Boom2Bust.com

Why Halloween Is Going To Suck This Year

… and in other news, a new milestone was reached by Boom2Bust.com last night when post number 666 was published.

22 days to Halloween, Halloween, Halloween. 22 days to Halloween, Silver Shamrock.

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Don’t pay full price for your home. Visit RealtyTrac for homes at half price.

Quotes For The Week

A hat-trick of quotations for you…

The rejection of the package is good because it shows that some people in the U.S. are still sane. A bailout will not buy the U.S. a way out. The government is less powerful than markets in fixing this mess.

-Marc Faber, in a September 30 phone interview with Bloomberg

Sometimes I think we need to put out an ad: “No, we don’t have any more jobs than you do.”

-Jodi Royal-Goodwin, the redevelopment agency director for Reno, Nevada, in response to an influx of homeless people coming to the city looking for jobs

Altogether, we have had eight years of no gains in real median wages, flat stock market returns, and minimal net new jobs. Despite what you have heard, after adjusting for debt spending, population growth and realistic adjustments to the GDP deflator, there have only been 3 or 4 quarters of GDP growth since 2005. If you adjust for military, government and minimum wage positions – i.e. jobs funded by tax payers and jobs that don’t pay anything - there have been absolutely no net new jobs. Bush’s largest gains have been with inflation, oil and food prices, debt, trade deficits, bankruptcies, foreclosures, and healthcare costs. If an assembly of the world’s leading economic strategists were to design the most destructive economic disaster possible, they could not match the results of Bush’s tenure. Even the most loyal Bush supporters will admit he has been an absolute disaster – that is if they’re being honest.

-Mike Stathis, Managing Principal of Apex Venture Advisors and author of America’s Financial Apocalypse, in a Market Orackle (UK) piece from September 14

Weird Housing Tales, Part 11

Is this one screwed up housing market or what?

In some areas of the country, residential property prices are reaching new lows. The Associated Press wrote last night:

With a winning bid of just $1.75, a Chicago woman has won an auction for an abandoned home in Saginaw. Joanne Smith, 30, recently was the top bidder for the home during an auction on eBay, The Saginaw News reported. Her bid was one of eight for the home.

“I am going to try and sell it,” she told the newspaper. “I don’t have any plans to move to Saginaw.”

Smith said she hasn’t seen the property or visited Saginaw, which has been hard-hit by economic troubles in recent years.

There’s a notice on the door of the home saying a foreclosure hearing is pending, the newspaper said. She must pay about $850 in back taxes and yard cleanup costs.

However, in other parts of the United States, not only are prices holding up, but homeowners actually still see themselves as part of some exclusive club— with the “unclean” not welcome.

From the latest issue of HOMESPLUS, a free monthly real estate magazine:

A Texas homeowners association says a nearly new Ford truck isn’t good enough to be left out in a driveway overnight.

Owner Jim Greenwood has gotten three notices telling him to get the truck out of the driveway or face a $50 fine per event, the Austin American-Statesman reported.

The homeowners association of the gated community called Stonebriar Village in Frisco, Texas, does, however, allow more prestigious brand trucks such as Lincolns to be parked in driveways. Greenwood tried to explain to the board during a July meeting that his truck and the Lincoln Mark LT were constructed on the same assembly line and basically the same vehicle. He claims a board member responded by telling him that “Lincoln markets to a different class of people.”

Chalk one up for Chevy lovers and snobs.

Source: Custom Names & Signs

Sources:

“Bid of $1.75 on eBay gets abandoned Saginaw home”
Associated Press, October 1, 2008

“No Fords Allowed In Texas Driveway”
HOMESPLUS, September 11-October 15, 2008

Second Stimulus Package Taking Shape?

Had an idea this would be a hot topic after the carnage on Wall Street today. CNN Money’s Corey Boles and Michael R. Crittenden wrote this evening:

Sens. Carl Levin, D-Mich., and Sherrod Brown, D-Ohio, said that the federal government needs to step in and help people on Main Street, urging Republicans on Capitol Hill and the White House to work with the Democratic majority in Congress to finalize an economic assistance package.

“The uncertainty about the future of the market underpins the need for another economic stimulus package,” said Levin…

Levin and Brown were speaking on a media conference call Tuesday morning.

Meanwhile, Senate Majority Leader Harry Reid, D-Nev., called on Republican presidential candidate Sen. John McCain, R-Ariz., to work to pass a second stimulus package…

House Majority Leader Steny Hoyer, D-Md., said the news from Wall Street underscored the need for another stimulus package, and said he hoped to bring a recovery plan to the House floor soon.

Speaker of the House Nancy Pelosi, D-Calif., said she hoped the Bush administration would come to the table to talk with Democrats.

