Auction of failed banks' assets yields $6.2M

January 2, 2010

BLOOMBERG NEWS

The financial crisis that popped the real estate bubble and pushed U.S. bank failures to a 17-year high let the Federal Deposit Insurance Corp. reap about $6.2 million from the auction of assets of failed banks in 2009, six times the total in 2008.

Along with the mundane, such as desks, lamps and chairs from shuttered branches, banks also left behind a rapper's tour bus (reeking of marijuana), a 2001 Ferrari, artwork and a palm tree.

While the $6.2 million is a sliver of the $38.3 billion of failed bank assets that the FDIC held as of Sept. 30, any cash is useful after the surge in crippled lenders sent the FDIC's deposit insurance fund into the red.

The tour bus was acquired by Omni National Bank in repossession from a leasing company before the Atlanta-based lender went bust in March. The bus sported 12 coffin-like bunks, each with flat-panel televisions, and sold for $310,000 to a company in Nashville, Tenn., that leases buses to touring musicians.

New Frontier Bank of Greeley, Colo., which cost the insurance fund $670 million, also left the FDIC with a 1,000-horsepower drag-racing Chevrolet pickup truck, and almost 1,000 milking cows.

 

Auction ecstasy, agony

DAN OAKES

December 14, 2009

MELBURNIANS flirted with trading a record $1 billion worth of real estate in the past week, coming in just shy of that figure but still hitting a record $963 million.

But behind that landmark sum are all the underbidders who missed out at the weekend's 1057 auctions.

Agents reported up to eight bidders at some auctions but, even with an average of four per auction, that is almost 3200 buyers in the inner 20-kilometre auction ring who will end the year without finding a new home.

This year's big auction weekend had a clearance rate of 81 per cent and that strength, agents claim, will continue in 2010.

But the boom seems to be stagnating turnover because many would-be sellers are opting to stay and renovate rather than trade up and face huge stamp duty costs.

 

Rates Are Low, but Banks Balk at Refinancing

 
Mark Belvedere says his bank has refused to refinance his condo outside San Francisco, citing the property's lost value.

 

By DAVID STREITFELD NEW YORK TIMES

Published: December 12, 2009

Mortgage rates in the United States have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government. Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out.

The scarcity of credit not only hurts homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.

Refinancing could save owners hundreds of dollars a month, which could be spent, saved or used to pay down debts. Extra spending would help lift the economy, and lower payments might spare some people from losing their homes to foreclosure.

The plight of homeowners has become a volatile political issue. On Friday, as the House passed a series of new financial regulations, it narrowly defeated a provision that would have allowed bankruptcy judges to modify the terms of mortgages. The measure was strongly opposed by the banking industry.

President Obama, in his weekly address on Saturday, placed much of the blame for the recession on “the irresponsibility of large financial institutions on Wall Street that gambled on risky loans and complex financial products, seeking short-term profits and big bonuses with little regard for long-term consequences.”

The president is scheduled to meet with banking executives at the White House on Monday in another administration effort to increase the flow of loans to consumers and small businesses. Among those expected to attend are representatives from Citigroup, JPMorgan Chase, Bank of America, Wells Fargo and Goldman Sachs.

An estimated six of 10 homeowners with mortgages have rates that exceed the 4.8 percent rate currently available on 30-year fixed mortgages, the least risky form of home loans.

Nevertheless, only half as many refinancing applications were reported last week than were reported at the beginning of January, the peak level for the year. The total dollar volume of refinancing activity in 2009 will be about $1 trillion. In 2003, another year when rates fell, it was $2.8 trillion.

(Mortgage applications to purchase houses showed modest improvement for much of the year, but recently fell sharply to their lowest level in 12 years.)

“The government has succeeded in driving mortgage rates down to their lowest level in our lifetime,” said Guy Cecala, the publisher of Inside Mortgage Finance magazine. “That hasn’t been a big home run, because a lot of people can’t take advantage of it.”

It is highly unusual for mortgage money to be available below 5 percent. Average rates fell as low as 4.7 percent in the 1940s, as the government held down interest rates to finance World War II, and stayed just below 5 percent until the early 1950s. Rates went above 5 percent in 1952 and stayed there — until this year.

The super-low rates are not likely to last much longer. The Federal Reserve program that has driven rates to such lows, which involves buying $1.25 trillion in mortgage-backed securities, is scheduled to expire in March, and Fed leaders have said that it would not be renewed.

Some analysts believe rates could jump as high as 6 percent in the spring. On a $300,000 mortgage, such a jump would cost an extra $225 a month.

Andrew Knapp, a sales executive in Bartlett, Ill., has tried twice to refinance, which would save his family several hundred sorely needed dollars every month. Lenders said the house had lost value and the Knapps had too much debt. “There was no urgency for them to do anything,” Mr. Knapp said.

The most recent Federal Reserve survey of lenders found that they were continuing to tighten terms for business and household loans. Banks say they are under pressure from regulators to raise their cash reserves, which means fewer loans. They also argue that a troubled economy breeds extreme caution.

“More than ever before, lenders are very conscious of making good quality loans,” said Michael Fratantoni, the vice president for research at the Mortgage Bankers Association. “They are looking at the value of the collateral and the credit quality of the borrower.”

But some borrowers argue that more refinancings now might well forestall losses for the banks later.

Mark Belvedere bought a condominium in a San Francisco suburb in early 2004 and refinanced it in 2005. He now owes $235,000 on a property that would sell for barely half that today.

Mr. Belvedere said he would be willing to live with all that lost equity if he could refinance his loan from a variable rate, which could eventually go as high as 12 percent, into a 30-year fixed term.

 

If You Don't Buy a House Now, You're Stupid or Broke

Have you read this article yet? It was featured in Business Week. 

My first thought, wow! what a blunt and harsh statement! But the writer, Mark Roth, uses this headturning title to get your attention to make excellent points for those who are on the fence.  Namely that interest rates are at an all time low, in fact, the lowest in 40 years. He noted that in the late 70s, rates hit a high of 18%!

Can you even imagine buying a house at 18%?  I personally can't fathom it as I bought my first house with an FHA loan while I was in college for 7% in 2001.  In the 80s, when rates dropped from 12% to 9%, my parents practically danced their way to the 1^st refinance of their home. 

Generation X'ers probably would never dream of purchasing a home above 7% given all we have ever known are super low rates hovering between 5-6%. Mr. Roth points out the history of previous interest rates as well as the impact of rates on one's purchasing power. I happen to agree with his prediction that as the economy becomes more stable, interest rates WILL rise to hedge inflation.  My prediction has been that by this time next year, rates will have risen 1-2% at a minimum.

