Oklahoma Real Estate Blog

This week, the National Association of Realtors announced that existing-home sales in July had fallen an astounding 25.5 percent from the previous year. Sure, there was a federal tax credit in place last summer. But with single-family home sales at their lowest level since 1995 and unemployment still stubbornly high, home prices may fall further.

In the meantime, millions of homeowners are still far underwater, and government programs to help them have fallen well short of their goals. More foreclosures are coming, casting a deeper shadow over home prices. So it’s hardly surprising that the conventional wisdom says that home values will never again rise faster than inflation.

But as with stocks and the weather, it is dangerous to assume any certainty in the housing market. And by wallowing too much in the misery of others, people looking for a new place to live run the risk of thinking every home purchase will end in regret, at least financially.

Many still could, if they buy in hard-hit areas where prices could fall further.

But a mortgage is still a form of long-term forced savings, after all. This is more important than ever, since fewer people have access to generous pensions than they did during the last big housing slump. A 401(k) or similar plan is no bargain, either, with its erratic returns and employer matches that come and go as the economic winds shift. Social Security is also likely to be less generous, and Medicare will probably cost more.

Besides, owning a home isn’t just about what shows up on a net worth statement — something that bears repeating after all the “investing” that people thought they were doing when buying homes over the last 10 or 15 years. Many of these more qualitative factors, from living free of a landlord’s whim to having access to a good school district or retirement community, haven’t changed and probably never will.

It is possible, as a homeowner, to make very little money but still buy plenty of happiness. So before you swear off real estate, reconsider a few of the basics.

WORST CASES Some buyers may rue the day in 2010 they bought their homes. They may end up like those who bought in 2006 and have lost their jobs. Now those people face the difficulty of moving to pursue employment elsewhere because they owe much more than their homes are worth.

Marke Hallowell and Allison Firmat, who are getting married next month, are well aware of the history. Yet they plan to put 5 percent or less down, using a fixed-rate mortgage backed by the Federal Housing Administration, once they find a condominium in southern Orange County, Calif. (They’ve already been outbid a few times.)

Ms. Firmat is not working, and Mr. Hallowell is a Web developer. Does he worry about mobility problems or making the payments in the event of a job loss, given that he’s the sole breadwinner? “We’re getting such a good deal on interest rates that we could rent our place out,” he said.

Mr. Hallowell and Ms. Firmat say they believe their approach is conservative, at least compared to what they might have done five years ago.

“Nothing is going to change the rate we will have,” Mr. Hallowell said. “Condos like the ones we’re looking at now were unobtainable in the past, unless we went into something with a total balloon payment. There were times I was tempted, but never seriously.”

Indeed, many people who are buying at the moment are locking in mortgage rates of about 4.5 percent. A year ago, they might have paid 5.25 percent on a $300,000 loan for a monthly payment of about $1,657. Today, you could lock in a lower monthly payment of around $1,520 on a mortgage that size, or you might not need to borrow that much, given that prices have fallen in many areas.

FORCED SAVINGS You may make nothing at all beyond inflation over time on a home, but the part of your mortgage payment that goes toward principal is a form of forced savings.

Sure, you might do better by renting and investing the difference between the rent and the total costs of ownership. But at least three things need to go right.

First, you need to actually save the money. Americans have trouble with that sort of plan. Then, you need an after-tax return that’s better than whatever a home would deliver. That’s a task that might not have gone so well over the last 10 or 12 years, and it involves its own future risk, given how little safer investments are returning now. Finally, you must not raid the savings along the way.

DIFFICULT LANDLORDS A bank can kick you out only if you don’t pay your mortgage. But landlords can drive you away in any number of ways.

Laura Mapp and her husband, Carl Berg, rented from a relative, but it didn’t go particularly well. They found another landlord they liked, but came back from a holiday trip one year to a note saying he wanted to move in himself. They had a month to scram. (The note came with a bottle of wine, at least.)

In yet another rental, they let their landlord know they were looking to buy and inquired about a month-to-month lease. No problem, their landlord said, as long as they used his boyfriend as their real estate agent.

Earlier this year, the couple gave up on landlords and bought a house in the Highland Park neighborhood in Seattle.

THE NICE PART OF TOWN No matter how pretty the neighborhood, prices may still fall further in places like greater Detroit, Cleveland and Las Vegas; outlying areas of Los Angeles, San Francisco and Phoenix; and much of Florida. If you’re looking elsewhere, consult The Times’s rent-versus-buy calculator, halfway down the page at nytimes.com/yourmoney.

But if you want to live in the Fox Hill Farm development in Glen Mills, Pa., you’ll have to buy because renters are not allowed, said Bob Kuhn, who lives there. The same may be true of other communities for older people.

And there may not be many family-size rentals — or at least any financial edge to be gained by renting — in suburbs or urban neighborhoods with excellent public schools.

After many years of building their down-payment fund and a couple of years of watching the listings in the Eagle Rock and Mount Washington areas of Los Angeles, Garret and Alison Williams realized that prices simply were not falling much there.

By the time they were ready to pounce this year, they had a big enough down payment and interest rates had fallen so far that renting didn’t make much financial sense, even if they could have found a rental big enough for them and their two small children.

“Had we rented, we would be paying more than we’re paying for a mortgage,” said Ms. Williams, who had lived in the same two-bedroom rental for 12 years before she and her family moved into their new house in Eagle Rock earlier this month. “I don’t see how we could really regret having made the move when it’s so much better for us on so many levels.”

This is a very even handed assessment of whether you should be buying a home right now.

The new financial regulatory reform is supposed to curb the predatory lending practices that led to the collapse of the mortgage market and have put millions of Americans at risk of losing their homes.

The Federal Reserve must now translate the legislative language into rules that will govern how brokers, lenders, appraisers and investors behave from now on. Given the Fed’s long history of putting the financial industry first and consumer protection second, Congress will need to keep a close eye on the rule-making process.

It has become fashionable to blame profligate borrowers for the calamity. And there is no question that in the madness of the housing bubble, some people should never have sought mortgages or bought homes they clearly couldn’t afford. But the crisis was driven by Wall Street’s hunger for quick profits and its eagerness to buy mortgages and package them into securities. Banks, mortgage companies, brokers and appraisers all conspired to steer borrowers into loans with escalating interest rates, balloon payments and other conditions that made them highly prone to default.

The new law does not ban risky loans outright. It does establish several conditions that, if correctly implemented, should discourage lenders from issuing them.

Lenders must now take the common-sense precaution of documenting the borrower’s ability to pay. They can no longer penalize borrowers — eager to free themselves from subprime or other risky mortgages — for paying off the loans early. And lenders are forbidden to pay kickbacks — “yield spread premiums” — to brokers who push borrowers into costly, higher-interest loans.

If loans violate the law, borrowers will be able to stop a foreclosure and sue to recover damages. The risk of being hauled into court should persuade investors to look closer at the underlying loans to make sure that they conform with federal law.

These are all good, and desperately needed, reforms. Industry lobbyists, who do some of their best work in the rule-making phase, will work hard to water them down.

Consumer advocates are especially worried about how the Fed will formulate the rules that are supposed to stop lenders from steering creditworthy minority or female applicants into more expensive mortgages and end “wealth stripping,” under which lenders design loans that quickly rob homeowners of their equity.

Congressional leaders believe that the Fed was chastened by the crisis and will now do all that is needed to protect lenders. Given the agency’s long history of kowtowing to the banks, mortgage lenders and credit card companies, Congress will need to do more than trust. It will have to verify that the new rules finally give consumers — and the American economy — the strong, permanent protections they need.

This article comes at an interesting time for me. On September 9th, I am a part of a real estate industry roundtable at the Federal Reserve in Oklahoma City. We will be discussing the future of our industry and this should be a part of the discusiion.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.

“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.

If the long term is grim, the short term is grimmer. Housing experts are bracing themselves for Tuesday, when the sales figures for July will be released. The data is expected to show a drop of as much as 20 percent from last year.

The supply of homes sitting on the market might rise to as much as 12 months, about twice the level of a healthy market. That would push down prices as all those sellers compete to secure a buyer, adding to a slide that has already chopped off as much as 30 percent in home values.

Set against this dismal present and a bleak future, buying a home is a willful act of optimism. That explains why Adam and Allison Lyons are waiting to close on a $417,500 house in Deerfield, Ill.

“We’re trying not to think too far ahead,” said Ms. Lyons, 35, an information technology manager.

The couple’s first venture into real estate came in 2003 when they bought a condo in a 17-unit building under construction in Chicago. By the time they moved in two years later, it was already worth $50,000 more than they had paid. “We were thinking, great!” said Mr. Lyons, 34.

That quick appreciation started them on the same track as their parents, who watched the value of their houses ascend for decades. The real estate crash interrupted that pleasant dream. The couple cannot sell their condo. Unwillingly, they are becoming landlords.

“I don’t think we’re ever going to see the prosperity our parents did, but I don’t think it’s all doom and gloom either,” said Mr. Lyons, a manager at I.B.M. “At some point, you just have to say what the heck and go for it.”

Other buyers have grand and even grander expectations.

In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities — Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10 percent a year for the next decade.

With minor swings in sentiment, the latest results reflect what new buyers always seem to feel. At the boom’s peak in 2005, they said prices would go up. When the market was sliding in 2008, they still said prices would go up.

“People think it’s a law of nature,” said Mr. Shiller, who teaches at Yale.

For the first half of the 20th century, he said, expectations followed the opposite path. Houses were seen the way cars are now: as a consumer durable that the buyer eventually used up.

The notion of housing as an investment first began to blossom after World War II, when the nesting urges of returning soldiers created a construction boom. Demand was stoked as their bumper crop of children grew up and bought places of their own. The inflation of the 1970s, which increased the value of hard assets, and liberal tax policies both helped make housing a good bet. So did the long decline in mortgage rates from the early 1980s.

Despite all these tailwinds, prices rose modestly for much of the period. Real home prices increased 1.1 percent a year after inflation, according to Mr. Shiller’s research.

By the late 1990s, however, the rate was 4 percent a year. Happy homeowners were taking about $100 billion a year out of their houses, which paid for a lot of good times.

“The experience we had from the late 1970s to the late 1990s was an aberration,” said Barry Ritholtz of the equity research firm Fusion IQ. “People shouldn’t be holding their breath waiting for it to happen again.”

Not everyone views the notion of real appreciation in real estate as a lost cause.

Bob Walters, chief economist of the online mortgage firm Quicken, acknowledges that the recent collapse will create a “mind scar” just as the Great Depression did. But he argues that housing remains unique.

“You have to live somewhere,” he said. “In three or four years, people will resume a normal course, and home values will continue to increase.”

All homes are different, and some neighborhoods and regions will rebound more quickly. On the other hand, areas where there was intense overbuilding, like Arizona, will be extremely slow to show any sign of renewal.

“It’s entirely likely that markets like Arizona will not recover even in the 15- to 20-year time frame,” said Mr. Humphries of Zillow. “The demand doesn’t exist.”

Owners in those foreclosure-plagued areas consider themselves lucky if they are still solvent. But that does not prevent the occasional regret that a life-changing sum of money was so briefly within their grasp.

Robert Austin, a Phoenix lawyer, paid $200,000 for his home in 2000. Five years later, his neighbors listed a similar home for $500,000.

Freedom beckoned. “I thought, when my daughter gets out of school, I can sell the house and buy a boat and sail around the world,” said Mr. Austin, 56.

His home is now worth about what he paid for it. As for that cruise, “it may be a while,” Mr. Austin said. Showing the hopefulness that is apparently innate to homeowners, he added: “But I won’t rule it out forever.”

I agree with much of the article. Oklahoma did not participate in the bubble boom of 2000-2007 because we were in recovery rather than oversupply, so we did not experience a meltdown, rather we are having a market correction at this time. However, appreciation will be very slow to come back in most areas, even here. Home ownenership will have to be based again on tax deduction, paying down the mortgage, and pride of personalization and control. Appreciation will be the icing on the cake once again, and that is not a bad thing.

In July, for the 17th month in a row, there were more than 300,000 foreclosures filings, including default notices, auction notices and bank repossessions, according to RealtyTrac, a marketer of foreclosed properties. Over the past eight months, bank repossessions have surged. In July, 92,858 homes were repossessed.

As repossessed homes are put up for sale, house prices are likely to fall further. As prices fall, more borrowers end up “underwater” — owing more on their mortgages than their homes are worth. That’s a big risk factor for default, especially when coupled with high unemployment. Moody’s Economy.com estimates that 1.9 million homes will be lost this year, down only slightly from 2 million in 2009.

Unfortunately, there is no evidence that the Obama administration’s efforts to address the foreclosure problem will make an appreciable dent. Its main program — which pays lenders to modify bad loans — was started over a year ago. So far, only 398,198 loans have been permanently modified. Of the $30 billion allotted to the program, only $321 million has been spent so far.

Part of the problem is poor administration. Homeowners, who apply to their bank or mortgage service company, complain about confusing procedures and lost paperwork. Banks have complained of frequent rule changes from the government.

Obama administration officials have blamed the banks for poor customer service while also arguing that this is inherently difficult to manage; lenders have had to establish new systems and hire people to undertake difficult case-by-case analyses to determine who qualifies for a loan modification. The program’s inspector general recently faulted the Treasury Department for failing to set clear goals and benchmarks for the program.

Another big problem is that many lenders, whose participation in the program is voluntary, have been reluctant to aggressively rework bad loans. Reducing a loan’s principal balance — rather than lowering interest levels or extending payout periods — is often the best chance of keeping underwater borrowers in their homes. Banks have been loath to accept the bigger losses that come with lowering principal. Fearing that banks will drop out of the program altogether, the Treasury has not pushed them hard enough.

The administration has recently begun other, more promising antiforeclosure efforts. So far, they are too small to make a big difference. A total of $4.1 billion has been committed this year for state-based efforts to help unemployed or underwater borrowers in 18 states (and the District of Columbia) that have been hit especially hard by joblessness and falling house prices. About $2 billion worth of projects have been approved and are expected to help 140,000 borrowers.

State efforts to help the unemployed may be easier to implement because they are more likely to involve temporary cash assistance to help pay mortgages, rather than loan modifications. Helping underwater borrowers achieve principal reductions, however, may prove as difficult on the state level as it has been in the federal program.

If these initial state-based efforts are successful, the administration must keep expanding them. The nation badly needs an antiforeclosure plan that is, finally, up to the scale of the problem.

First, as someone who works with distressed homeowners, loan modifications are just a divice to kick the foreclosure down the road, it only adds more pricinciple so when the trial period is over the payment is higher and since the old lower payment was not being made then the foreclosure is ususally a sure thing. Second, I blame the real estate business. REALTORS® who don’t know the first thing about short sales are trying to do them. The banks are plagued with incomplete paperwork, multiple offers which is improper, and lack of follow up. This clogs the system and slows down the complete and accurate packets for distressed homeowners and puts them in jeopardy.

The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.

Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.

“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”

Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.

Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. “People got 90 cents for free,” Mr. Combs said. “It rewards immorality, to some extent.”

Utah Loan Servicing is a debt collector that buys home equity loans from lenders. Clark Terry, the chief executive, says he does not pay more than $500 for a loan, regardless of how big it is.

“Anything over $15,000 to $20,000 is not collectible,” Mr. Terry said. “Americans seem to believe that anything they can get away with is O.K.”

But the borrowers argue that they are simply rebuilding their ravaged lives. Many also say that the banks were predatory, or at least indiscriminate, in making loans, and nevertheless were bailed out by the federal government. Finally, they point to their trump card: they say will declare bankruptcy if a settlement is not on favorable terms.

“I am not going to be a slave to the bank,” said Shawn Schlegel, a real estate agent who is in default on a $94,873 home equity loan. His lender obtained a court order garnishing his wages, but that was 18 months ago. Mr. Schlegel, 38, has not heard from the lender since. “The case is sitting stagnant,” he said. “Maybe it will just go away.”

Mr. Schlegel’s tale is similar to many others who got caught up in the boom: He came to Arizona in 2003 and quickly accumulated three houses and some land. Each deal financed the next. “I was taught in real estate that you use your leverage to grow. I never dreamed the properties would go from $265,000 to $65,000.”

Apparently neither did one of his lenders, the Desert Schools Federal Credit Union, which gave him a home equity loan secured by, the contract states, the “security interest in your dwelling or other real property.”

Desert Schools, the largest credit union in Arizona, increased its allowance for loan losses of all types by 926 percent in the last two years. It declined to comment.

The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.

“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”

The delinquency rate on home equity loans was 4.12 percent in the first quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping. Borrowers who default can expect damage to their creditworthiness and in some cases tax consequences.

Nevertheless, Mr. Leggett said, “more than a sliver” of the debt will never be repaid.

Eric Hairston plans to be among this group. During the boom, he bought as an investment a three-apartment property in Hoboken, N.J. At the peak, when the building was worth as much as $1.5 million, he took out a $190,000 home equity loan.

Mr. Hairston, who worked in the technology department of the investment bank Lehman Brothers, invested in a Northern California pizza catering company. When real estate cratered, Mr. Hairston went into default.

The building was sold this spring for $750,000. Only a small slice went to the home equity lender, which reserved the right to come after Mr. Hairston for the rest of what it was owed.

Mr. Hairston, who now works for the pizza company, has not heard again from his lender.

Since the lender made a bad loan, Mr. Hairston argues, a 10 percent settlement would be reasonable. “It’s not the homeowner’s fault that the value of the collateral drops,” he said.

Marc McCain, a Phoenix lawyer, has been retained by about 300 new clients in the last year, many of whom were planning to walk away from properties they could afford but wanted to be rid of — strategic defaulters. On top of their unpaid mortgage obligations, they had home equity loans of $50,000 to $150,000.

Fewer than 5 percent of these clients said they would continue paying their home equity loan no matter what. Ten percent intend to negotiate a short sale on their house, where the holders of the primary mortgage and the home equity loan agree to accept less than what they are owed. In such deals primary mortgage holders get paid first.

The other 85 percent said they would default and worry about the debt only if and when they were forced to, Mr. McCain said.

“People want to have some green pastures in front of them,” said Mr. McCain, who recently negotiated a couple’s $75,000 home equity debt into a $3,500 settlement. “It’s come to the point where morality is no longer an issue.”

Darin Bolton, a software engineer, defaulted on the loans for his house in a Chicago suburb last year because “we felt we were just tossing our money into a hole.” This spring, he moved into a rental a few blocks away.

“I’m kind of banking on there being too many of us for the lenders to pursue,” he said. “There is strength in numbers.”

John Collins Rudolf contributed reporting.

Copyright ©2010. The Associated Press. Produced by NewsOK.com All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Unemployment figures in the Oklahoma City area increased in May

Despite May increase in unemployment, U.S. Census Bureau positions helped keep Oklahoma City’s jobless numbers from looking worse.

BY SUSAN SIMPSON Oklahoman    14

Published: July 1, 2010
Modified: June 30, 2010 at 10:36 pm

The Oklahoma City area unemployment rate crept up to 6.5 percent in May, compared with 5.9 percent in April and 6.1 percent in May 2009, the Oklahoma Employment Securities Commission said.

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Unemployment figures in the Oklahoma City area increased in May

While the jobless rate in the Oklahoma City area increased in May, the rise was mitigated by hundreds of temporary jobs that were filled with the U.S. Census Bureau, officials said.

Many sectors lost jobs, including manufacturing and business support services, but the number of federal jobs in the metro area rose by about 900 last month.

Many of those can be attributed to census hiring.

The Oklahoma City census office hired about 1,000 people in the spring, including droves of workers who traveled door to door last month taking census information.

“It does help the economy over this period,” said Sydnee Chattin-Reynolds, deputy regional director for the U.S. Census Bureau.

Applicants were exceptionally qualified, she said, and even included out-of-work professionals with doctoral degrees.

However, census operations are coming to a close and the Oklahoma City office now has only one-quarter of its work force left, she said.

Unemployment elsewhere

The May jobless rate was 6.2 percent in the Lawton area and 7.7 percent in the Tulsa area, both increases from the previous month.

John Carpenter, spokesman for the OESC, said Oklahoma cities continue to have lower jobless rates than most metropolitan areas in the nation.

The Washington, D.C., area had the lowest May rate, 6 percent, while the highest at 14.1 percent was in Las Vegas.

The state unemployment rate for May was 6.9 percent.

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Related Topics: Business, Economic Indicators, Labor Market, Unemployment Rate, Government and Politics, U.S. Census

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Ma, Oklahoma City 2 hours ago

Of course the unemployment rate is going up. We have the most corrupt and incompetent administration in our nation’s history in charge of the economy.

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IamStinkerpants, Purgatory 1 hour ago in reply to Ma, Oklahoma City

Kevin, Oklahoma City liked this

In Oklahoma City? The story is about Oklahoma City, idiot.

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jake, okc 2 hours ago

Jeff, Norman liked this

No one in my family is unemployed… Of course we all stayed in school and will actually work…

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Jeff, Norman 3 hours ago

Terry, Norman and 1 more liked this

CHANGE you can believe in. Higher unemployment, higher taxes. Yup, that is change.

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C, Mustang 3 hours ago in reply to Jeff, Norman

Yeah, cause nobody was getting laid off until Obama was sworn into office.

This is not a party issue, quit trying to make it one.

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Tony, Tulsa 4 hours ago

Oklahoma’s republican controlled govt, has let the people down. Instead of job bills, you got abortion control, gun deregulation, and NO enforcement of HB1804

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joe, oklahoma city 56 minutes ago in reply to Tony, Tulsa

It is the end result of pure greed starting back to the late 70’s, companies buying each other, loans made to buy things that could not be paid for. The endless consumption, which finally got to a breaking point. At that point it did not matter which party was in control when the cycle broke, it just broke.

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Jack, Gotebo 1 hour ago in reply to Tony, Tulsa

Nice, try, Just the Facts, but no cigar. The Democrats did not cause Wall Street and the financial sector to use “financial innovation” to create the Great Recession. Neither did Republicans, but their bias against enforcing the law (which is what regulation is) sure didn’t help.

And to all conservatives, please disabuse yourself of your party’s propaganda that poor people, minorities and Democrats caused the meltdown. McClatchy newspapers took the facts (link below), which showed that the private sector made more than 80 percent of the risky sub-prime loans. Only 20 percent of these high-profit, high-risk loans were held by Fannie and others.

It’s pretty much this simple: I loan Joe $100,000 for a house without making him prove his income. I make him put $5,000 down, so that’s cash for me. As he pays me 12 percent interest a month, I earn 3 times what the stock market could. When he defaults, I get the house back and sell it again for $100,000 or more. That worked beautifully for years.

The failure was due to the fact that the private sector (including big players like the now-defunct Washington Mutual) put too many of these bad loans on the market. They did it because they made short-term huge green on these high-profit bad loans. When the defaults piled up to the tipping point, the housing mkt flooded and prices plunged.

P.S. Fannie and Freddie don’t make loans to poor people. They buy the loans that the private sector makes to them. Prosecutions are ongoing against the private firms who lied to F and F about the quality of the loans. By prosecuting, the American public will get its money back from the private-sector crooks.

http://www.mcclatchydc.com/2008/10/12/53802/pri…

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Just the Facts 2 hours ago in reply to Tony, Tulsa

1 person liked this.

Last time I checked, 6.5 percent is a heck of a lot better than then national average of 9.7 percent. Remember here that Democrats are in control in Washington – completely in control.

But, let me guess – it is all Bush’s fault, right? Well, he certainly deserves some of the blame, but looking at these charts from the Bureau of Labor Statistics, I would say the Democrats own this baby (notice recession begins after Democrats take control of House and Senate):

http://data.bls.gov/PDQ/servlet/SurveyOutputSer…

They are also in control of California which is bankrupt and has an average unemployment of 12.4 percent and an unemployment of around 18 percent in more liberal cities like LA.

Considering what the Oklahoma Republicans are fighting against with the Democrats I would say they are doing a pretty darn good job.

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mike 4 hours ago

AS I SEE IT, by Mainer Mike Brown

No matter how bad the jobless rate gets, there’s always the crummy jobs out there, such as dishwashing or janitorial positions, to help you get by until better occupations return when the economy springs back.

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Tony, Tulsa 4 hours ago in reply to mike

In the 80’s, that was still true, and I did quite a few double shifts scrubbing off dirty plates back then.
Now–illegal labor has taken many of those positions.

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paul, yukon 5 hours ago

Not to fear, okies.

The worst of this recession hasn’t hit you yet, but it will.

We’ll see how “all y’alls” are talking up how wonderful you’ve been baffled into believing this stinkhole is a bit down the line….

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Jeff, Norman 3 hours ago in reply to paul, yukon

Terry, Norman liked this

Well, we will have the NBA to ease our minds. Too bad Seattle doesn’t have that.

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C, Mustang 3 hours ago in reply to paul, yukon

Terry, Norman and 1 more liked this

I once lived in a city I didn’t like. I moved. I’m much happier now. You have that same option as well Paul. Unless you just like being a miserable SOB.

Hey Oklahoman, please bring back the ignore feature. Thanks.

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Although this is not great news it is not unexpected. Temporary jobs like wiht the census helped lower the unemployment statistic. It took this country years of bad economic practices and too much leverage to get to this crisis, so we will have these bumps as we try to get to a continued recovery mode. With Las Vegas at 14.1% Oklahoma City citizens could have it worse.

Bill Bridwell, a real estate agent in the desert south of Phoenix, is among the thousands of agents hired nationwide by the companies to sell those foreclosures, recouping some of the money that borrowers failed to repay. In a good week, he sells 20 homes and Fannie sends another 20 listings his way.

“We’re all working for the government now,” said Mr. Bridwell on a recent sun-baked morning, steering a Hummer through subdivisions laid out like circuit boards on the desert floor.

For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office predicts that the final bill could reach $389 billion.

Fannie and Freddie increased American home ownership over the last half-century by persuading investors to provide money for mortgage loans. The sales pitch amounted to a money-back guarantee: If borrowers defaulted, the companies promised to repay the investors.

Rather than actually making loans, the two companies — Fannie older and larger, Freddie created to provide competition — bought loans from banks and other originators, providing money for more lending and helping to hold down interest rates.

“Our business is the American dream of home ownership,” Fannie Mae declared in its mission statement, and in 2001 the company set a target of helping to create six million new homeowners by 2014. Here in Arizona, during a housing boom fueled by cheap land, cheap money and population growth, Fannie Mae executives trumpeted that the company would invest $15 billion to help families buy homes.

As it turns out, Fannie and Freddie increasingly were channeling money into loans that borrowers could not afford. As defaults mounted, the companies quickly ran low on money to honor their guarantees. The federal government, fearing that investors would stop providing money for new loans, placed the companies in conservatorship and took a 79.9 percent ownership stake, adding its own guarantee that investors would be repaid.

The huge and continually rising cost of that decision has spurred national debate about federal subsidies for mortgage lending. Republicans want to sever ties with Fannie and Freddie once the crisis abates. The Obama administration and Congressional Democrats have insisted on postponing the argument until after the midterm elections.

In the meantime, Fannie and Freddie are, at public expense, removing owners who cannot afford their homes, reselling the houses at much lower prices and financing mortgage loans for the new owners.

The two companies together accounted for 17 percent of real estate sales in Arizona during the first four months of the year, almost three times their share of the market during the same period last year, according to an analysis by MDA DataQuick.

Valarie Ross, who lives in the Phoenix suburb of Avondale, has watched six of the nine homes visible from her lawn chair emptied by moving trucks during the last year. Four have been resold by the government. “One by one,” she said. “Just amazing.”

The population of Pinal County, where Mr. Bridwell lives and works, roughly doubled to 340,000 over the last decade. Developers built an entirely new city called Maricopa on land assembled from farmers. Buyers camped outside new developments, waiting to purchase homes. One builder laid out a 300-lot subdivision at the end of a three-mile dirt road and still managed to sell 30 of the homes.

Mr. Bridwell sold plenty of those houses during the boom, then cut workers as prices crashed. Now his firm, Golden Touch Realty, again employs as many people as at the height of the boom, all working exclusively for Fannie Mae. The payroll now includes a locksmith to secure foreclosed homes and two clerks devoted to federal paperwork.

Golden Touch gets more listings from Fannie Mae than any other firm in Pinal County. Mr. Bridwell said he was ready to jump because he remembered the last time the government ended up owning thousands of Arizona houses, after the late-1980s collapse of the savings and loan industry.

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This is an excellent article about the foreclosure problem in America. Oklahoma has not had the woes of Florida, Arizona, and nevade but we still have rising foreclosures and the cost for this is increasing. This is why short sales where we keep a homeowner out of foreclosure is a good thing for the taxpayer because it does two things valuable. First it limits the loss to less than what foreclosure ultimately cost. Second, it helps limit the credit rating hit of the homeowner where a foreclosure can destroy the ability to even get a decent car loan. If you are a distressed homeowner having a hardship that keeps you from making house payments, contact me at joe@joepryor.com for a consultation.

Exacting buyers are upending the battered real estate market, agents and other experts say, leading to last-minute demands for multiple concessions, bruised feelings on all sides and many more collapsed deals than usual.

It is a reversal of roles from the boom, when competing buyers were sometimes reduced to writing heartfelt letters saying how much they loved the house and how they promised to eternally worship the memory of the previous owners. These days, it is the buyers who are coldly seeking the absolute best deal while the sellers are left in emotional turmoil.

“We see buyers who must have learned their moves from the World Wrestling Federation,” said Glenn Kelman, chief executive of the online broker Redfin. “They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the alternative is putting the house back on the market as damaged goods.”

Everyone expected the housing market to suffer at least a temporary hangover after the government’s $8,000 tax credit expired, but not necessarily this much. Preliminary data from around the country indicates that the housing market began swooning last month immediately after the credit was no longer available. In some places, sales dropped more than 20 percent from May 2009, when the worst of the financial crisis had subsided.

Builders have been affected too. Construction of new homes in May dropped 17.2 percent from April, the Commerce Department said Wednesday, significantly lower than forecast. Permits for future construction dropped 10 percent, suggesting a cruel summer.

Even the lowest home mortgage rates in decades are not doing much to invite deals. The Mortgage Bankers Association said Wednesday that applications for loans to buy houses were down by a third compared with last year. Applications are back to the level of the mid-1990s, when the country’s housing market was smaller.

Against such a backdrop of misery, buyers are empowered — and are taking full advantage.

John Porter Simons, a Seattle software engineer, thought he had a couple willing to pay $340,000 for his house. But they asked for $24,000 worth of work, most of which involved waterproofing the basement. “It was totally irrational,” said Mr. Simons. “My basement has never flooded. I live on a hill.”

He made a counteroffer to their offer, and the buyers walked. The house is now under contract to a new set of buyers, who got a cut in price and $2,500 in electrical work thrown in.

Buyers, of course, say they are merely being smart.

Chris Dunn, an economic consultant in Chicago, saw a house he liked last month for $539,000. He offered $500,000, but then his inspector told him that he would eventually have to replace the windows. The sellers were persuaded to kick in $10,000 more to pay for the work.

“We didn’t feel we were being that aggressive,” said Mr. Dunn. “We had the position, ‘If the seller is willing to come down enough, we will buy this home.’ If they weren’t willing, we would have just moved on. In this market, you have a lot of options.”

In some cases, agents say, sellers literally cannot afford to make concessions. Another $10,000 will push them underwater, which means they will have to arrange the sale through the bank.

“People cashed in on their houses to get money to go on vacation, for a new roof, to send the kids to college,” said Roberta Baldwin, an agent in Montclair, N.J. “They thought it was always going to be worth more.”

Even when a sale can be worked out, it is not uncommon for everyone to walk away feeling more aggrieved than celebratory.

“Buyers feel they’re not appreciated for simply making an offer,” Ms. Baldwin said. “And sellers feel humiliated and even angry. They expected to do better.”

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I have been checking the days on market and price reductions in various parts of Oklahoma City and it would confirm this analysis even in our market which is deemed by many as stable. The company I use for detailed market statistics, Altos Research confirms this also. priceing for sellers is crucial, in fact it is more important than it has ever been in the last decade.

By The Wall Street Journal

Congress is considering an extension for would-be homebuyers who are racing to close home sales in order to receive a federal tax credit

.

The real-estate industry has warned that tens of thousands of buyers who rushed to buy homes to qualify might not close before the deadline imposed by Congress

, meaning they could miss out on receiving credits worth thousands of dollars if lawmakers don’t act.

Congress last fall extended an $8,000 tax credit for first-time homebuyers

and added a smaller $6,500 credit for current homeowners who were buying a primary residence. To qualify for the credit, buyers had to sign purchase contracts by April 30 and must close on the transaction by June 30.

• Compare refinancing offers

But there are so many transactions in the pipeline that the companies responsible for handling the sales, including mortgage lenders, appraisers and title insurers and real-estate brokers, say the last-minute homebuying rush in April has created bottlenecks.

Senate Majority Leader Harry Reid (D., Nev.) last week said he would back a measure to extend the June 30 closing date to Sept. 30 for buyers who had met the April contract deadline.

The National Association of Realtors

estimates that from 55,000 to 75,000 homebuyers who are under contract won’t be able to close in time to claim the tax credit. The trade group is lobbying Congress to extend the June 30 deadline only for those buyers who met the April deadline.

“Everybody who got under contract at the end of April deserves to get the tax credit,” says Stephen Adamo, the president of Weichert Financial Services, a division of real-estate brokerage Weichert Realtors. “For reasons out of their control, they’re in jeopardy of losing it.”

Quick mortgage tips

That is causing heartburn for buyers like Alan Nickelson, a first-time homebuyer who went into contract on a three-bedroom home in Kent, Wash., days before the tax-credit deadline in April. While he was pre-approved for a loan and will make a 20% down payment on the $275,000 home, he says the transaction has been held up because of home inspections and repairs required by the appraiser.

Nickelson says it is “entirely possible” that he will miss out on the tax credit. He says he would have bought the home anyway but that he planned to use the $8,000 credit to offset repair costs. “It was icing on the cake, but it was really sweet icing,” says the 52-year-old machinist.

Homebuyer tax credit extension?

One particular worry is that short sales, where a lender allows a home to sell for less than the amount owed, won’t receive requisite approvals in time to meet the closing deadline. Unlike normal sales, in which only two parties — the buyer and the seller — negotiate the price, short sales are more time-consuming affairs because they require note-holders to agree on price.

“From February on, I told people, you have no chance” of finishing a short sale by June 30, says Steve Capen, a real-estate agent in St. Petersburg, Fla. But he says clients who began pursuing deals even before that could still miss the deadline.

Real-estate agents say that even “plain-vanilla” transactions are increasingly at risk. Response times from loan officers and appraisers have doubled over the past month, says Kailee Rainey, who works for real-estate brokerage in Seattle.

Lee Barrett, the president of Century 21 Barrett, a real-estate company in Las Vegas, spent part of the week in Washington meeting with his congressional delegation about the need to extend the closing deadline. “The lenders are overwhelmed. The title companies are overwhelmed,” he says. “It’s just a mad surge of everybody trying to close deals.”

At Wells Fargo, employees from other sales divisions are being brought in to handle mortgages, and staff members are working weekends and nights to process higher volumes. “It’s all hands on deck,” says Greg Gwizdz, an executive vice president at Wells Fargo Home Mortgage. He says the bank has prioritized “every customer who qualified for the tax credit.”

A 23% boost

A spokeswoman for Bank of America says the lender is also placing “increased priority” on loan applications submitted before the April 30 deadline. Luke Hayden, the president of PHH Mortgage, a lender in Mount Laurel, N.J., says consumers can help speed the process along by being “very responsive to requests for documentation” from lenders.

Some of the delay reflects new rules related to disclosure and appraisal requirements enacted to correct the excesses of the bubble years. The new regulations have prompted lenders to take extra caution at every step, stretching closing timelines.

The tax incentive was credited with boosting existing-home sales in April by 23% from year-earlier levels, according to the NAR, while new-home sales gained by 47.8% from one year ago, according to government figures.

It is unclear how many sales would fall through for those who miss out on the tax credit. Buyers could be hard-pressed to void sales contracts unless they have made their closing contingent on receiving the tax credit or are willing to forgo any deposits.

This article was reported by Nick Timiraos for The Wall Street Journal.

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I have some short sales that could benefit from an extension. Although I am for the market going back to a non-stimulus situation, in this case mortgage copmpanies are much slower in processing loans becasue of the tax crredit volume, and of course being required to get full documentation.

By Darren Currin Darren Currin –>
Columnist Darren Currin writes the blog “Oklahoma per Square Foot.” See his and all our blogs at journalrecord.com/blog-hub.
Posted: 12:08 PM Tuesday, June 8, 2010

Bricktown Hampton Inn

I must admit I was quite surprised to read about the $32 million acquisition of the Hampton Inn in Bricktown that occurred last week. This deal comes at a time when large commercial real estate transactions are just not occurring in Oklahoma City thanks largely to a lack of available product coupled with a lack of available credit for buyers to finance deals. This deal is not only the largest commercial real estate transaction of the year thus far, but it also signals the high value that is being placed on downtown hotels.

Without question, the Oklahoma City hotel market has been impacted by the downturn in the national economy as average occupancies and average daily room rates have declined. The good news is that the decline in Oklahoma City has not been as dramatic when compared to most other markets. As a result, the city’s hotel market can best be described as stable. Moreover, downtown Oklahoma City hotels boast some of the highest average daily rates in the entire metro area. These high rates result in higher net operating incomes, which also fuel higher purchase prices.

This stability coupled with the increased value of downtown Oklahoma City properties and hotels most likely were two of the primary factors behind such a high purchase price for the 200-room hotel located at 300 E. Sheridan. Furthermore, downtown Oklahoma City hotels have benefitted throughout the recent national economic downturn by boasting strong occupancies. The steady flow of events in downtown Oklahoma City over the past two years has been instrumental in bringing more downtown hotel guests. In fact, there is rarely a week now when there is not some sort of convention, business meeting, festival or sporting event occurring in or near the city’s central business district. Plus, the Oklahoma City Thunder have also had a tremendous impact on downtown hotels thanks to the high number of out-of-town fans that stay overnight for games and the visiting players, coaches and media that typically stay at least one night in the city.

Does this deal represent a trend of escalating hotel values all over the metro area? It may be a little early to make that determination. Even though the downtown hotels have done well, most of the occupancy decrease has occurred in the suburban areas of Oklahoma City. Additionally, there remains some concern that Oklahoma City may be overbuilding hotels especially in Edmond and in the Memorial Road area where new hotels are continuing to be built. These factors might keep hotel prices in the suburban areas of the city from jumping to the high level that what was seen with the Hampton deal in Bricktown.

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The continued success of downtown is a tribute to the foresight of our leaders and the public in support of the MAPS projects including the last one. Let’s hope that this has some legs and the suburban areas will follow through despite the concerns of the author.