Brown said elements of a stimulus package needed to include an extension of unemployment insurance benefits, spending to repair the country’s infrastructure, an increase in grants to states to help them pay for rising Medicaid costs, and an extension of tax credits for companies investing in research and development, and renewable energy sources.

According to CNN Money’s Boles and Crittenden, another goal of a second stimulus package could be to rescue the battered U.S. housing market. They wrote:

Democratic aides in the Senate said that lawmakers could attempt to do more with part of a second stimulus bill to bolster the housing market, which is at the root of the problems affecting banks like Lehman Brothers and Merrill Lynch due to their exposures to the subprime mortgage market.

The aides said that discussions were beginning Monday as to what that assistance could be, and that details weren’t available yet.

Boles and Crittenden also noted there are some who would like to see any housing initiatives include a halt to foreclosures. From the CNN Money piece:

John Sweeney, president of the AFL-CIO, the largest group of U.S. labor unions, renewed his call for a government-imposed moratorium on home foreclosures to allow the problems in the housing market to settle down.

Source:

“3rd UPDATE:Market Woes Reinforce Need For Stimulus -US Dem Sens”
Corey Boles and Michael R. Crittenden
CNN Money, September 15, 2008

Pay Attention To The Employment Data, For Housing’s Sake

If you haven’t heard by now, the latest U.S. government employment numbers that were released earlier today sure weren’t pretty. Bloomberg’s Shobhana Chandra reported:

The U.S. lost more jobs than forecast in August and the unemployment rate climbed to a five-year high of 6.1 percent… Payrolls fell by 84,000 in August, and revisions added another 58,000 to job losses for the prior two months, the Labor Department said today in Washington.

Chandra added:

Today’ report brings the total decline in payrolls so far this year to 605,000. The economy created 1.1 million jobs in 2007.

You might be reading this at work right now, contemplating whether or not your job is safe. Yet, there’s something else you might want to think about as well, especially if you’re looking to sell your home anytime soon or otherwise depending on a housing rebound. CNBC’s Albert Bozzo wrote earlier this week:

If the extraordinary and unpredictable haven’t completely crushed the housing market, the conventional and cyclical may yet finish the job.

Much has been made of the popping of the real estate asset bubble and the entrenchment of the credit crunch.

But little attention has been paid to what a recession and accompanying spike in unemployment could do to a housing market already stricken by faltering sales, sinking prices, high interest rates and soaring foreclosures.

And the timing couldn’t be worse.

Bozzo interviewed Dean Baker, co-director of the Washington, D.C.-based Center for Economic Policy Research, about the relationship between unemployment and housing. Baker said:

There’s definitely a relationship. Where there’s unemployment, there’s downward pressure on prices.

And regarding the ongoing U.S. housing bust, “We’re going to see an add on effect from job losses,” added Baker.

CNBC’s Bozzo also spoke to Rick Sharga of RealtyTrac, a leading online marketplace for foreclosure properties. Bozzo wrote:

Rick Sharga, SVP at RealtyTrac, sees unemployment adding “another leg” to the foreclosure problem, adding that before the arrival of sub prime, credit crunch factor, “the single best predictor of foreclosure rates was the unemployment rate.”

“If we do see an economic downturn then all bets on this foreclosure cycle being over are off,” he says. “Prices will become vulnerable again. You’re going to see more price depreciation.”

Bloomberg’s Kathleen M. Howley reported on the latest foreclosure numbers earlier today. Howley wrote:

Foreclosures accelerated in the second quarter to the fastest pace in almost three decades as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn’t refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey’s 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter…

Don’t be surprised to see more calls for a turnaround in the housing market thwarted should job losses continue to grow. Nigel Gault, Group Managing Director of the North American Macroeconomics Service for forecasting firm Global Insight, explained to CNBC:

If people are worried about losing their jobs or are losing their jobs, housing is the kind of purchase you can easily postpone.

Sources:

“U.S. Economy: Payrolls Decline, Sending Unemployment to 6.1%”
Shobhana Chandra
Bloomberg, September 5, 2008

“Rising Unemployment May Deepen US Housing Slump”
Albert Bozzo
CNBC, September 3, 2008

“U.S. Mortgage Foreclosures, Delinquencies Reach Highs (Update1)”
Kathleen M. Howley
Bloomberg, September 5, 2008

Next Wave Of Mortgage Resets On The Horizon

The financial news media has been quiet lately when it comes to covering mortgage resets and their effect on the housing crisis. Too quiet. CNBC’s Ariel Nelson made some noise Thursday when she wrote:

Last year, everyone was worried that the resets on subprime loans would force borrowers into higher interest rates and payments. This element of the housing slide and credit crunch has subsided a bit…

However, the Option ARMs and Interest Only (IOs) loans scheduled to reset in the next few years will add more trouble. These loans represent about 15% of securitized loans and some have negatively amortized, increasing the payments and making refinancing more difficult. According to data from Barclay’s, about $300 billion in option ARMs and $820 billion in IO’s are set to recast. The results could be payment shocks over 80% for option ARMs and over 60% for IOs according to Barclay’s.

