Beyond Bailouts To Handouts

The Herald Tribune reports from Florida. “Much of the slippage in Florida’s share of older residents can be linked to the economic downturn and housing crisis. Census Bureau projections had predicted a 17.8 percent share for Florida in 2010, anticipating a wave of early retirees that did not materialize. The recession’s effect on stock portfolios and housing prices forced many would-be Florida retirees to delay moving, said Pat Neal, president of the Lakewood Ranch development company, Neal Communities. The average age of his customers, he said, has gone from 59 to 63.”

“‘People postponed everything,’ Neal said. ‘It’s now six years later and the biological clock has continued to tick. You know how it goes: denial, acceptance, resignation. People are resigned to the fact that their home in Cincinnati will never have the value it did in 2005.’”

“The total number of bankruptcy filings in the Middle District of Florida is trending down for the first time since the onset of the Great Recession in 2007. At least one bankruptcy attorney said the number of filings might increase in 2012. ‘A lot of the people who were over-leveraged on their credit card debt have already washed through the system,’ said Mark Hildreth, a bankruptcy attorney with Shumaker Loop & Kendrick, in Sarasota. ‘That’s one reason for the drop. But another reason is that banks pulled back on foreclosure filings for much of 2011.’”

“Now that banks have begun ramping up their foreclosure filings again, bankruptcies could follow. Real estate investors, developers and builders are the biggest casualties, according to data tracked by the Herald-Tribune’s Inside Real Estate blog.”

The Orlando Sentinel. “Through the first 11 months of the year, bankruptcies in the Orlando area are down 16 percent from the same period last year, according to the latest federal-court figures. People are working overtime or multiple jobs to make ends meet, keep creditors at bay and avoid bankruptcy. Gwen Donovan, a Cocoa fitness instructor, said she was working seven days a week at three different YMCA locations until she was laid off in June. Now searching for jobs, working part-time and facing foreclosure, Donovan said she is determined not to declare personal bankruptcy.”

“‘I really don’t want to do that — it’s just not right for me,’she said. ‘But my creditors won’t work with me, and the bank is not really working with me. I feel like I’m being forced into bankruptcy, and I don’t want it. I really can make things work if they’ll just stop raking me over the coals.”‘

“‘One of the things we’ve seen is that there has been an incredible increase in the amount of payments that people have made on their credit-card debt,’ said Richard Schram, a senior executive at CredAbility of Central Florida, a consumer-counseling operation. ‘You also have a lot of unemployed people who have depleted their 401(k) funds to pay down their debt and fend off creditors.’”

‘Many people simply have nothing left, Schram said. ‘If you’re unemployed and delinquent on your mortgage or in foreclosure, and you have no savings left, no equity in your house, no resources to pay down your debt, there’s really no incentive to declare bankruptcy,’ Schram said. ‘It’s really a no-win situation: They know they owe, but there’s nothing they can do about it.’”

“As attorneys general in other foreclosure-battered states step up their investigations into fraudulent mortgage practices by large U.S. banks, some Florida groups are accusing state Attorney General Pam Bondi of being soft on the giant lenders. ‘We wanted to convey the idea that we want her to put pressure on the banks to be positive and forthright with their clients,’ said Jerry Pena, a community organizer. ‘… Her stance was that she didn’t feel the banks were as liable as the media portrayed them to be, and people shouldn’t have gone ahead and signed the mortgage paperwork, and that they knew what they were getting into.”

The Destin Log. “Destin resident Randolph Branham was convicted Dec. 15 of conspiracy to commit bank fraud and bribery of a loan officer. Prior to the trial, four others indicted in the scheme pled guilty, which included Crestview attorney Chris Cadenhead, two Destin residents, Jackie T. Fair Jane M. McDonald, and former loan officer Larry J. Malone, of Bainbridge, Ga.”

“During the trial, it was proven that in order for McDonald and Fair to obtain a penthouse condominium located in Destin, Cadenhead, Branham, and Fair conspired to defraud the financial institution, Southwest Georgia Farm Credit, ACA, located in Bainbridge. As a part of the conspiracy, Branham contacted Southwest Georgia Farm Credit’s then-Chief Lending Officer, Malone, to ask that he assist Cadenhead in obtaining a $500,000 loan from the bank, which was going to be used to help purchase the penthouse condominium. With the understanding that Malone would receive a financial benefit in the form of a bribe, Malone agreed to assist and, thereafter, authorized the $500,000 loan to Cadenhead.”

