Real Estate Crash thread

[Benny Profane]

We'll see how smart the new buyers are a year or two from now when the little palace they bought is underwater again. If the old owners were able to sell at a profit or close to even, they'll be the smart ones, if they rented.
Unfortunately, all of this activity is being supported by you and me, the taxpayer, with government supported low down payment mortgages.

[ass-to-mouth]

Looks like Congress is extending the closing deadline to qualify for the $8K tax credit to September 30, 2010.

Dirt pimps win again.

[Spats]

"Borrowers exit troubled Obama mortgage program"

http://finance.yahoo.com/news/Borrow...html/print?x=0

More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes.

[liv2ski]

http://www.zerohedge.com/article/mer...le-dip-housing

Highlights from an interview by Meredith Whitney currently on CNBC (full interview to be posted later):

* A double dip in housing is a certainty
* State economies are plunging, and are $200 billion underwater, will lead to 2 million in state-level layoffs leading to a low-end impact; raising taxes at state level will impact the top-end
* Retail sales have been stronger only due to consumers not paying mortgages, retail sales have already topped as is
* Q2 bank results will finally catch up with accelerated mortgage foreclosures; charge-offs and delinquencies in credit cards are better due to mortgage non-payment cash flow going to other obligations, and this will soon top as well
* Structural employment issues in the US won't get better any time soon.

Watch the interview. Smart lady and not to hard on the eyes either. She brings up a number of issues we have already discussed in this thread.

[liv2ski]

Check out this link: http://www.hotstockmarket.com/forums...t=74095&page=3
It seems odd to me that DRN had such a strong run up in Feb-May of 2010, but things were looking a little more rosy with the $8k tax credit at that time.
For R.E. Bears like myself, DRV is worth watching.

"May existing home sales plunged far below expectations, coming in at an annualized -2.2% rate, compared to consensus of 6.0%, and a revised 8% in April. This is the second worst monthly drop in history, and shows just how very wrong economists are, and how they will all have to revise their outlooks lower, for all macro indicators including GDP. The plunge occurred even despite near record low 30 year mortgage rates: the Freddie 30-year, conventional, fixed-rate mortgage fell to 4.89 percent in May from 5.10 percent in April; the rate was 4.86 percent in May 2009. The push forward effect of the administration's various subsidies is now over and a double dip is likely now inevitable unless yet another stimulus plan is implemented. There is nothing quite like the administration finding a scapegoat du jour: first it was snow in winter, then hot weather in the spring, now it is the oil spill: "Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance."
http://www.zerohedge.com/article/hou...sensus-down-8-

[ass-to-mouth]

I love stories like this.

Wednesday, June 23, 2010 As of 3:44 PM EDT

Prisoners, Scammers Profit On Home-Buyer Credit

By Andrea Coombes

The Internal Revenue Service doled out more than $27 million in fraudulent claims for the home buyers' tax credit on returns for 2008, including claims by prisoners serving life sentences and people who purchased their home before the credit was in effect, a U.S. Treasury Department report said Wednesday.

The IRS paid out $9.1 million to 1,295 people who were in jail at the time they said they bought a home, and 241 of those prisoners were serving life sentences, according to the report from the Treasury Inspector General for Tax Administration, which monitors the Internal Revenue Service. On average, that's slightly more than $7,000 per prisoner.

Another $17.6 million went to 2,555 people who bought their homes before the tax credit became law--averaging out to about $6,890 per person.

In other fraudulent claims, the total cost of which the Treasury inspector general wasn't yet able to quantify, the same home was claimed by more than one taxpayer. About 10,280 people got a tax credit for a home that also was used by another taxpayer to claim the credit, according to the report.

"This is very troubling," said J. Russell George, the Treasury inspector general that oversees IRS activities. "While the IRS has taken a number of positive steps to strengthen controls and help prevent inappropriate credits from being issued, our audit found that additional controls are necessary to address erroneous claims for the credit."

In one case, 67 separate taxpayers claimed the credit on the same home. This type of fraud led the IRS to pay out "tens of millions of dollars" fraudulently, the report said.

What's more, at least 34 IRS employees were found to file claims "despite indications that they owned a home within the past three years," the report said. That's in addition to 53 IRS workers that the Treasury inspector general found filing fraudulent claims in 2009.