Option ARM Recast and Payment Shock Forecast
Source: CNBC

Earlier today, the Mortgage Bankers Association announced that a record 9.2% of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June.

Source:

“ARM Resets: Tsunami Ahead”
Ariel Nelson
CNBC, September 4, 2008

Detroit Foreclosure Bargains

Back on August 14, I wrote a post about a foreclosed Detroit home selling for a dollar. I happened to stumble upon the following from MarketWatch’s Craig Tolliver earlier today, which deals with the same topic:

Think you can make a killing in the foreclosure market? You’d be hard pressed to find better bargains than in Detroit. The Motor City gives new meaning to an upside-down housing market. If the banks were smart, a reach I grant you, they’d bypass the brokers and unload these beauties at Dollar Tree or The 99 Cents Only Stores.

One unnamed bank just sold a four-bedroom house for a buck — at a cost of $10,000! Explains why bank stocks are in the toilet. If you’re looking to troll the Detroit market, realtor.com has four more $1 steals (including a duplex!) and listings for over 170 properties under $1,000. (Go shopping!) “My 14-year-old son could buy a block of Detroit property,” Ann Laciura lamented to the Detroit News. She’s a senior servicing specialist for the Bearing Group, the firm hired to manage and sell the property. The kicker? Even at a buck, it still took 19 days to sell it. Word to Detroit banks: It might be more cost effective to forgive the debt than foreclose. I’m just sayin.’

Only $700…

Source:

“Four bedrooms for a buck”
Craig Tolliver
MarketWatch, August 22, 2008

Landlords Faced With Falling Rents And Occupancy Rates

From the Wall Street Journal back on January 17:

To be sure, rents have continued to rise steadily in many markets. And the housing downturn means that more people are looking for rentals as well, increasing demand. Many would-be buyers have become renters because they can’t get a mortgage in today’s tight credit environment, or because they’re sitting tight in hopes that prices drop further.

Eight months later, it’s looking like the party may be over for apartment building owners. From the Journal last Wednesday:

For the past year, apartment buildings have been one of the few bright spots in the real-estate industry as people forced out of the home-buying market by foreclosures or the credit crunch have turned to renting.

But now the specter of job losses is beginning to spread the gloom into that sector as well. As would-be renters are doubling up in apartments or moving in with friends and families, rents and occupancy rates are beginning to fall in many cities.

Journal reporter Nick Timiraos (who, ironically, wrote both pieces) noted:

The one downside of the housing crisis for apartment owners has been the “shadow market,” made up of unsold homes that owners have put on the rental market.

But that competition isn’t nearly as big a problem as job-loss trends. “In many markets, our new prospects are beginning to resist the current and increasing levels of market rents we’ve enjoyed over the past quarter,” David Neithercut, chief executive of Equity Residential, told investors during this month’s earnings call. While the Chicago-based apartment owner, one of the largest in the U.S., reported an increase in funds from operations of 1.5% last quarter, it lowered its estimates for comparable-property revenue growth.

Sources:

“Home Sellers’ Pain Is Renters’ Gain”
Nick Timiraos
Wall Street Journal, January 17, 2008

“Apartment Buildings Lose Their Immunity To Housing’s Chill”
Nick Timiraos
Wall Street Journal, August 20, 2008

Florida County Looks At Using Inmates To Maintain Foreclosures

U.S. News & World Report’s Luke Mullins recently came across a story of how one Florida county intends to maintain its glut of foreclosed properties. Mullins wrote back on August 15:

You think living next to that abandoned house with waist-high grass is unsettling? Just wait until the prisoners start showing up…

From The Suncoast News, in Florida:

Pasco County officials will ask for permission to use county jail inmates to help clean and mow lots of foreclosed homes that have fallen into disrepair.

“We’ve got to get in front of this,” Commissioner Michael Cox said today [August 12] in bringing up the issue. “Last I heard there were 6,000 homes in foreclosure” in Pasco, he said…

And the prisoners? Well, they should at least be glad they’re not being made to perform Michael Jackson’s “Thriller.”

Cebu Provincial Detention and Rehabilitation Center
YouTube Video Link

Source:

“County Wants Prisoners to Primp Foreclosures”
Luke Mullins
U.S. News & World Report, August 15, 2008

Detroit Home Sells For One Dollar

From FOXBusiness.com yesterday:

In what might be considered a new low for the housing market, a home in Detroit sold for $1.

