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Anecdotal Evidence That Banks Are Hiding Depressed High End Real Estate
Why are Banks Hiding High End Residential Real Estate? Real Estate Channel
- Without the FTB tax credit, the housing market is receiving
artificial demand and price support from the FHA loan guarantees and
banks sitting on mortgages of homes once valued at $300,000 - Banks in areas that were severely damaged by the downturn in
domestic real estate (Cook County, Illinois, Miami-Dade County, Florida,
Orange County, California) have significant inventories of homes worth
more than $300,000 that they will not put on the market, even after
foreclosures lasting more than 2 years
According to Bruce Krasting over at Zero Hedge, the FHA is “Officially Broke” anyway: FHA – “We are Officially Broke” After perusing the data above, one would wonder why… (Link to FHA/FR)
SUMMARY: A recently issued independent actuarial study shows that the Mutual Mortgage Insurance Fund (MMIF) capital ratio has fallen below its statutorily mandated threshold.
More Reggie Middleton on Residential Real Estate:
As I Made Very Clear In March, US Housing Has a Way to Fall
Recent Mortgage Loss and Credit Performance Commentary
This is the public version of our quarterly review of Alt-A and
subprime mortgage performance sourced from the NY Fed and FDIC data.
All paying subscribers can access the entire document here: 4Q09 Alt-A and Subprime commentary (452.33 kB 2010-05-21 05:49:09).
»
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THIS IS A FAILURE SANDWICH!! IT IS MADE OF CRAP FINANCIAL INSTRUMENTS AND TAXPAYER BAILOUTS, AND YOU WILL EAT...EVERY...FUCKING...BITE!!
More of this "shadow banking" shit? Forget waking up "homeless on the continent that their fathers conquered," we're more likely to wake up with empty wallets and bleeding assholes at the rate that things are going now.
I live on the Jersey Shore and I've seen literally dozens of homes in my development that have had for sale signs up since last summer. All the 'temporary' type of For Sale signs have been replaced with the more permanent 'wooden post' variety. Nearly every one has had at least one 'New Price!' attachment added to the sign. One of my neighbors has been in their house since February 2009 with ZERO dollars paid in mortgage OR even the property tax or home owner's insurance. The bank just keeps going in circles with them but no action has been taken yet. They are so underwater with the house at the moment I think the current market value is about 50% of what they owe. They are just trying like crazy to save as much as they can for when the foreclosure process finally happens. At first they were considering bankruptcy to avoid foreclosure but as the market just completely tanked they decided to hold out.
I laughed at my township's property tax assesment last year. I told them if they actually belived my house was worth that number we could do the closing in 30 days and it was theirs! They also told me they currently have over 30,000 appeals on property tax currently 'in queue' and I asked them how many they cranked through in a month. The answer was 60 - 80. Ummm... so... what's the plan there? If my property tax increase is in the appeals process it can't take effect until the appeal is completed. Ergo... is my property tax going to be set to it's pre-increase value for... the rest of my life?
For those who don't know New Jersey has one of the most punitive property/income tax combos in the USA. Property tax funds everything here. Our last governor (Jon Corzine) actually suggested quite seriously that the only way to really close the budget gap was to dis-allow for the deduction of property tax on your state income tax. Seriously? Can you imagine what would happen? ANYONE who could would sell their home and leave the state. Those that can afford to move? Middle to upper-middle class and the wealthy. Perfect. Drive away your primary tax base into either Penn., NY, or Conn. Not to mention the sales taxes that go with those folks leaving. *shaking my head* Talk about 'head up your ass' thinking.
'Houston, we have a problem.' My step-brother just got a job in the construction business!... problem is.. the job is tearing down existing condos that have NEVER been lived in because the city involved sued the bank for lack of property management (public nuisance/eyesore municipal codes) and told them to either maintain all the units or tear them down. Apparently maintenance is both too expensive and shows up 'badly' on the books. Project is slated for 1.5 years to tear down almost 750 units.
My fellow Jerseyite, truly we are on the front lines of receiving nothing for everything, lol. But, it's cool...as long as people are "working" on pointless projects that go absolutely nowhere in the long term, then we're just fucking dandy, right?
Masturbation used to be one of those things that you did in the comfort of privacy...no small wonder that we're the persistent asshole of the country.
delete
Without giving a source, I can tell you without a doubt there is ABSOLUTELY NO HIDDEN INVENTORY OF HIGH VALUE SINGLE FAMILY RESIDENCES IN BERGEN COUNTY NJ.
