Entries from March 2007 ↓

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

The slowdown in the real estate market has made some rethink their career choice. Some have gone back to their past careers but this Central Michigan man has made a more interesting decision. He has gone from a real estate appraiser to trapper.

Richard C- Smith has been a recreational trapper for more than 45 years, longer than his career as a real estate appraiser.

With the downturn in the real estate market, the 59-year-old from Grand Blanc Township is turning his hobby into a second career as a trapper for people who are having problems with raccoons, skunks, squirrels and muskrats.

Smith says nuisance trapping is becoming a promising field because hunting and trapping are being restricted in some areas as the suburbs grow.via WLNS

Ken Harney has to be my favorite real estate writer in the media. He is dead on this week with his column on the upside down nature of escrow in the lending arena.

According to some industry estimates, a majority of subprime mortgages closed during the housing boom years carried no escrows for property taxes and hazard insurance.

That is in stark contrast to the prime mortgage market for consumers with good credit, where mandatory escrow accounts are routine.

“It’s an upside-down world,” said Mike Calhoun, president and chief operating officer of the Center for Responsible Lending, a consumer advocacy group based in Durham, N.C.

“The people you’d think need an escrow the most aren’t required to have them, and the people who need them the least are forced to use them.” via the Baltimore Sun

Think about it for a second, how can you place the most onerous restrictions on borrowing on those who can (and plan on) afford the additional upfront costs, while letting those who are at the greatest risk have the most lenient terms.

Are you getting the feeling that the whole subprime market was created to fail for the borrowers?

The subprime market is hitting the final stages for a while as the Wall Street financiers are cutting off access to capital and placing expensive restrictions and contingencies when they lend at all. Wall Street is a brutal place where your best friend will also cut your heart out in a second if there is enough in it for them, but it also is the engine of capitalism.

These folks are there to do one thing, make money. And they do it well. Wall Street created a lucrative income stream while interest rates were low by created securitized mortgages and lending to those willing to pay a higher interest rate. The additional income from the brokerage of subprime mortgages hit 2.3 Billion last year.

Now that interest rates are up and the risk is also increased, these investments do not make sense for Wall Street to participate in and we are seeing the market shut down. When seen from a Wall Street perspective, the whole subprime market meltdown makes logical sense.

For those trapped in the reprecussions of it the lesson is brutal.

By extending generous credit to subprime lenders, Wall Street firms financed the borrowing binge that helped fuel the housing boom. Those firms now are turning off the money spigot. They see more borrowers having trouble paying off those mortgages in a slowing economy, which has made investors less willing to pour money into the sector.
More than two dozen subprime mortgage lenders have closed shop, and there is concern that the defaults could spread to other types of risky loans and to less-risky mortgages, exacerbating the housing market’s slowdown and possibly weighing on the economy. Accredited Home Lenders Holding Co., a subprime lender, recently was forced to sell $2.7 billion of loans at a big discount to meet lenders’ demands for more collateral.
Worries about defaults in slightly less-risky mortgages also have hit shares of companies that specialize in them, including Impac Mortgage Holdings Inc., where loans with overdue payments more than doubled last year, and IndyMac Bancorp Inc.
Subprime lenders sell many of their loans to Wall Street banks, which package them into securities to be sold to bond investors. The appetite for these bonds grew when interest rates were falling and investors wanted high-yield alternatives. The riskier the customer, the higher the interest rate, so subprime bonds were in demand. via RealEstateJournal

Scanning the internet this morning after being awoken (way too early, I may add) by my soon to be 7 year old with a stomach ache, I ran across this article on how to deal with a real estate slump. Besides the gloom and doom that articles of this sort trumpet, there was an interesting point that the wirter made.

The feel that the media is so invested in the real estate market from so many angles that they are unable to report the bad news on real estate and trumpet the positives whenever they appear. While I have never been one to defend the media, in other publications I write for I tend to rip them severely on the bias they carry in politics, I wonder if there is any truth to this.

Is the media so invested in real estate that they will gloss over bad news and hype good news? Is there a bias that can needs a filter when reading business stories.