“Three months later, Malone approved a second loan for $700,000 to refinance the first loan and a $150,000 check was sent to Cadenhead. The evidence showed that, from the proceeds of that second loan, Malone was given a $50,000 check, which represented the payment of the bribe originally negotiated by Branham, Branham received a $25,000 check, Cadenhead took $25,000 for himself, and another individual also received some of the money.”

“Thereafter, McDonald obtained loans through fraud in her name for the penthouse condominium with the assistance of Fair and Cadenhead. As a result of Branham’s conviction, Branham faces a maximum sentence of 30 years in prison on both Counts One and Two.”

From TC Palm. “As a way to help clean up neighborhoods, city officials are looking to require foreclosed properties be registered in a database and the mortgage holders pay an annual fee. City commissioners and staff met at a workshop to discuss the possibility of mirroring a St. Lucie County ordinance that generates money to pay for fixing up foreclosed properties falling into decay, such as by mowing overgrown lawns. The registration holds someone accountable for a foreclosed property.”

“Mayor Bob Benton said registration wouldn’t solve the problem of blight on the city due to foreclosed properties, but it would help. Police Chief Sean Baldwin said he likes the idea of registration as a crime prevention tool. Blight and crime have a direct connection, Baldwin said. The latest crime related to foreclosed properties is the theft of recyclable materials, such as copper and aluminum. He said criminals are stealing $25,000 to $30,000 worth of materials from electrical wiring and plumbing to get $50 to $60.”

“Baldwin said people don’t check on foreclosed properties and don’t know when materials have been stolen, which causes problems for the Police Department when it comes to enforcement.”

The News Chief. “Polk County’s total foreclosure filings - default notices, scheduled auctions and repossessions - were down 15 percent in November compared with the year before, and fell 33 percent from October, according to RealtyTrac. Lakeland Realtor Gate Arty said there is still intense local demand for foreclosure properties because of the ongoing supply issues. ‘Any time a foreclosure listing hits now, it almost harkens back to the market of ‘05 and ‘06, where you have multiple offers almost instantly,’ said Arty, of Keller Williams Realty.”

The St Petersburg Times. “From July 2010 through November 2010, Tampa Bay lenders recorded 2,971 short sales with a median price of $112,000. In the same period this year, banks recorded 3,700 short sales with a median price of $89,900 in Pinellas, Hillsborough and parts of Pasco and Hernando counties, according to My Florida Regional MLS data. While short sales have risen, foreclosure sales in the bay area plummeted from their peak of 1,549 in March to 505 last month, a 67 percent drop. The 505 sales last month is 23 percent lower than November 2010.”

“Hungry investors are now entering bidding wars on short sales because the supply of bank-owned homes is so low. ‘The investors are all over these,’ said Craig Beggins, owner of Century 21 Beggins Enterprises in Apollo Beach. ‘They have no choice. This is going to cause the average prices to go up. The cheap houses are going away.’”

The Star. “The U.S. housing market remains in such a state of crisis that homeowners and banks have moved beyond bailouts to handouts — they’re donating unwanted properties to charity. This year alone Real Estate Donations has been handed the keys to over 100 homes from folks who can no longer afford them. That’s a ’significant’ jump from the six to 12 properties that used to be donated to the non-profit agency each year before the subprime mortgage crisis and the collapse of the U.S. housing market, says Charles Konkus who started the charity 11 years ago.”

“Many are in such bad shape, or have been stripped bare during the months they sat empty during the lengthy bank foreclosure process, Konkus has had to turn them down.”

“The program has allowed folks such as New Jersey resident Ellie May, 86, to escape ongoing taxes and upkeep on the dilapidated Florida bungalow she and her now deceased husband hadn’t used in years. When it proved impossible to sell given all the distressed homes up for sale in Florida, her son, Victor Tagliaferro, contacted Real Estate Donations.”

“By April the home should be renovated and ready for an aged vet who has first gone through counselling around how to budget and live within their means, says Konkus. ‘We’re a long way from a recovery, but programs like this may help,’ says Tagliaferro. ‘At least they get people into houses and back into neighbourhoods.’”

“More than two years ago, Chase Magnuson was hired to create George Washington’s ‘real estate gifting program’ because other charities were refusing to accept real estate donations from homeowners just looking to walk away. So far it has closed on 13 properties, from a retail complex to office buildings, rental homes, condos and parcels of land, says Magnuson. ‘I get a number of calls every week on all types of properties. Too often I have to tell them, ‘You have more mortgage than the property is worth and there’s no ‘gift’ in that.’”

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It’s Time To Move Beyond The Wrecking Ball

Readers suggested a topic on jobs. “I’d like some discussion on people that have lost their jobs that were making a lot of money (in banks as VPs, or corporations) suddenly realize that they are not in demand. My own view is that these people were all fluff and were employed due to the sham economy up to 2007. My feeling is that businesses purged these highly paid persons (more old than young) when they realized that these persons skills were only ‘talking’ and not doing. When the economy was going gangbusters, these people were hiding behind the productivity of their colleagues. Now that the tide has gone out…”

A reply, “They get promoted in good times to manager and then bad times come, and see ya later.”

And this, “I’ve known more than a few well-paid older folks who haven’t grasped the idea that computer literacy is no longer an option. It’s a necessity. Especially if you want to have a job.”

Another said, “Doesn’t that imply that if they’d done the right things to update their skills, they could get another job at the same or better salary? What if the truth is that there’s nothing they could have done, and they only made that much money due to a temporary market condition? It’s not like the graduating class is stealing those VP jobs from the guy who didn’t keep up his skills.”

One had this, “If anything, IMO they updated their skills too much. Lots of those VP’s started out as ME EE CE engineers, or similar STEM positions. The higher up they rose, the farther away from their original STEM jobs they got. They would have a better chance if they tried to go back to their STEM quals. However, actual STEM pays a lot less than management of STEM.”

The Gazette.net in Maryland. “Employment growth is expected to increase at a sluggish rate of 1 percent during the next three years, according to statistics in a report released by the Board of Revenue Estimates today. ‘There are three essential components to an economy that is powered primarily by consumer spending — jobs, housing and consumer confidence, and all three ‘legs of the stool’ need to be moving in the right direction for a sustained recovery,’ Comptroller Peter Franchot, who heads the board, said in a statement.”

US News & World Report. “‘It has become an urban legend that we’re not recovering because housing prices are low,’ says Peter Morici, an economics professor at the Robert H. Smith School of Business at the University of Maryland in College Park. ‘During the boom, we amassed a huge trade deficit. That creates a hole in demand. That’s what’s holding back the recovery this time.’”

The Motley Fool. “While testifying before Congress earlier this year, Federal Reserve Chairman Ben Bernanke was asked if there was precedent for the economy recovering from a recession while the housing market stayed weak. He looked puzzled, thought about it for a moment, and replied: ‘It’s normal for housing and construction to be an important part of the recovery.’ No, in other words.”

“The key to getting the economy back on track is deleveraging — paying off debt accumulated during the bubble years. For households, the vast majority of that debt is in the form of mortgages. In that sense, housing not only caused the recession, but it’s by far the biggest impediment to recovery.”

“But it goes beyond paying off debt. In a report released last week, the Fed asked a simple question: How many of the 8.7 million jobs lost during the recession were tied to the housing market? Its answer: about 40%. And that probably understates it. The reality is many housing-related jobs never should have existed in the first place. When thinking about housing-related job losses and the potential recovery, you have to make a distinction between jobs tied to the housing market and jobs tied to the housing bubble. Many fall into the latter group. According to economist Mark Zandi, 23% of all new jobs created from 2003-2006 were housing-related. Many won’t come back — nor should they.”

