Saturday, February 09, 2008

Painting the Lawns Green: The Housing Bust's Newest Growth Industry

From the Stockton Record:

A Stockton man sees the growing number of dead brown lawns of foreclosed homes in the area and sees nothing but green. Nick Terlouw has launched the Greener Grass Co., which amounts to a service in which he sprays dead lawns with a deep green, water-based dye that makes the turf look good enough for a golf course or a professional football stadium.

For between $175 and $225 per yard, Terlouw uses a motor-powered 50-gallon insecticide sprayer designed for treating orchard trees. He waves his magic wand and in broad sweeps, a la painting a house, makes tired, if not expired, turf sit up and sparkle like Shirley Temple.
Terlouw is trying to market his service to real estate agents and property managers. One home-owners association has hired him to spray a couple of dead lawns, he said. "Honestly, I see a gold mine here."
From the Stockton Record:
While abandoned rural homes have always appeared to attract attention from lawbreakers, Environmental Health's Alan Biedermann has seen a sharp increase in problem homes that are damaged like the Guzman house. Many are way beyond repair and must be demolished, he said. "Stealing is becoming way more common. We've got five properties in that area alone that we're dealing with now," said Biedermann, the county's lead senior registered environmental health specialist.

About every six months, he takes demolition contractors on a tour of abandoned homes so they can bid on deconstructing the property. Typically, five to 10 contractors are interested in the work. On last summer's tour, they visited 17 homes. Last week on his most recent tour - called a bid walk - Biedermann led 30 contractors through 32 homes slated for the wrecking ball. "It's going to probably get worse before it gets better," he said.
"In addition to the residential wasteland being created here, I have noticed a few visible changes in the commercial real estate market. I drive by some of the nicest office space in Stockton, and I am noticing more and more "for lease" signs on the properties. These are offices of well-to-do professionals. The vacancies are accelerating, and it seems like it's just begun. The road ahead looks bleak."
"Maybe the rest of the country will fare better than here, maybe not. I actually pictured the residentially displaced people forming communes in the empty warehouses. Now that would be different."
From News10 (video):
Local mosquito control officials worry the alarming number of homes with swimming pools being lost to foreclosure could lead to a mosquito population explosion...A random check by News10 of five bank-owned homes with swimming pools discovered four of them with green water.
From the Sacramento Bee:
The city of Sacramento is trying to squeeze every nickel of fees and taxes out of North Natomas before the federal government shuts down new construction. City staff has been asked to identify key revenue-generating projects north of the American River and move them quickly through the development approval pipeline to qualify for building permits by year's end.
Faced with an estimated $55 million budget deficit in the next fiscal year, largely attributed to the severe decline in the housing market, city officials say they can't afford to see revenue from North Natomas completely cut off even for a year. The area accounts for about 45 percent of the dollar value of building permits issued in the city annually.
From the Sacramento Bee:
Elk Grove Unified School District is anticipating an enrollment decline of about 500 students this fall...The district blames the region's housing slump for the drop. Families and their students are moving out, [district spokeswoman Elizabeth] Graswich said.
From the Elk Grove Citizen:
There will be less than 300 students attending both an upcoming high school and middle school when they open this August. The schools’ neighbors are also currently vacant lots and construction sites instead of homes that were expected to pour in during Elk Grove’s housing boom that is now over.
From the Redding Record Searchlight:
While numbers have not been released, the housing downturn was expected to slash lumber demand in 2007 to about 50 billion board-feet, according to the Western Wood Products Association. That would mean a reduction of 14 billion board-feet from 2005 to 2007. That's equal to the combined annual lumber output in Oregon, Washington and Idaho.

"It's the steepest two-year decline ever in lumber consumption. It's even worse than what we experienced in 1980 to 1982, and 1974 to 1976 with the oil crisis," said Butch Bernhardt of the Western Wood Products Association....


SacramentoCrash said...

"When subdivisions in Natomas sprouted like weeds a few years ago, my wife and I joked that the homes had to be Coast Guard Approved, and included life vests and signal flares because it was just a matter of time before they were underwater."

You got that one right buddy.

Jacob said...

So why dont they just spray the brown lawns, with I dunno, how about water.

