Tuesday, September 09, 2008

'Fore!'closure

From CBS13:

The sounds of 'fore' on a local golf course may soon be silenced due to a foreclosure of sorts. Like many homeowners facing foreclosure, the owners of Wild Wings Golf Course near Woodland say they can't pay their bills and plan to walk away from the property. The closure would mean homeowners who bought homes with a golf course view may soon be seeing brown instead of lush green fairways.
...
With a backyard view of course the D'Amico family is wondering what will happen to there property value. When the development started in 2005, homes were going for $750,000 plus. Now, residents fear Wild Wings will turn into weeds.
From News10:
Brandenburg Development of San Jose is behind in it's property tax payments and water bills and says the golf course loses money every month. "Brandenburg has offered the property to the County for a one-dollar donation," says homeowner Stephanie Young-Birkle.
...
But Yolo County is balking so far. The County faces a continuing budget deficit and has been laying off workers.
From the Sacramento Bee:
A financial dispute involving one of Sacramento's signature condo complexes apparently is turning nasty. As we hear it, officials with project investor Resmark Equity Partners LLC of Los Angeles entered the L Street Lofts building early Friday with the intention of changing locks and assuming control. Representatives of developer Sotiris Kolokotronis then arrived at 1818 L St. and tensions escalated, resulting in police being summoned.
...
What's behind the financial dispute between Resmark and Kolokotronis? It could be Resmark's concern that fewer than half of the 92 units – priced between $389,000 and $1.2 million – have been sold since L Street Lofts opened last year.
From Hovnanian earnings call via Seeking Alpha:
Ivy Zelman – Zelman & Associates

Ara, you point out some positives that referring to markets, Northern Cal and Augusta and Stockton and other areas where the market’s seen an improvement in existing home sales, you know ironically the increase in existing home sales is coming from foreclosures and dominating markets as much as 50% to as high as 75% of those existing home sale increases, and we know that through title companies and work we’ve done that half of those and maybe even more, many are being purchased by investors.

The good news is that it’s moving inventory. The bad news is that there’s for every house that’s taken off, there’s more in the pipeline to come. The other bad news is it’s taking share from your new home market and your prices, although in many cases you may not be making money now, are likely to go lower because appraisals are coming in lower because the comparables are foreclosures. So I’m really having a hard time seeing the light at the end of the tunnel that you seem to see.
From the Sacramento Bee:
Sacramento-area homebuyers flocked to mortgage offices Monday to lock in some of the year's lowest interest rates following a weekend federal takeover of mortgage giants Freddie Mac and Fannie Mae. But inside one of the nation's hardest-hit housing markets, which has seen billions of dollars in home equity erased the past two years, it was still tough to gauge the longer impact. The early consensus among local mortgage brokers, home builders and economists was that the government takeover can't hurt and might be good for Sacramento's real estate market. At the very least, some said, it averts the possible disaster of a credit meltdown and means things won't get worse.
...
Brian Jacobosky, a Folsom house hunter, said he's pleased to see rates fall after the federal takeover. But he said, "That's not going to change our game plan." His family is browsing for a home after selling a house in Arizona and moving to Sacramento. Jacobosky thinks he'll get more financial mileage from declining sales prices than fluctuating interest rates.

25 comments:

smf said...

From the SacBee comments:

Condo living can be wonderful for young couples and singles. Living in a nice condo in the heart of a vibrant district like Mid-town Sac or downtown Sac is exactly what many young adults want out of life.

It is completely true...except that young couples and singles cannot afford the prices.

These condos are targetted towards the wrong people.

Diggin Deeper said...

"The early consensus among local mortgage brokers, home builders and economists was that the government takeover can't hurt and might be good for Sacramento's real estate market. At the very least, some said, it averts the possible disaster of a credit meltdown and means things won't get worse."

Pure BS! Ask the employees and stockholders of Lehman if things won't get worse. Or if it could get much worse at WaMu. Or with the losses the insurance companies, banks, big pension funds, and mutual funds will take as their stock in the GSE's is rendered worthless.

I'd like to know how the $14B in Mac and Mae losses this year were accounted for. You hold $5.3 Trillion in mortgage debt, with loss ratio's running as high as they are, and then blow those figures by the public as fact?

One thing I'll agree with is that RE loans will get processed and funded as long as the presses remain in the "ON" position.

Patient Renter said...

Brian Jacobosky, a Folsom house hunter, said he's pleased to see rates fall after the federal takeover

Pleased, and apparently oblivious to the incredible costs that made those lowered rates possible, something that nobody should be pleased about.

Jacob said...

So a $5T takeover by the government is a good thing and guess what, it was good for a 1 day bounce on wall street. 1 day... The market gave all the gains back today.

When the Fed was cutting rates, a rate cut was good for almost a week long bounce.