Congress created the first-time home-buyer provision--a refundable tax credit--in 2008 as in interest-free loan that taxpayers must pay back over 15 years. Lawmakers later removed the repayment requirement for subsequent home buyers and increased the maximum value of the credit. Congress also later expanded the tax break to include some people who weren't first-time buyers.

The latest version of the tax credit is worth 10% of the home's purchase price, up to $8,000 for eligible first-time buyers and $6,500 for those eligible for the repeat-buyer credit. The tax-credit deadline required taxpayers to enter a purchase contract to buy a home by April 30.

All told, 1.8 million taxpayers received $12.6 billion in home-buyer credits through February 2010, according to the report.

For its part, the Internal Revenue Service said it dealt with millions of claims for a tax credit that was developed in a short time period.

"During a severe housing crisis, the IRS made the credit available within weeks of enactment, even allowing individuals to claim 2009 home purchases on their 2008 tax returns," the agency said in an emailed statement.

"Where there are questionable claims, the IRS has moved aggressively and successfully blocked or denied nearly 400,000 questionable home-buyer claims and opened more than 150 criminal investigations. These aggressive efforts have saved taxpayers more than $1 billion."

Regarding the payments to prisoners, the IRS said it does not have access to "reliable, accurate data" on all prisoners. The IRS "encourages Congress to enact legislation to give IRS the data it needs on all federal, state and local prisoners," the statement said.

"At the same time, the IRS commissioner has directed senior agency officials to immediately engage with federal, state and local prison systems to identify ways to improve the timeliness and accuracy of the information that the IRS receives on the prison population and report back before the next tax-filing season. Additionally, [on Wednesday] the IRS wrote a letter to prison officials soliciting their participation in this effort."

As for its employees claiming the credit, the IRS said it "takes the issue of tax compliance by its employees very seriously. We will take strong action, including dismissal, when an erroneous claim has been willfully made. We will not tolerate erroneous claims on the home-buyer credit--regardless of where they come from."

-By Andrea Coombes; 415-439-6400; AskNewswires@dowjones.com

[liv2ski]

Editor's Note: This article was written by Kevin Grewal, editor of SmartStops.net.

"The trend of increasing foreclosures and a weak housing market
deals yet another blow to the real estate sector.

According to recent data from RealtyTrac Inc., US home foreclosures hit record numbers, marking the second consecutive record-breaking month in a row. The month of May saw foreclosures increase in every state. To put it into perspective, bank repossessions climbed 44% from last May, and one in every 400 households received a foreclosure notice.

What's even more alarming is that a relief in the number of foreclosures to hit the market is nowhere in sight. In the first quarter of the year, nearly one in every four mortgage holders owes more than his house is worth. With this in mind, a contagion effect could hit the markets as increasing numbers of homeowners are strategically walking away from their homes. This could tremendously hinder the real estate markets as inventories will likely increase and fewer individuals will be credit-worthy to obtain a loan in the future.

In fact, the number of foreclosures is expected to continue to increase throughout the year with foreclosure activity stabilizing sometime in late 2011".
http://www.minyanville.com/businessm.../2010/id/28707

Then you throw in the shit show in Commercial RE and OMFG

No One Wants to Catch a Falling Knife

In mid-June, CoStar's Mark Heschmeyer published a comprehensive review of the nation's commercial real estate market. He emphasized that the damage to major metro markets varied widely.

Hardest hit were Las Vegas, Orlando, Tampa, and Atlanta where distressed property sales accounted for 27-44% of all transactions. Nationwide, nearly 19% of all office transactions from early 2009 through March 2010 were distressed sales which were heavily concentrated in the suburbs.

Heschmeyer then turned to reports on specific markets from professionals in the field. The managing director of brokerage firm
NAI Global reported that various sectors of Manhattan commercial property had plunged 40-60% from the peak years and sales activity had also plummeted. A commercial land buyer in Dallas lamented that investment funds which had been created to pick up distressed property -- primarily REITs and hedge funds -- were all over the place, bidding up prices and "not letting assets hit bottom."

The Florida situation was so grim that the president of one troubled asset firm believed the general consensus to be that distressed properties would account for a majority of transactions for the next three to five years. A Philadelphia professional lamented that "properties are distressed because there are no tenants to lease up vacant space." In San Diego, the number of defaults filed this year was running at a pace more than 10 times greater than a year earlier.

One sarcastic pro from Arizona quipped that "It looks like we have reached the bottom, unless we find a new bottom."