I didnt like the idea of a HOA to begin with, but seeing now that they wont even contract with someone to water the lawns is pretty bad.

Chuck Ponzi said...


HOAs are more concerned with liability than with the money for water.

If their watering causes foundation problems on the house... they suddenly become the targets of some lawsuits. Better to steer clear of it altogether.

Chuck Ponzi

Jacob said...

Didn't think about that. But even so they could offer the bank to do it (even for a small fee) and require a non endemnity agreement.

I dunno, just seams like letting the vacant homes rot doesnt really help anyone else in the neighborhood, especially if they want to sell to some other sucker.

aggiealum said...

How accurate are realtytrac's numbers of reo, auction homes, preforeclosures?

KTM 300 said...

My reward for paying my bills on time. Well, ah...I guess I will just have to wait a while longer...Once again I've played by the rules, and those who did not sweat the BS come out ahead. This great news for sellers, now that the government is going to come to the rescue, they can hold out longer for the price they want and so deserve.

NEW YORK ( -- Six of
the nation's largest mortgage lenders have temporarily stopped foreclosure proceedings, it was announced Tuesday, in a joint effort to cool the raging foreclosure crisis.

Under a new program, called Project Lifeline, legal efforts to oust seriously delinquent borrowers from their homes will be postponed for 30 days. During that time lenders and borrowers will try to work out payment options on a case-by-case basis.

Project Lifeline will not be confined to borrowers with adjustable rate mortgages (ARMs), according to the prepared remarks of Alphonso Jackson, Secretary of Housing and Urban Development (HUD), that accompanied the announcement of the program.

ARMs have recorded the highest rates of delinquencies but defaults for loans of all types have risen dramatically over the past couple of years.

"For many families, Project Lifeline will temporarily pause the foreclosure process long enough to find a way out. Loan modifications may follow. And, this program is not only available to subprime borrowers but to people with any kind of home mortgage," said Jackson.

The lenders already on board are Citigroup (C, Fortune 500), Countrywide (CFC, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Washington Mutual (WM, Fortune 500) and Wells Fargo (WFC, Fortune 500); more may sign up if Project Lifeline meets with success. The program was put together with the backing of Jackson, Treasury Secretary Henry Paulson and Faith Schwartz, director of Hope Now, the government-backed, foreclosure prevention coalition.

Paulson said the effort won't be a magic bullet.

"There'll be homeowners who still take no action, and some will still walk away," Paulson said. "But some borrowers facing immediate foreclosures may find solutions."

In addition, Paulson said he was not optimistic about immediate improvement for housing markets.

"In terms of subprime, the worst is just beginning," Paulson said. "The loans resetting over the next couple of years, that vintage was done under the most lax underwriting standards."

During the temporary moratorium, foreclosure prevention specialists will examine individual cases to see if there's a good possibility that, through some kind of loan modification or repayment plan, borrowers will be able to regain their footing, start paying their mortgage again and remain in their homes.

For lenders, repossessing homes has become an increasingly unprofitable venture. As real estate markets have turned, many at-risk mortgage borrowers are upside-down, owing more on the loan than their home is worth. Foreclosing on such properties means taking a bath when the house is resold, especially factoring in maintenance, legal, tax, realtor commissions and other costs.

Recent reports indicate the average foreclosure results in an average loss of more than $50,000 for the lender. It's cheaper to work out a deal with defaulting borrowers.

The moratorium idea has been raised before. "Many people have been calling for a moratorium on foreclosures," said John Taylor, CEO of the National Community Reinvestment Coalition. "I look on it as a good thing."

Last April, civil rights groups, noting that minorities were bearing the worst impact of the foreclosure crisis, called for a six month halt in foreclosure proceedings. In May, the California Reinvestment Coalition, a community advocacy group, lobbied state legislatures for a similar, state-wide plan. This past December, Sen. Hillary Clinton went on record supporting a 90-day halt.

Jim Rokakis, treasurer of Cuyahoga County in Ohio, which has been hard hit by foreclosures questioned the initiative. "Does this mean you're going to do it again in 120 days?" he asked. Subprime resets will peak again in the spring and Hope Now's effort includes notification of resets 120 days in advance.