The Arizona Republic. “Conventional wisdom is that the Phoenix-area economy stinks and it won’t get better until the housing industry recovers. I think that’s a misdiagnosis of the current condition of the economy and its intermediate prospects. Employment in the Phoenix area peaked toward the end of 2007. Since then, the area has suffered severe job losses. Prior to the housing bubble, the Phoenix area consistently ranked at or near the top in job creation.”

“I’ve consumed much ink and digits over the years arguing that Phoenix doesn’t have an economy dependent on real estate, to no noticeable effect. Such an economy cannot exist. Real estate does not create its own demand. If it did, there wouldn’t be so many empty houses in the Valley. All economic relationships are interdependent, but for the most part, real estate is a dependent variable. It depends on some other factors driving the demand for its products.”

“If you are a place growing faster than other places, you will have an oversize real-estate sector compared with other places. But that doesn’t mean that real estate is driving the economic activity. Conventional wisdom has it backwards: A robust Phoenix economy doesn’t depend on recovery in the housing industry. Instead, recovery in the housing industry depends on an otherwise robust Phoenix economy.”

The Sun Gazette in Virginia. “Could a lack of housing options for those across the economic spectrum be the factor that pops Arlington’s economic balloon? ‘I’m scared. Really. It’s going to be frightening.’ That’s how Laura Van Syckle, director of recruitment at Virginia Hospital Center, reacted to the suggestion that the county’s current housing crunch is likely to get worse before, or if, it gets better.”

“As land in the county continues to escalate in price, longtime property owners and developers are cashing in by building top-of-the-line housing, and charging prices to match. It’s now not uncommon for upmarket apartments to rent for $3 per square foot per month, said Mark Silverwood, president of the development firm Silverwood Cos. By one calculation, it would take an annual household income of $103,500 a year to afford to live in a market-rate two-bedroom apartment in Arlington.”

The Washington Post. “Nancy Welsh is the founder of the Raleigh, N.C.-based nonprofit Builders of Hope, which works to change the face of affordable housing by rehabilitating abandoned houses slated for demolition: It’s no secret that the United States is in the midst of a housing crisis. Foreclosure notices were filed against a record-setting 2.9 million properties last year and 1.2 million in the first half of this year. Yet the price of many foreclosed homes remains unaffordable for a majority of Americans.”

“Policymakers are desperately searching for a solution to the housing crisis. They fantasize about tearing down 3 million homes – roughly 60,000 homes per state – all in an effort to jump-start the housing market and the economy. What they fail to realize is the opportunity these homes offer for creating the affordable housing that Americans so desperately need.”

“This affordable housing void has resulted in many of the working class being priced out of the cities where they work, unless they choose to live in at-risk communities and dilapidated buildings.”

“Others have been forced to move in with family members or friends to save money during these economically challenging times. There is also a growing trend among young people of waiting to leave the nest, which can further burden their potentially struggling parents. In 2010, 1.6 million more young adults ages 20 to 29 were living with their parents compared with 2005.”

“We have millions of people in need of permanent housing and millions of units of vacant housing available. Instead of demolishing these homes, the inventory should be reused to rebuild the stagnant housing market, as well as address the immediate need for affordable housing and job creation.”

“By recycling homes and revitalizing blighted neighborhoods, we can put the surplus of vacant and foreclosed houses to work creating a more sustainable future for our country. It’s time to move beyond the wrecking ball and start getting Americans back into homes.”

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On the Market: What's Black and White and Beyond Hideous All Over?

× Like us and you'll find top breaking news in your Facebook newsfeed. Sign up for our daily email newsletter and get top stories and breaking news delivered to your inbox. Monday, January 31, 2011, by Sarah

We kicked January off with one contender for worst house of the year—it's only fitting that we cap the month off on a similar note. Here, for instance, is a five-bedroom Houston property that's listed for $1.5M. The seller appears to have a fascination with mermaids—there's a mermaid-themed master bedroom and a mermaid sculpture in the foyer—as well as taxidermy—there's a room with not one, not two, but multiple mounted heads. There's also a tiki hut out back. Have a look.

· 12930 Memorial Drive, Houston [HAR]
· Fan Favorite in Black and White: Is This Really the Gaudiest House in Houston? [Swamplot]
· Tennessee Presents an Early Contender for Worst Room of the Year [Curbed National]

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