The home, located at 8111 Traverse Street, close to the Detroit City Airport, was foreclosed upon last summer, after it was purchased for $65,000 in 2006, according to an article in The Detroit News.

The bank was so eager to sell the foreclosed property, it lowered the price to $1 in a final attempt to find a buyer. According to the newspaper, 14 days after the property was listed for $1, a local woman purchased the house as “an investment property.” The property taxes will run the new owner $3,900, in 2009.

And homeowners around the country are praying that “What happens in Detroit, stays in Detroit.”

War Of The Worlds Spoof From “Scary Movie 4” (2006)
YouTube Video Link

Source:

“House in Detroit Sells for $1”
FOXBusiness.com, August 13, 2008

Sovereign Wealth Fund Buying Foreclosed Homes

According to the New York Post’s Teri Buhl, a sovereign wealth fund is preparing to acquire tens of thousands of foreclosed American homes. This past weekend Buhl wrote:

There’s a new land grab starting in America.

Foreign money, which up to now has focused its attention on investing in iconic commercial real estate - like Barneys New York and the Chrysler Building - is now moving to scoop up tens of thousands of discounted foreclosed homes across the country.

One sovereign fund, said to have earmarked $29 billion to purchase foreclosed residential real estate, recently hired a West Coast mortgage broker and is starting to search for bargains, The Post has learned.

The search, which is being carried out, in part, by Field Check Group mortgage consultant Mark Hanson, who was retained by the broker, Steve Iversen, is concentrating on single- and multi-family REO (real estate owned) homes, or homes that have already been taken over by the mortgagee.

Neither Iversen nor Hanson would disclose the name of the client, but sources told The Post it’s a sovereign fund.

The unidentified fund joins individual US investors, hedge funds and Wall Street banks in kicking the tires of REO homes, which have fallen in value so much that they are now tempting investments.

Don’t be surprised if housing bulls jump all over this one and say it will help bring about a bottom to the U.S. residential real estate slump.

“California Dreaming”

Source:

“Lost Sovereignty”
Teri Buhl
New York Post, August 10, 2008

Unpaid Parking Ticket Leads To Foreclosure

Oh, this one’s a doozy. From Luke Mullins, Associate Editor of U.S. News And World Report, last week:

Man, I’ve got to start reading the Milwaukee Journal Sentinel more often…

As an increasing number of property owners lose their homes to exotic mortgage products and falling home values, the city of Milwaukee has foreclosed on a resident’s house because he failed to pay a parking ticket…

I expected a little bit more from the town which gave us “Happy Days” and “Laverne & Shirley.” You can read the rest of Mullins’ piece here.

Source:

“Parking Ticket Leads to Home Foreclosure”
Luke Mullins
U.S. News & World Report, August 12, 2008

Weird Housing Tales, Part 9

I was waiting for a story like this one. From the accessAtlanta website last week:

Things couldn’t look better three years ago for Milton and Patricia Harper of Lake City, who giddily accepted the keys to a small castle, plus enough money to pay taxes on it for 25 years.

Now, the Clayton County house that “Extreme Makeover: Home Edition” built is a two-story, turreted example of how things can go wrong. It’s in foreclosure.

The Harpers used the house at 5489 Ahyoka Drive as collateral for a $450,000 loan, Clayton County mortgage records show. Records at the law firm handling foreclosures for the lender, JPMorgan Chase Bank, say it is in foreclosure. The four-bedroom house with decorative rock walls and a three-car garage is scheduled for auction on the Clayton County Courthouse steps Aug. 5.

Mark Davis, the author of the piece, said that the home took six days to build back in January 2005. Atlanta-based Beazer Homes USA and “Extreme Makeover” demolished the Harpers’ previous home due to a faulty septic system. In its place, professionals and volunteers built the largest home ever for the popular television show. Furthermore, Beazer Homes’ employees and company partners raised $250,000 for the family, which was to provide for scholarships for the three Harper children and a home maintenance fund.

Hope the $250,000 isn’t gone as well…

Source:

“‘Extreme Makeover’ home in Atlanta in foreclosure”
Mark Davis
accessAtlanta, July 25, 2008

Quote For The Week

The folks who sat on the sidelines, they should feel legitimately annoyed that the more speculative folks who bought homes they couldn’t afford are going to be bailed out or helped by the federal government… And these other folks [who] acted responsibly and didn’t get in over their heads and decided they didn’t want to buy
the home, they’re not getting any benefit.

-Edward Leamer, senior economist at the University of California and director of the prestigious UCLA Anderson Forecast, on government efforts to bail out homeowners struggling to avoid foreclosure.