"If they really want to make an impact they will require mandatory counseling before foreclosure can be completed. If you can't do it, you can't foreclose," Rokakis said.

As the foreclosure crisis deepened - there were more than 2.2 million foreclosure filings in 2007, according to RealtyTrac, an online marketer of foreclosure properties - government forces and industry players expanded the scope of prevention efforts.

Secretary Jackson sees the program as one more step in a multifaceted approach to meeting the foreclosure crisis. Project Lifeline will supplement such efforts as FHASecure, which is refinancing many adjustable rate mortgage borrowers into government insured fixed rate loans; the rate freeze, brokered by the Treasury Department, a five-year suspension of interest rate increases for many at-risk, subprime ARM borrowers; and the provisions of the economic stimulus package that increase cap limits for loans eligible for purchase by Freddie Mac and Fannie Mae that should lower borrowing costs for many home owners in high-cost areas.

"The sum total of these actions is a powerful correction to the downward spiral of the housing market. It will lead to a reversal of misfortune, saving homes and equity, providing necessary sanity and salvation for many families on the brink of foreclosure," said Jackson.

Jacob said...

Just another bandaid on that sucking chest wound.

This is life support for the banks, that it might help the borrower is an irrelevant coincidence.

I wonder what percentage of borrowers that are in over their head actually want to keep their home. I mean if you owe 500k on a home worth 300k, foreclosure seams like a great deal.

Plus if you qualified for your loan based on bs no doc financials then it doesnt really matter cause you will never be able to afford the payments, no matter what credit counciling you get.

smf said...

"For many families, Project Lifeline will temporarily pause the foreclosure process long enough to find a way out"

And the way out would STILL be foreclosure.

I don't think there is anything that the government can do to fix this situation, except to let the chips fall where they may.

aggiealum said...

Pardon the naivety, but after reading about Project Lifeline, I thought this: It only helps those with loans from the 6 banks (BoA, CFC, Wells, JPM, WM, and Citi). Here's where the naivety comes in: I'm assuming these banks loaned them their own (depositers') money. So the interest was essentially their income. Since the "bet" back then was to have higher interest at reset, if these banks agree to "freeze" rates to prevent payments from rising (ie forgo the additional income), wouldn't that help the homeowner (barring nothing's changed since they bought the home)? Rather than foreclose the home, the banks can buy some time for the home owners to try to sell now (or at least have the opportunity to wait it out)? In hopes of at least stabilizing the number of homes foreclosed, even though it would mean more homes are going to be on the market?

Jacob said...

They owners cannot sell. They put 0% down, paid neg am for a year or two so that home they bought for 450k they now owe 470k and it would only sell for 325k (made up numbers).

They cant refinance for the same reason, they cannot get a 470k loan for an asset work 325k. Even if the home was worth the full amount they will not find a lender for 100% of the value.

When the bank takes the home they try to sell if for like $250k and nobody bids so the bank is screwed and times that by 1000s of homes.

Also many people got into more home than they could afford figuring they could tap the atm in two years, no that option is gone.

This may help a few people, but more likely the forclosure delay helps the banks a lot more. Even if they agree to let the person stay in the home and pay 50% the rent, that is better than foreclosing for the bank right now. They might lose 10k a year on a home for that, if they foreclose they lost 150k at once.

commonsense said...

"Recent reports indicate the average foreclosure results in an average loss of more than $50,000 for the lender. It's cheaper to work out a deal with defaulting borrowers".

Huh? Of course bankers will love to persuade the goffers to stick to their mortage obligation while the house value plumets. Check out Countrywide REO list. Most are high $200/per square feet and need about 35%-50% correction to be marketable.Oh,well. Bankers should realise as much as they want to make money on Real Estate so the homeowners and investors who were goofed to buy into the buble.

smf said...

"Recent reports indicate the average foreclosure results in an average loss of more than $50,000 for the lender."

Where? If you take the average of the whole US that $50K sounds right. But right now I can easily find homes that sold for $350K on the market for $200K.

I would guess the banks allowed this moratorium to occur, since they have so many already in the pipeline to deal with anyways.

But this is only the beginning of the end for the bubble. Wait till all those 'savvy foreclosure investors' find that they are also going upside down and that home prices don't go back up anytime soon.