In Charleston, the average sale is $250,000. Assuming a 5% down payment at 5% interest on a 30 year fixed, your monthly principal and interest payment would be $1275.  If rates rise to 7%, your payment increases to $1580/month.  Some buyers may be on the fence because they fear prices may drop further.

Consider this. If there is a 10% decrease in price and the $250,000 falls to $225,000 in one year, but you wait to purchase and the interest rate rises to 7%, your payment will be $1422. 

You spend more money per month plus at the higher interest rate, you pay more interest over the life of the loan.  Real estate appreciation is always a cycle and as the economy stabilizes, values will level out.  Steve Harney is already analyzing data this is happening in many markets and that this will occur by 2014 in many states. Making a home purchase is still a decision that should be weight carefully and is not for everyone.  One important consideration will depend on how long you plan to stay in the home.   

Mark Roth summed up the article, "What I'm trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime."

The Charleston Relocation Experts team specializes in helping families make good decisions.  We do NOT think you are stupid or broke if you don't buy a house right now.  But if you are considering purchasing a home now would be a good time. 

 

Real Estate Auctions Becoming Purchase Vehicle of Choice
July 9, 2007

Summary
Profit in real estate is made on the buy and the opportunities present today in the most attractive residential buyer's market in decades are there for the bidding.  Yes, there for the bidding.  The sluggish home sales experienced across the nation due to stale inventory is getting a helping hand from auction companies who are drawing record crowds to move the REO of their lender clients.

Analysis
As the housing swoon continues and foreclosures climb, more buyers are turning to real estate auctions to find good deals. Valued from $100,000 to more than $800,000, homes come with guaranteed title insurance paid by the seller, ensuring that all properties are free of any back taxes or liens.

Citing data from the National Auctioneers Association, H&M said the fastest growing sector of the $257.2 billion auction industry is residential real estate auctions, which jumped 12.5% in 2006. It's not unusual for some properties to sell at auction for 70%-80% of their list price.

Some of the biggest auction house customers are traditional banks and big name residential lenders who can ill afford to let costly REO sit dormant in neighborhoods across the nation. 

Auctions provide an emotionless format where pre-qualified buyers are ushered into the room for a chance at investment acquisitions at fire sale prices.  Internet auctions open the purchasing audience,literally,to the entire electronic world which helps frustrated mortgagors and their REO managers shed themselves of maintenance overhead associated with the glut of inventory currently available due to foreclosures on subprime paper;a smaller audience of qualified buyers as lending standards are tightened and new homes completed just after the fallout from the interest only and hybrid ARMs. 

The bargain shoppers showing up at these auctions are not all individuals.  They include the real estate acquisition professionals of very prominent REITs and Wall Street investment companies.  Profit in real estate is made on the buy!  See you at the auction.

 

 

Silverdome fetches $583,000 - Soccer teams could use it 

 

BY MELANIE D. SCOTT, JOHN GALLAGHER and KEVIN BULL
FREE PRESS STAFF WRITERS

The Pontiac Silverdome and its 127 adjacent acres could become home to a Major League Soccer team now that the city has accepted a bid of $583,000 from a Toronto-based real estate company to buy the facility.

The Auctioneer and real estate firm conducting the auction of the vacant stadium, announced Monday that the unidentified winning bidder plans to use the complex for a men's Major League Soccer team and women's professional soccer.

"Many people said they were going to be bidding tens of millions of dollars and that's easy to say if you're not going to put up the money," said Fred Leeb, Pontiac's emergency financial manager.

A purchase price of $583,000 shows how depressed the real estate market has become in Michigan!

 

Homeowners are relying less on real estate agents

By Denise Law

Published: November 13 2009

A larger number of property sellers are beginning to privately sell their properties, according to a study by The Office of Fair Trading (OFT). Although the majority of sellers prefer a traditional real estate agent, over a third considered using an online agent or selling at an auction, an increase from 2004’s survey.

“This is important research which updates the available evidence about the process of buying and selling a home and current and future developments in the sector,” said Heather Clayton, senior director of infrastructure at OFT.

“For example, it shows the enormous potential for new internet-based business models in home buying and selling.” The OFT published four reports that included a survey of estate agents and trading standard services, as well as consumer reaction to the home buying and selling procedure.

In the consumer report, 88 per cent of both buyers and sellers were satisfied with their real estate agents, up from five years ago, when the figures were 72 and 74 per cent respectively.  The reports also found that consumer complaints were directed primarily at the individual buyer or seller on the other side of the transaction, as opposed to the estate agent.

In another study, 24 per cent of real estate agents surveyed failed to comply with the Trading Standards’ regulations.  On the question of services provided to buyers such as legal advice and mortgages, estate agents made referrals to 65 per cent of buyers.

Thirty-six per cent of those buyers went on to use at least one of the recommended services.  In regards to an agent’s selling behaviour, 82 per cent of buyers said they did not feel pressured into purchasing a home.

When asked whose interests they felt the estate agent represented, 53 per cent of buyers said the agent was fair to both parties, while 40 per cent said the agent showed preference towards the seller.

Only 6 per cent felt that the agent was working on the buyer’s behalf.

The most common reason for a failed transaction was another buyer making a better offer, with 19 per cent of buyers losing out on an offer the seller had originally accepted.

Ms Clayton said: “Our final report will look at, among other things, how new ways of buying and selling a home may develop in the future, whether there is scope to improve consumer protection enforcement, consumer awareness of potential pitfalls in the process and ancillary services sold by estate agents.”

 

Colorado bank loan auction generates just $157M

DENVER — An auction last month of loans from the failed New Frontier Bank generated $157 million on a portfolio once valued at more than $500 million, according to government records.

The federal government salvaged 27 cents on the dollar in the auction, underscoring the poor quality of agriculture loans that were stranded when the Greeley bank failed in April, The Denver Post reported Tuesday.
One package of notes valued at $5 million sold for $122,778 — or 2 percent of its values, the newspaper reported.

About three-quarters of the notes sold were at least 60 days past due.
Cattle Consultants LLC purchased a $15 million loan package for $5 million. Records with the secretary of state’s office show the partnership is managed by Colorado Rockies team owner Dick Monfort.

A Greeley bank paid the most for loans, at $14.8 million for a portfolio, The Post reported. However, most of the buyers appear to be out-of-state banks or limited-liability partnerships. State Agriculture Commissioner John Stulp and other industry experts have worried that if out-of-state buyers without ties to the state farming community bought most of the loans, they could be tempted to turn a quick profit by foreclosing and cashing in any collateral.

