Wednesday, March 25, 2009
Do we have 3,000 homes nearing foreclosure in Charleston?
(This was my response to Brad Rundbaken's email this morning from the CharlestonMarketReport.com, and his original comments below)
Brad:
I'm afraid you are correct. We do a lot of REO work for banks and we are absolutely slammed with pre-foreclsoure BPO Evaluations right now. My guess is that there are about 500 Looming Foreclosures in Mount Pleasant alone. There are three or four Mt. Pleasant high-end neighborhoods on the verge of imploding. There are probably three times that many in number, in Summerville and twice that many in the rest of Charleston County. So, that would be 3,000 exactly, right now in delinquency.
The problem is that our congressmen and Senators don't understand. You and I see it at the local level in a moderate market. They don't. D.C. doesn't have a recession, so when they dine, they're not seeing a typically full restaurant with five people in it. They're not talking to homeowners who are current on their mortgage (by the droves) that are about to throw in the keys, because they owe 30% more than it's worth; and on top of this there are tons in denial. What happens when they wake up? No matter how much all the recent moves help housing and even if our sales double to 600, 700 or even 800 homes per month in the Tri-county, that will only be enough to consume the added foreclosures that are coming. This means more of the same as an optimist, just more transactions. The Charleston County foreclosure list doubled this week.
Have you noticed, Brad, 85% of the listings on the market in the Charleston MLS are severely overpriced? Most of the people are either listening to bad advice from their Realtor or they, seriously, are waiting on the "Normal" Charleston market to return. With a lack of stated financing, a lack of buyers/confidence, I'm afraid we may have thousands more go into foreclosure by not facing the problem and dealing with it today.
On Wed, Mar 25, 2009 at 8:03 AM, wrote:
Charleston Market Report Newsletter
I went on the Rocky D show yesterday with the intent of warning my fellow Charlestonians about the problem with Tim "Tax Cheat" Geitner stealing more of our tax dollars to prop up bad banks and the increasing foreclosure problem in Charleston.
I am trying to get the Charleston community into a proactive discussion about the increasing foreclosure problem that will have a major impact on local real estate prices if it is not addressed asap. My current estimate is that there are over 3000 homes in foreclosure or short sale status that are NOT reported on the MLS. Local and national banks are often holding these properties off the market or will not sell them because they do not want to take the writedown. The local real estate industry and govenments are either not aware or ignoring the problem.
As of today no emails or calls from anyone regarding my announcement to be proactive instead of reactive to this growing problem. I guess it is business as usual in Charleston. Not good.
'Shadow' Supply Of Foreclosures May Delay Housing's Recovery
BY KATHLEEN DOLER
FOR INVESTOR'S BUSINESS DAILY
Posted 3/24/2009
Even as a few rays of hope peek out for housing, a dark cloud of unlisted and unsold foreclosed homes threatens to further delay a recovery and undermine lenders' financials.
The government is riding in with new programs almost every week, including Monday, that may rescue lenders. But they also cause paralysis in the short term.
Lenders are holding "between 600,000 and 700,000 residential properties that are not on the multiple listing service (MLS)," said Rick Sharga, senior vice president at RealtyTrac, a foreclosure listing firm in Irvine, Calif.
This shadow supply isn't counted as part of the housing inventory. There were 3.8 million existing homes on the market in February, equal to 9.7 months' worth at the current sales pace.
Add in the shadow supply and selling all the available homes will take even longer, and that suggests prices have even further to fall.
There has been some good news on the home front. February existing-home sales rose 5.1%, the best monthly gain in years. Housing starts shot up 22.2% from a record low. Low mortgage rates and falling prices have made homes more affordable — though that doesn't help if you can't get a loan or you've lost your job.
Meanwhile, foreclosure activity has been artificially suppressed. Mortgage delinquency rates have continued to soar in the last several months even as the new foreclosure rate has held steady. That's due to government moratoriums or voluntary lender halts. But most experts say eventually most of those homes will be foreclosed.
Lenders also may be understating the impact foreclosures will have on their balance sheets. And the shadow is likely to grow as more homeowners default.
Window Dressing?
Specialists who handle loan modifications for borrowers say that despite a flurry of new programs, few mortgages are being reworked.
"Lenders aren't doing anything," said Jim Richman, president and founder of Richman & Associates, a real estate and debt restructuring firm in Glendale, Calif. "They're waiting to see if the government will bail them out."
"Everybody is stalled 100%; the lenders aren't doing anything" with modifications, said Moe Bedard, president of Loan Safe Solutions, a Corona, Calif.-based firm that does mortgage auditing for attorneys.
Richman is a former banker and former Housing and Urban Development commissioner. He also believes lenders "are illegally operating under current federal rules," by not writing down their foreclosures adequately.
"Lenders are doing everything they can to stay in business, but it's against all the rules," said Richman. "(Regulators) are afraid to enforce the rules because if they do the banks will fail, and the feds will have to bail them out."
Sharga says he's spoken "directly with foreclosure attorneys in several states (including Texas, Michigan and California) to find out if any of their firms were reappraising properties" during the foreclosure process for their clients. "None did formal appraisals," he said.