You know we are in bad shape when $5T is nothing more than pissing in the wind.

The train has left the tracks and gravity plus momentum have a firm grip. And we don't have enough money in the world to thow in front to stop it.

Condos were meant to be an affordable alternative for people looking to get into RE. But builders and lenders had no problem with selling to speculators and soon those entry level homes were out of reach as well.

So will Lehman or WM fail first? Can't be much left in the bailout fund, I mean there has to be a limit on how fast we can print $$.

Stuck in SF said...

PR and Jacob. I am not for bailouts either, but one is for sure. We are going to pay one way or another. We are a bailout nation. This has allowed us to have cheap mortgages and risk taking corporations all these years.
If we didn't bail out the GSE's and the credit markets completely froze would we go into a economic tailspin? Would politicians then create a new New Deal and bail us out. It just seems like no matter what, the government will spend billions on this. It's just who we are. If we would have just stayed out of the process many years ago, the housing boom would never of happened and we wouldn't not be blogging right now. Free markets need to be free in order to work. There cannot be an implicit guarantee to help should things get bad. Risk is no longer priced as it should be.

James said...
This comment has been removed by the author.
James said...

"It is completely true...except that young couples and singles cannot afford the prices."

Why do you think all young people and singles cannot afford those prices? There are a ton of such individuals downtown who can. A 30 year old making over $100,000 is not that uncommon. You are talking about a pretty small number of housing units in an area with a very limited supply of housing. Finding a couple of hundred such individuals is easily possible. In fact, half of my entire floor fits that profile. We work at 400 Capitol and living in a nice loft downtown would be perfect. Again this comes down to qaulity of life. Do you think a young couple or single person wants to live in the burbs with no night life? They want to live downtown, which they are currently doing. Do you know what a nice loft of flat rents for in the subject areas? These kids are dropping $2000 per month on rent. I do think they can afford a $450,000 mortgage.
Another group which fits the mold are hip empty nesters. No house or yard to take care of. Good restaurants and culture just outside your building. Be young again. Why retire to some ugly 50 and over golf course community.

smf said...

James:

If there are 'hundreds' of such youngsters, we wouldn't be in this problem, would we?

As for empty nesters, I see that more as a myth.

Has anyone even made a study to ask empty nesters what they really want?

Something tells me that the results would be unexpected.

Don't make the same mistakes .commers made. They 'assumed' that people would give up going to the store if they could shop online.

Didn't quite happen in the end, did it?

smf said...
This comment has been removed by the author.
Patient Renter said...

If we didn't bail out the GSE's and the credit markets completely froze would we go into a economic tailspin?

Yea, most likely.

My problem with what happened is that nobody understands or cares about the policies that got us in this mess, and certainly nobody in power is willing to speak out about how these policies are specifically crafted to benefit private corporate interests over the public ones.

Ed said...

James - You need to check your math there buddy. $2000 rent does NOT equal a $450,000 mortgage. Even with 20% down (you know, a years gross salary for your 100K earner.)

Ed

ps: Don't forget to include taxes, insurance, common fees, closing costs, maintenance and upkeep. Leave something for decorating too.

James said...

Ed, I wasn't comparing $2000 to a $450,000 mortgage. How many people buy a house for exactly what they pay in rent. They usually move up. And how many people really put 205 down? How many people really get a fully amortized mortgage?
Point being. There are people who make good money and have the means to live in a nice downtown condo. Why don't you go back and see how many deposits were put down on the towers. The numbers are there.

James said...

SMF, amazon is having a record year. Something tells me they are shopping more online.

smf said...

James:

If the #s were there, the towers would have been built.

Condos suffered from more rampant speculation than housing, so # of deposits mean nothing if someone (plenty of stories about this) put deposits for 5 units.

As to Amazon, what is the value of its stock now compared to the year 2000?

Diggin Deeper said...

James I agree with most of what you say. However, the fact is those lofts are not selling. As the article points out 92 units on the market for sale, over half still sitting empty. The numbers don't work and those that did buy are now in the middle of a battle between developers/investors.

The shift toward the city is coming but looks like it will have to wait until better times.

James said...

PR. I also think some of it has to do with downtown not quite being the hip happening place we all see it being in 10-20 years. I was very tempted to buy a condo in the towers, but the bus station and the hotel berry and marshal kept me away. There is no grocery store downtown. A nugget would be perfect. The idea of walking all the way up to Safeway takes a bit of the appeal away. The other step is to get Mo out of K street. I hear he is starting to make some progress with the city though.
It's funny, a lot of those lofts are now being rented by businesses. My wife just put a deposit down on a loft above Ella to run her lobbying firm out of. It's a little funky, but has a nice kitchen.

mopar777 said...