No news of foreclosure notices has reached the state Agriculture Department or the Colorado Farm Bureau yet. “It remains to be seen how most people will come out of this — whether they will avoid devastation,” said Bob Winter, who is on the board of directors of the Colorado Farm Bureau.

The Federal Deposit Insurance Corp. liquidates closed banks’ assets to cushion the blow to its insurance fund, which protects most deposits. Greeley bankers said some borrowers avoided the auction block by reaching agreements with the FDIC to allow other banks to purchase their loans. The FDIC did not respond to
questions from The Denver Post.

 

South Florida Condos down 88% - is now the time to buy?

(LAS VEGAS, NV) -- In one of the largest and unorthodox condominium lawsuit settlements of its kind, Deutsche Bank AG has agreed to return about $140 million in down payment deposits to purchasers of homes at the 1,322-unit, $3.9 billion, under construction Cosmopolitan Resort & Casino West condo-hotel tower in Las Vegas. The tentative settlement still has to be approved by the Clark County District Court. The bank is settling for about 70 percent of the total $200 million cash deposits paid by buyers. 

The suit alleges the buyers were financially damaged when developer Ian Bruce Eichner never specified a completion date for Cosmopolitan West. The seven-million-square-foot, 600-foot-tall tower is now tentatively scheduled to open in late 2010, according to the Las Vegas Business Press.

Eichner defaulted on construction loans in January 2009. Deutsche Bank then bought the tower at 3700 Las Vegas Blvd. at a foreclosure sale for $1 billion. The site is between Caesars Resort and MGM's $11 billion CityCenter project.

Meanwhile, the planned 800-unit, 600-foot tall Cosmopolitan East Tower faces the same fate as Cosmopolitan West, according to Las Vegas brokerage sources following the development's construction pattern.  Buyers are depositing down payments averaging $140,000.  A total sellout of the project would generate about $112 million in deposits, local brokers estimate.

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(CHICAGO, IL) -- Chicago condos are moving quickly after developers slashed prices. For example, Mesirow Financial Real Estate Inc. has sold 100 units at its new 237-unit R+D 659 on the Near West Side. 

Smithfield Properties LLC sold 40 condos in July and August at SoNo, a 200-unit tower at 860 W. Blackhawk St., Michael Golden, co-founder of @properties and marketer for Smithfield, told ChicagoBusiness.com.  Golden lowered prices by 13 percent.

"It's all about price now," Golden says. "Buyers in this market are attracted to value," not to high-dollar incentives as in past markets.

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(LAS VEGAS, NV) -- The median price of a luxury condo in Las Vegas this summer was $386,500 - 25 percent less than a year ago, according to Vegas-based Restrepo Consulting Group.

Condos like Streamline, Juhl, Luxe Lofts and Turnberry Tower Two are all hurting.  At Turnberry Tower, for example, 256 of the building's 318 units are unsold. That's 80 percent of the asset.

"There is still a significant number of units on the market with very little sales taking place," says Brian Gordon of Las Vegas-based Applied Analysis.

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(MIAMI, FL) -- South Florida condo prices are down 88 percent from their 2006 peak and dropping steadily, according to Deerfield Beach, FL-based real estate consultant Jack McCabe.

Condos that sold for $1,000 per square foot in 2006 are down to a range of  $125 per square foot to $350 per square foot, McCabe tells Bloomberg. The price could drop to as low as $100 per square foot before the market bottom is reached, McCabe says.

The Florida Association of Realtors reports that in the past 12 months, condo prices in Miami fell 31 percent to a median $144,700. In the West Pal Beach-Boca Raton market, the drop was 15 percent to a median $112,200.  In Fort Lauderdale, the slide was 36 percent to $85,100.

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(BROOKLYN, NY) -- Brooklyn shelter categories are on a roll, according to the latest reports from Prudential Douglas Elliman, headed by CEO Dottie Herman, and the Real Estate Board of New York.

Third-quarter condo sales volume totaled $25.2 million; co-op sales $16.5 million; and one-family to three-family houses, $58.7 million.

Condo prices of existing units rose by 4.5 percent, or almost $20,000 per unit. New condo prices increased by about 2.25 percent, or about $10,000 per unit. More than 70 percent of all residential sales in North Brooklyn, or Williamsburg and Greenpoint, were condos.

In Park Slope, the perennial sales leader, the average condo price was $716,000, up 14 percent over third quarter 2008.

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(BRONX, NY) -- Fifty-four unsold units at the 64-unit, three-year-old, multi-million-dollar Solaria in the affluent Riverdale neighborhood of the Bronx, go on the auction block Nov. 22 at the Sheraton New York Hotel and Towers. 

Only 10 condos have been sold since the building was developed by Joseph Korff, president, Arc Development.  The developer says the project is not in financial straits but is only auctioning the unsold units because he is frustrated with the market.

"...Buyers seemed to like the project but were uncertain where the market was headed and how much the apartments were worth," Korff told The New York Times.

The minimum auction bid will be about 55 percent of the current asking prices.  The lowest-priced unit, a lower-floor, one-bedroom condo, will be offered at a minimum $299,000. The same unit was previously priced at about $660,000. Riverdale, a community of about 50,000 residents, is just north of Manhattan's west side on the Hudson River.

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(NEW YORK, NY) -- Daniel Radcliffe, the 20-year-old Wizard in Broadway's Harry Potter production, has purchased his third New York City property, a five-bedroom, 3,000-square-foot West Village townhouse.  The price:  $6.4 million.

Celebrity publications report Radcliffe now owns more than $16 million in Manhattan area condos and apartments, plus a luxury condo in his home United Kingdom neighborhood of Fulham in London.

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(BOSTON, MA) -- Los Angeles Dodgers left fielder Manny Ramirez, a former Boston Red Sox slugger, has dropped the asking price of his 37th floor Boston penthouse condo to $7.9 million from $8.5 million.

The four-bedroom condo at the Ritz-Carlton Residences has been on the market for six months and failed to attract a single buyer, according to Carmela Laurella of Aotis & Ahearn, who is marketing the unit.

The unit is located near the Boston Common and has a private master bedroom suite, six bathrooms, 10-foot ceilings and three valet parking spaces.  Boston city tax officials assess the unit at only  $4.4 million.

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(ORLANDO, FL) -- Short sales of condos, townhouses and single-family houses will overtake the current crush of foreclosures over the next five years, according to Gitta Urbainczyk.