Sharga says lenders have taken huge write-downs. But if they have not reappraised their foreclosures, are the write-downs adequate?
"What the banks can buy with time (holding foreclosures and not listing them for sale) is the tooth fairy," said Thomas Barrack Jr., founder, chairman and CEO of Colony Capital, a Los Angeles-based private equity firm specializing in real estate. "The government has shown that if you wait long enough, it will come out with a new program to modify the obligations of the bank and borrower. Pixie dust comes every week."
The Treasury on Monday laid out its plan to partner with private funds to buy up to $1 trillion in so-called "toxic assets." It's as-yet unclear if these purchases will include actual foreclosed properties — these programs tend to morph as they get rolled out.
"Why take a loss today if there's any chance that loss could be less (due to changes in government programs)?" said Terry McEvoy, a banking analyst with Oppenheimer & Co. in New York.
Some shadow inventory may not be listed publicly because some lenders sell foreclosures via in-house divisions, says Bedard. Or, lenders may be selling the defaulted paper to investors. But these gray market sales can't account for all unlisted foreclosed properties.
And the stalling is getting worse. "What we're seeing is slowdowns in the processing of properties throughout the foreclosure cycle . . . it's taking longer to file (default) notices, taking longer to actually foreclose and taking longer to get the properties on the market," said Sharga.
"The lenders ease their way into the losses," said Jeff Davis, senior vice president and director of research at Howe Barnes Hoefer & Arnett Inc., Chicago. "If the economy would pick up, a lot of the issues wouldn't be as problematic. But that's not happening and these issues are just compounding."
If banks dump their properties at once, it could cause dramatic price erosion in already hard-hit areas.
Home prices, which have fallen 30% or more in some areas, still have more to go, many experts say. In some areas they need to drop "another 30% to get down to 1998 normalized levels," Barrack says.
Lenders have argued before Capitol Hill to relax or suspend mark-to-market rules for valuing mortgage-backed securities. Lawmakers, in turn, have leaned heavily on the private-sector Financial Accounting Standards Board to make changes. FASB has signaled it'll modify the rule in cases where markets are illiquid. It met Tuesday to discuss the issue.
Barrack, who opposes changing the mark-to-market rules, said: "When real estate and securities were booming, the lenders were booking unbelievable earnings. Now the market is going the other way.
"They can't have it both ways," Barrack said.
Other analysts disagree. "When you mark to the market and there is no market, you're recognizing an economic loss and a loss of liquidity," instead of an actual loss, said Davis.
But he said if the underlying assets —the homes — "are collapsing in value, then there's a problem."
Brad:
I'm afraid you are correct. We do a lot of REO work for banks and we are absolutely slammed with pre-foreclsoure BPO Evaluations right now. My guess is that there are about 500 Looming Foreclosures in Mount Pleasant alone. There are three or four Mt. Pleasant high-end neighborhoods on the verge of imploding. There are probably three times that many in number, in Summerville and twice that many in the rest of Charleston County. So, that would be 3,000 exactly, right now in delinquency.
The problem is that our congressmen and Senators don't understand. You and I see it at the local level in a moderate market. They don't. D.C. doesn't have a recession, so when they dine, they're not seeing a typically full restaurant with five people in it. They're not talking to homeowners who are current on their mortgage (by the droves) that are about to throw in the keys, because they owe 30% more than it's worth; and on top of this there are tons in denial. What happens when they wake up? No matter how much all the recent moves help housing and even if our sales double to 600, 700 or even 800 homes per month in the Tri-county, that will only be enough to consume the added foreclosures that are coming. This means more of the same as an optimist, just more transactions. The Charleston County foreclosure list doubled this week.
Have you noticed, Brad, 85% of the listings on the market in the Charleston MLS are severely overpriced? Most of the people are either listening to bad advice from their Realtor or they, seriously, are waiting on the "Normal" Charleston market to return. With a lack of stated financing, a lack of buyers/confidence, I'm afraid we may have thousands more go into foreclosure by not facing the problem and dealing with it today.
On Wed, Mar 25, 2009 at 8:03 AM,
Charleston Market Report Newsletter
I went on the Rocky D show yesterday with the intent of warning my fellow Charlestonians about the problem with Tim "Tax Cheat" Geitner stealing more of our tax dollars to prop up bad banks and the increasing foreclosure problem in Charleston.
I am trying to get the Charleston community into a proactive discussion about the increasing foreclosure problem that will have a major impact on local real estate prices if it is not addressed asap. My current estimate is that there are over 3000 homes in foreclosure or short sale status that are NOT reported on the MLS. Local and national banks are often holding these properties off the market or will not sell them because they do not want to take the writedown. The local real estate industry and govenments are either not aware or ignoring the problem.
As of today no emails or calls from anyone regarding my announcement to be proactive instead of reactive to this growing problem. I guess it is business as usual in Charleston. Not good.
