'There Goes the Property Value'
George Warren reports for News10 (video here):
More than 100 units in a Sacramento-area condominium complex are headed into foreclosure in what appears to be a case of bad timing. A development group called Rollingwood North LLC purchased the former Rollingwood Commons apartment complex in Fair Oaks and Orangevale in 2004 when the housing market was near an all-time high.
The company began converting the 242 units to "luxury" condominiums. According to county records, sales started strong in late 2005 with 76 units sold in the final three months. But sales tapered off in 2006 and in the first three months of 2007 the group sold just one unit.
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Rollingwood North apparently stopped paying dues to the homeowners association, which has begun foreclosure proceedings...[T]he collection agency handling the foreclosures told News10 it is still filing the paperwork and the total will be 188 units in default.
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"There goes the property value," said Sharon Morton, who paid $239,000 for her two-bedroom condo last fall.
16 comments:
Guess they couldn't find anyone from Rollingwood to comment on the story. I wonder who those guys are?
AFAICT, there were really only 43 total sales at Rollingwood since 2005, not 76. Probably has something to do with the way they're handling title transfers...
When the market is going up in value, no one stops to think about all the factors that contribute to the costs of owning real estate. The tax man, the HOA, the Mello Roos bonds.
Think about the home builders who all made large commitments to the municipal entities where they are building homes (or not building homes...). The builders promised to provide services, fund parks, pay for schools etc., all backed up by insurance companies and their surety bonds. Then the market tanks and the builders can not pay the obligations, since no one is buying houses. The city revenues decline and they need the revenue more than ever.
Some people on wall street estimate the public builder's obligations are starting to exceed their net worth. Imagine the irony, when a public builder tosses the keys to the empire on top of the job shack, leaving it as collateral for the surety bond provider, who must then pay the munipal entity more than the collateral value of the home building company. Talk about sub prime lending.
When the HOA's are foreclosing for unpaid dues, you know the market is correcting in a very big way. That is the tail wagging the dog. It will get more interesting in the very near future.
Amazing what a little web searching can dredge up. Looks like Rollingwood was bought by a "Pismo Beach developer" and "Condominium conversion maven" by the name of Al Nevis for $39.4M, or $144K per unit.
Looks like the Nehemiah Sacramento Valley Fund (a non-profit run by Pacific Coast Capital Partners) sunk $5.5M into the project also.
OK, this gets even better. A subsidiary of Nehemiah happens to run one of those downpayment assistant programs.
Hey, George. How many of those condo buyers had "down payment assistance" from Nehemiah? I don't think the IRS allows companies that provide down payment assistance to be investors in the property they're helping to fund.
If true, this is a huge story.
Hey Max,
E-mail Bill Wisserman at the Sac Bee after the national media picks it up I'm sure he will print it.
E-mail Bill Wisserman at the Sac Bee after the national media picks it up I'm sure he will print it.
Ha! Half of those "buyers" will be on the street before the Bee covers this.
Seriously, I'm wondering if the reason there hasn't been any buyers is because the "assistance" dried up after this IRS ruling:
IRS Targets Down-Payment-Assistance Scams; Seller-Funded Programs Do Not Qualify As Tax Exempt
If this scenario is true, these people are true victims. See this article in the Denver Post:
FHA program key in surge of foreclosures
Max...great work!! True victims involved here, although got to fault them for the "too good to be true and should have known better rule".
Big pump for the blog site if you get this to the right people. Not only do they have a housing problem but a tax issue as well.
Posted these details on my blog (With apologies to Lander. :)
Rollingwood Details
Looks like the subprime bailout will now be handled by the federal government:
Lawmakers propose aid for subprime borrowers
http://news.yahoo.com/s/nm/20070411/bs_nm/usa_subprime_congress_dc_4
The federal government should offer troubled borrowers hundreds of millions of dollars to bail them out of subprime mortgage loans, several leading Democratic lawmakers said on Wednesday.
"The federal government can send in an infusion of (money) to prevent foreclosure," said Charles Schumer, a New York Democrat.
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"... We will be proposing significant amounts of dollars to go here and do this. Could not tell you how much, but in the hundreds of millions of dollars for sure. Maybe more than that," Schumer said.
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"We have to move quickly because the trend line goes way up in terms of the number of foreclosures," he said.
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Each foreclosure can drain $80,000 from lenders, homeowners and local governments, the senators said. Lawmakers need to remember how homeowners suffer but also what foreclosure does "to the entire neighborhood and depressing the value of every home within miles of there," said Brown.
We wouldn't want to depress the artificially inflated value of homes, would we?
Here come the Dems with pre-election posturing and saving the poor lumpin from themselves. What's a few hundred million more added to the defecit. A little here, a little there and soon we'll be talking hundreds of billions again.
If that bailout happens we're just delaying a financial collapse. The next few years are going to be interesting from an economy standpoint. Best to just enjoy life and not worry about timing the market. Fortunately, I don't need a home, so I'll keep renting for years.
Or this may be the time to pick up a rollingwood condo. :-)
Bailout by the Dems, I wonder if G.W. will sign it or does he have to? Just like our society to reward those who fail and penalize those who do not.
This is not a bail out for the subprime/AltA borrower but a bailout for Wallstreet. Its the new game, no rules, but how you can you scam the last dollar out of Joe six pack.
Also, this is just another opportunity for major fraud. The only government bailout should be FEMA trailers for any homeless FB subprime borrower. Anybody know where you get your hands on a few FEMA trailers, hint just follow the largest river in the U.S. south.
PR - I'm with you - there's lots of life to live while this bubble deflates. I'm in no hurry. Owning a home is on my list, but it's not in the top ten. I work too hard for my money to see
$10K, 20K, or 30K disappear in 12 months.
Do the math...$80,000 x 1 million foreclosure victims (can't forget to include the mortgage companies) = Foreclosure on America. I wonder if someone will be kind enough to remove the flag from the Rotunda. Won't happen, this is just political pandering.
Max,
Good observations. Can you contact me?
George Warren
KXTV News10
gwarren@news10.net
I hate that it's come to this, but Schumer is an absolute idiot, along with the others supporting this. If someone can't afford their payment now, infusing them with cash isn't going to help them afford their payment in the long run. End of story.
Unless they plan to permanently subsidize people who can't afford their payments, this is simply prolonging the inevitable. And of course, it has the downside of wasting tax payer money, and alienating everyone who was wise enough to not take on a bigger mortgage than they could afford. Way to go Schumer.
Thinking about it a bit more, ANY bailout encourages wreckless behavior on the part of consumers and lenders. Why not take on a bunch of debt if you know the govt. will bail you out.
Again, way to go Schumer.
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