In her online newsletter, the Lake Mary, FL-based agent says her team has closed 50 short sales over the past 15 months and is processing 15 others.

"The federal government is now exploring the short-sale process to be streamlined and used as a preferred method over the traditional foreclosure" route, she says. 


 

Detroit house auction flops for urban wasteland.

 

By Kevin Krolicki

DETROIT (Reuters) - In a crowded ballroom next to a bankrupt casino, what remains of the Detroit property market was being picked over by speculators and mostly discarded. After five hours of calling out a drumbeat of "no bid" for properties listed in an auction book as thick as a city phone directory, the energy of the county auctioneer began to flag.

"OK," he said. "We only have 300 more pages to go."

There was tired laughter from investors ready to roll the dice on a city that has become a symbol of the collapse of the U.S. auto industry, pressures on the industrial middle-class and intractable problems for the urban poor. On the auction block in Detroit: almost 9,000 homes and lots in various states of abandonment and decay from the tidy owner-occupied to the burned-out shell claimed by squatters.

Taken together, the properties seized by tax collectors for arrears and put up for sale last week represented an area the size of New York's Central Park. Total vacant land in Detroit now occupies an area almost the size of Boston, according to a Detroit Free Press estimate.

The tax foreclosure auction by Wayne County authorities also stood as one of the most ambitious one-stop attempts to sell off urban property since the real-estate market collapse. Despite a minimum bid of $500, less than a fifth of the Detroit land was sold after four days.

The county had no estimate of how much was raised by the auction, a second attempt to sell property that had failed to find buyers for the full amount of back taxes in September. The unsold parcels add to an expanding ghost town within the once-vibrant town known worldwide as the Motor City.

Critics say the poor showing at the auction underscores the limits of using a market-based system to clean up property tax problems. They say the system has enriched a few but failed to deliver a way for Detroit to staunch its dwindling population and could worsen the vacancy crisis. One proposed alternative would have officials take control of the tax foreclosure process through a land bank program of the kind being used to revitalize the nearby city of Flint.

The stakes in the debate are rising. The number of Detroit properties in tax foreclosure has more than tripled since 2007 and seems certain to rise further. The lots for sale last week represented arrears from only 2006, well before the worst of the downturn for U.S. automakers.

"We have to keep in mind that GM and Chrysler filed for bankruptcy this year," said Terrance Keith, chief deputy treasurer of Wayne County. "Some people are going to be totally tapped out next year." 

Detroit, already stuck with a $300 million budget deficit, is responsible in the meantime for cutting the weeds and responding to fire calls for thousands more abandoned lots.

'WHY AM I COMPETING AGAINST A BANK?'

Many potential homeowners that Detroit desperately needs said they felt penalized by the auction process. They mostly found themselves outbid by deeper-pocketed investors from California and New York who were in a race to claim the auction book's relatively few livable properties. Dozens of potential bidders, mostly local residents, were turned away on the first day of the auction by deputies after they failed to meet the morning deadline for registration.

Ross Wallace, a lieutenant in the U.S. Army, turned in his check for $500 and waited on the auction floor in full dress uniform for a chance to buy a Detroit house on the cheap. Wallace, 27, said he did not want to leave his fiancee and two children with a mortgage before shipping out to Iraq later this year. "I still have student loans and I'm trying to be responsible. I don't want to leave debt," he said.

Wallace waited for the auction to roll around to Detroit's Boston-Edison district, a once stately area that was home to boxing legend Joe Louis and Motown founder Berry Gordy. But he was quickly outbid. An unidentified investor at the front of the room who had scooped up several dozen properties took the home Wallace wanted for about $15,000.

"Why am I competing against a bank?" he said later. "It would be common sense to have a separate process for people who want to move back to the city or it's going to stay empty." Nearby, a Dutch-born local woman, Riet Schumack, 54, knitted patiently through the auction for a chance to bid on a lot in Brightmoor, one of the most blighted neighborhoods.

Schumack, who runs a community garden near her home that employs 14 neighborhood children, said she had been battling through a maze of bureaucracy for years to try to buy an abandoned lot nearby to expand and plant fruit trees. She learned the lot had been taken back from its previous owner -- an absentee investor with more than 100 abandoned lots in Brightmoor -- only because of her constant calls to city and county officials, she said.

When officials told her she would have to wait for a fourth day to bid on the property, Schumack broke down into tears. "Anybody with a job is not able to sit here for days. So you are left with the sharks," she said. Opinions were divided on whether the investors buying lots and homes by the dozen were a sign of better times ahead.

"They weren't here two years ago. So why are they here now? Unless, as speculators, they believe this is the bottom," said Keith of the Wayne County treasurer's office. Bill Frank, a Detroit realtor trying to buy a small house for a just-married friend, found himself repeatedly outbid. "Speculators are often not good for a city and, from my experience, they are going to lose a fortune," he said. "But there are no easy answers. It's a declining city."

 

Fewer McMansions on the Horizon

Builders Have Little Incentive to Create More McMansions and Hardly Anyone is Buying. There are Deals Out There, But You Better Act Fast.

By JUNE FLETCHER WSJ

If you're looking to buy a brand-new McMansion in the 'burbs, you'd better act fast. With home prices this low there's not much incentive for builders to start new houses. And inventories are getting razor-thin: Economists and analysts at the National Association of Home Builders fall construction conference in Washington, D.C. on Wednesday pointed out that the current 7.3-month supply of new homes is the lowest it's been since 1992.

Moreover, most of the summer's pickup in home sales and starts, which has since abated, could be attributed to the $8,000 first-time home buyer's tax credit. With that credit slated to end on Nov. 30—and with continuing problems securing money to build—builders have little incentive to ramp up their production of new homes.

Many places will take years to rebound. Rockville, Md. builder Robert Mitchell says these days he'll only build a home when he has contract in hand, because his lenders won't advance money for speculative building. "We sold off our standing inventory," he says.

AFP/Getty Images

Before the drought: Construction workers build a new home in August 2006 at a new sub-division in Sugar Grove, Ill., a suburb outside of Chicago.

Normally, short supply means higher prices. But consumers have been so battered by job losses and falling home equity, many are unwilling to commit to buying. Mark Zandi, chief economist of Moody's Economy.com, notes that "homes are as affordable as they've ever been," based on household income. However, he says that continuing layoffs and foreclosures will continue to depress prices, which have fallen 32% since their 2006 peak, according to S&P/Case-Shiller's composite 10-city index. He predicts that prices will fall another 5% to 10% before stabilizing in the middle of next year.