'Shadow' Supply Of Foreclosures May Delay Housing's Recovery
BY KATHLEEN DOLER
FOR INVESTOR'S BUSINESS DAILY
Posted 3/24/2009
Even as a few rays of hope peek out for housing, a dark cloud of unlisted and unsold foreclosed homes threatens to further delay a recovery and undermine lenders' financials.
The government is riding in with new programs almost every week, including Monday, that may rescue lenders. But they also cause paralysis in the short term.
Lenders are holding "between 600,000 and 700,000 residential properties that are not on the multiple listing service (MLS)," said Rick Sharga, senior vice president at RealtyTrac, a foreclosure listing firm in Irvine, Calif.
This shadow supply isn't counted as part of the housing inventory. There were 3.8 million existing homes on the market in February, equal to 9.7 months' worth at the current sales pace.
Add in the shadow supply and selling all the available homes will take even longer, and that suggests prices have even further to fall.
There has been some good news on the home front. February existing-home sales rose 5.1%, the best monthly gain in years. Housing starts shot up 22.2% from a record low. Low mortgage rates and falling prices have made homes more affordable — though that doesn't help if you can't get a loan or you've lost your job.
Meanwhile, foreclosure activity has been artificially suppressed. Mortgage delinquency rates have continued to soar in the last several months even as the new foreclosure rate has held steady. That's due to government moratoriums or voluntary lender halts. But most experts say eventually most of those homes will be foreclosed.
Lenders also may be understating the impact foreclosures will have on their balance sheets. And the shadow is likely to grow as more homeowners default.
Window Dressing?
Specialists who handle loan modifications for borrowers say that despite a flurry of new programs, few mortgages are being reworked.
"Lenders aren't doing anything," said Jim Richman, president and founder of Richman & Associates, a real estate and debt restructuring firm in Glendale, Calif. "They're waiting to see if the government will bail them out."
"Everybody is stalled 100%; the lenders aren't doing anything" with modifications, said Moe Bedard, president of Loan Safe Solutions, a Corona, Calif.-based firm that does mortgage auditing for attorneys.
Richman is a former banker and former Housing and Urban Development commissioner. He also believes lenders "are illegally operating under current federal rules," by not writing down their foreclosures adequately.
"Lenders are doing everything they can to stay in business, but it's against all the rules," said Richman. "(Regulators) are afraid to enforce the rules because if they do the banks will fail, and the feds will have to bail them out."
Sharga says he's spoken "directly with foreclosure attorneys in several states (including Texas, Michigan and California) to find out if any of their firms were reappraising properties" during the foreclosure process for their clients. "None did formal appraisals," he said.
Sharga says lenders have taken huge write-downs. But if they have not reappraised their foreclosures, are the write-downs adequate?
"What the banks can buy with time (holding foreclosures and not listing them for sale) is the tooth fairy," said Thomas Barrack Jr., founder, chairman and CEO of Colony Capital, a Los Angeles-based private equity firm specializing in real estate. "The government has shown that if you wait long enough, it will come out with a new program to modify the obligations of the bank and borrower. Pixie dust comes every week."
The Treasury on Monday laid out its plan to partner with private funds to buy up to $1 trillion in so-called "toxic assets." It's as-yet unclear if these purchases will include actual foreclosed properties — these programs tend to morph as they get rolled out.
"Why take a loss today if there's any chance that loss could be less (due to changes in government programs)?" said Terry McEvoy, a banking analyst with Oppenheimer & Co. in New York.
Some shadow inventory may not be listed publicly because some lenders sell foreclosures via in-house divisions, says Bedard. Or, lenders may be selling the defaulted paper to investors. But these gray market sales can't account for all unlisted foreclosed properties.
And the stalling is getting worse. "What we're seeing is slowdowns in the processing of properties throughout the foreclosure cycle . . . it's taking longer to file (default) notices, taking longer to actually foreclose and taking longer to get the properties on the market," said Sharga.
"The lenders ease their way into the losses," said Jeff Davis, senior vice president and director of research at Howe Barnes Hoefer & Arnett Inc., Chicago. "If the economy would pick up, a lot of the issues wouldn't be as problematic. But that's not happening and these issues are just compounding."
If banks dump their properties at once, it could cause dramatic price erosion in already hard-hit areas.
Home prices, which have fallen 30% or more in some areas, still have more to go, many experts say. In some areas they need to drop "another 30% to get down to 1998 normalized levels," Barrack says.
Lenders have argued before Capitol Hill to relax or suspend mark-to-market rules for valuing mortgage-backed securities. Lawmakers, in turn, have leaned heavily on the private-sector Financial Accounting Standards Board to make changes. FASB has signaled it'll modify the rule in cases where markets are illiquid. It met Tuesday to discuss the issue.
Barrack, who opposes changing the mark-to-market rules, said: "When real estate and securities were booming, the lenders were booking unbelievable earnings. Now the market is going the other way.
"They can't have it both ways," Barrack said.
Other analysts disagree. "When you mark to the market and there is no market, you're recognizing an economic loss and a loss of liquidity," instead of an actual loss, said Davis.
But he said if the underlying assets —the homes — "are collapsing in value, then there's a problem."
Labels: Charleston SC and Mount Pleasant SC Foreclosures