In the blogosphere there are definately 2 camps, the bubble bloggers and the real estate business bloggers. I try to straddle both sides of the arguments with some success. I see there are weaknesses in the marketplace but I do not feel that they will drive the economy or housing prices off the cliff. At the same time, I do treat the professional journalists with some deference that they are unbiased in most of their reporting on the real estate markets.

Am I wrong to do so?

There’s no question that commercial and residential real estate makes up a huge part of the U.S. economy. But because so many people are now feeding at the real estate trough, it’s tough to find unbiased comments about the market - especially when almost everyone has a vested interest in a continually rising real estate market.
Just about every word on the housing market that is printed or spoken in the media is put through that biased filter. That means even the smallest victory is celebrated when it may not actually be good news for the real estate market.
There are some new wrinkles in the real estate market that make the housing bubble “different this time.” While we (and other countries) have witnessed normal housing boom and bust cycles over the years, there are two huge mitigating factors that accompany this one:
1. Not Learning From 1929: Failing to take a lesson from the 1929 stock market crash, regulators have allowed lenders to extend unprecedented leverage to real estate buyers. We have seen what may be only the tip of the iceberg with the problems in the sub-prime lending market.
2. Public Company Pressure: Because there are a large number of homebuilders listed on the stock market, these companies have keep chalking up consistently good results - both for the good of the market, as well as their shareholders. And when they can’t (like now), their shares get crushed. In the past two weeks alone, Lennar was the second company to put up earnings that were way down - some 70-80%, and to cap it off, then guide lower for the rest of the year. Result? Lennar dropped from a close of $45.58 last Friday to an intraday low of $42.64 today, before closing at $44.50. via Money Week

Planning an open house on an off street in Orlando or other parts of Florida? If you were planning on driving traffic to the home using signs on busy street corners, think again. The code enforcement folks are cracking down hard and empowering any city employee to remove signage that is put up illegally.

Open houses have become increasingly important in the softening real-estate market. Roadside signs can play a critical role in luring prospective buyers.

But most of the signs, whether those placed by real-estate agents, new-home builders or homeowners, are there illegally — and local governments are cracking down. A coordinated, statewide sweep six months ago collected more than 7,000 signs in just Orange and Seminole counties.

The move worries the Orlando Regional Realtor Association, which has formed a task force to tackle the issue. It also is in talks with the Home Builders Association of Metro Orlando, which is “real interested” in possible changes, said Randy Martin, the Realtor group’s president. via the Orlando Sentinel

If you were unable to use an open house sign to drive traffic, what would you do?

The new home that LeBron James is building is the going to be the talk of Cleveland. All of the sport shows are talking about the 35,000 square foot home that he is building. It is being referred to as a playground for adults including a full casino.

I wonder if he is putting in the casino so he can get Michael Jordan and Charles Barkley to come over and play.

Bob Dyer of the Akron Beacon Journal provided NewsChannel5’s John Kosich with sneak peek information about the 35,000-square-foot home.
James is a superstar forward with the Cleveland Cavaliers.
Images: LeBron’s New Home
Dyer said the home has everything and is a “playground for adults.”
The home will have a casino, two-lane bowling alley, barber shop, aquarium, sports bar and a recording studio.
The master bedroom will also have a two-story walk-in closet.
Additionally, the home will have a six-car garage. via newsnet5.com

Full Slide show available here.

Bernanke has issued a statement on the mortgage industries subprime troubles and potential impact on the economy. Here it is and I will try to comment on it later today.

“At this juncture … the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,” Bernanke said in testimony to Congress’ Joint Economic Committee.
It marked Bernanke’s most extensive discussion yet of the mounting problems in the risky mortgage market. Those troubles raise “some additional questions about the housing sector,” which has been mired in a deep slump for more than a year, Bernanke said.
Fallout in the risky mortgage market is clobbering some lenders and homeowners and has stoked concerns on Wall Street, Capitol Hill and elsewhere.
So-called “subprime” lenders who make home loans to people with blemished credit histories or low incomes have been battered. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments. Delinquencies and foreclosures in the subprime mortgage market are soaring.
“Although the turmoil in the subprime mortgage market has created financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear,” Bernanke said.
The crumbling housing market has been a major factor behind the slowdown in the U.S. economy. Bernanke said the “near-term prospects for the housing market remain uncertain.”
Even so, Bernanke stuck with the Federal Reserve’s assessment that the economy is likely to grow at a moderate pace over the coming quarters. He also repeated the Fed’s belief that inflation also should ease in the months ahead.