When the market does start to pick up, the NAHB sees that happening two years from now, the landscape will be changed, literally. After a long run-up in median new home size, peaking at 2,309 square feet in 2007,home sizes shrank to 2,091 square feet in 2009. "It's the largest decline ever seen," said NAHB's chief economist David Crowe. Since first-time buyers and their parents, the empty-nesters, will be the dominant demographic groups over the next decade, builders will cater to those groups more modest needs. Already, big builders like Toll Brothers have introduced models that look more like cozy carriage homes and four-squares than their usual English manor-style homes.

In the meantime, the next couple of years are going to be strange for those who want to buy new and have the means to do it. Sure, interest rates are likely to remain favorable (in the 5% to 6% range, according to Mortgage Bankers Association chief economist Jay Brinkmann). But you may have to settle for an already-built home in a builder's inventory if you want a bargain. Demand is so weak and prices so low, that for many builders, creating a new home to your specifications just isn't worth the effort. The NAHB's Mr. Crowe noted that 56% of builders the trade group surveyed recently reported that appraisals for their homes fell below the cost of building.

 

Real estate history made in Boston's Back Bay, masterminded by Live Auction Bidding

BY Jason Sheftell
DAILY NEWS REAL ESTATE CORRESPONDENT

Friday, October 23rd 2009

Handout: Bryant Back Bay

Up to $20 million of luxury homes in Boston's Back Bay were sold in under an hour, making real estate history.

Reynolds for News

From left, Louise Sunshine, Tracy Campion, center, and John Gollinger right, confer during an auction.

Real estate history was made last Saturday in Boston’s Back Bay when up to $20 million of luxury homes in the same building were sold in less than an hour. Never before in the United States had an auction for multiple condominiums in one building with minimum bids starting near $1.075 million fetched final prices averaging more than $1.35 million.

The event was masterminded by a NYC agent that prior heading up Donald Trump’s marketing department. It may have proved that luxury condo auctions can determine value and close the gap between developer and buyer.

The 10 homes on sale at the 50-unit Bryant Back Bay building sold in 25 minutes.

Immediately afterward, the sales team sold four additional homes to auction attendees at similar prices, about $1.4 million. By yesterday, six more offers filtered in with the highest allegedly hitting $2 million.

“This auction will lead to five to six luxury auctions to come in New York City. “We have set a new standard for how to move inventory in the luxury market. This was totally, absolutely, gigantically brilliant.”

Although this might be regarded as hype, at least one New York expert believes Boston will eventually be seen as a market-shifting event.

“It’s a big number, and they moved a lot of real estate in a very short period of time,” says Jonathan Miller, founder of New York’s Miller Samuel, an appraisal and consultancy company. “It’s inevitable that New York will see this phenomenon. Developers did not budget having this much luxury product unsold when they asked banks for loans 18 months ago. They have to do something to get rid of it.”

The building is owned by Vornado Realty Trust, a multibillion-dollar Manhattan-based real estate company with holdings all over the United States, including 22 million square feet in New York City.

The importance of the event was underlined by the attendance of Vornado Chairman Steven Roth, who took a risk placing so many units on the block. Poor results could have harmed the building’s future sales and lowered prices for nearby apartments in similar buildings.

The auction places Vornado, which, it was recently revealed, has a cash reserve of $2.8 billion, at the forefront of the growing trend toward luxury auctions.

 

Real estate auctions, on the rise, attract new audience of ill-informed buyers!

By Jason Hidalgo • October 24, 2009

But for Lester Ho, his first attempt at buying property at an auction went from heart-pounding excitement to heartbreaking disappointment faster than an auctioneer could say lickety-split.

The Reno gynecologist attended a residential real estate auction earlier this month after being tipped by his broker. Hoping to score a good deal on a new property, Ho filled out the necessary forms, paid a deposit, and took his seat at the auction. Soon, the property he eyed came up with an opening bid of $119,000. What Lester did not know was that this auction group had some fine print.

“The property came around and nobody was bidding,” Ho said. “So, I just stuck my hand out and bid $121,000.” One person made a counter bid and Ho found himself in a two-man bidding war. But the other person quickly dropped out after Ho threw out a bid of $125,000. Much to Ho’s surprise, he had the high bid in his first-ever home auction.

“The price was about half of what the property was originally listed for,” Ho said. “So, you can only imagine how happy I was.”

Ho went on to fill out even more paperwork and was told he would get a call about the property within a day. But once the call came, Ho’s excitement fizzled out as he played the message on his phone. Ho was told that the seller will not sell the property at the price that he bid for. Apparently, his bid didn’t meet the auction’s reserve price. Dr. Ho felt the old auto dealer days of 'bait and switch' coming back to haunt him.

“They said they wouldn’t sell me the property unless I raise my offer by more than $20,000,” Ho said. “I felt like they were trying to shake me down, and it left a bad taste in my mouth. I ended up saying no out of principle.”

Since 2003, home auctions have seen steady growth in the United States. But the collapse of the housing bubble has made auctions even more popular, particularly as a way to offload distressed or hard-to-move properties.

Even as home values started dropping after the housing crash, gross sales from residential real estate auctions jumped from $14.2 billion in 2005 to $17.1 billion in 2008, according to the National Auctioneers Association. Home auctions also accounted for 47.7 percent of the total sales growth seen in auctions as a whole from 2003 to 2008.

“Auctions are utilized more and more now because it’s tough to tell the true value of a home these days due to what’s happened in the marketplace,” said Chris Longly, deputy executive director of the National Auctioneers Association. “Auctions will work for you in a good market and a bad market. A lot of people have this misconception that you’re getting ‘a deal’ in an auction, but you’re not. You’re getting what the market is willing to pay for.”

Nevada has the highest foreclosure rate in the nation for the 33rd straight month in September, according to foreclosure tracker RealtyTrac, and as a result, the Silver State is seeing its fair share of home auctions. Most of the action is in Las Vegas, although Northern Nevada has had national auction companies come to the area to do auctions as well, Longly said.

The rising popularity of auctions has led to an interesting trend, said Kent Anderson, a Reno real estate agent and auctioneer.

“I have seen a marked change in audience,” Anderson said. “I’m seeing less investors and more first-time homebuyers — especially those trying to take advantage of the first-time homebuyer tax credit.”

Bidder beware?
Although the influx of new bidders has helped fuel the growth seen in home auctions, the trend also raises an issue concerning newcomers who may not know what they’re getting into.