Another seasoned veteran of real estate cycles in Tempe, Arizona, perhaps summed up best the attitude of market participants: "No one wants to catch a falling knife."

Commercial Mortgage Loans Coming Due -- A Ticking Time Bomb

William Hoffman is the CEO of Trigild, a non-performing loan specialist firm. In a telephone conversation with this Real Estate Channel author, he pointed out that although lenders don't want to foreclose, there's no other way to work out underwater loans that are coming due in the next two or three years. His view was that lenders won't want to refinance properties that have dropped 30-40% in value. The chart below aptly illustrates the ticking time bomb that awaits both underwater owners and lenders.

http://image.minyanville.com/assets/...010/kj6303.jpg

If there's a bottom on the horizon for commercial real estate, it's very difficult to see from this chart. Perhaps it is time to batten down the hatches.
http://www.minyanville.com/businessm...d/28991?page=2

Edit: I just read page 1 of this thread for the first time.
So Tipster, still 30% up in value?
Hopefully, Lee got his place paid off and didn't sell his other appreciating RE. Damn Canucks

[grapedrink]

i think this is a pretty good time to call the canadian real estate bubble top. let the slow downward grind begin!

[XXX-er]

i think this is a pretty good time to call the canadian real estate bubble top. let the slow downward grind begin!

call me when it hits bottom so I can re-invest eh?

[liv2ski]

i think this is a pretty good time to call the canadian real estate bubble top. let the slow downward grind begin!

As long as the Chinese are coming over and buying up properties with their newly minted millions, I doubt BC real estate will tank, but once or should I say if the Chinese economy hits a major blow out, then maybe their purchases will slow down and that may put a lid on upward growth of RE values.
I too wish RE values in BC would reset, but they are not being dragged down for the same reasons as they are in the USA, Britain, Ireland, etc.

[mock vomit]

More great news, not.

Foreclosures Up In 75 Percent Of Top U.S. Metro Areas

By REUTERS
Published: July 29, 2010
Filed at 7:48 a.m. ET

NEW YORK (Reuters) - Foreclosures rose in 3 of every four large U.S. metro areas in this year's first half, likely ruling out sustained home price gains until 2013, real estate data company RealtyTrac said on Thursday.

Unemployment was the main culprit driving foreclosure actions on more than 1.6 million properties, the company said.

"We're not going to see meaningful, sustainable home price appreciation while we're seeing 75 percent of the markets have increases in foreclosures," RealtyTrac senior vice president Rick Sharga said in an interview.

Foreclosure actions -- which include notice of default, scheduled auction and repossession -- in the first half rose in 154 of the 206 metro areas with populations 200,000 or more.

"We're not going to see real price appreciation probably until 2013," said Sharga. "We don't see a double dip in housing but we think it's going to be a long painful recovery for the next three years."

Nine of the 10 areas slammed hardest by the foreclosure tidal wave improved from the first half of 2009, suggesting a peak at rates that are still up to five times the national average, RealtyTrac said in its midyear 2010 metropolitan foreclosure report.

Cities with the 20 highest foreclosure rates were all in Florida, California, Nevada and Arizona.

As long as unemployment hovers near 10 percent and unrelenting foreclosures hang over the market, prices cannot stage a lasting comeback. Home prices are about 29 percent lower, on average, than peaks set four years ago.

"If unemployment remains persistently high and foreclosure prevention efforts only delay the inevitable, then we could continue to see increased foreclosure activity and a corresponding weakness in home prices in many metro areas," RealtyTrac chief executive James J. Saccacio said in a statement.

Home prices rose in May for the second month, still propped up by the crush of demand for homebuyer tax credits that ended April 30, according to Standard & Poor's/Case-Shiller indexes.

But that momentum will not last, economists agree.

Unemployment and wage cuts are chipping away at confidence and could slice average prices as much as 10 percent before a gradual climb resumes, many housing experts predict.

Sharga said the recent nominal price increases suggest that lenders so far have managed the distressed property flow well and buyers are bidding for those houses when they do get listed for sale.

Banks will take over at least a record 1 million mortgages this year, RealtyTrac estimated earlier this month, noting that more than 5 million loans are seriously delinquent and face foreclosure.

More than 3 million households are seen getting at least one foreclosure notice this year, and this record will be surpassed slightly at the peak of next year, RealtryTrac expects.