Bernanke: Mortgage Woes Not Spreading: Financial News - Yahoo! Finance.

I was tempted to say that Martha Stewart was coming to Los Angeles, but reading the press release a bit further I realized that the Terreno Vista development is almost an hour outside of the city in the desert. The homes will be reasonably affordable for the LA region starting at 300 Thousand dollars.

One thing that struck my funny bone is that the homes are to be designed based on Martha Stewart’s homes  in Maine and New York. Did anyone tell her that these homes are in the high desert?

Terreno Vista will bring Martha Stewart style to KB homebuyers in the Los Angeles area. Inspired by Martha Stewart’s personal homes in Maine and New York, the 97 homes in Terreno Vista will be 1-and-2 stories and range from 1,875 to 2,968 square feet. Prices are anticipated to start in the low $300s.

Martha’s influence is seen in the many options available to homebuyers, such as specialized flooring, bathroom and kitchen fixtures, lighting, paint colors, cabinetry selections, and other special touches such as distinctive mantels, shelving, molding and wainscoting. To provide additional design inspiration, model homes will contain furniture and decorative accents from Martha Stewart Living Omnimedia.

Lancaster is the county’s fastest growing city, but still boasts a small town feel. The city offers affordable living within an hour’s drive of Los Angeles, with ready access to three major interstate freeways. Located in Southern California’s High Desert, the area features easy access to a variety of year-round, outdoor activities including hiking, skiing, biking and more.
Terreno Vista and the surrounding area also benefit from the National Soccer Center directly adjacent to the southern boundary of the community. KB Homes Release.

As the mortgage market faces major issues for lending practices, the slow moving cover-your-behind federal government has started it’s investigations into picture. One of the first investigations that is happening is alleged mortgage fraud at Beazer Homes USA. The company has gotten some tough press in the Charlotte Observer and it has triggered a request for documents from Beazer by the Federal Bureau of Investigation and the US Attorneys Office.

“Beazer Homes has been in contact with the U.S. Attorney’s Office and, at this time, there have been no allegations of any wrongdoing,” Beazer said in a statement. “Instead, Beazer Homes has received a request for documents generally relating to its mortgage business. We are fully cooperating with this request and the U.S. Attorney’s Office.”
Beazer also said it believes the request for the lending documents was fueled by articles recently published by the Charlotte (N.C.) Observer.
“Based on our internal investigations to date, we have found no evidence to support the allegations in these articles,” Beazer said. “We have further been told by the U.S. Attorney’s Office that the statements by the FBI and published by Business Week were not authorized and should not have been made.” via the Atlanta Business Chronicle:.

The era of the McMansion is over according to the folk at the Association of Home Builders. They state that the consumer is looking to jettison the living room and gain space in the master bedrooms, kitchen, and family rooms.

For the most part I agree with this, but there is a caveat that should be throw in. Over the past couple of years we have seen a huge increase in the costs of heating and cooling todays homes. Energy costs have skyrocketed and thus the expense of maintaining square footage that is unused is being questioned.

Our house has a 1,600 square foot office in it. Up until this past year I have had my office down in part of the basement, but the heating and cooling costs were going up, so we moved my office to the unused living room and we are saving some money. A little bit noisier but overall not a bad trade not having to have the heating and cooling units running constantly.

Although the size of the average home has been on the rise, to 2,495 last year from 1,500 square feet in 1973, consumers are beginning to choosse higher quality living spaces over additional square footage, according to Ahluwalia, who spoke at the recent International Builders Show in Orlando, Fla.

Architects, designers, manufacturers, and marketing experts who were asked by NAHB about their expectations for future homes agreed that home size would slip into the 2,300- to 2,500-square-foot range by 2015.

NAHB says that two-story homes will continue to dominate as increasing construction costs drive choices. “As housing prices go up, so too does the share of two-story homes goes up says Ahluwalia, noting that two story construction is less expensive than one story on a square-foot basis. U.S. Census Bureau data shows that 55 percent of the homes built in 2005 had two or more stories. via REALTOR® Magazine