The Housing Bubble

The Tampa Tribune reports from Florida. “Big-money investment firms called hedge funds are calling real estate agents daily seeking to buy homes before they’re even listed for sale on the Multiple Listing Service. Realtors report that investors are buying homes they wouldn’t have touched several months ago, including townhomes and homes in the upper $200,000s and $300,000s. Most investment firms don’t buy townhomes, real estate agents say, because they prefer easy-to-rent single-family homes. However, Tampa real estate broker Dale Hunter is noticing big investors snapping up townhomes lately, including one firm that bought up a $300,000 townhome in Tampa.”

“MLS statistics show Blackstone Group and Fundamental REO, a New York firm started by a former Goldman Sachs banker, rarely went above $200,000 when they started buying in Hillsborough County last year. But in recent months, about a quarter to a third of their purchases have been above $200,000, with a few dozen over $300,000. A big question is just how deep the Tampa Bay area’s market for rental homes is, especially for the $200,000-plus homes hitting the rental market.”

“David Kirschner has been renting out single-family homes in Carrollwood and southern Pasco County for decades and wonders that, too. Rental homes in the area fetch about 70 cents to 80 cents per square foot, so a typical 1,500 square foot home might rent for at least $1,050, Kirschner said. MLS records indicate Blackstone Group has bought at least 49 houses with 3,000 square feet or more of living space, a size that normally would command more than $2,000 a month. Renting those out for more than $2,000 a month might start testing the area’s limits.”

“He also shares a worry with many others in the real estate business: what will happen when the hedge funds sell off their homes for a profit in a few years? The fear is they will flood the market and cause another housing slump. ‘Will the market be able to absorb it? Hopefully, the demand will be there,’ he said.”

The Herald Tribune. “Two of the largest real estate investors in the country are manipulating home values across Southwest Florida through rapid price inflations that could form another bubble here, an analysis shows. The Blackstone Group and rival Colony Capital have bought 522 single-family homes from Parrish to North Port since last fall, spending nearly $84 million on those deals, according to a Herald-Tribune review of property records.”

“The strategy has created a slew of potentially adverse impacts — from fewer short-sale approvals to a rise in home squatters and bidding wars among buyers — all resulting in what some analysts consider dangerously false inflation. ‘They’re out to buy as many homes as they can, and price is no longer a factor,’ said Jack McCabe, a real estate consultant in Deerfield Beach.”

“Most troubling to some, the firms routinely outbid owner-occupiers by paying significantly more for houses than what the same properties fetched just months earlier. Colony, for instance, bought one home in May for $172,000. The same residence sold the previous November for $64,000 — a markup of 275 percent in six months. The two-bedroom, one-bath home measuring 1,013 square feet was built in 1956 and valued by the county at $66,500 last year.”

“Colony took the same tack when it bought a home in Venice in April for $136,000 — an appreciation of $62,500 over its last sale, shortly before Christmas. Then, it sold for $73,500. The Herald-Tribune’s analysis shows Blackstone, too, has overpaid — sometimes significantly compared with market rates — for many of its homes. In May, it paid $265,000 for a five-bedroom in Sarasota that was built in the 1980s. That same house changed hands just two months earlier for $185,000.”

“Blackstone spent $142,000 for a home on Radnor Place in Sarasota in January. Less than two months earlier, the 1,400-square-foot house went for $79,000. With dozens of similar examples of Blackstone purchases in excess of market rates, some Realtors fear the region could again be crippled by the artificial price appreciation that was a staple of the mid-2000s real estate run-up. ‘These purchases are ridiculous,’ said Robert Goldman, a Realtor, real estate attorney and developer in Venice. ‘I think the strategy is going to backfire in their face. I just don’t see how they can charge enough rent to recover these prices.’”

“Already market watchers say they are concerned that Blackstone’s purchase prices have influenced so-called ‘comparables’ — similar transactions that appraisers use to value homes. The more houses Blackstone buys at inflated prices, experts say, the more those prices will be used as a gauge to the value of all other similar properties nearby — a phenomenon that could skew prices throughout the market.”

“Bulk buyers last year paid an estimated 45 percent more than assessed value for the 5,289 foreclosures they bought in Florida. As more of those institutions now turn to short sales and traditional listings, industry analysts believe prices will balloon marketwide. ‘These big companies are paying way over market in general,’ said Shannon Moore, broker and owner of Green Lion Realty, which works with smaller competing investors in North Port. ‘What they’re paying at auction is ridiculous. It definitely seems like they could be creating another false bubble.’”