Las Vegas had the country's highest metro foreclosure rate in the first half of the year, with 6.6 percent of its housing units, or one in 15, getting a filing. The number of properties getting a notice, however, fell 9 percent from the same period last year.

[frozenwater]

I live in one a market that has always seen depressed home prices compared to the rest of the Wasatch Front (Ogden Utah).

When I moved here 3 years ago I thought it to be a great time to buy, homes were being scooped up so fast it was ridiculous.

I bought 2 homes, both in "good" neighborhoods, but not mcmansion neighborhoods.

I purchased the home I live in for $184,000.

I purchased a home I intended to flip for $114,000.

I put 15K into the flip home and thought it reasonable at the time to flip it for 160K.

Just then the market crashed.

3 years later the appraisel on the "flip home, now rental property just came in at $105k. I can't refinance it.

I'm honestly afraid to look at my primary residence appraisel.

Across the street a home has sat for sale for 3 months at 135K. 26% below what I paid and it is not selling.

I have had 2 foreclosures on my block.

This really has been the financial blow of my life. Right now I am not sure I will ever be able to move, and I really fucking hate where I live.

Fuck this market.

[liv2ski]

^^^ Damn, vibes Frozen. I am truly sorry to hear that.

[powder11]

As long as the Chinese are coming over and buying up properties with their newly minted millions, I doubt BC real estate will tank, but once or should I say if the Chinese economy hits a major blow out, then maybe their purchases will slow down and that may put a lid on upward growth of RE values.
I too wish RE values in BC would reset, but they are not being dragged down for the same reasons as they are in the USA, Britain, Ireland, etc.

I spent a few hours analyzing recent RE sales in Whistler and 80% of the recent sales (last 6 months) were AT or ABOVE asking price. The other 20% were at either extreme of the market (tear downs or castles), so you kind of have to over look that data. Mind you, the asking prices are about 10-15% down from the peak in 2008, but with sales volume increasing too, that could mean rising prices in the future. I don't really follow the Vancouver market, but from news articles I've read, it's been steadily going up.

Anyone calling for dooms day in these markets isn't paying attention to what's going on. The Chinese govt has also just approved Canada as a tourist destination for it's people, so there could be an influx of new money for vacation homes in Whistler not too far off.

[grrrr]

Yeah, Frozen...I hate to say it but even losing my shirt and my home to my ex-wife doesn't seem so bad now.

[meatdrink9]

I live in one a market that has always seen depressed home prices compared to the rest of the Wasatch Front (Ogden Utah).

When I moved here 3 years ago I thought it to be a great time to buy, homes were being scooped up so fast it was ridiculous.

I bought 2 homes, both in "good" neighborhoods, but not mcmansion neighborhoods.

I purchased the home I live in for $184,000.

I purchased a home I intended to flip for $114,000.

I put 15K into the flip home and thought it reasonable at the time to flip it for 160K.

Just then the market crashed.

3 years later the appraisel on the "flip home, now rental property just came in at $105k. I can't refinance it.

I'm honestly afraid to look at my primary residence appraisel.

Across the street a home has sat for sale for 3 months at 135K. 26% below what I paid and it is not selling.

I have had 2 foreclosures on my block.

This really has been the financial blow of my life. Right now I am not sure I will ever be able to move, and I really fucking hate where I live.

Fuck this market.

The market is not great, but here's another perspective for you: You sold roughly 700K of real estate (two properties) in Victor right at the height of the market and traded that 700K in debt for 300K. I pretty sure Victor is down more than Ogden, but even if we said that both markets went down this same 26% (mentioned in your post, I doubt Ogden has dropped this much) you saved $108,000 by moving to Ogden. I'd say you dodged a massive bullet.

[Tresckow]

Right now I am not sure I will ever be able to move, and I really fucking hate where I live.

Fuck this market.

dammit, I figured if you moved from here soon, then the home prices in this neighborhood would actually rebound. Nobody wants to live near a grumpy old metrosexual scrooge that waters the garden in their robe while mumbling to himself.

Guess we are fucked then

[grapedrink]

As long as the Chinese are coming over and buying up properties with their newly minted millions, I doubt BC real estate will tank, but once or should I say if the Chinese economy hits a major blow out, then maybe their purchases will slow down and that may put a lid on upward growth of RE values.
I too wish RE values in BC would reset, but they are not being dragged down for the same reasons as they are in the USA, Britain, Ireland, etc.

there's more to canada than vancouver, and vancouver certainly isn't immune. we shall see..