I've been to several courthouse auctions in Hackensack and the situation has drastically changed from early 2009.
http://www.bcsd.us/sheriff_sale.aspx#sales
http://www.bcsd.us/sheriff_sold.aspx
Every single REO home of any high value is immediately bought by groups of private investors directly from the bank managers who control the REO portfolios. The banks are no longer pretending to play by the NJ real estate listing services rules using flash MLS listings to get comps.
These REO homes are selling well below MLS comps, however the banks are getting all cash offers on large bundles of properties, and are glad to move the inventory.
One example, I've seen bundles of 12+ properties valued at over 10MM, sold for 6MM.
Of those 12 properties, only 2 have gone back on any of the NJ/NY MLS services.
The same thing is happening in San Diego County, California according to Jim Klinge, http://www.bubbleinfo.com/, . Though in California they do have to flash MLS listings by law.
why are they not going back on the market, who wants to hoard empty houses?
Property managers renting them out?
It's the new math...or someone "Fat Fingered" a digit over to the Trillions side when calcing underwater mortgages. Com'on omnicompetent regulators wouldn't let this happen, God Damn it!
Not enough Hopium being smoked/mainlined on this site!
What's going on: you've been living in the real world? Heavens forfend . . .
Nothing depreciates faster than a vacant house. Keep holding the
weeds are five feet high.
I suspect you're right on the mark, Reg. It would seem to me that a housing collapse should be a "top-down" event. In other words, the drop in high-priced homes would dictate the drop in more affordable ones. It hasn't happened where I live (Philadelphia area), the high-end market seems to have largely evaporated. I guess I thought that those people were still hanging on somehow.
Um, not so much now.....thanks, Reg.
I doubt this. Here is what is really going on, straight from a former VP at Wells:
The U.S. flat out runs the banks. Its agents are in offices of ALL major banks.
The U.S. will not allow a foreclosed home back on the market unless it is "close" to the amount of the mortgage. Reason? If it goes back on the market for less, it depresses the value of all houses in the neighborhood.
So, of approximately 300 houses scheduled to be released to an agent each month, now that agent is getting 6 or 7.
Look, all the Federal Government is waiting for is for college-educated unemployment to go to 40-50%. Until then, it's going to extend and pretend and prop up the oligarchy. Period. There is NO political will in the middle class to do anything else, until the middle class is itself unemployed.
What's the uncorrupt measure of college-educated U.S. unemployment? 10%. That's not enough to prompt ANY change in policy from extend and pretend and oligarchy backstopping.
Things will go on EXACTLY the way they are going on now, until they don't go on that way anymore. End of story.
Actually, I don't think the lenders will even start foreclosure. They try to get what they can from the occupant, but don't file notice of default or anything. A lot of these occupants aren't all that sophisticated in the first place. The lenders try to convince them that even if they don't pay the mortgage, they should continue to pay the property tax and insurance.
Again, this is in the hard-hit areas. In some areas, where the houses still have fairly high values, I believe they will begin forclosure right away (still takes a while).
I am sort of extrapolating from a small sample size, but that's what the internet is for, anyway.
--mamba-mamba
"The U.S. flat out runs the banks."
She/he _would_ say that, wouldn't she/he? Like "the banks flat out run the govt" would be something that you'd hear from these folks? There's no distinction, they're tied at the hip.
I don't think anyone is waiting for anything, it's just slowing down the eventual collapse (and they all know it).
Things will go on EXACTLY the way they are going on now, until they don't go on that way anymore. End of story.
In a nutshell!
I see many examples of deteriorating (or not yet discovered) prices for empty, once super-expensive homes. But not much mention of physical deterioration. A house is an organic thing, and unless it is periodically cleaned and inspected for mold, insects, rodents, cracks, leaks etc., its value can eventually go negative. This happens when the cost of repair exceeds potential sale price, at which point only the land has value. In some locations this value may be considerable, but the cost of demolition and cleanup must be subtracted to male the property salable.
Edit: while I was composing this, Defenestrate gave examples of mansions becoming tear-downs in super-posh Chicago areas. I wonder if some banks consider the uncollected mortgage payments a fair trade for the "owners" to act as "house-sitters" and at least keep the heat and AC on in season so the place doesn't rot from the inside out.
I believe this is true. A friend of a friend of a friend was who has been in default for a long time, was told by the lender to please not move out. This is somewhere in the east San Francisco Bay Area.
As I said in another thread somewhere, there are so many non-performing loans in the hard-hit areas, that the lenders really don't have any good options. They don't want to sell the properties now (can't sell all at once), and they can't let them sit vacant because they will be looted and destroyed.
--mamba-mamba
yes, I think there is some truth to that...it takes them so long to process foreclosure, if they are not going to get to it, let someone at least occupy it...but if they aren't paying mortgage, will they repair leaky roof?
Good Article... Question : are the banks paying the property taxes
on all these vacant houses..? are they paying to mow the grass ?
I ask because most counties will mow the grass if the home
owner does not do it, then send the bill to the owner..
there is more, water bills. even if the water is shut off..
there is a min fee of $ 400. / year in some counties..
House Insurance , $ 600. / year ave. to pay..
This adds up fast... ( the banks are going under )
some cities are taking action and charging banks...but a lot of time, they can't even figure out who owns the house loan,
If you're talking high-end problems, Cook County, IL has nothing on Lake County, IL. That's where I am.
The North Shore of Chicago is the area's traditional high-roller set of suburbs. From Winnetka to Lake Forest, the market is so top heavy with $1 million+ properties, it's frightening. And those are the ones that are listed. There are plenty of brand new, never lived in properties across the street from Lake Michigan that sit silent, empty (some slowly rotting) with no "for sale" sign in front of them.
A real estate agent who works the area has confided she was shocked to discover the number of people living in high-end homes who had paid not a dime in over a year and were still living, unharassed, in their tony North Shore properties.
Older construction, bought by investors hoping to flip with no updates, is suffering horribly. One property with its own path to the lake originally listed at $1.5 million and recently sold for $480k. Another was a classic old mansion, sold in 2002 for $1.3 million in good condition, now listed at $799k as a "tear down" with no takers. There have been two Frank Lloyd Wrights that foreclosed. Other architecturally significant homes have been left unheated, so the pipes burst. Now they are tear downs, too.
I'd love to get my hands on the Census numbers of how many homes are vacant up here.
In the meantime, local boutiques and banks have gone out of business-- their storefronts still empty. The public schools, libraries, park districts up here are losing their property tax base and cutting services. And there's no doubt the already astronomical local taxes will have to go higher to make up the difference.
I'm amazed no one in the press has picked up on the trouble up here. Either they think the North Shore is "immune" or we're one click too far from Chicago to get on the MSM's map.
The only upside is in a few years there will be many fewer black Asscalades cutting people off in traffic.
get my hands on the Census numbers of how many
This White House will use all census data to lie and cheat and stay in office. Only Rhanm Emmanuel and Harold Ickies will see the "real data".
Ickies is clinton scum and Rham is barracky scum. Our nation is lost with these Chicago School operatives pursuing progressive ideology.
have a friend that has been looking intensely for a house for years, backed off in 2007 because he saw housing go down, lost out on houses that sold too cheap a minute after they listed (insider fraud stuff) and now he is just waiting, but still looks and prowls, sort of for fun. He knows every local real estate site, blog and database inside and out. He says there are so many obvious empty houses he sees in neighborhoods - no blinds, bad grass, etc.. that never show up as foreclosures and never show up as for sale. He said in some suburban neighborhoods, he finds 1 out of 10 or 20 are in the obvious empty but not foreclosed, nor for sales. Add that in with houses that are occupied and cared for, but the folks haven't paid a dime in a year or so and in the the nubmer of actual foreclosures acknowledged openly and you realize it zombie house land out there. And this in is MN, kinda middle of road in housing problems.
these properties are being held for the future communitarian overlords, city managers, school officials/consultants; you get the picture.
Also some may be held by the squid for liquidation during hyper-inflation following the US dollar collapse/devaluation.
In Michigan, properties in tax foreclosure are held for the supra-state instead of put back on the tax roles; again you get the picture!
Get real!
These properties are from a dying paradigm. Who the fuck would want high-end condos and palaces when there's NO way to maintain them? (who is going to have the money and resources to do so, as things continue down the entropy slope?)
Yeah, so some morons will want to live in them. It's just like all the folks pimping out Hummers and other excessive vehicles, the future is a sure dead-end: they're climbing on a sinking ship!
Looked at a completed new condo building here in Panhandle FL. area, 20 or so units left for sale out of 28. Nice building with boat docks, gym, etc. Bank has $300/ft in sticks and bricks, $15M or so in the land. We couldn't make it pencil buying it $100/ft. bulk because of problems with the building, upside down owners, lack of mortgages for end users, etc. Too much risk. Going to be a $20M minimum haircut for the bank IF they can find a sucker. They have rented out the units below market to extend and pretend.
Banks have a new paperwork requirement for all officers to include in the new construction package sent to committee - your resignation letter.
This has been my experience. I have a newly built home (never lived in) in the most exclusive neighborhood of Eastern Washington (Liberty Lake) near the Idaho state line. This area never had the kind of boom we saw in CA, NV, AZ, FL yet home prices have fallen as much as 40%. The 4 br, 3.5 bath home on 3/4 acre has spectacular views of the city, the lake and the mountains (details here: http://www.tourfactory.com/346059). The house is currently listed at $1,199,000 -- over $500,000 below the cost of construction. Last year's assessed (not appraised, assessed for taxes) value was $1,715,000.
I had the construction loan "permed" on completion in 2007 (BofA nee Countrywide) into a 10-year fixed, interest only loan. Three months ago I ran into heavy medical expenses and had to stop making payments. So far, all they are doing is sending me notices but do not discuss resolution with me.
It looks like I will have to walk away from the house (deed in lieu of foreclosure), taking a loss of $700,000. This means that I will stop utilities, maintenance, groundskeeping, etc. when the bank takes it over. The value of the house will rapidly depreciate. There are bank-owned properties sitting in the exclusive development of the Estates at Legacy Ridge up to $2.5 million that have not been put on the market since foreclosure over a year ago!
If that POS McMansion costs $1.5mil. to build, then the builder is ripping you off.
How many POS McMansions can E. WA support? Who makes that kind of money in the middle-of-nowhere?
Nearest cities? Spokane & Boise... how many multi-million dollar homes can these two metro-areas support? Not many.
Buying/building a million-dollar home in that area was a sucker play. You are the sucker, and the developers played you.
I wouldn't pay more than $200k for a home in E. WA.
Consider yourself fortunate, 2/3 of the world's population lives on $3/day or less. Here, here's where you could be living:
http://www.skyscrapercity.com/showthread.php?t=669286&page=50
My wife is from around there (though more of the "middle class" area). When I mention low-quality homes she tells me that "cardboard boxes are low-quality homes!"
Dang dude the house is wired for broadband?I'll give you $25 right now. Is the title clear?
"...an untalented cook can turn wholesome dough and fresh green apples, valuable already, into an inedible mess, value zero. Conversely, a great chef can fashion of those same materials a confection of greater value than a commonplace apple tart, with no more effort than an ordinary cook uses to prepare an ordinary sweet."
You took $1.7 million and created another monstrous, eyesore McMansion on a lot barely big enough to hold it, and you are confused why people with over a million to spend on a house aren't interested? What's really amazing is that this sort of thing was ever considered enough of a good idea to act on. But I guess it's the nature of manias.
LOL -- McMansion... monstrous eyesore? There are bigger houses on lots 1/3 the size. The house design won the "Best Design" award at a "Street of Dreams" home show and the architect is an internationally sought-after, multiple award winning talent. How do these snap judgments of other people's work add anything to the discussion -- especially without ever having seen the home???
Perhaps my investment decision was wrong. Have you ever made a bad investment choice? When I broke ground in 2005, it appeared that the USD is headed into some severe headwinds. The way banks and the Fed have been creating money out of thin air led me to think that inflation must surely follow. Under these circumstances, real assets (gold, oil, timber, real estate, etc.) should outperform financial (paper) assets. Obviously, I was wrong.
Ungaro,
We lived in Liberty Lake for several months in 2007 (while on temporary assignment to a Couer D'Alene hospital. We often walked on the ridge adjacent to that development. The houses were huge but attractive and it was a beautiful view. Wonderful area and a great little town (Liberty Lake).
Sorry for your trouble (medical problems, foreclosure, etc.) but things happen in life that no one can really prepare for. You just have to "live forward" and leave the past behind.
We are about to sign a contract to build a new home in mid-sized city in the Mid-West Rust Belt. It will end up in the $300K-$350K range when we finish with all the upgrades we want. I expect in 2 years it will probably be worth around $200K (in today's dollars). From a financial viewpoint it is silly but from a our viewpoint it makes sense.
Not everything can be valued in dollars. Besides, those of you hoping to be rich in the future, remember that no one is guaranteed a future (especially the one you planned on). Today is all you have. Don't be foolish with your money, prepare for the future, but remember that all your plans for the future can be taken away in a single day. Ours were a couple of years ago.
Live, love and try to laugh today. Don't be too critical of others failures. What seemed sensible a few years ago looks foolish today. What seems sensible today may seem stupid tomorrow. We are all at the mercy of forces we cannot control. Prepare and plan, but don't be surprised if today's conventional wisdom becomes tomorrow's folly.
I don't get the building when there are so many existing homes of great variety and neighborhoods to chose from in the rust belt....
What sensible words, your last paragraph.
Money isn't everything.
We cannot predict the future, but we can try to plan as well as we can.
+ 100
Yes, definitely a McMansion. The architect should be gelded. The buyer should be committed.
You linked the real estate listing, complete with lots of pictures. If it can provide enough information to attract potential customers - and that is the whole point - then you have to accept the possibility that the same information can repell them as well. Apparently the market agrees with my snap judgment more than it agrees with the people who give out bogus awards.
You were right about gold and oil. Unfortunately, you picked the one solid asset that was already in a bubble. And then levered up. That makes you a speculator, not an investor. And now you've paid for an expensive lesson: The "experts" don't know shit. I don't care if it's Ben Bernanke or the Street of Dreams committee.
Unfortunately, your harping on awards indicates that while you've paid the tuition, you haven't actually learned the lesson yet. That's a damn shame. You could have at least walked away from this debacle with some wisdom.
+10,000
yeah...sorry OP...that thing is gross
Consider if you will, that perhaps a sizeable chunk of the credit derivative market is being held in escrow at Central Banks everywhere, so that the credit default swaps are prevented from appreciating, and that very likely these counterparty trades must eventually emerge. Unless, of course that The Fed clearly intends on issuing short term treasuries in lieu of these indefinitely.
And that the real estate market is only a small percentage of this whole thing. And tranches of these high end properties are the asset in some party/counterparty arrangement.
Somebody, somewhere is going to say: "let's get some of the lead out" and demand that the more tradeable paper be released.
My neighbor has been in foreclosure for over a year but because he owes so much, he's been living in it payment free. The banks are refusing to pull the triggor which would put that money pit on their books. The house today is worth no more then 500k and he owes more then 720k on it. I wish they would finally foreclose on him, his pool is a breading ground for massive amounts of mosquitos and his grass is yellow and way overgrown.
A film of oil floating on the surface of the water will sort the mozzies out - it kills off the larvae when they come up to breathe.
You can also use larve pucks to poison the water. They sell them at Rona/Home Depot for 4 bucks a piece. throw four or five in there and you won't have to worry about it for a couple of months.
Pour a gallon of bleach in the fucker: 99¢
True Story: A friend has a high end home, very beautiful, plenty of privacy on many acres on top of a mountain in New Hampshire. At the top of market price was probably worth $2M, priced it to sell at 1.5, then 1.2... and now are trying to sell it for $600k with no takers. Quality RE not selling is not just a CA, NV or NY thing.
Within the last several weeks, that Shadow Inventory in the Winter Home of the Great Satan's Central Coast (CA) ain't so shadow no more.
For sure. Waterfront homes on the eastern shore of VA that were going for 500-600k even a year ago are now sitting there at 350k untouched. Blows my mind that it'll drop more before it's over.
I am presently in Bal Harbour Miami (North Miami), and i wish i could put my hands on some high end condo on Collins Ave by the beach, ie: One Bal Harbour condos or St Regis. Cause these are properties that are exceptional. If such properties are repossessed it is because people have gone to far with debt! Take a look in the underground parking of these properties, you'll find Ferraris, Bentleys, Rolls, etc... And these cars are there only for the short vacations that their owners come down to when in Florida. It is called excess.
Good anecdotal evidence that we have much farther to fall before balance is restored.
The main question of course is how long can the Banks keep this huge shadow inventory on their books? They've done it for two years now, albeit with Government assistance in the form of being allowed to cook their books, as well as backdoor subsidies. Right now, it sure looks like they can go on with this game forever, doesn't it?
However, there are some signs that even they might be starting to crack. The Troubled Asset Ratio for some of them (notably at least parts of BofA) are in the range that the FDIC was closing down a year ago. Also, I note that BofA has annouced plans to start significantly releasing parts of their shadow inventory this year. So it looks like BofA is the first one to head towards the exits, if they follow through on this. That puts the other Banks in the position of being stuck with significantly lower prices on their shadow inventory, if they opt to try to sell it off later.
Perhaps the end game is in sight now. We'll know more later this year. But one thing is very clear. As soon as the Fed gets hit by the Bond Market Vigilantes, this whole game (for Housing, as well as the rest of the pretend and extend game), is over.
I think they can keep it up for awhile...it seems they have replaced the profit stream they previously got from these now, non-performing loans via the taxpayers...Fed prints them money, lends it to them at zero percent and they buy Treasuries and earn interest, throw in a little insider prop trading and voila....you have income and fake reserves to appear solvent....Unless American figure out we are paying banks interest on money we lent without interest, this could go on a long long time.
Maybe Reggie knows how much banks are making from these new sources of income, fleecing the taxpayer or the non-insider investor, rather than from their previous business, interest income on loans