Auctions with an undisclosed reserve price, in particular, can be quite confusing for those not familiar with the process, said Mike McGonagle. In some cases, such auctions are used to attract inexperienced bidders and generate interest in properties by posting low opening bids that are nowhere near the actual reserve price.

“Auctions are a scam,” McGonagle said. “Buried in most of their terms and conditions is wording that the opening price may not be the reserve price — which is the price that the owner has authorized as the minimum sale price (for the property).”

Failure to meet the reserve means winning bidders won’t be able to actually buy the property unless they make up the difference. That’s exactly what happened to Ho and another acquaintance following an auction held earlier this month at the Peppermill by Accelerated Marketing Partners and sold2u.com .

Anderson, who was hired by national auction firm Sold2U to do the auction for Silverwing Development, said the reserve price was clearly spelled out in the terms and conditions that were printed in brochures, the bidder packet and registration card handed out to participants.

“This was always advertised as a reserve auction,” Anderson said. “We even made several announcements before the auction started. We took great care to make sure people understood the terms and conditions.”

Ho said that he checked the terms again after he got the call about his bid and found that the reserve price was indeed mentioned in the documentation. But his biggest beef isn’t with the reserve but with the auctioneer saying “sold” when he got the high bid.

Another sticking point for Ho was the fact that opening bids advertised for the properties in the auction — $79,000 for Laguna Terrace at Virginia Lake and $89,000 for The Cottages in East Reno — turned out to be far below the actual reserve price.

“When the guy said ‘going once, going twice, going three times, sold,’ I thought we had a verbal deal,” Ho said. “Also, when they do set an opening bid, they should at least make it close to the actual price that they want for the property. It’s a crapshoot. It makes you wonder if they set these low opening bids just to get people in.”

Nevada licensing issues
Anderson disputed Ho’s account about the wording he used during the auction.
“I offered 12 properties during that auction and each time, I said ‘Sold subject to seller confirmation,’” Anderson said. “I always make sure that I abide by the terms and conditions of the auction. I’m not going to put my license and reputation on the line for something like that.”

But even among auctioneers, there’s debate about the proper use of the word “sold.” Longly of the National Auctioneers Association said mentioning the word “sold” at a reserve auction is taboo for many auctioneers. Instead, auctioneers should use the words “high bid.”

“Declaring ‘Sold subject to seller confirmation’ is extremely misleading and many professional auctioneers would consider such a statement unethical.” Longly said. “The simplest statement of ‘sold’ can confuse consumers, especially first-time auction attendees, and leads them to believe they purchased the property. They hear ‘sold’ but they don’t hear ‘subject to.’”

Still, semantics alone isn’t enough to give Ho a case against auction organizers, especially with the reserve mentioned in the terms and conditions. But Ho’s experience also shows the importance of formal auction licensing, Longly said.

Currently, roughly 33 states require an auctioneer license, Longly said. Nevada isn’t one of them. Nevada does require a business license, which can be revoked, according to Longly. But it still isn’t the same as an actual auctioneer license, which requires exams, ethics training and education that would address all sorts of auction-related issues, including proper semantics.

“You can still call the Secretary of State or the Nevada Attorney General’s office to file a grievance,” Longly said. “But requiring an auction license gives you one more layer in that grievance process so someone can be held accountable. It’s one more safety feature for consumers.”

Auction smarts
Despite some potential pitfalls, auctions are still a great way to get a good deal on real estate today, said Guy Johnson, a local real estate agent with Chase International. Johnson himself had a less-than-ideal experience with the dreaded reserve price when he got the high bid on his first auction many years ago in Chicago.

Johnson likened the strong sell he got from the seller at the time to a “used car routine.” But once he got familiar with the process, his experiences with auctions have been positive.

“If you’ve got the patience and the time, you can find a good deal,” Johnson said. “The only two outcomes is you either get a great deal or you don’t get the house because you didn’t meet the reserve. You really don’t run the risk of getting a bad deal.”

The key, though, is to do your due diligence prior to the auction, Johnson said. This includes reading the terms and conditions of the auction, checking the property to make sure you know the condition of what you’re bidding for, and setting your maximum threshold price — and sticking to it — so you don’t get caught in the heat of the moment and overbid.

Otherwise, try watching several auctions first to get a feel for them or seek advice from someone familiar with the process, Johnson said.

Ho, meanwhile, said he’d think twice before bidding at an auction again. Even Ho’s real estate agent Jessica Razzari, who accompanied him at the auction, said the experience has made her leery of the process, especially given all the work it required.

“We had to submit bank statements showing that cash was available for the purchase, we had to put down 3 percent of the auction price as an earnest deposit, we were basically at the auction for two hours submitting everything we needed to qualify,” said Razzari, who does real estate sales for Kearney Residential Realty. “And after all that, the price for the winning bid wasn’t the price they wanted to sell for. You can certainly find better deals out there.”

 

Foreclosures Drove September Prices Up Six Percent

UPI OCTOBER 19

Real estate agents participating in the Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions report that residential property values rose 6 percent from August to September and reversed a decline of 1 percent from July to August.

The increase was driven by high demand for REO or bank-owned properties, according to transaction data reported by survey respondents. Nationally, the average price of damaged REOs rose from $106,700 in August to $124,500 in September. The average price of move-in ready REOs rose from $178,500 in August to $199,300 in September. In September, damaged REOs accounted for 15 percent of home purchase transactions and move-in ready REOs accounted for 16 percent of transactions.

The average price for non-distressed properties remained nearly constant between August and September. In August, the average price for non-distressed properties was $267,900; in September, the average price for these properties was $268,200. Non-distressed properties made up 55 percent of home purchase transactions in September, with short sales accounting for another 14 percent.

Average home purchase transactions per survey respondent, a proxy for overall market transactions, grew at a rate of 16 percent from August to September. In most years, home sales decline from August to September.

Strong demand for moderately priced REOs caused time-on-market for these properties to decline markedly. In August, damaged REO stayed on the market an average of 9.4 weeks; by September, time-on-market had declined to 7.0 weeks. For move-in ready REOs, time-on-market declined from 8.0 weeks in August to 5.9 weeks in September. In contrast, average time-on-market for non-distressed properties rose from 13.0 weeks in August to 14.2 weeks in September.

First–time homebuyer demand for properties continued to be strong in the month of September. First-time homebuyers accounted for 42 percent of home purchase transactions in September. For the first two months of 2009, before the enactment of the first-time homebuyer tax credit, first-time homebuyers made up 32 percent of home purchase transactions. Survey respondents reported that first-time homebuyer traffic—an indicator of future transactions--grew sharply in September while traffic for current homeowners and investors was level or declining. The majority of move-in ready REO is purchased by first-time homebuyers.

"Our survey statistics are indicating a mini-boom in the housing market," commented Thomas Popik, research director for Campbell Surveys. "There's a confluence of positive factors: historically low interest rates, high demand from first-time homebuyers before the expiration of the tax credit at the end of November, increased affordability, lower inventories of foreclosed properties, and a perception among homebuyers and real estate agents that the market has turned."

The survey obtained hundreds of comments from real estate agents regarding current market conditions. Many agents indicated an REO buying frenzy in local markets, especially California. "Entry level REO's are taken by the storm! Many multiple offers!" exclaimed a California agent. "Low inventory and high demand are resulting in 20-60 offers on most properties in the entry level to moderate price points. First-time homebuyers have difficulty competing with investors and high down-payment buyers," reported another real estate agent located in California. "Banks and listing agents are pricing these REO's at liquidation prices to encourage a bidding war and it's working," wrote a real estate agent located in Florida.

Despite reporting strong increases in both average prices and number of transactions, real estate agents responding to the survey gave a hint of looming problems caused by rising unemployment. For the third month in a row, the survey's inventory index showed rising inventories of short sale properties, while inventories of REO properties were flat or declining. Because of a typical time period of 12 to 18 months between the first missed mortgage payment and foreclosure auction, REO properties come on the market long after borrowers experience financial distress. In contrast, many homeowners decide to attempt short sales soon after job loss.

"REO time on market is falling fast. However short sale inventory is increasing rapidly to 54% of inventory," reported a California agent. "We are seeing more and more short sale listings in every area but very few REO properties are currently on the market," reported a Florida agent. Another California agent stated, "Large numbers of short sale homes dominate the current inventory."

 

BANK WALKAWAYS ON THE INCREASE. TACTIC OR CAPACITY?

America is entering the 2nd phase of the real estate collapse. The commercial real estate collapse is beginning. What is scary is that banks are walking away instead of repossessing properties. If the property is not repossessed, it means that banks do not have to mark down these foreclosed properties. Their balance sheet will look better. But for how long?
  
Nobody is sure exactly how many bank walkaways are occurring. For various reasons, they can’t be identified in searches of public real estate and court data without individually pulling case files, experts say. But nobody questions that they are on the increase. David Rothstein, a researcher with Policy Matters Ohio, summarized the way they occur like this:
 
• The lender files a foreclosure, gets the foreclosure judgment in court, takes the property to sheriff’s auction but doesn’t bid on it if no one else does.
 
• The lender files as above, gets the judgment, sets the sheriff’s auction, then cancels the sale at the last minute.
 
• The lender files as above but then never requests a sheriff’s auction.

• The lender doesn’t even bother to file foreclosure.
 
All of these actions leave the foreclosed property in the hands of the original owner who, in many cases, has moved out and is unaware the lender hasn’t taken it. One indicator of the trend in walkaways is the gap between the number of foreclosure filings by lenders and the number of properties actually sold at sheriff’s auction.
 
A Dayton Daily News analysis of Montgomery County records found that, through September, foreclosure filings are on a pace this year to decrease by 8 percent. Meanwhile, foreclosed properties sold at sheriff’s sale will be down more than 21 percent. Over the three years an average of 2,500 foreclosure filings have not made it to sale at auction.
 
A foreclosure filing may not make it to auction for a number of reasons, including owners coming up with the money or lenders working out deals with them. But, Rothstein said, the growing difference between filings and sales suggests walkaways are playing an increasing role.
 
“When we look at the numbers, it’s not like thousands of people are getting loan modifications that would lift them out of the foreclosure process,” he said. “So what’s happening to those other properties?”
 
Another indicator is the falling number of properties that banks are repossessing, said Daren Blomquist, a spokesman for RealtyTrac shows that bank repossessions, called REOs, have been steadily declining in Montgomery County over the last three years. The 2009 monthly average for repossessions is only 43 percent of what it was in 2007, a newspaper analysis of the data show.
 
“There’s something happening once the properties enter foreclosure that is at the very least slowing down the process,” Blomquist said. “Maybe not to that (Montgomery County’s) extreme, but we’re seeing a similar pattern nationwide.”
  
Another indicator is the number of canceled sheriff’s sales, said Chuck Rodersheimer, a Dayton attorney who specializes in bankruptcy and foreclosure cases. ZIP codes like 45405 and 45406 northwest of downtown Dayton illustrate the problem, he said. A newspaper analysis of sheriff’s sale data found that 45406 had 721 cancellations since 2006, by far the most of any county ZIP code. The 45405 ZIP was second with 594 cancellations.
   ……
John Carter, housing inspector with the city of Dayton, finds the decline in foreclosures “very scary,” because houses are continuing to go vacant. For every 100 houses that he orders boarded up, he said, 40 to 50 properties have a mortgage but no foreclosure filed. When he contacts the banks, they sometimes tell him they have no plans to foreclose.
 
“That makes it look like the foreclosure numbers are going down, but in actuality the banks are not even starting foreclosure,” Carter said. “So there’s no number to track now.”

 

At foreclosure auctions, broken dreams on sale

 
By James B. Kelleher James B. Kelleher

CHICAGO (Reuters) – The seven-bedroom, three-bath house in this city's West Garfield Park neighborhood had once been someone's American Dream. But at a recent auction of about 100 foreclosed houses and condos, it was just Property No. 20 -- and drawing no bids from a roomful of buyers despite its bargain-basement price.

"Any interest in this home at $7,000?" fast-talking auctioneer Renee Jones asked the crowd. "If not, we'll move on." Saddled with swollen portfolios of foreclosed and unsold properties in the housing crisis, U.S. lenders and builders are turning to professional auctioneers to help them unload the unwanted real estate in a hurry.

It is an open question whether the auctions indicate that the U.S. real-estate market is recuperating or is still in intensive care.

But the rapid-fire, under-the-hammer sales -- usually resorted to only after every other effort to market a property has failed -- are on the rise across the United States, providing a colorful burst of activity in a corner of the weak economy that needs all the life it can get.

"Over the last two years, we've progressively seen more and more of these," said Chris Longly, the deputy executive director of the National Auctioneers Association trade group. "It's a sign of the times."

Hard data on the number of foreclosed properties being sold at auction are hard to come by. "The foreclosure market is a moving target right now." said Dave Webb.

But Auctioneers say they are gearing up for more in the coming months, convinced that a moratorium on foreclosures earlier this year only postponed what they believe is an inevitable avalanche of new repossessions. "The foreclosures are going to explode again," said Webb.