[powder11]

there's more to canada than vancouver, and vancouver certainly isn't immune. we shall see..

Vancouver/BC has way more diversity in the economy than the rest of Canada. Strong natural resources, tourism, hollywood, shipping as well as being the best place in Canada to live, so everyone wants to move here which pushes housing prices up.

All other provinces are one trick ponies that eat shit when their pony stops turning tricks.

[liv2ski]

Vancouver/BC has way more diversity in the economy than the rest of Canada. Strong natural resources, tourism, hollywood, shipping as well as being the best place in Canada to live, so everyone wants to move here which pushes housing prices up.

All other provinces are one trick ponies that eat shit when their pony stops turning tricks.

No shit, my step bro has lived in Calgary forever. I am bad remembering time that has passed, but it feels like 20 years ago the Oil/Gas business in Alberta tanked and there were a million foreclosures and declining home values in Calgary. My step bro walked from his house, as it was so far underwater.
I was born in Calgary, but could never move back, as it is just to cold in the winter. Vancouver maybe, as even my beach bunny wife loves BC, hence Powder11's point.

[frozenwater]

The market is not great, but here's another perspective for you: You sold roughly 700K of real estate (two properties) in Victor right at the height of the market and traded that 700K in debt for 300K. I pretty sure Victor is down more than Ogden, but even if we said that both markets went down this same 26% (mentioned in your post, I doubt Ogden has dropped this much) you saved $108,000 by moving to Ogden. I'd say you dodged a massive bullet.

There are times when the glass is half full, tomorrow may in fact be one of those times. Today, well, today is not such a time.

--oh, and treskow, I am SO going to pee in your freezer.

[grapedrink]

Vancouver/BC has way more diversity in the economy than the rest of Canada. Strong natural resources, tourism, hollywood, shipping as well as being the best place in Canada to live, so everyone wants to move here which pushes housing prices up.

All other provinces are one trick ponies that eat shit when their pony stops turning tricks.

there are so many detailed articulate arguments explaining the real estate situation in canada (and vancouver) that there's no need to get too deep into it here.. but it's not different here, and it's not different this time, it never is.

[LeeLau]

Edit: I just read page 1 of this thread for the first time.
So Tipster, still 30% up in value?
Hopefully, Lee got his place paid off and didn't sell his other appreciating RE. Damn Canucks

I sold 2 properties in late 06 and went mortgage free and continued investing in TIPs and a lifestyle of wanton hedonistic self-indulgent pleasure with my beloved wife - a quiver of skis and bikes

[liv2ski]

I sold 2 properties in late 06 and went mortgage free and continued investing in TIPs and a lifestyle of wanton hedonistic self-indulgent pleasure with my beloved wife - a quiver of skis and bikes

Nice to hear two of us lucked out all the way around.

[liv2ski]

14.7 Million (19%) Of US Mortgages Have $770 Billion In Underwater Equity, $2.4 Trillion In Total Debt Impaired

http://www.zerohedge.com/article/147...al-debt-impair

An excel spreadsheet released from a recent briefing by Mark Zandi and Robert Shiller is making the rounds within the blogosphere. It provides a useful compilation of the underwater equity statistics in the country. In a nutshell here are the observations:

* 19%, or 14.748 million of the 77.570 million US households, are in negative equity
* 30.6% of the 48.243 million of homeowners with first mortgages are in negative equity
* 21.8% of the 67.578 million in owner-occupied single family homes are in negative equity
* 4.133 million of the 14.748 million of underwater homeowners are underwater by 50%+, meaning the owe more than 50% more than their homes are worth
o Of the 50%+ underwater category, the worst states are California (672K), Florida (423K), and Texas (344K)
* Total Negative Equity in the US is currently estimated at $771.1 billion
o California mortgages have $234 billion in negative equity, Florida mortgages have $79 billion in negative equity, Texas mortgages have $48 billion in negative equity
* $2.4 trillion in total mortgage debt is impaired due to negative equity

How Mark Zandi, who prepared this spreadsheet according to the meta data, could look at this data and come up with his recent paper in collaboration with Blinder, claiming that the recession is over, is simply beyond rationalization.

Some of the key data in chart format: