks to that embrace of globalization, the Texas turnaround may help lead the nation in its economic turnaround. Texans have always had the ability to think big. Now that their state has become a player in the global economy, we can expect a new kind of swagger
http://www.slate.com/id/2250999/?yahoo=y
On several measures of economic stress, Texas is doing quite well. The state unemployment rate is 8.2 percent—high, but still one many states would envy. (California's is 12.5 percent; Michigan's is 14.1 percent.) It entered recession later than the rest of the country—Texas was adding jobs through August 2008—and started slowly adding jobs again last fall, thanks mostly to its great position in the largely recession-proof energy industry.
The Texas housing market also has fared better than many. The mortgage delinquency rate (the portion of borrowers three months behind on payments) is 5.78 percent, compared with 8.78 nationwide, according to First American CoreLogic. That's partly because relaxed zoning codes and abundant land kept both price appreciation and speculation down. "House prices didn't experience a bubble in the same way as the rest of the nation," said Anil Kumar, senior economist at the Federal Reserve Bank of Dallas. But it's also because of two attributes not commonly associated with the Longhorn State: financial restraint and comparatively strong regulation. Unlike many of its neighbors, Texas has state laws that prohibited consumers from using home-equity lines of credit to increase borrowing to more than 80 percent of the value of their homes. The upshot: Dallas housing prices have fallen only 7 percent from their 2007 peak, according to the Case-Shiller index.
As it has for decades, energy is driving Texas' economy. But it's not because the state's wells are gushing crude. In November 2009, Texas wells produced 1.08 million barrels per day, about half as much as they did in the late 1980s. In recent years, natural gas has been undergoing a renaissance. The state's production rose about 35 percent between 2004 and 2008. And Texas has received a big boost from a different, renewable source of energy: wind.
In this area, Texas' size and history of independence has enabled it to jump-start a new industry. The state has its own electricity grid, which is not connected to neighboring states. That has allowed it to move swiftly and decisively in deregulating power markets, building new transmission lines, and pursuing alternative sources. "We can build transmission lines without federal jurisdiction and without consulting other states," said Paul Sadler, executive director of the Austin-based Wind Coalition. Ramping up wind power nationally would require connecting energy fields—the windswept, sparsely populated plains—to population centers on the coasts and in the Midwest. Texas' grid already connects the plains of West Texas with consumers in Dallas, Austin, San Antonio, and Houston. Texas recently surpassed 10,000 megawatts of capacity, the most by far of any state and enough to power 3 million homes, Sadler says. Wind energy is also powering employment—creating more than 10,000 jobs so far. And it and has attracted foreign companies, including Danish turbine maker Vestas, Spanish renewable-energy giant Iberdrola, and Shell.
Texas today is more suburban engineer than urban cowboy, more Michael Dell than J.R. Ewing. Austin, home to the University of Texas, the state government, and Dell Computer, has a 7 percent unemployment rate. Yes, ExxonMobil is based in Irving.* But the state's energy complex is increasingly focused more on services and technology than on intuition and wildcatting. And it is selling those services into the global oil patch. Russian, Persian Gulf, and African oil developers now come to Houston for equipment, engineering, and software.
While its political leaders may occasionally flirt with secession, Texas thrives on connection. It surpassed California several years ago as the nation's largest exporting state. Manufactured goods like electronics, chemicals, and machinery account for a bigger chunk of Texas' exports than petroleum does. In the first two months of 2010, exports of stuff made in Texas rose 24.3 percent, to $29 billion, from 2009. That's about 10 percent of the nation's total exports. There are more than 700,000 Texan jobs geared to manufacturing goods for export, according to Patrick Jankowski, vice president of research at the Greater Houston Partnership. "A lot of it is capital goods that the Asian, Latin American, and African [countries] are using to build their economies."
Thanks to that embrace of globalization, the Texas turnaround may help lead the nation in its economic turnaround. Texans have always had the ability to think big. Now that their state has become a player in the global economy, we can expect a new kind of swagger
http://www.slate.com/id/2250999/?yahoo=y
Thursday, April 15, 2010
Rents Rising as More Americans Can’t Afford to Buyby JON PRIOR
Purchasing a home remains unaffordable for many Americans despite continued declines in home prices and record low mortgage rates. And in the search for affordable housing, many consumers are relying on an already strained apartment market for temporary accommodation, as housing advisers urge Congress to implement government-backed rental assistance.
The income needed to purchase a median-priced home dropped in 93% of the markets studied by the Center for Housing Policy – the research affiliate to the National Housing Conference, an advocate for policies that promote affordable housing. Yet, despite the drop, many Americans still do not earn enough to own a home.
The study compared and ranked the costs of buying or renting a home in more than 200 US metropolitan areas with the salaries of more than 60 jobs.
Consumers are renting more, according to the survey, but the typical rent for a two-bedroom home rose in 89% of those markets to meet the demand. The rise in rents and drop in homeownership costs are most noteworthy in Florida, where the income needed to buy a median-priced home fell more than 20% in 12 metro markets. Meanwhile, two-bedroom rents rose across all of the Florida markets by nearly 6%.
And with deal-home prices rising, for instance foreclosures hovering near record heights, distressed consumers are finding refuge in the apartment sector. In reaction, Bob DeWitt, CEO of GID Investment Advisers testified to Congress yesterday on behalf of the National Multi Housing Council (NMHC), that government support is needed for the apartment industry. He warned lawmakers not to create a capital shortage for the lower-profile sector as they contemplate ways to reduce taxpayer exposure to the secondary market.
“This is important,” he said, “because the nation is increasingly relying on apartments as fundamental changes in our society are changing the types of housing we need to build. Housing expert Professor Arthur Nelson of the University of Utah projects that half of all housing built over the next 10 years will need to be rental housing to meet the dramatically changing landscape of demand
http://www.housingwire.com/2010/03/24/rents-rising-as-more-americans-can%E2%80%99t-afford-to-buy/
The income needed to purchase a median-priced home dropped in 93% of the markets studied by the Center for Housing Policy – the research affiliate to the National Housing Conference, an advocate for policies that promote affordable housing. Yet, despite the drop, many Americans still do not earn enough to own a home.
The study compared and ranked the costs of buying or renting a home in more than 200 US metropolitan areas with the salaries of more than 60 jobs.
Consumers are renting more, according to the survey, but the typical rent for a two-bedroom home rose in 89% of those markets to meet the demand. The rise in rents and drop in homeownership costs are most noteworthy in Florida, where the income needed to buy a median-priced home fell more than 20% in 12 metro markets. Meanwhile, two-bedroom rents rose across all of the Florida markets by nearly 6%.
And with deal-home prices rising, for instance foreclosures hovering near record heights, distressed consumers are finding refuge in the apartment sector. In reaction, Bob DeWitt, CEO of GID Investment Advisers testified to Congress yesterday on behalf of the National Multi Housing Council (NMHC), that government support is needed for the apartment industry. He warned lawmakers not to create a capital shortage for the lower-profile sector as they contemplate ways to reduce taxpayer exposure to the secondary market.
“This is important,” he said, “because the nation is increasingly relying on apartments as fundamental changes in our society are changing the types of housing we need to build. Housing expert Professor Arthur Nelson of the University of Utah projects that half of all housing built over the next 10 years will need to be rental housing to meet the dramatically changing landscape of demand
http://www.housingwire.com/2010/03/24/rents-rising-as-more-americans-can%E2%80%99t-afford-to-buy/
Friday, April 9, 2010
Dallas area has a flood of hotel foreclosure filings
A perfect storm of overbuilding and a depressed economy is threatening a growing number of Dallas-Fort Worth hotels with foreclosure.In the first four months of 2010, more hotel foreclosure filings have been recorded in North Texas than in all of last year.
And the industry outlook is for defaults to increase.
"The hotel market here got overbuilt and overfinanced," said George Roddy, whose Foreclosure Listing Service track property foreclosure filings in more than two dozen Texas counties. "There are just too many of them."
So far this year, Foreclosure Listing Service has recorded 43 hotel and motel foreclosure filings in the four-county area. That's up from 41 for all of 2009 and just 18 in 2008.
Hotels posted for forced sales by lenders range from the luxury Four Seasons Hotel & Resort in Las Colinas, with $183 million in original debt, to decrepit highway motels with less than $1 million in debt.
"What surprises us was that most of these foreclosure filings didn't occur in 2009," said Randy McCaslin with hotel analyst PKF Consulting.
Lenders may have been waiting to see how the economy was going to play out, McCaslin said.
"It seem like now is the time" lenders have decided to make their move, he said. "It's happening to any real estate that's overleveraged. It was the exceptional hotel that could make debt service last year."
Worst since 1930s
Income from hotel properties has taken a big hit.
From late 2006 to late 2009, D-FW hotel occupancies fell 8.3 percentage points to 45.5 percent, according to the latest data from PKF Consulting.
Over the same three years, average hotel room rates fell 6.9 percent. Rates are down an even greater 12 percent from the peak in 2007.
PKF Consulting says that the U.S. hotel business in 2009 had the worst year since the 1930s.
And the industry now has the highest proportion of troubled properties of any real estate type, according to a recent report by Real Estate Research Corp. An estimated $38 billion in U.S. hotels are now considered distressed.
"The luxury hotels are getting hit the hardest because of the AIG effect," said longtime Texas hotel industry expert John Keeling of Houston's Valencia Group, a hotel investor and developer. "Many business travelers are avoiding the luxury hotels because they don't want to be criticized for spending too much."
Running out
Keeling anticipates that 2010 will be another tough year for Texas hotels and that 2011 won't be much better with only the "beginnings" of room rate and occupancy recovery.
"Will we get there by 2012? That's probably even optimistic," he said.
Keeling said many of the state's hotel operators have "held on by their fingernails" and are now running out of options to meet mortgage obligations.
So far, the lenders have been reluctant to take the properties back, "because they didn't know what to do with them," Keeling said.
In 2009, just $2.5 billion in U.S. hotel properties were sold to investors, according to Real Estate Research – a 77 percent decline in sales volume from 2008. The peak year was in 2007 when $78.5 billion in hotel property sales were recorded.
Hotel brokers say there are buyers for distressed hotels, but so far few good properties have come to the market.
"What we are seeing on the market now is a good bit of junk that needs a lot of renovation," said David Young, a hospitality property broker with Henry S. Miller Commercial. "I've got a bunch of clients that want to buy hotels."
http://www.dallasnews.com/sharedcontent/....
And the industry outlook is for defaults to increase.
"The hotel market here got overbuilt and overfinanced," said George Roddy, whose Foreclosure Listing Service track property foreclosure filings in more than two dozen Texas counties. "There are just too many of them."
So far this year, Foreclosure Listing Service has recorded 43 hotel and motel foreclosure filings in the four-county area. That's up from 41 for all of 2009 and just 18 in 2008.
Hotels posted for forced sales by lenders range from the luxury Four Seasons Hotel & Resort in Las Colinas, with $183 million in original debt, to decrepit highway motels with less than $1 million in debt.
"What surprises us was that most of these foreclosure filings didn't occur in 2009," said Randy McCaslin with hotel analyst PKF Consulting.
Lenders may have been waiting to see how the economy was going to play out, McCaslin said.
"It seem like now is the time" lenders have decided to make their move, he said. "It's happening to any real estate that's overleveraged. It was the exceptional hotel that could make debt service last year."
Worst since 1930s
Income from hotel properties has taken a big hit.
From late 2006 to late 2009, D-FW hotel occupancies fell 8.3 percentage points to 45.5 percent, according to the latest data from PKF Consulting.
Over the same three years, average hotel room rates fell 6.9 percent. Rates are down an even greater 12 percent from the peak in 2007.
PKF Consulting says that the U.S. hotel business in 2009 had the worst year since the 1930s.
And the industry now has the highest proportion of troubled properties of any real estate type, according to a recent report by Real Estate Research Corp. An estimated $38 billion in U.S. hotels are now considered distressed.
"The luxury hotels are getting hit the hardest because of the AIG effect," said longtime Texas hotel industry expert John Keeling of Houston's Valencia Group, a hotel investor and developer. "Many business travelers are avoiding the luxury hotels because they don't want to be criticized for spending too much."
Running out
Keeling anticipates that 2010 will be another tough year for Texas hotels and that 2011 won't be much better with only the "beginnings" of room rate and occupancy recovery.
"Will we get there by 2012? That's probably even optimistic," he said.
Keeling said many of the state's hotel operators have "held on by their fingernails" and are now running out of options to meet mortgage obligations.
So far, the lenders have been reluctant to take the properties back, "because they didn't know what to do with them," Keeling said.
In 2009, just $2.5 billion in U.S. hotel properties were sold to investors, according to Real Estate Research – a 77 percent decline in sales volume from 2008. The peak year was in 2007 when $78.5 billion in hotel property sales were recorded.
Hotel brokers say there are buyers for distressed hotels, but so far few good properties have come to the market.
"What we are seeing on the market now is a good bit of junk that needs a lot of renovation," said David Young, a hospitality property broker with Henry S. Miller Commercial. "I've got a bunch of clients that want to buy hotels."
http://www.dallasnews.com/sharedcontent/....
Wednesday, April 7, 2010
Bernanke Says Joblessness, Foreclosures Pose Hurdles to Recovery
By Scott Lanman and Darrell Preston
April 7 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said joblessness, home foreclosures and weak lending to small businesses pose challenges to the economy as it recovers from the worst recession since the 1930s.
“We are far from being out of the woods,” Bernanke said today in a speech in Dallas. While the financial crisis has abated and economic growth will probably reduce unemployment over the next year, the U.S. faces hurdles including the lack of a sustained rebound in housing, a “troubled” commercial real estate market and “very weak” hiring, he said.
The remarks reflect concerns by Fed officials at their meeting last month that the job market and tight credit would restrain consumer spending. At the session, Bernanke and his colleagues reiterated interest rates will stay very low for an “extended period.” He didn’t repeat that in today’s speech, while saying the Fed’s “stimulative” rates will aid growth.
“The economy has stabilized and is growing again, although we can hardly be satisfied when one out of every 10 U.S. workers is unemployed and family finances remain under great stress,” Bernanke said in prepared remarks to the Dallas Regional Chamber.
Separately, New York Fed President William Dudley said today that the benchmark federal funds rate “needs to be exceptionally low for an extended period to contribute to easier financial conditions to support economic activity.”
Dudley, who serves as vice chairman of the rate-setting Federal Open Market Committee under Bernanke, was responding to a question from former U.S. Deputy Treasury Secretary Roger Altman, now chairman of Evercore Partners Inc., after a speech to the Economic Club of New York.
Treasuries Rise
Treasuries rose, pushing the yield on 10-year securities down six basis points to 3.89 percent at 2:16 p.m. in New York. The Standard & Poor’s 500 Index fell 0.3 percent to 1,186.26.
At the meeting last month, central bankers left the benchmark rate target, covering overnight interbank loans, in a range of zero to 0.25 percent, where it has been since December 2008.
The median estimate of analysts surveyed by Bloomberg News last month is for a Fed interest-rate increase in November.
“Although much of the financial system is functioning more or less normally, bank lending remains very weak, threatening the ability of small businesses to finance expansion and new hiring,” he said.
Securities Purchases
The Fed last week completed plans to purchase $1.25 trillion of mortgage-backed securities and $175 billion of federal agency debt to reduce home-loan costs. Central bankers are debating when to start selling the debt to reduce the Fed’s balance sheet, which has ballooned to $2.31 trillion from its pre-crisis level of about $874 billion.
“We have yet to see evidence of a sustained recovery in the housing market,” Bernanke said. “Mortgage delinquencies for both subprime and prime loans continue to rise as do foreclosures. The commercial real estate sector remains troubled, which is a concern for communities and for banks holding commercial real estate loans.”
Bernanke said some of the economy’s “toughest problems” are in the job market. U.S. employers added 162,000 jobs in March, the third gain in five months and the most in three years. The unemployment rate held at 9.7 percent, close to a 26- year high.
“Hiring remains very weak,” Bernanke said. “I am particularly concerned” that more than 40 percent of those without jobs have been out of work for at least six months, because such spells may erode skills and reduce the workers’ income and employment prospects, the Fed chief said.
http://www.bloomberg.com/apps/news?p...UHEGDJho&pos=1
__________________
April 7 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said joblessness, home foreclosures and weak lending to small businesses pose challenges to the economy as it recovers from the worst recession since the 1930s.
“We are far from being out of the woods,” Bernanke said today in a speech in Dallas. While the financial crisis has abated and economic growth will probably reduce unemployment over the next year, the U.S. faces hurdles including the lack of a sustained rebound in housing, a “troubled” commercial real estate market and “very weak” hiring, he said.
The remarks reflect concerns by Fed officials at their meeting last month that the job market and tight credit would restrain consumer spending. At the session, Bernanke and his colleagues reiterated interest rates will stay very low for an “extended period.” He didn’t repeat that in today’s speech, while saying the Fed’s “stimulative” rates will aid growth.
“The economy has stabilized and is growing again, although we can hardly be satisfied when one out of every 10 U.S. workers is unemployed and family finances remain under great stress,” Bernanke said in prepared remarks to the Dallas Regional Chamber.
Separately, New York Fed President William Dudley said today that the benchmark federal funds rate “needs to be exceptionally low for an extended period to contribute to easier financial conditions to support economic activity.”
Dudley, who serves as vice chairman of the rate-setting Federal Open Market Committee under Bernanke, was responding to a question from former U.S. Deputy Treasury Secretary Roger Altman, now chairman of Evercore Partners Inc., after a speech to the Economic Club of New York.
Treasuries Rise
Treasuries rose, pushing the yield on 10-year securities down six basis points to 3.89 percent at 2:16 p.m. in New York. The Standard & Poor’s 500 Index fell 0.3 percent to 1,186.26.
At the meeting last month, central bankers left the benchmark rate target, covering overnight interbank loans, in a range of zero to 0.25 percent, where it has been since December 2008.
The median estimate of analysts surveyed by Bloomberg News last month is for a Fed interest-rate increase in November.
“Although much of the financial system is functioning more or less normally, bank lending remains very weak, threatening the ability of small businesses to finance expansion and new hiring,” he said.
Securities Purchases
The Fed last week completed plans to purchase $1.25 trillion of mortgage-backed securities and $175 billion of federal agency debt to reduce home-loan costs. Central bankers are debating when to start selling the debt to reduce the Fed’s balance sheet, which has ballooned to $2.31 trillion from its pre-crisis level of about $874 billion.
“We have yet to see evidence of a sustained recovery in the housing market,” Bernanke said. “Mortgage delinquencies for both subprime and prime loans continue to rise as do foreclosures. The commercial real estate sector remains troubled, which is a concern for communities and for banks holding commercial real estate loans.”
Bernanke said some of the economy’s “toughest problems” are in the job market. U.S. employers added 162,000 jobs in March, the third gain in five months and the most in three years. The unemployment rate held at 9.7 percent, close to a 26- year high.
“Hiring remains very weak,” Bernanke said. “I am particularly concerned” that more than 40 percent of those without jobs have been out of work for at least six months, because such spells may erode skills and reduce the workers’ income and employment prospects, the Fed chief said.
http://www.bloomberg.com/apps/news?p...UHEGDJho&pos=1
__________________
Bernanke is Catching on: Says U.S. Must Address Soaring Debt
Mr. Bernanke said the U.S. will ultimately have to decide between raising taxes, cutting Social Security or Medicare, or less spending on everything from education to defense.
By LUCA DI LEO
DALLAS—The U.S. must start to prepare for challenges posed by an aging population with a credible plan to gradually reduce a soaring public debt, Federal Reserve Chairman Ben Bernanke said Wednesday.
Health spending is set to increase over the long term as the U.S. population grows older, posing challenges to the country's already strained finances, the Fed chief warned.
Meanwhile, Fed Bank of New York President William Dudley said Wednesday that the damage caused by financial-market bubbles should bring about a sea change in the way the central bank acts, with the Fed needing to move toward active efforts to reign in financial market excess.
"There is little doubt that asset bubbles exist and they occur fairly frequently," and when they burst the economy frequently suffers, Mr. Dudley said. While it can be difficult to discern the existence of a financial-market bubble, "uncertainty is not grounds for inaction" on the part of central bankers, Mr. Dudley said.
More
Mr. Bernanke, speaking at a Dallas Chamber of Commerce event, said that "unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth."
http://online.wsj.com/article/SB1000...s_markets_main
By LUCA DI LEO
DALLAS—The U.S. must start to prepare for challenges posed by an aging population with a credible plan to gradually reduce a soaring public debt, Federal Reserve Chairman Ben Bernanke said Wednesday.
Health spending is set to increase over the long term as the U.S. population grows older, posing challenges to the country's already strained finances, the Fed chief warned.
Meanwhile, Fed Bank of New York President William Dudley said Wednesday that the damage caused by financial-market bubbles should bring about a sea change in the way the central bank acts, with the Fed needing to move toward active efforts to reign in financial market excess.
"There is little doubt that asset bubbles exist and they occur fairly frequently," and when they burst the economy frequently suffers, Mr. Dudley said. While it can be difficult to discern the existence of a financial-market bubble, "uncertainty is not grounds for inaction" on the part of central bankers, Mr. Dudley said.
More
Mr. Bernanke, speaking at a Dallas Chamber of Commerce event, said that "unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth."
http://online.wsj.com/article/SB1000...s_markets_main
Sunday, April 4, 2010
Manhattan Apartment Sales Jump, Buyers Seek Bargains
By Oshrat Carmiel
April 2 (Bloomberg) -- Manhattan apartment sales doubled in the first quarter as bargain-hunting buyers scooped up co-ops and condos in a market where resale prices have fallen an average 29 percent since their peak.
The number of sales soared to 2,384 from 1,195 a year earlier, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today. The median price for a co-op or condo slid 11 percent to $868,000. "
Read More:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQraOQrodPxg&pos=5
April 2 (Bloomberg) -- Manhattan apartment sales doubled in the first quarter as bargain-hunting buyers scooped up co-ops and condos in a market where resale prices have fallen an average 29 percent since their peak.
The number of sales soared to 2,384 from 1,195 a year earlier, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today. The median price for a co-op or condo slid 11 percent to $868,000. "
Read More:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQraOQrodPxg&pos=5
Wednesday, March 31, 2010
Fannie, Freddie on Hot Seat as Fed Pulls Out of Mortgages
http://moneynews.com/StreetTalk/Fannie-Freddie-Fed-Void/2010/03/31/id/354322
Goodbye, Federal Reserve. Hello Fannie and Freddie.
With the Federal Reserve ending its 15-month $1.25 trillion mortgage bond buying binge on Wednesday, delinquent loan buyouts by Fannie Mae and Freddie Mac could serve as the saving grace for the $5 trillion agency mortgage-backed securities market.
The paydowns from these buyouts will put billions into the hands of mortgage investors for reinvestment and significantly reduce supply, mitigating the massive void the central bank will leave behind and helping keep yield spreads near record tights.
That is good news for the U.S. housing market since it should keep mortgage rates, which are linked to yields on Treasuries and yields on mortgage-backed securities, at historically low levels.
The timing is everything as the housing market enters its most important period — the spring selling season — and struggles to regain its old self as data shows growth has been anything but resurgent.
The delinquent loan buyouts of $200 billion by Fannie Mae and Freddie Mac, first announced in February, will put about $140 billion of cash into private investors' hands, according to Matthew Jozoff, managing director and head of mortgage strategy at JPMorgan in New York.
At the same time, these buyouts will remove about $200 billion of net supply from the market, his team said.
"This 'double-whammy' is powerful, and effectively extends the Fed involvement several months from their official end date," they said.
The Federal Reserve has plowed billions per week into the agency MBS market since early 2009 in an effort to bring down mortgage rates and to stimulate the battered housing sector and the overall economy.
"The (Fannie and Freddie) buyouts should help take supply out of the marketplace, so in our view, the technicals have lined up to make the Fed exit go smoother than otherwise would have been expected," said Joe Ramos, lead portfolio manager on the U.S. fixed income team at Lazard Asset Management in New York.
"While reinvestments from paydowns will not be big enough to fully offset the buying by the Fed, it should help keep prices firm," he said.
Mortgage rates play a crucial role in housing affordability. February home sales data points to a sector that has hit a lull after showing signs of a recovery late last year. New home sales fell for a fourth straight month, reaching a record low, while existing home sales fell for a third straight month.
Interest rates on 30-year fixed-rate mortgages, currently around 5 percent, will probably drift higher throughout 2010, ending the year at over 5.5 percent, according to Mark Zandi, chief economist at Moody's Economy.com, in West Chester, Pennsylvania.
"The current 5 percent fixed rate has been key to keeping the housing market together as well as it has been kept together," he said. "That the housing market is so weak despite the low rates suggests how strong the headwinds are to the housing market, including the tough job market, tougher underwriting standards, and the ongoing foreclosure crisis."
Mortgage rates will likely be buffered over the next few months as the majority of the paydowns get reinvested, but investors will also likely keep some cash as well, according to Janaki Rao, vice president of mortgage research at Morgan Stanley in New York.
"The initial reaction to the buyout news indicated a rush toward the lower coupons as investors rushed to safeguard against faster prepays," he said.
While reinvestments are certainly a strong positive for agency MBS, a confluence of other factors should keep agency MBS firm as well. A buildup of cash, solid deposits and weak loan growth should foster strong bank demand for agency MBS going forward.
Furthermore, many money managers who were underweighted the sector for much of the past year amid lofty valuations are expected to buy on even modest cheapening. That, coupled with low supply, will offset the Federal Reserve's absence from the agency MBS market.
"We do not see things changing in a major way, perhaps 10 to 20 basis points of widening without demand from the Fed," Lazard's Ramos said.
"Demand from asset managers will likely have the largest impact on prices after the Fed exit," he said.
Goodbye, Federal Reserve. Hello Fannie and Freddie.
With the Federal Reserve ending its 15-month $1.25 trillion mortgage bond buying binge on Wednesday, delinquent loan buyouts by Fannie Mae and Freddie Mac could serve as the saving grace for the $5 trillion agency mortgage-backed securities market.
The paydowns from these buyouts will put billions into the hands of mortgage investors for reinvestment and significantly reduce supply, mitigating the massive void the central bank will leave behind and helping keep yield spreads near record tights.
That is good news for the U.S. housing market since it should keep mortgage rates, which are linked to yields on Treasuries and yields on mortgage-backed securities, at historically low levels.
The timing is everything as the housing market enters its most important period — the spring selling season — and struggles to regain its old self as data shows growth has been anything but resurgent.
The delinquent loan buyouts of $200 billion by Fannie Mae and Freddie Mac, first announced in February, will put about $140 billion of cash into private investors' hands, according to Matthew Jozoff, managing director and head of mortgage strategy at JPMorgan in New York.
At the same time, these buyouts will remove about $200 billion of net supply from the market, his team said.
"This 'double-whammy' is powerful, and effectively extends the Fed involvement several months from their official end date," they said.
The Federal Reserve has plowed billions per week into the agency MBS market since early 2009 in an effort to bring down mortgage rates and to stimulate the battered housing sector and the overall economy.
"The (Fannie and Freddie) buyouts should help take supply out of the marketplace, so in our view, the technicals have lined up to make the Fed exit go smoother than otherwise would have been expected," said Joe Ramos, lead portfolio manager on the U.S. fixed income team at Lazard Asset Management in New York.
"While reinvestments from paydowns will not be big enough to fully offset the buying by the Fed, it should help keep prices firm," he said.
Mortgage rates play a crucial role in housing affordability. February home sales data points to a sector that has hit a lull after showing signs of a recovery late last year. New home sales fell for a fourth straight month, reaching a record low, while existing home sales fell for a third straight month.
Interest rates on 30-year fixed-rate mortgages, currently around 5 percent, will probably drift higher throughout 2010, ending the year at over 5.5 percent, according to Mark Zandi, chief economist at Moody's Economy.com, in West Chester, Pennsylvania.
"The current 5 percent fixed rate has been key to keeping the housing market together as well as it has been kept together," he said. "That the housing market is so weak despite the low rates suggests how strong the headwinds are to the housing market, including the tough job market, tougher underwriting standards, and the ongoing foreclosure crisis."
Mortgage rates will likely be buffered over the next few months as the majority of the paydowns get reinvested, but investors will also likely keep some cash as well, according to Janaki Rao, vice president of mortgage research at Morgan Stanley in New York.
"The initial reaction to the buyout news indicated a rush toward the lower coupons as investors rushed to safeguard against faster prepays," he said.
While reinvestments are certainly a strong positive for agency MBS, a confluence of other factors should keep agency MBS firm as well. A buildup of cash, solid deposits and weak loan growth should foster strong bank demand for agency MBS going forward.
Furthermore, many money managers who were underweighted the sector for much of the past year amid lofty valuations are expected to buy on even modest cheapening. That, coupled with low supply, will offset the Federal Reserve's absence from the agency MBS market.
"We do not see things changing in a major way, perhaps 10 to 20 basis points of widening without demand from the Fed," Lazard's Ramos said.
"Demand from asset managers will likely have the largest impact on prices after the Fed exit," he said.
Tuesday, March 30, 2010
Half of Commercial Mortgages to Be Underwater: Warren
By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.
“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending."
As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010.
Meanwhile, the U.S. Treasury on Monday pledged to sell its 7.7 billion Citigroup shares this year, a step that further reduces the government's influence on the banking giant. Warren said she is having difficulty getting clarity on Citigroup’s [C 4.09 -0.09 (-2.15%) ] business plans.
“This is a cake that is still being baked,” she said of the company's plans. “[Citi's CEO] Vikram Pandit said he was going to shrink the company by 40 percent...and Citi’s numbers keep moving around so much I don’t know
Speaking on troubled mortgage lenders, Warren said it’s time for the government to "pull the plug" on mortgage lenders Fannie Mae [FNM 1.05 -0.01 (-0.94%) ] and Freddie Mac [FRE 1.28 --- UNCH (0) ].
“I’m one of those people who never liked public-private partnership to begin with. I think what they did was use public when public was useful and private when private was useful,” she said. “And I think we’ve got to rethink that whole thing.”
“There is no implicit guarantee anymore,” she added. “I don’t care how big you are, if you make serious enough mistakes, then your business can be entirely wiped out."
http://www.cnbc.com/id/36085517
“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending."
As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010.
Meanwhile, the U.S. Treasury on Monday pledged to sell its 7.7 billion Citigroup shares this year, a step that further reduces the government's influence on the banking giant. Warren said she is having difficulty getting clarity on Citigroup’s [C 4.09 -0.09 (-2.15%) ] business plans.
“This is a cake that is still being baked,” she said of the company's plans. “[Citi's CEO] Vikram Pandit said he was going to shrink the company by 40 percent...and Citi’s numbers keep moving around so much I don’t know
Speaking on troubled mortgage lenders, Warren said it’s time for the government to "pull the plug" on mortgage lenders Fannie Mae [FNM 1.05 -0.01 (-0.94%) ] and Freddie Mac [FRE 1.28 --- UNCH (0) ].
“I’m one of those people who never liked public-private partnership to begin with. I think what they did was use public when public was useful and private when private was useful,” she said. “And I think we’ve got to rethink that whole thing.”
“There is no implicit guarantee anymore,” she added. “I don’t care how big you are, if you make serious enough mistakes, then your business can be entirely wiped out."
http://www.cnbc.com/id/36085517
Housing Prices May Be Heading for a Double Dip
Anyone thinking housing prices have reached a bottom had better do some recalculating. Despite Tuesday's Case Schiller report showing smaller declines in January, housing prices may already be in another free fall.
Newly revised numbers are pointing to the decline.
The Federal Housing Finance Agency's (FHFA) adjusted figures show a housing price decline of 2 percent in December and 0.6 percent decline in January—reversing some regional price increases in 2009.
And more pricing dips are predicted.
"Case Schiller aside, we expect housing prices to fall another five percent in the coming months," says Paul Dales, US economist at Toronto based Capital Economics. "We've actually seen some declines in areas of the country. That's going to put a halt on any housing recovery."
Dales argues that the end of the $8,000 first time buyers tax credit on April 30th and the large amount of foreclosures in the pipeline—or on their way there—are reasons why prices will continue to fall.
"There's going to be less demand for housing when the tax credit ends," Dales says. "That leaves more home on the market for sale. And as to foreclosures, there will be more of them and that puts pressure on prices. We estimate about 2.5 million foreclosures through the rest of 2010
If tax breaks ending and more foreclosures weren't bad enough, banks and other lenders have added to the problem for prices.
"Financing has dried up," says Alan Rosenbaum, president and CEO of Guardhill Financial, a residential mortgage firm in New York City. "And with the government more or less getting out of the lending business as it stops buying mortgage backed securities (MBS), there's less incentive for lenders to make loans. We could see a drop in home prices for sure."
With the Fed ending its asset backed purchasing program on March 31st, fears of higher interest rates have caused many to fear a slowdown in housing sales and putting even more pressure on prices.
Rates have been rising, ever so slowly. But they are still at historic lows and with the ending of the tax credit, some see the move as an incentive to buy regardless of price.
"If rates go up and with the tax credit gone, I think it would spur on housing," says Diane Saatchi, senior vice president with Saunders and Associates Realty in New York. "People will see rates rise and that will stimulate them to buy now rather than wait for rates to go higher."
But interest rates aren't really considered a problem—or a cure for housing prices right now.
"It's inventory," says Walter Malony, spokesman for the National Association of Realtors. "Prices are dependent on the inventory absorbed. I think we'll see about the same amount of foreclosures this year as we had last year. That's not good."
What differences Malony does see in the foreclosures this year are the cause. Foreclosures in 2009 were mainly dominated by people who couldn't refinance because their home was 'underwater' or they owed more on it than the mortgage was worth.
This year, Malony says, foreclosures are mainly due to job losses. "I keep saying that to save housing, the job picture has to improve," adds Malony.
The Obama administration and banks like Bank of America [BAC 17.76 -0.28 (-1.55%) ] and Citigroup [C 4.09 -0.09 (-2.15%) ] have offered plans to help stop the flow of foreclosures but experts don't put much stock in them.
"Banks aren't going to do much with these programs," says Guardhill Financial's Rosenbaum. "It's too labor intensive and they don't want to spend money on it. Big banks want to get out of the mortgage business."
Read more
http://www.cnbc.com/id/36098637
Newly revised numbers are pointing to the decline.
The Federal Housing Finance Agency's (FHFA) adjusted figures show a housing price decline of 2 percent in December and 0.6 percent decline in January—reversing some regional price increases in 2009.
And more pricing dips are predicted.
"Case Schiller aside, we expect housing prices to fall another five percent in the coming months," says Paul Dales, US economist at Toronto based Capital Economics. "We've actually seen some declines in areas of the country. That's going to put a halt on any housing recovery."
Dales argues that the end of the $8,000 first time buyers tax credit on April 30th and the large amount of foreclosures in the pipeline—or on their way there—are reasons why prices will continue to fall.
"There's going to be less demand for housing when the tax credit ends," Dales says. "That leaves more home on the market for sale. And as to foreclosures, there will be more of them and that puts pressure on prices. We estimate about 2.5 million foreclosures through the rest of 2010
If tax breaks ending and more foreclosures weren't bad enough, banks and other lenders have added to the problem for prices.
"Financing has dried up," says Alan Rosenbaum, president and CEO of Guardhill Financial, a residential mortgage firm in New York City. "And with the government more or less getting out of the lending business as it stops buying mortgage backed securities (MBS), there's less incentive for lenders to make loans. We could see a drop in home prices for sure."
With the Fed ending its asset backed purchasing program on March 31st, fears of higher interest rates have caused many to fear a slowdown in housing sales and putting even more pressure on prices.
Rates have been rising, ever so slowly. But they are still at historic lows and with the ending of the tax credit, some see the move as an incentive to buy regardless of price.
"If rates go up and with the tax credit gone, I think it would spur on housing," says Diane Saatchi, senior vice president with Saunders and Associates Realty in New York. "People will see rates rise and that will stimulate them to buy now rather than wait for rates to go higher."
But interest rates aren't really considered a problem—or a cure for housing prices right now.
"It's inventory," says Walter Malony, spokesman for the National Association of Realtors. "Prices are dependent on the inventory absorbed. I think we'll see about the same amount of foreclosures this year as we had last year. That's not good."
What differences Malony does see in the foreclosures this year are the cause. Foreclosures in 2009 were mainly dominated by people who couldn't refinance because their home was 'underwater' or they owed more on it than the mortgage was worth.
This year, Malony says, foreclosures are mainly due to job losses. "I keep saying that to save housing, the job picture has to improve," adds Malony.
The Obama administration and banks like Bank of America [BAC 17.76 -0.28 (-1.55%) ] and Citigroup [C 4.09 -0.09 (-2.15%) ] have offered plans to help stop the flow of foreclosures but experts don't put much stock in them.
"Banks aren't going to do much with these programs," says Guardhill Financial's Rosenbaum. "It's too labor intensive and they don't want to spend money on it. Big banks want to get out of the mortgage business."
Read more
http://www.cnbc.com/id/36098637
Friday, March 19, 2010
Regulators shut 7 banks in 5 states; 37 in 2010
WASHINGTON (AP) -- Regulators on Friday shut down seven banks in five states, bringing to 37 the number of bank failures in the U.S. so far this year.
The closings follow the 140 that succumbed in 2009 to mounting loan defaults and the recession.
The Federal Deposit Insurance Corp. took over First Lowndes Bank, in Fort Deposit, Ala.; Appalachian Community Bank in Ellijay, Ga.; Bank of Hiawassee, in Hiawassee, Ga.; and Century Security Bank in Duluth, Ga.
The agency also closed down State Bank of Aurora, in Aurora, Minn.; Advanta Bank Corp., based in Draper, Utah; and American National Bank of Parma, Ohio.
The FDIC was unable to find a buyer for Advanta Bank, which had $1.6 billion in assets and $1.5 billion in deposits. The regulatory agency approved the payout of the bank's insured deposits and it said checks to depositors for their insured funds will be mailed on Monday.
The failure of Advanta Bank is expected to cost the federal deposit insurance fund $635.6 million.
For the other banks:
-- First Citizens Bank of Luverne, Ala., agreed to assume the deposits and assets of First Lowndes Bank. First Lowndes had $137.2 million in assets and $131.1 million in deposits. The FDIC expects that the cost to its insurance fund will be $38.3 million.
-- Community & Southern Bank of Carrollton, Ga., agreed to assume the deposits and assets of Appalachian Community Bank. The bank had $1 billion in assets and about $917.6 million in deposits. The cost to the insurance fund is expected to be $419.3 million.
-- Citizens South Bank of Gastonia, N.C., will assume the deposits and assets of Bank of Hiawassee. Bank of Hiawassee had about $377.8 million in assets and $339.6 million in deposits. The failure is expected to cost the insurance fund $137.7 million.
-- Bank of Upson, based in Thomaston, Ga., agreed to assume the assets and deposits of Century Security Bank, which had $96.5 million in assets and $94 million in deposits. It is expected to cost the insurance fund $29.9 million.
-- Northern State Bank in Ashland, Wisc., agreed to assume the deposits and assets of State Bank of Aurora. The bank had about $28.2 million in assets and $27.8 million in deposits. The FDIC expects the move will cost the insurance fund $4.2 million.
-- National Bank and Trust Co., based in Wilmington, Ohio, agreed to assume the assets and deposits of American National Bank, which had $70.3 million in assets and $66.8 million in deposits. The cost to the insurance fund is expected to total $17.1 million.
The pace of bank seizures this year is likely to accelerate in coming months, regulators have said, as losses mount on loans made for commercial property and development.
The bank failures -- the 140 last year was the highest annual tally since the height of the savings and loan crisis in 1992 -- have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.
Depositors' money -- insured up to $250,000 per account -- is not at risk, with the FDIC backed by the government. Apart from the fund, the FDIC has about $66 billion in cash and securities available in reserve to cover losses at failed banks.
Banks, meanwhile, have tightened their lending standards. U.S. bank lending last year posted its steepest drop since World War II, with the volume of loans falling $587.3 billion, or 7.5 percent, from 2008, the FDIC reported recently.
New Senate legislation was unveiled this week that is a blueprint for the biggest overhaul of financial regulations since the 1930s, giving the government unprecedented powers to split up large complex firms if they pose a threat to the nation's financial system. It would also create an independent consumer watchdog.
The bill crafted by Sen. Banking Committee Chairman Christopher Dodd, D-Conn., would force big, complex financial firms to pay insurance premiums in advance for a $50 billion fund to cover possible failures in their ranks. The fees levied up front would give the FDIC an immediate source of funds to resolve big failed institutions, so that taxpayer money wouldn't be used.
The costs of resolving smaller banks that fail would continue to be covered by the FDIC.
The FDIC expects the cost of resolving failed banks to grow to about $100 billion over the next four years.
AP Business Writer Tim Paradis in New York contributed to this report
http://finance.yahoo.com/news/Regulators-shut-7-banks-in-5-apf-2660571978.html?x=0&sec=topStories&pos=2&asset=&ccode=
The closings follow the 140 that succumbed in 2009 to mounting loan defaults and the recession.
The Federal Deposit Insurance Corp. took over First Lowndes Bank, in Fort Deposit, Ala.; Appalachian Community Bank in Ellijay, Ga.; Bank of Hiawassee, in Hiawassee, Ga.; and Century Security Bank in Duluth, Ga.
The agency also closed down State Bank of Aurora, in Aurora, Minn.; Advanta Bank Corp., based in Draper, Utah; and American National Bank of Parma, Ohio.
The FDIC was unable to find a buyer for Advanta Bank, which had $1.6 billion in assets and $1.5 billion in deposits. The regulatory agency approved the payout of the bank's insured deposits and it said checks to depositors for their insured funds will be mailed on Monday.
The failure of Advanta Bank is expected to cost the federal deposit insurance fund $635.6 million.
For the other banks:
-- First Citizens Bank of Luverne, Ala., agreed to assume the deposits and assets of First Lowndes Bank. First Lowndes had $137.2 million in assets and $131.1 million in deposits. The FDIC expects that the cost to its insurance fund will be $38.3 million.
-- Community & Southern Bank of Carrollton, Ga., agreed to assume the deposits and assets of Appalachian Community Bank. The bank had $1 billion in assets and about $917.6 million in deposits. The cost to the insurance fund is expected to be $419.3 million.
-- Citizens South Bank of Gastonia, N.C., will assume the deposits and assets of Bank of Hiawassee. Bank of Hiawassee had about $377.8 million in assets and $339.6 million in deposits. The failure is expected to cost the insurance fund $137.7 million.
-- Bank of Upson, based in Thomaston, Ga., agreed to assume the assets and deposits of Century Security Bank, which had $96.5 million in assets and $94 million in deposits. It is expected to cost the insurance fund $29.9 million.
-- Northern State Bank in Ashland, Wisc., agreed to assume the deposits and assets of State Bank of Aurora. The bank had about $28.2 million in assets and $27.8 million in deposits. The FDIC expects the move will cost the insurance fund $4.2 million.
-- National Bank and Trust Co., based in Wilmington, Ohio, agreed to assume the assets and deposits of American National Bank, which had $70.3 million in assets and $66.8 million in deposits. The cost to the insurance fund is expected to total $17.1 million.
The pace of bank seizures this year is likely to accelerate in coming months, regulators have said, as losses mount on loans made for commercial property and development.
The bank failures -- the 140 last year was the highest annual tally since the height of the savings and loan crisis in 1992 -- have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.
Depositors' money -- insured up to $250,000 per account -- is not at risk, with the FDIC backed by the government. Apart from the fund, the FDIC has about $66 billion in cash and securities available in reserve to cover losses at failed banks.
Banks, meanwhile, have tightened their lending standards. U.S. bank lending last year posted its steepest drop since World War II, with the volume of loans falling $587.3 billion, or 7.5 percent, from 2008, the FDIC reported recently.
New Senate legislation was unveiled this week that is a blueprint for the biggest overhaul of financial regulations since the 1930s, giving the government unprecedented powers to split up large complex firms if they pose a threat to the nation's financial system. It would also create an independent consumer watchdog.
The bill crafted by Sen. Banking Committee Chairman Christopher Dodd, D-Conn., would force big, complex financial firms to pay insurance premiums in advance for a $50 billion fund to cover possible failures in their ranks. The fees levied up front would give the FDIC an immediate source of funds to resolve big failed institutions, so that taxpayer money wouldn't be used.
The costs of resolving smaller banks that fail would continue to be covered by the FDIC.
The FDIC expects the cost of resolving failed banks to grow to about $100 billion over the next four years.
AP Business Writer Tim Paradis in New York contributed to this report
http://finance.yahoo.com/news/Regulators-shut-7-banks-in-5-apf-2660571978.html?x=0&sec=topStories&pos=2&asset=&ccode=
Credit scores can drop after getting loan help
WASHINGTON (AP) -- Some homeowners who sign up for the government's mortgage assistance program are getting a nasty surprise: Lower credit scores.
For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points. That makes it harder to get a loan and can present a problem when applying for a new job.
Housing counselors say it's unfair, especially because the news often comes as a surprise to homeowners.
"Why should people's credit be hurt even worse when they're trying to do the right thing?" said Eileen Anderson, senior vice president at Community Development Corp. of Long Island, a housing counseling group in New York.
And many homeowners are angry that a program designed to help carries such a penalty, said Kathy Conley, a housing counselor with GreenPath Inc., a nonprofit group in Farmington Hills, Mich.
"It's a feeling of being duped," she said.
Still, the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That's due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner's' credit by 150 points or more on a scale of 300 to 850.
To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus -- Experian, Equifax and TransUnion.
For delinquent borrowers, the damage was done when they fell behind on their loans.
But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower's credit score.
The credit rating industry defends the practice. People who sign up for loan modifications would not be asking for help unless they were having severe money troubles, said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade group in Washington that represents the credit bureaus.
"The consumer is going into the program because they're in a financial bind," he said. "Other lenders would need to be aware of that."
The Obama administration acknowledges that enrolling in the program can hurt credit scores. But Meg Reilly, a Treasury Department spokeswoman, said that foreclosure "brings far more serious financial consequences for borrowers and their families."
The credit score issue is an unexpected consequence of the program that has been plagued with problems and disappointing results since its launch last year. Only about 170,000 homeowners had completed the process as of February. Hundreds of thousands more are still in limbo.
Jim Owens, 46, of Harrisburg, Ore., was accepted on a trial basis for the Obama plan last year.
He and his family were in bad financial shape. They were barely able to pay the mortgage and utility bills.
The main reason: After being laid off and unemployed for six months, he took a job as maintenance director at a retirement home. But it paid only around $25,000 year, about $10,000 less than his former job in a city public works department.
He and his wife were also struggling with debt, after taking out a second mortgage four years ago to pay off debt and medical bills.
Late last year, he was searching for a used sport-utility vehicle. He got a 30-day approval for $2,000 car loan.
But that time ran out before he found a car, so he had to reapply for the loan. He was shocked to learn that, after signing up for the Obama plan, he was denied.
"I should have been told," that this might happen, Owens said. "Without credit, you can't do a whole lot in life."
A Citi spokesman, Mark Rodgers, said the company follows the Treasury Department's guidelines for reporting to credit bureaus. "We do not determine credit scores," said Rodgers, who declined to comment on Owens' case.
The impact is worse for borrowers who enroll in the Obama program and are then ruled ineligible.
If homeowners do manage to get accepted into the Obama program and have their loans permanently modified, lenders update the credit bureaus. The new status neither hurts nor helps the borrower's credit score. Over time, they can see their score increase.
"The best way to build credit back is to continue to pay bills as agreed, to use credit wisely," said Tom Quinn, vice president of scoring solutions at Fair Issac Corp., which designed the well-known FICO score system. "As time goes on, the score gradually increases."
http://finance.yahoo.com/news/Credit-scores-can-drop-after-apf-1601705094.html?x=0
For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points. That makes it harder to get a loan and can present a problem when applying for a new job.
Housing counselors say it's unfair, especially because the news often comes as a surprise to homeowners.
"Why should people's credit be hurt even worse when they're trying to do the right thing?" said Eileen Anderson, senior vice president at Community Development Corp. of Long Island, a housing counseling group in New York.
And many homeowners are angry that a program designed to help carries such a penalty, said Kathy Conley, a housing counselor with GreenPath Inc., a nonprofit group in Farmington Hills, Mich.
"It's a feeling of being duped," she said.
Still, the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That's due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner's' credit by 150 points or more on a scale of 300 to 850.
To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus -- Experian, Equifax and TransUnion.
For delinquent borrowers, the damage was done when they fell behind on their loans.
But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower's credit score.
The credit rating industry defends the practice. People who sign up for loan modifications would not be asking for help unless they were having severe money troubles, said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade group in Washington that represents the credit bureaus.
"The consumer is going into the program because they're in a financial bind," he said. "Other lenders would need to be aware of that."
The Obama administration acknowledges that enrolling in the program can hurt credit scores. But Meg Reilly, a Treasury Department spokeswoman, said that foreclosure "brings far more serious financial consequences for borrowers and their families."
The credit score issue is an unexpected consequence of the program that has been plagued with problems and disappointing results since its launch last year. Only about 170,000 homeowners had completed the process as of February. Hundreds of thousands more are still in limbo.
Jim Owens, 46, of Harrisburg, Ore., was accepted on a trial basis for the Obama plan last year.
He and his family were in bad financial shape. They were barely able to pay the mortgage and utility bills.
The main reason: After being laid off and unemployed for six months, he took a job as maintenance director at a retirement home. But it paid only around $25,000 year, about $10,000 less than his former job in a city public works department.
He and his wife were also struggling with debt, after taking out a second mortgage four years ago to pay off debt and medical bills.
Late last year, he was searching for a used sport-utility vehicle. He got a 30-day approval for $2,000 car loan.
But that time ran out before he found a car, so he had to reapply for the loan. He was shocked to learn that, after signing up for the Obama plan, he was denied.
"I should have been told," that this might happen, Owens said. "Without credit, you can't do a whole lot in life."
A Citi spokesman, Mark Rodgers, said the company follows the Treasury Department's guidelines for reporting to credit bureaus. "We do not determine credit scores," said Rodgers, who declined to comment on Owens' case.
The impact is worse for borrowers who enroll in the Obama program and are then ruled ineligible.
If homeowners do manage to get accepted into the Obama program and have their loans permanently modified, lenders update the credit bureaus. The new status neither hurts nor helps the borrower's credit score. Over time, they can see their score increase.
"The best way to build credit back is to continue to pay bills as agreed, to use credit wisely," said Tom Quinn, vice president of scoring solutions at Fair Issac Corp., which designed the well-known FICO score system. "As time goes on, the score gradually increases."
http://finance.yahoo.com/news/Credit-scores-can-drop-after-apf-1601705094.html?x=0
Wednesday, March 3, 2010
Detroit homes sell for $1 amid mortgage and car industry crisis
Detroit homes sell for $1 amid mortgage and car industry crisis
One in five houses left empty as foreclosures mount and property prices drop by 80%
Tuesday, 02 March 2010
Some might say Jon Brumit overpaid when he stumped up $100 (£65) for a whole house. Drive through Detroit neighbourhoods once clogged with the cars that made the city the envy of America and there are homes to be had for a single dollar.
You find these houses among boarded-up, burnt-out and rotting buildings lining deserted streets, places where the population is shrinking so fast entire blocks are being demolished to make way for urban farms.
"I was living in Chicago and a friend told me that houses in Detroit could be had for $500," said Brumit, a financially strapped artist who thought he had little prospect of owning his own property. "I said if you hear of anything just a little cheaper let me know. Within a week he emails me a photo of a house for $100. I thought that's just crazy. Why not? It's a way to cut our expenses way down and kind of open up a lot of time for creative projects because we're not working to pay the rent."
Houses on sale for a few dollars are something of an urban legend in the US on the back of the mortgage crisis that drove millions of people from their homes. But in Detroit it is no myth.
One in five houses now stand empty in the city that launched the automobile age, forged America's middle-class and blessed the world with Motown.
Detroit has been in decline for decades; its falling population is now well below a million – half of its 1950 peak. But the recent mortgage crisis and the fall of the big car makers into bankruptcy has pushed the town into a realm unique among big cities in America.
A third of the population are unemployed. Property prices have fallen 80% or more in large parts of Detroit over the last three years. The average price of a home sold in the city last year has been put at $7,500 (£4,900).
The recent financial crash forced wholesale foreclosures among people unable to pay their mortgages or who walked away from houses that fell to a fraction of the value of the loans they had taken out on them.
Banks are selling off properties in the worst neighbourhoods, which are usually surrounded by empty and wrecked housing, for a few dollars each. But even better houses can be had at a fraction of their former value.
Technically, Brumit paid $95 for the land and $5 for the house on Lawley Street – which fitted what estate agents euphemistically call an opportunity.
Brumit said: "It had a big hole in the roof from the fire department putting out the last of two arson attempts. Both previous owners tried to set it on fire to get out of the mortgages. So there's a big hole about 24ft long and the plumbing had almost entirely been ripped out and most of the electrics too. It was basically a smoke damaged, structurally intact shell with a snowdrift in the attic."
Setting fire to houses to claim the insurance and kill off the mortgage is not uncommon in Detroit; a blackened, wooden corpse of a house sits at the bottom of Brumit's street. But it is more common for owners to just walk away from their homes and mortgages.
On the opposite side of Lawley Street Jim Feltner and his workers were clearing out a property seized by a bank. "I used to be a building contractor. I was buying up places and doing them up. Now I empty out foreclosures. I do one or two of these a day all over the city," he said. "I've been in Detroit 40 years and I've watched the peak up to $100,000 for houses that right now aren't worth more than $20,000 tops. I own a bunch of properties. I have 10 rentals and I can't get nothing for them, and they're beautiful homes."