The Orlando Sentinel. “With about half of all resales these days closing as cash deals, and a quarter of all properties going for more than their asking price, the region’s house ‘flippers’ have been selling hundreds of homes and condominiums in the past year to equity companies and institutional investors, an Orlando Sentinel analysis has revealed. Local radio ads now advertise: ‘Do you want to make a ton of money buying and flipping houses?’ The real question, though, may be: How much longer can the investor frenzy continue?”

“‘Right now a bubble is not a serious concern, but we can’t sustain the 20 percent price gains,’ said Ron H. Richards, whose family has been in Orlando for generations and whose company is now one of the most prolific flippers in the region. ‘We saw a nice spike in prices, but a lot of the larger groups are not finding the returns they thought they would.’”

“The biggest buyer of flipped homes in the four-county Orlando metropolitan area has been an investment group affiliated with Blackstone Group LP. A review of 57 recent Central Florida home purchases by the New York-based investment group found that it chose to deal with a broad pool of sellers rather than one source. The group paid a median price of $110,950 for the properties.”

“‘The No. 1 concern with institutional investors is that they control big swaths of real estate and, if they decide at some point that it’s time to sell, how that’s going to affect these markets,’ said Daren Blomquist, VP for RealtyTrac. ‘To me, it always makes me nervous when there are large corporations that control big pieces of real estate. It’s like Shadow Inventory Part II.’”

The News Journal. “Sales of vacation homes in the U.S. rose 10.1 percent in 2012 from the previous year, according to the National Association of Realtors. Anne and Brian Fuselier searched about a year and half before they finally found their dream second home. The Orlando-area couple’s patience paid off. They waited out the market and snapped up a three-story, $600,000-plus home nestled along the Mosquito Lagoon south of New Smyrna Beach. Bill Roe whose firm brokered the Fuseliers’ purchase, said second home sales represent about 30 percent of his business, with the buyers mainly from the Central Florida market.”

“And Roe said his agency’s total pending sales are up more than 100 percent over last year. Roe said that there was a ‘ton of money’ lying around after the housing bubble burst and the economy was slumping. Now that home values are on the rebound, he believes many people are looking to invest that cash in other ways than buying municipal bonds or taking the plunge in the stock market. ‘So what’s that leave? It leaves real estate. And most of them wanted to buy that second home anyway,’ he said.”

“Pre-preliminary tax roll estimates released last month by Volusia County Morgan Gilreath’s office last month forecast the county’s property values would increase about $800 million this year — a 2.3 percent increase. Values are estimated to rise in almost every city, including New Smyrna Beach, with a $124 million or 3.8 percent uptick over last year. ‘The message is: if you want to buy real estate in Volusia County or probably anywhere in Florida, you may already be a little bit late, but you’re not too late,’ Gilreath said. ‘Come on down and buy.’”

“Gilreath said while sellers should feel more comfortable putting their homes on the market than they did last year, they may want to wait. While he couldn’t forecast exactly how much property values would rise next year, he believes the increases will only continue. ‘If you can hold on to it, prices are going up,’ he said.”

From Miami Today. “Experts say the economy is on the mend, yet home foreclosure filings are still on the rise in Greater Miami. Much of the reason, they say, is because property values are rising, making it more appealing for banks and other lenders to initiate proceedings to seize financially distressed properties. ‘Banks are seeing good values, so they’re trying to get their money out’ of distressed properties through foreclosures, says Dan Mackler, a lead attorney with the Gunster law firm in Miami who has represented banks and investment groups in the process.”

“The number of properties receiving a foreclosure filing in Greater Miami was 21% higher in April than it was the same time last year, according to RealtyTrac. Of the 55,896 properties in some stage of foreclosure in Greater Miami, only a small fraction — 2,215 — are for sale, RealtyTrac reports.”

“Mr. Mackler says that’s because banks have tended to hold foreclosed local properties without putting them back on the market as they have waited for housing prices to rebound. Meanwhile, Greater Miami and Florida as a whole continue to have some of the highest foreclosure rates in the country — and one of the unfortunate byproducts of that trend has been a glut of vacant properties.”

“In some markets, investors have been reselling previously foreclosed properties — a practice known as ‘flipping’. That includes Miami, where property flippers have been churning out profits at an average of more than 35%, according to RealtyTrac. Data show the highest foreclosure rates in the area have been in the suburbs around the city, places such as Kendall, Hialeah and North Miami. ‘A lot of them have come from South America,’ Mr. Mackler says about the cash buyers. ‘They see [Miami properties] as a safe place to [invest] their money and let it appreciate for three or four years and sell it.’”

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The Pioneer Press reports from Minnesota. “Despite the steady rise in home prices over the past few months, Twin Cities’ real estate veterans say it’s too soon to call the market a bubble again. But it’s also almost impossible to avoid a bidding war on almost any home priced below $200,000. Gary Pederson’s search involved bidding wars on five houses in St. Paul. He finally landed a three-bedroom, two-bath home in Midway by offering 10 percent over the $189,900 asking price. The house he bought went on the market at noon on a Monday. His real estate agent had given him a head’s up that it was coming up for sale, and Pederson had driven by it the previous week.”

“He got a walk-through of the house at 4:30 p.m. that Monday and then made an offer. By Tuesday, the buyer had five offers. His previous experiences with being out-bid made him decide to bid up the price on this Midway home. ‘Realtors are telling people you have to be ready to go,’ Pederson said. ‘I’m expecting the neighborhood will see an increase in values.’”

The Des Moines Register in Iowa. “Third-grade teacher Erin Denny’s summer to-do list is massive: She’s finishing her master’s degree, planning her wedding and buying a house. The surprising challenge of the three might be buying a home. In about a month, she’s lost two houses to other buyers — within less than a day of viewing them. One home in Clive had been on the market for two days when she and her fiance took a tour. ‘We went home that night to talk about it, and decided to put in an offer,’ Denny said. The next morning, the house had been sold. ‘The people who looked at it right after us put in an offer. … We didn’t even get overnight to think about it. Homes in our price range are moving so quickly, you just have to make almost instant decisions, which is kind of scary.’”

“Tales like Denny’s — a main feature of the bubble that eventually led to the housing crash and recession — are becoming more commonplace as the Des Moines-area market rebounds. Buyers and sellers describe multiple offers, bidding wars and barely there listings.”

“‘The market is crazy. We didn’t see this last year,’ said Iowa Realty agent Carrie Brugger, adding that the last six offers she and business partner have written for clients have had competing buyers. ‘It’s a lot more frenzied now. I see it across the market — from homes selling from $80,000 to $800,000.’”

The Pantagraph in Illinois. “The housing market is on the mend and more help is available for those struggling to keep their homes in McLean County, but foreclosed and abandoned houses continue to hurt neighborhoods. Homes already in the midst of foreclosure are still working through the system, and neighborhoods must put up with the often abandoned and unkempt properties waiting to be resold. Bloomington’s west side has a number of them, said Valerie Dumser, a board member of the West Bloomington Revitalization Partnership and resident of the area.”

“‘It doesn’t do much for the values of our homes,’ Dumser said. ‘It doesn’t say much for the neighborhoods. People don’t want to move into a neighborhood that looks empty and neglected.’”

“Some of those empty homes have been sitting for years, Dumser said. That may be because McLean County foreclosures now take an average of 20 months to be resolved — twice as long as before the housing crisis, according to an ongoing study by Diego Mendez-Carbajo, chairman of the Department of Economics at Illinois Wesleyan University. Though fewer new foreclosures are being filed, the ones held over from previous years are still numerous.”

The Journal Sentinel in Wisconsin. “May foreclosure filings in southeast Wisconsin dropped 45% from a year earlier, another sign of a recovering housing market. Russell Kashian, a University of Wisconsin-Whitewater economics professor who tracks residential real estate in the state, said he is surprised foreclosure filings decreased that much in a job market that has been lackluster. ‘It’s surprising we’re doing that great,’ Kashian said. ‘We’re not exactly booming.’”

“After stumbling hard during the economic downturn, the condominium market in downtown Milwaukee is back on its feet and making a quiet comeback. Robert Monnat, partner at Mandel Group Inc. in Milwaukee said the majority of the area’s oversupply from the housing bubble has been absorbed. The downtown condo market consists of about 3,100 units in all. Of that number, about a fourth make up a sort of ’shadow inventory’ of condos that were converted to rental units when the number of buyers shrank during the downturn. Some will come back on the market as condos. ‘You have a fairly large supply of condominium units that were built that are actually masquerading right now as apartments,’ Monnat said.”

From The Sun in Wisconsin. “Wisconsin home sales jumped 9.2 percent statewide in April 2013 compared to a year earlier, which marks 22 straight months of positive growth. According to relator data, Polk County home sales increased 38.89 percent in the first quarter 2013 when compared to the same quarter a year ago. Borrowing rates remain low and banks are loosening restrictions on mortgages, said Logan Kelly, an economics professor at UW-River Falls, which also impacts the rate at which homes sell.”

“‘One of the drivers of real estate is mortgages,’ he said. ‘We’re starting to see lending practices loosen up a little bit. They were locked up really tight. To quality for a loan was really tight, and its beginning to loosen up.’”

“Although the gains in the housing market have come without significant improvement in employment, Kelly noted that the consistent rise in growth is an indicator that the economy, and consumer confidence, is improving. ‘It does say something about that person’s expectation of the future,’ he said. ‘They aren’t expecting to lose their job and are not expecting to have any major decreases in income over the next couple of years.’”

The Gawker. “The U.S. Attorney for the Western District of Wisconsin announced a major conviction today in the ongoing criminal prosecution of the people who brought the economy to its knees four years ago via a toxic campaign of mortgage fraud. Meet James Wazlawik of Prescott, Wisc. Wazlawik was sentenced to one day in jail and three years supervised release after pleading guilty to ‘making a false statement to a bank in connection with a home equity loan.’ His crime: When he applied for a $150,000 home equity loan from Citibank in 2005, he put his signature to an ‘income verification form’ claiming that his monthly income was $8,500. In fact, it was substantially less than that.”

“Here’s how Wazlawik put it in a sentencing letter to U.S. District Court Judge Lynn Adelman: ‘I did not know a person could get a loan without consistent income. I was told by the broker that there was a program called NINA-no income no asset that anyone with good credit could apply for. So I applied for this loan thinking that the money available on the line of credit would be able to be used to grow our business…When I took this mortgage, I still had a significant amount of credit available on my first mortgage, which was also a line of credit. What I did not count on was the economy beginning to sour.’”

“So Wazlawik, surprised to find that ‘a person could get a loan without a consistent income,’ took advantage of a loan officer’s offer and signed on the dotted line. But why would a loan officer encourage someone without consistent income to obtain a home equity loan? Probably because Citibank, the victim in this case—the U.S. Attorney’s press release notes that the bank ‘lost $146,829 when Wazlawik was unable to repay the loan’—spent most of the last decade feverishly buying, packaging, and reselling mortgages that it knew would never be repaid.”

“In 2012, Citigroup paid $158 million to the federal government to settle claims that in order to obtain insurance from the Federal Housing Administration, it systematically lied about the likelihood its loans would be repaid—sort of like providing false information on a loan application. Justice Department prosecutors calculated that 30 percent of Citibank’s FHA-insured loans went into default. That’s $1.44 billion dollars worth of bad loans.”

“Like Wazlawik, Citibank failed to anticipate the economy turning sour. It has since been the recipient of more than $476.2 billion in cash and guarantees from American taxpayers, making it the single largest recipient of federal bailout funds after the economy collapsed as a direct result of what Citibank did with loans like Wazlawik’s.”

“To date, no one in the executive ranks of Citibank—or any of the other Wall Street institutions that solicited and profited from loans like the one Citibank issued to Wazlawik—have been criminally targeted by the Department of Justice.”

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Some housing bubble news from around the globe. The South China Morning Post, “On paper, Vancouver is not a wealthy city. But it is a city that is attractive to wealthy overseas buyers, mostly from mainland China, who are driving up prices. Investors are either securing their money in real estate for several years, or purchasing pre-sale properties and flipping them for tremendous profits. Developer Thomas Fung has an office and retail project under construction, and already has had several of the pre-sale purchasers flip their spaces for around 50 to 60 per cent profit.”

“Because of residential property investments, certain parts of the city are underpopulated. In downtown Vancouver’s Coal Harbour, an estimated 23 per cent of all condos are empty. The wealthy owners have not rented them out. ‘People who can afford to buy those condos are so rich they don’t even care about the return on their investment,’ Fung said.”

The Telegraph on China. “China’s shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned. ‘The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation,’ said Charlene Chu, the agency’s senior director in Beijing.”

“Concerns are rising after a string of upsets in Quingdao, Ordos, Jilin and elsewhere, in so-called trust products, a $1.4 trillion (£0.9 trillion) segment of the shadow banking system. Bank Everbright defaulted on an interbank loan 10 days ago amid wild spikes in short-term ‘Shibor’ borrowing rates, a sign that liquidity has suddenly dried up. ‘Typically stress starts in the periphery and moves to the core, and that is what we are already seeing with defaults in trust products,’ she said.”

The Edge Malaysia. “A recent poll among auctioneers revealed that a number of local and foreign buyers have not been servicing their loans for high-end property purchases made a few years ago, during the height of the luxury high-rise residential property boom in Kuala Lumpur. Most of these owners have tried to sell or rent out their units but find it difficult to sell residences priced above RM 1 million. ‘Eventually, these buyers decide that they would rather lose their 10% down payment than to continue being stuck in this situation,’ said auctioneer Dan Tan.”

“‘I have been told there is a condominium along Jalan Tun Razak that is currently only 60% occupied. The development was completed four years back,’ says auctioneer Abdul Hamid PV Abdul. Abdul Hamid add that although there have been numerous industry reports regarding an obvious oversupply of condominiums in the KLCC area, more high-end, high-rise developments are set to be launched.”

The Saigon GP Daily in Vietnam. “The People’s Committee of Ho Chi Minh City convened a meeting on June 4 with related departments associated with housing and construction to discuss the ongoing crisis of unsold housing inventory in the City. Around 308 condominium blocks in HCMC have had to put on hold all construction for lack of buyers and frozen property market. Since the beginning of the year, 1,877 apartments were sold, accounting for 13 percent of total apartment inventory but 12,613 apartments are still unsold.”

The Times of India. “Builders across the country have been worried as unsold housing stock have been piling up in the recent months. Chennai’s unsold housing stock, for instance, has risen from 20,000 units a year ago to 45,000 units now as per a study conducted by international realty consultant Jones Lang LaSalle. Sales have dipped across seven major markets in India in the first quarter of 2013, said JLL chairman and country head Anuj Puri.”

“About 35% of Chennai suburbs unsold housing stock is on the OMR, said India Property CEO Ganesh Vasudevan. ‘If investors who have funded the projects find it difficult to exit, the market may crash as it happened in the case of NCR,’ he said.”

The New Zealand Herald. “A bank economist has warned of consumer spending sprees and widespread economic fallout if house price rises continue, just as QV showed the sector continuing to rocket ahead. Felix Delbruck, Westpac Institutional Bank senior economist, worried about the effects of a rocketing market, saying it was true that, about two years ago, people had been paying down debt, but that trend now appeared to have reversed. Mortgage growth had picked up since early last year ‘and indeed now seems to be growing slightly faster than household incomes. Mr. Delbruck said borrowers could remortgage, ‘effectively using the house as an ATM.’”

“QV operations manager Kerry Stewart said Auckland prices were still very high and a ’somewhat desperate’ feeling was emerging among buyers searching for good houses at reasonable prices. The speed with which people had to make an offer had seen some forgo the usual due diligence.”

Bdaily Business News in the UK. “Announced during the Budget, Help to Buy helps people purchase properties with deposits as low as 5% but has also been criticised by the IMF, outgoing Bank of England Governor Sir Mervyn King and former Chancellor Alistair Darling. Early results however show the scheme to be exceeding expectations with 4,000 new homes sold in the two months since it was announced. Figures out this week have also shown output in the construction industry rising for the first time since last October, with house builder Bellway also reporting a boost in sales.”

“Ajay Jagota of KIS Lettings, who manages properties for 700 landlords believes that despite the dangers Help to Buy could yet prove a crucial catalyst to economic recovery. He said: ‘Of course Help to Buy runs the risk of fuelling a new housing bubble, especially if demand for homes starts to seriously exceed supply - but if it is properly-implemented and only ever used (as) a short-term measure there’s no reason to believe the sky is about to fall on our heads.’”

“‘It seems to me that Help to Buy’s critics are judging it only on the basis of the most apocalyptic worst-case scenario – they’re like people who won’t go to hospital when they’re sick in case the ambulance crashes. If you won’t do something because of a hypothetical risk, you won’t do anything. If you look at the details the government’s financial exposure is minimal, and if lenders behave cautiously – which is there is every reason to presume they will, giving their recent reticence to lend at all – the risks should be minimised, especially if the government manages the situation effectively,’ he said.”

The Foreigner on Norway. “Estate agents are signalling people must be prepared for it to take longer to sell their homes. ‘The last three-month growth rate is now at 0.8 per cent if you calculate average growth from the previous three. It hasn’t been this low since 2009,’ senior analyst Katrine Godding Boye at Nordea said to Aftenposten. ‘This spring has been weak price-wise.’”

“Property sales major Eiendomsmegler1 CEO Odd Nymark said ‘We note that the market has been a little slower in the last three months. There are no housing types that stand out, it’s across the board. It’s is a bit strange since this is peak season.’”

“An Oslo resident Marianne Klemp told the paper she is still struggling to find a buyer for her central Oslo two-room apartment and has now had to reduce the price. ‘There was one person a day who came to the first two viewings and a total of about five people at the next ones. I’ve just got an offer of 200,000 below the sales price, but it’s 150,000 less than what I paid for it two years ago,’ she explained.”

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A reader in Florida asks this question. “Should I buy a house, stop paying the mortgage, pay the taxes and… wait?”

The Jacksonville Business Journal. “There are still bank-owned properties coming on to the market, mostly at the same rate they’re being absorbed, Florida Realtors chief economist John Tuccillo said. One-third of the nation’s shadow inventory — homes owned by banks that haven’t yet been put on the market — is in Florida, but the fear that the banks will flood the market with those properties is unfounded. ‘This is not a knockout blow,’ he said. ‘This is a death of a thousand cuts. But this is a market that will be us for a long period of time.’”

“But the investor-fueled home price increases — which are occuring much more dramatically in other parts of the state — have led to speculation that the state’s headed for another real estate bubble. ‘History never repeats itself,’ Tuccillo said. ‘We might pass the same way, but it will look different. We’ll make a new mistake by 2017 or 2018.’”

CBS Sacramento. “Home prices in the state are on the rise, but some experts argue it could be an indication of the beginning of a new bubble forming. Holly Brickner, who works for Lyon Real Estate in Natomas, is benefiting from the market bump. But she’s concerned about how quickly prices are rising. She says buyers are now willing to pay tens of thousands of dollars above appraisal or asking price because inventory has plummeted.”

“Last March, there were 551 homes listed in Sacramento County. That number has dropped to just 95 listed in May. She believes government foreclosure assistance programs are shrinking inventory, forcing buyers to become desperate. ‘I do believe there are government programs that are allowing the banks and incenting the banks to hold on to their homes that would have been foreclosed on already,’ she said. ‘I would say there’s a bubble risk right now. Inventory is rising too quickly, so it has to cool off a little bit.’”

From ABC 15. “On February 9, 2012, Attorney General Tom Horne held a news conference boasting that Arizona was part of a $25 billion national settlement with five of the nation’s largest banks. At the time Horne announced they had put a stop to the robo-signing and forgery of foreclosure documents. And the Attorney General announced Arizona’s share of the settlement would be $110 million. Horne said that money would be used to compensate the victims. But more than a year later, the ABC15 Investigators have found Arizona victims are still waiting for help.”

“Attorneys Dan McCauley and Beth Findsen are two of a small handful of lawyers who go to court to fight for the victims of illegal foreclosure. Dan McCauley said, ‘I’ve seen nothing go to the victims, nothing from the state of Arizona at all.’ Beth Findsen told us, ‘I have yet to see one dollar awarded to a homeowner. The banks are getting away with murder.’”

“Mike Brosnahan is a husband and father of two. He is fighting to stay in the home he built in Sedona. He has fought all the way up to the Arizona Supreme Court. Brosnahan told ABC15 Investigators, ‘All they’re doing is breaking up the American dream and leaving it in shambles.’”

“Rocky Coronado served in the U.S. Air Force. The veteran and his wife have been fighting for their home for three years while raising a teenage son. Rocky said, ‘I think it demoralizes him.’ His wife Brenda said, ‘It consumes your waking life.’”

“Both the Coronados and the Brosnahans insist they are not deadbeats and are not seeking a free house–they just want a fair deal. They say they paid their mortgages until they were told to stop so they could get a modification. And now their lawyers say their banks are using fraudulent documents to foreclose and take their homes.”

“Horne admitted it’s too late for victims who have already lost their homes. Nobody who has already been foreclosed on and evicted is going to get their house back. And who gets help may depend on how much money is left because last year the legislature swept $50 million of the $110 million settlement into the state budget—a budget that already had $400 million in reserves. Horne told ABC15 he fought against the sweep but in the end he had to abide by what the legislature decided. He points out they could have taken the entire amount of the settlement. Horne also said he plans to spend another $30 million of the settlement on outreach and marketing. He said he is also setting aside $4 million to provide legal assistance to homeowners fighting foreclosure.”

“The victims of illegal foreclosures we spoke to say every penny of the $110 million settlement should have been used to compensate them. Rocky Coronado said, ‘It just blows my mind that they could have the nerve to take that money that should have gone to homeowners like us.’”

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It’s Friday desk clearing time for this blogger. “With inventory down and prices rising, buyers are exhibiting the kind of frenzied behavior not seen since 2005. It is not enough that they are mobbing open houses, bidding thousands of dollars over asking price, and making all-cash offers. They are going so far as to Google owners and craft pitches in which they pretend to enjoy the same things the sellers do. Family photos are not uncommon. As word spread in Jamaica Plain that Tanya Contos’s Colonial might be going on the market, strangers began ringing her doorbell. ‘It was like trick-or-treating, but for houses,’ she said. ‘They were slipping notes through my mail slot.’”

“The letters are a ploy resurrected from past competitive markets, but do they work? ‘When you have five people writing similar letters telling the same story about how much they love the house, what does that become?’ asked Gary Rogers, a past president of the Massachusetts Association of Realtors. ‘Junk mail.’”

“If you’re relocating to the Washington region from places such as Atlanta, Charlotte or Philadelphia and are looking to buy a home in the $750,000 range, chances are you’ve already experienced a reality check. In those cities, $750,000 would be considered the luxury market — where you can buy an estate on several acres. ‘Buyers who come to our area looking for an equivalent home go through sticker shock in this area when they try to duplicate what they had before,’ said Jeremy Cunningham, a real estate agent who mainly covers Northern Virginia.”

“In this area, $750,000 is considered the mid-range. Luxury starts around $1.2 million, he said.”

“Foreclosure sales plummeted in May after federal banking authorities reminded lenders to play by the rules when foreclosing on homes. Sales at courthouse auctions fell from April to May a combined 25 percent in Santa Clara, San Mateo, Alameda and Contra Costa counties, according to PropertyRadar. There were similar declines across California, the company said. Foreclosure sales have been declining for months and are now 70 percent below their level a year ago in those counties as rising property values pull more homeowners out of trouble and banks work on loan modifications with those who are still struggling.”

“Lenders still have plenty of foreclosed properties that they haven’t put on the market. The number of foreclosed properties they hold has dropped more than 45 percent from a year ago, but they are holding 3,413 foreclosed properties in the East Bay, Peninsula and South Bay, according to PropertyRadar. That’s reduced the number of homes for sale and caused prices to jump, said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland.”

“Foreclosed properties ‘are not being released by investors or banks,’ Brown said. ‘They are completely, artificially jacking up prices.’”

“Foreclosure filings in May more than doubled in Flagler County compared with April, according to a new report. ‘Not only was there a jump in Flagler County for scheduled auctions, but there was a statewide jump of 79 percent as well, so we are seeing an overall trend,’ said Jennifer von Pohlmann, a RealtyTrac spokeswoman. ‘We see the pattern in Volusia as well.’”

“‘We’re starting to see the shadow inventory coming out,’ said local Realtor Ron Wysocarski in Port Orange. ‘It’s a perfect storm. There’s a low inventory and demand is up as those hedge funds are buying and renting distressed houses. Together, they raise prices. There is an appetite now and banks can dump homes on the market without much of an impact because they are being bought up so quickly.’”

“Surging home prices in parts of Dubai and rebounding shopping and tourism markets are prompting developers to announce projects on a scale not seen since the emirate’s property market collapsed in 2008. So far, sovereign wealth, pension and insurance funds are staying away even as they splurge on real estate elsewhere. ‘It’s a thin market and it has a reputation of being something of a casino,’ said Richard Price, chief executive for Asia at CBRE Global Investors, which manages $93 billion of property assets. ‘The housing bubble was built on sand rather than fundamentals.’”

“House-hunters are seeing a return of ‘buy-off-the-plans’ developments which advertise low deposits and no repayments until completion. Marketing material for Urba Residences offers ‘just $1000 down and nothing else for 18 months’ for those using existing equity in their current house, or a 10 per cent cash deposit. Barfoot & Thompson agent Alistair Brown told the New Zealand Herald that of the 140 apartments about 80 had been bought, with about half choosing the $1000 down-payment option.”

“‘What happened in 2007 is everyone piled into those things without thinking them through, thinking ‘Yay the property market will keep rising and in 18 months I’ll have a profit, because they’re $250,000 today and they’ll be $300,000 in 18 months time and I will have only put up $1000. Good for me’. It might not be that way,’ said Real Estate Institute chief executive Helen O’Sullivan.”

“Australia’s GDP growth expanded merely 0.6% in the first quarter. This was after a 0.6% rise in Q4 2012. Minus export growth, Societe Generale’s Albert Edwards writes that gross national expenditure has fallen for two straight quarters. ‘All we have in Australia is, at its simplest, a credit bubble built upon a commodity boom dependent for its sustenance on an even greater credit bubble in China,’ he said. ‘Although a Chinese bumpy/hard landing will bring Australia to its knees, what will will send Australia into a deep recession after 22 years is the collapse in its grotesquely over-valued housing market.’”

“For years the resources boom made Port and South Hedland one of the tightest property markets in Australia. Now, the cancellation of big projects could leave the remote West Australian city with a property glut and a lot of burned investors. Greg and Karen Thompson pulled their home off the market in Hedland after just one viewer inspected the house over three months. The couple, who have lived in the area since 1996, planned to use the proceeds to help fund their retirement. ‘We had to take it off the market,’ Mrs Thompson said. ‘It’s dead.’”

“John Briggs of Port Hedland Real Estate predicts tough times ahead. ‘Sales are few and far between,’ he said. ‘Anybody who has bought in the last 18 months is in for a torrid time.’ ‘Anyone looking to buy into towns like Port Hedland is buying at the wrong end of the market cycle,’ said Gavin Hegney, of valuers Hegney Property Group. ‘There’s also the threat of a collision of new supply coming on the market and falling demand.’”

“A recent report from the Organization for Economic Co-operation and Development revealed Canada has the third most overvalued real estate in the developed world. Ben Rabidoux, creator of the blog Economic Analyst, which looks into housing and mortgage trends, said while low interest rates certainly contributed to the housing boom, said much has been fuelled by the availability of credit.”

“‘It’s not like we haven’t seen periods of relatively low interest rates in the past and even in those periods we found that prices weren’t in the extreme like they are today,’ Rabidoux said. ‘I think it’s very clear — it’s not so much the interest rate itself, it’s that really what we’ve seen in the last decade has been an unprecedented credit boom. And that’s what’s really driving these housing prices.’”

“During the past four centuries, there have been five occasions when major credit bubbles have led to stonking crashes. Tulip mania in 17th-century Holland was the first; the South Sea bubble in the 18th century was the second; the US real estate crash of the 1830s was the third; the 1929 Wall Street Crash and the Great Depression was the fourth. The sub-prime crisis that began in 2007 was the fifth.”

“As the world approaches the sixth anniversary of the freezing up of credit markets, a terrible idea has occurred to investors: we might only be part-way through the crisis. This has come as something of a shock. For the best part of the year markets have been pushing asset prices higher in the belief that the worst of the crisis is over. They have given a big round of thanks to Ben Bernanke, Sir Mervyn King et al for keeping monetary policy ultra-loose and avoiding a repeat of the 1930s.”

“Doubts are now starting to set in, and rightly so. Cheap credit has done wonders for equity and bond markets but precious little to revive real activity. An extremely aggressive and highly dangerous dependency culture has developed and it is not easy to see how central banks get out of the problem that they have created for themselves. There is also a risk that seeking to solve a debt problem with still more debt is creating the conditions for an even bigger bubble.”

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