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
As for empty nesters, I see that more as a myth.
Has anyone even made a study to ask what empty nesters what they really want?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Since you'll often find me dancing downtown at the Ballroom of Sacramento, Azucar, Harlow's or Midtown Stomp, I guess this empty nester wants the downtown nightlife.
Talk about a hip empty nester - I know this one guy who's 68, a great dancer and has lots of fun with the ladies.
Del Web's golfland? Forget it!

RV6Flyer said...

"As to Amazon, what is the value of its stock now compared to the year 2000?"

The same, but if you applied the same P/E ratio as 2000 to now, the stock price would be 4 times as high.

Diggin Deeper said...

"The same, but if you applied the same P/E ratio as 2000 to now, the stock price would be 4 times as high."

That's what a shift in risk tolerance, tight credit, and reverse leverage will do...You could probably apply the same analogy across the entire S&P when you factor in the devaluation of the USD over the same period....Kind of like running in place...you're not getting anywhere, anytime soon...and you're paying more and more to come to that conclusion.

Ed said...

"Kind of like running in place..."

Makes you wonder what investors *really* got for their money with all those "retained earnings."

Q: What is the value of a stock that never pays a dividend?

http://ask.metafilter.com/71639/What-are-stocks-actually-worth-if-they-never-pay-dividends

Cow_tipping said...

RV6Flyer said...
"As to Amazon, what is the value of its stock now compared to the year 2000?"

The same, but if you applied the same P/E ratio as 2000 to now, the stock price would be 4 times as high.

Wednesday, September 10, 2008 10:36:00 AM

Amazon and ebay ... that is all you got ...
OK lets see, try pets.com, webvan and the 1000's of other dead .coms.
Goes to show, if you were first on the scene, actively muscled out the competetion and had a monopoly, started early and pushed and pushed and pushed your business, it will all of a sudden attain critical mass and just be an unstoppable train.
Kinda like the failing condo towers, the 100's of condo-hotels, the huge McMansion subdivisions in the middle of nowhere ...
Cool.
Cow_tipping

soldout said...

"A 30 year old making over $100,000 is not that uncommon" You are absolutely right if you consider 1% of the population of 30 year olds. But I guess when you hang out constantly with that 1% you tend to think like Leoana Helmsley.

Jacob said...

Yea, not that many people make $100k.

Anyway, this just in, more info on those areas that are immune to price corrections.

http://www.westsideremeltdown.blogspot.com/

TSV = Total Sales Volume
ASP = Average Selling Price

For August:

Beverly Hills 90210
-68.9% (TSV) -37.8% (ASP)

Westwood 90024
-64.5% (TSV) -29.1% (ASP)

West Hollywood/LA 90048
-55.9% (TSV) -5.4% (ASP)

Also for CA:

44.8% of sales were foreclosures.
40219 NODs
39507 Total Sales

So let's see if my math is right:

There were 39507*.448 = 17699 foreclosures sold in August, and 40219 NODs sent out.

As fast as the banks can sell these foreclosures, they are still outpacing the sales with new foreclosures.

Diggin Deeper said...

"As fast as the banks can sell these foreclosures, they are still outpacing the sales with new foreclosures."

That's been happening all the way down. One thing is certain, demand for homes in this area has not dried up as prices have fallen to these levels.

Most of the $250K and below stuff is getting multiple bids IF they're priced 3-5% below most recent comps.

Here's an ongoing example:

3 homes (3/2.5/2 1550 sq ft.), same model, same neighborhood, come on the market in N. Natomas over a 2 week period. All foreclosures in comparable condition:

Home 1 priced at $245K 1 offer

Home 2 priced at $233K 4 offers

Home 3 priced at $214K 6 offers with more expected.

As of today are at least 11 buyers competing for 3 homes.
It's just an example that typifies what happens when you let the market determine the price paid...in this case I would fully expect the price to be over $233K but not by much...we'll soon see.

inpd said...

James writes:

"Do you know what a nice loft of flat rents for in the subject areas? These kids are dropping $2000 per month on rent. I do think they can afford a $450,000 mortgage."

As one of those kids living in midtown
let me assure you your numbers are wrong.

I live in The Fremont Building:
1100 sq ft apt, gym, inbuilt
washer dryer, 9 foot ceilings,
security gated, on top of a star-bucks,
sushi restaurant etc.

It's about as nice a location as
you can get and the building is 7
years old.

I rent month to month and pay
$1400 + $125 parking
If I committed to a 6 month lease
it would be $1350 and a 12 month
lease $1300. This is all advertised
at forrent.com so these are haggle-free
prices.

These prices are typical for
the up-market complexes.
A CADA apartments of similar size
but sans gym, security will be
$1100.

Please don't make stuff up to
support your conclusion it ruins
the discussion.