Feltner's workers are dragging clothes, boots and furniture out of the bedrooms and living room, and dumping them in the front yard until a skip arrives. Kicked to one side is a box of 1970s Motown records. A teddy bear lies spreadeagled on the floor.
"You could get about five grand for this place," said Feltner. "Nice house once you clean it out. All the plumbing and electricals are in it. Roof don't leak."
Brumit said a man called Jesse lived there. "Jesse had mentioned that he was probably going to get out of there because he knew he could buy a place for so much less than he owed. That's a drag. You don't want to see people leaving," he said.
The house next door is abandoned. On the next street, one third of the properties are boarded up.
It's a story replicated across Detroit.
Joan Wilson, an estate agent in the north-west of the city, whose firm is offering a three-bedroom house on Albany street for $1, says that more than half of the houses she sells are foreclosures in the tens of thousands of dollars. "The vast majority of people that call to enquire, almost the first thing out of their mouth is that they want to buy a foreclosure. I have had telephone calls from people looking online that live, for example, in England or California, who've never set foot in the area. They're calling about one specific house they see online. I tell them they need to look at the neighbourhood. Is it the only house standing within a mile?"
But what is blight to some is proving an opportunity to remake parts of the city for others living there. The Old Redford part of Detroit has suffered its share of desolation. The police station, high school and community centre are closed. Yet the area is being revitalised, led by John George, a resident who began by boarding up an abandoned house used by drug dealers 21 years ago and who now heads the community group Blight Busters. They are pulling down housing that cannot be saved and creating community gardens with fresh vegetables free for anyone to pick.
"There's longstanding nuisance houses, been around seven, eight, nine years. We will go in without a permit and demolish them without permission," said George. "If you, as an owner, are going to leave something like that to fester in my neighbourhood, obviously you either don't care or aren't in a position to take responsibility for your property, so we're going to take care of it for you." Blight Busters has torn down more than 200 houses, including recently an entire block of abandoned housing in Old Redford. "We need to right-size this community, which means removing whole blocks, and building farms, larger gardens, putting in windmills. We want to downsize – right-size – Detroit," George said.
Houses that can be rescued are done up with grants from foundations.
"Detroit has some of the nicest housing stock in the country. Brick, marble, hardwood floors, leaded glass. These houses were built for kings," George added. "We gave a $90,000 house to a lady who was living in a car. She had four children. It didn't cost her a dime. We had over a thousand people apply for it. It's probably worth $35,000 now."
Old Redford is seeing piecemeal renewal. One abandoned block of shops has been converted to an arts centre and music venue with cafes. One of the few remaining cinemas in Detroit – and one that's among the last in the US with an original pipe organ – has been revived and is showing Breakfast at Tiffany's.
Brumit calculates that he has spent $1,500 to buy and do up his house, principally by scavenging demolition sites. He will move in with his wife and four-month-old child once it is complete, probably in the summer.
He said: "The Americans we know got ripped off by the American dream. But [the renovation] is the most like moving out of the country that we can actually do. We're the minority in terms of ethnicity and this is a rich environment … there's 30% open space in the city and that doesn't include the buildings that should be torn down. You're in a city riding your bike around and you hear birds and stuff. It's incredible."
http://www.u.tv/News/Detroit-homes-sell-for-$1-amid-mortgage-and-car-industry-crisis/eca5863e-658b-4cdf-a9cc-127b43811575
One in five houses left empty as foreclosures mount and property prices drop by 80%
Tuesday, 02 March 2010
Some might say Jon Brumit overpaid when he stumped up $100 (£65) for a whole house. Drive through Detroit neighbourhoods once clogged with the cars that made the city the envy of America and there are homes to be had for a single dollar.
You find these houses among boarded-up, burnt-out and rotting buildings lining deserted streets, places where the population is shrinking so fast entire blocks are being demolished to make way for urban farms.
"I was living in Chicago and a friend told me that houses in Detroit could be had for $500," said Brumit, a financially strapped artist who thought he had little prospect of owning his own property. "I said if you hear of anything just a little cheaper let me know. Within a week he emails me a photo of a house for $100. I thought that's just crazy. Why not? It's a way to cut our expenses way down and kind of open up a lot of time for creative projects because we're not working to pay the rent."
Houses on sale for a few dollars are something of an urban legend in the US on the back of the mortgage crisis that drove millions of people from their homes. But in Detroit it is no myth.
One in five houses now stand empty in the city that launched the automobile age, forged America's middle-class and blessed the world with Motown.
Detroit has been in decline for decades; its falling population is now well below a million – half of its 1950 peak. But the recent mortgage crisis and the fall of the big car makers into bankruptcy has pushed the town into a realm unique among big cities in America.
A third of the population are unemployed. Property prices have fallen 80% or more in large parts of Detroit over the last three years. The average price of a home sold in the city last year has been put at $7,500 (£4,900).
The recent financial crash forced wholesale foreclosures among people unable to pay their mortgages or who walked away from houses that fell to a fraction of the value of the loans they had taken out on them.
Banks are selling off properties in the worst neighbourhoods, which are usually surrounded by empty and wrecked housing, for a few dollars each. But even better houses can be had at a fraction of their former value.
Technically, Brumit paid $95 for the land and $5 for the house on Lawley Street – which fitted what estate agents euphemistically call an opportunity.
Brumit said: "It had a big hole in the roof from the fire department putting out the last of two arson attempts. Both previous owners tried to set it on fire to get out of the mortgages. So there's a big hole about 24ft long and the plumbing had almost entirely been ripped out and most of the electrics too. It was basically a smoke damaged, structurally intact shell with a snowdrift in the attic."
Setting fire to houses to claim the insurance and kill off the mortgage is not uncommon in Detroit; a blackened, wooden corpse of a house sits at the bottom of Brumit's street. But it is more common for owners to just walk away from their homes and mortgages.
On the opposite side of Lawley Street Jim Feltner and his workers were clearing out a property seized by a bank. "I used to be a building contractor. I was buying up places and doing them up. Now I empty out foreclosures. I do one or two of these a day all over the city," he said. "I've been in Detroit 40 years and I've watched the peak up to $100,000 for houses that right now aren't worth more than $20,000 tops. I own a bunch of properties. I have 10 rentals and I can't get nothing for them, and they're beautiful homes."
Feltner's workers are dragging clothes, boots and furniture out of the bedrooms and living room, and dumping them in the front yard until a skip arrives. Kicked to one side is a box of 1970s Motown records. A teddy bear lies spreadeagled on the floor.
"You could get about five grand for this place," said Feltner. "Nice house once you clean it out. All the plumbing and electricals are in it. Roof don't leak."
Brumit said a man called Jesse lived there. "Jesse had mentioned that he was probably going to get out of there because he knew he could buy a place for so much less than he owed. That's a drag. You don't want to see people leaving," he said.
The house next door is abandoned. On the next street, one third of the properties are boarded up.
It's a story replicated across Detroit.
Joan Wilson, an estate agent in the north-west of the city, whose firm is offering a three-bedroom house on Albany street for $1, says that more than half of the houses she sells are foreclosures in the tens of thousands of dollars. "The vast majority of people that call to enquire, almost the first thing out of their mouth is that they want to buy a foreclosure. I have had telephone calls from people looking online that live, for example, in England or California, who've never set foot in the area. They're calling about one specific house they see online. I tell them they need to look at the neighbourhood. Is it the only house standing within a mile?"
But what is blight to some is proving an opportunity to remake parts of the city for others living there. The Old Redford part of Detroit has suffered its share of desolation. The police station, high school and community centre are closed. Yet the area is being revitalised, led by John George, a resident who began by boarding up an abandoned house used by drug dealers 21 years ago and who now heads the community group Blight Busters. They are pulling down housing that cannot be saved and creating community gardens with fresh vegetables free for anyone to pick.
"There's longstanding nuisance houses, been around seven, eight, nine years. We will go in without a permit and demolish them without permission," said George. "If you, as an owner, are going to leave something like that to fester in my neighbourhood, obviously you either don't care or aren't in a position to take responsibility for your property, so we're going to take care of it for you." Blight Busters has torn down more than 200 houses, including recently an entire block of abandoned housing in Old Redford. "We need to right-size this community, which means removing whole blocks, and building farms, larger gardens, putting in windmills. We want to downsize – right-size – Detroit," George said.
Houses that can be rescued are done up with grants from foundations.
"Detroit has some of the nicest housing stock in the country. Brick, marble, hardwood floors, leaded glass. These houses were built for kings," George added. "We gave a $90,000 house to a lady who was living in a car. She had four children. It didn't cost her a dime. We had over a thousand people apply for it. It's probably worth $35,000 now."
Old Redford is seeing piecemeal renewal. One abandoned block of shops has been converted to an arts centre and music venue with cafes. One of the few remaining cinemas in Detroit – and one that's among the last in the US with an original pipe organ – has been revived and is showing Breakfast at Tiffany's.
Brumit calculates that he has spent $1,500 to buy and do up his house, principally by scavenging demolition sites. He will move in with his wife and four-month-old child once it is complete, probably in the summer.
He said: "The Americans we know got ripped off by the American dream. But [the renovation] is the most like moving out of the country that we can actually do. We're the minority in terms of ethnicity and this is a rich environment … there's 30% open space in the city and that doesn't include the buildings that should be torn down. You're in a city riding your bike around and you hear birds and stuff. It's incredible."
http://www.u.tv/News/Detroit-homes-sell-for-$1-amid-mortgage-and-car-industry-crisis/eca5863e-658b-4cdf-a9cc-127b43811575
Thursday, February 25, 2010
Home Sales Drop to 50-Year Low
James Heiser
The New American
25 February 2010
There are further signs that Barrack Obama’s jobless “recovery” is, in fact, no recovery at all. The latest indication of the fundamental unsoundness of the American economy is found in statistics from the Commerce Department. According to that department, the sale of new homes plummeted in January to the lowest rate recorded in fifty years. As The Washington Post reports:
Purchases of new single-family homes dropped 11.2 percent in January from December to a seasonally adjusted annual rate of 309,000, the Commerce Department reported Wednesday. Sales fell in every region except the Midwest, and the raw number of new homes on the market rose for the first time in nearly three years.
"No sugarcoating these numbers," Mike Larson, an analyst at Weiss Research, wrote in a note to clients. "They stink."
The statistics do show that regional weather conditions may have played some roll in the drop. Again, according to The Washington Post, “The plunge in new-home sales was led by a 35 percent drop in the Northeast. Sales fell 9.5 percent in the South, which includes the Washington area.” But the snow cannot account for all of the drop when one is speaking of the a drop of this magnitude.
Reportedly, analysts had reportedly expected that new home sales would occur at an annual rate of 360,000; the adjusted rate — despite the Home Buyer Tax Credit — is shockingly lower. With the $8,000 credit for first time home buyers — $6,500 for repeat home buyers — extended through April 30, 2010, the stunning drop in home sales demonstrates that not even large tax credits can keep boosting the rate of sales.
According to a story at BusinessWeek.com, even more conservative estimates were proven to have been wildly optimistic:
Sales were projected to climb to a 354,000 annual pace from an originally reported 342,000 rate in December, according to the median estimate in a Bloomberg survey of 72 economists. Forecasts ranged from 325,000 to 386,000.
The decline is all the more striking in that it demonstrates that the decline has occurred precisely at the very time that the Home Buyer Tax Credit was supposed to be stimulating home sales. The rate of home sales is 6.1 percent below last January. It is true that the many foreclosed homes on the market probably play a significant roll in depressing the rate of sale of new homes—but the very existence that so many foreclosed homes are on the market is proof in itself that an economic recovery is still an unrealized dream.
http://www.thenewamerican.com/index....at-50-year-low
The New American
25 February 2010
There are further signs that Barrack Obama’s jobless “recovery” is, in fact, no recovery at all. The latest indication of the fundamental unsoundness of the American economy is found in statistics from the Commerce Department. According to that department, the sale of new homes plummeted in January to the lowest rate recorded in fifty years. As The Washington Post reports:
Purchases of new single-family homes dropped 11.2 percent in January from December to a seasonally adjusted annual rate of 309,000, the Commerce Department reported Wednesday. Sales fell in every region except the Midwest, and the raw number of new homes on the market rose for the first time in nearly three years.
"No sugarcoating these numbers," Mike Larson, an analyst at Weiss Research, wrote in a note to clients. "They stink."
The statistics do show that regional weather conditions may have played some roll in the drop. Again, according to The Washington Post, “The plunge in new-home sales was led by a 35 percent drop in the Northeast. Sales fell 9.5 percent in the South, which includes the Washington area.” But the snow cannot account for all of the drop when one is speaking of the a drop of this magnitude.
Reportedly, analysts had reportedly expected that new home sales would occur at an annual rate of 360,000; the adjusted rate — despite the Home Buyer Tax Credit — is shockingly lower. With the $8,000 credit for first time home buyers — $6,500 for repeat home buyers — extended through April 30, 2010, the stunning drop in home sales demonstrates that not even large tax credits can keep boosting the rate of sales.
According to a story at BusinessWeek.com, even more conservative estimates were proven to have been wildly optimistic:
Sales were projected to climb to a 354,000 annual pace from an originally reported 342,000 rate in December, according to the median estimate in a Bloomberg survey of 72 economists. Forecasts ranged from 325,000 to 386,000.
The decline is all the more striking in that it demonstrates that the decline has occurred precisely at the very time that the Home Buyer Tax Credit was supposed to be stimulating home sales. The rate of home sales is 6.1 percent below last January. It is true that the many foreclosed homes on the market probably play a significant roll in depressing the rate of sale of new homes—but the very existence that so many foreclosed homes are on the market is proof in itself that an economic recovery is still an unrealized dream.
http://www.thenewamerican.com/index....at-50-year-low
Saturday, January 23, 2010
Nomura: No real estate recovery for UAE in 2010
http://www.arabianbusiness.com/579615-dubai-debt-woes-to-hurt-uae-property-industry---nomura-
Dubai debt woes to hurt UAE property industry - Nomura by Bloomberg on Saturday, 23 January 2010Dubai’s debt crisis has sapped investor confidence and may hurt the property industry in the UAE this year, analysts at Nomura Holdings said in a report on Friday.“The Dubai government’s announcement of a Dubai World restructuring and debt standstill agreement has put an end to any likelihood of a real estate recovery in 2010,” newswire Bloomberg quoted Nomura as saying.Dubai World, one of Dubai’s three main state-owned business groups, said on November 25 that it would seek to delay repaying debt for at least six months, roiling markets in the Middle East and around the world.The global credit crisis led to a 50 percent decline in property prices in the city and hampered the ability of Dubai-based companies to raise loans and refinance.House prices in Dubai may fall this year and remain little changed in Abu Dhabi, with the second quarter being the low point for the market in the Gulf state, the Nomura report said.Dubai may have total debt of as much as $170bn, more than previously estimated, investment bank EFG-Hermes Holding said in a report Jan 19.The emirate, the second-largest in the UAE has raised $20bn by selling bonds to Abu Dhabi, two state-run banks there and the UAE central bank.
Dubai debt woes to hurt UAE property industry - Nomura by Bloomberg on Saturday, 23 January 2010Dubai’s debt crisis has sapped investor confidence and may hurt the property industry in the UAE this year, analysts at Nomura Holdings said in a report on Friday.“The Dubai government’s announcement of a Dubai World restructuring and debt standstill agreement has put an end to any likelihood of a real estate recovery in 2010,” newswire Bloomberg quoted Nomura as saying.Dubai World, one of Dubai’s three main state-owned business groups, said on November 25 that it would seek to delay repaying debt for at least six months, roiling markets in the Middle East and around the world.The global credit crisis led to a 50 percent decline in property prices in the city and hampered the ability of Dubai-based companies to raise loans and refinance.House prices in Dubai may fall this year and remain little changed in Abu Dhabi, with the second quarter being the low point for the market in the Gulf state, the Nomura report said.Dubai may have total debt of as much as $170bn, more than previously estimated, investment bank EFG-Hermes Holding said in a report Jan 19.The emirate, the second-largest in the UAE has raised $20bn by selling bonds to Abu Dhabi, two state-run banks there and the UAE central bank.
Sunday, January 17, 2010
Buy Treasuries, Buy The Dollar, Dump Commodities
Gary Shilling has become famous in the last few years for predicting the credit crunch and the bear market. The bearish investor still believes deflation is the dominant force at work and that the credit crunch is in the process of unfolding. But he isn’t bearish about everything. The following are his 6 buys:1. Buy treasury bonds – the safehaven trade will return.2. Buy income-producing securities – high quality dividend names will be a safe place to hide.3. Buy consumer staples and foods – consumers won’t stop buying the necessities.4. Buy ’small luxuries’ – consumers are trading down.5. Buy the U. S. dollar – still the world’s safehaven currency.6. Buy eurodollar futures.Unfortunately for market bulls Shilling is generally bearish about stocks and the global economy. His 11 sells:1. Sell U.S. stocks in general – U.S. stocks are just too expensive.2. Sell home-builder and selected related stocks – home prices will fall 10% in 2010 and the stocks will tank with it.3. Sell big-ticket consumer discretionary equities- consumers aren’t buying luxury goods due to the trade down.4. Sell banks & other financial institutions – the days of big bank profits and bailouts are over.5. Sell consumer lenders’ stocks – consumers will continue to deleverage.6. Sell many low- and old-tech capital-equipment producers.7. If you plan to sell a home or investment house, do so yesterday.8. Sell junk bonds.9. Sell commercial real estate – the real estate bubble is a slow motion train wreck.10. Sell most commodities – the dollar rally will crush commodities.11. Sell developing country stocks and bonds – there will be no decoupling.Read more market commentary at The Pragmatic Capitalist -- >
http://www.businessinsider.com/gary-shillings-top-trades-for-the-year-buy-treasuries-buy-the-dollar-dump-commodities-2010-1
http://www.businessinsider.com/gary-shillings-top-trades-for-the-year-buy-treasuries-buy-the-dollar-dump-commodities-2010-1
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