DREAMS ON THE CHOPPING BLOCK

The cadence and rhythm of the auctions, and the great deals that many buyers walk away with, make the events exciting to watch -- and make it easy to forget the heartache that lies behind almost every forced property sale in a country where home ownership is often equated with "The American Dream."

At the weekend Chicago event, Jones managed to race through the 100 properties up for bid in less than two hours. When a home did not immediately attract interest or the minimum price, Jones, wielding her gavel in front of a giant tote board, wasted no time moving on.

Kendi Kiogora, a 28-year-old first-time home buyer, said she felt like she "won the lottery" when she bought a one-bedroom, one-bath apartment in Chicago's trendy South Loop neighborhood, with skyline views and heated parking, for just $105,000 -- $62,000 less than its last listed price.

Real-estate professionals in attendance were less euphoric.

Antonette Taylor, an agent at a brokerage that plans to start holding auctions this fall, said the low prices -- most sold for 30 to 50 percent below their last deeply-discounted list price -- made her "a little nervous for my sellers." Other troubling signs: buyers passed on almost half the properties offered in Chicago and fewer than 100 bidders showed up for the event, which also attracted some online buyers.

"We're having a difficult day," said Tom Atkins. "There was a $1,000 property that no one bid on. You'd think a slum lord at the very least would buy it and put a (federal housing assistance voucher) renter in there for $600 a month."

Atkins said bidders at auctions are generally evenly split between first-time homebuyers and veteran investors.

Among the investors was Thomas Smith, 48, who paid $16,000 for a five-bedroom, three-bath home in Englewood, a notoriously violent neighborhood on Chicago's South Side he called "the murder capital of the world."

Smith figured another $15,000 in repairs would render the place rentable and said his ideal tenants would be "people...who fell off the ladder a little bit. I'm not trying to make a million dollars or anything."

BETTER THAN NOTHING

Later, when the nine-bedroom, four-bath property that David Kosak's boss had been trying to sell for a year went under the hammer, it fetched just $15,000 -- less than one-third its last list price but a figure the 23-year-old broker's assistant called "better than anything we've gotten."

Asked if he thought the auction activity might be a sign the property market was improving, Kosak was less upbeat.  "If it's getting better, we're not seeing it," he said. "We only do foreclosures, and we're only getting busier."

Whitney Tilson, a managing partner of T2 Partners and Tilson Mutual Funds and the author of "More Mortgage Meltdown: 6 Ways to Profit in These Bad Times," said there is a reason Kosak's office is getting busier.  After Barack Obama's election as U.S. president last year, Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants, imposed a foreclosure moratorium that lasted about four months. Many private banks followed suit.

As a result, there was a gap in the pipeline of foreclosed homes that pushed into late spring. That helped auction prices stabilize for a few months and permitted some analysts to claim the market had found its bottom.

But the moratoriums have now expired. With the mortgage modification and foreclosure prevention efforts championed by the Obama administration unable to keep pace with defaults, as many as 7 million homes and condos may eventually enter foreclosure before the dust finally settles, according to a report by Amherst Securities Group issued in September.

"There are a lot of things that have temporarily stabilized the market," Tilson said. "But those things are going away ... Delinquencies are spiking. This is going to be a mess."

 

Foreclosure notices are up but foreclosure sales are down

By Pete Carey

More than 2,000 Santa Clara County homeowners received foreclosure notices from their lenders in September, but a relative few actually had their homes sold at auction.

Foreclosure figures released Tuesday by ForeclosureRadar, a Discovery Bay company that tracks California foreclosure activity, continue a trend of the past several months: More and more homeowners are failing to make their mortgage payments but banks aren't forcing the sale of their homes while they try to work out loan modifications.

Lenders foreclosed on 415 homes last month, down about 5 percent from August and sharply fewer than the 650 properties foreclosed on by banks in September 2008. Of these, 109 homes were sold at auction to third parties and the remaining 306 were taken back by the lender.

At the same time, lenders filed 1,257 notices of default, the first step in the foreclosure process, and 1,027 notices of trustee sale, the final step before actual sale of a foreclosed home. The numbers for August were almost the same.

The slowdown in foreclosures was good news for homeowners falling behind on their loan payments, but bad news for people shopping for a home. The decline in foreclosures has pinched the supply of homes for sale.

"There just aren't that many foreclosures for sale," said Jeff Hansen of Keller Williams Realty in San Jose. Hansen said banks seem to be filing notices of default more rapidly than in the past, but moving more slowly to foreclose.

Hansen said he knows of two cases in which a bank foreclosed and took a home back, and then followed up by continuing to negotiate with the former owner on a loan modification. A total of 4,131 homes were in the process of foreclosure in Santa Clara County in September, a figure that has been growing steadily for much of this year.

Banks have been under pressure to modify loans under the Obama administration's Home Affordable Modification Program. More than 500,000 loans are in a three-month trial modification phase, the administration reported last week. The valley's foreclosures reflected a statewide pattern, according to Sean O'Toole of ForeclosureRadar. Foreclosure filings in California in September were about the same as August. They were higher than the previous September because a state law went into effect September 2008 requiring lenders to contact borrowers before filing notices of default.

Foreclosure sales remained low throughout California, the real estate service reported, while those about to lose their homes more than doubled from a year ago. "Clearly, if we have this many folks going into foreclosure, they haven't solved the problem," said O'Toole. "They're just delaying it."

"We're likely to have a bizarre situation where we have a tight supply of housing available for sale, yet literally millions of people underwater or unable to make their payments in California." O'Toole said about 900,000 California homeowners are unable to make their payments and between 2 million and 3 million are underwater — that is, they owe more than their home is worth.

 

What a deal! $25 million mansion now up for $6 mil.

October 14, 2009

BY SANDY ILLIAN BOSCH Pioneer Press

A castle-like mansion in Burr Ridge will be on the auction block next month for at least $6.25 million.

The 30,000-square-foot home, once listed at $25 million, was placed on the market last summer after a Chicago area doctor who had the house built decided to move to a warmer climate, said real estate broker Michael Berland.

Anyone wanting to see the house, which has six bedroom suites, 2,400-square-foot ballroom and 20-car heated garage, must buy a $30 due-diligence package. The property at 6501 S. County Line Road is open noon to 3 p.m. each Saturday and Sunday this month. The auction for the home, called the Villa Taj, is 2 p.m. Nov. 4 at the Hilton.

 

Too many palatial homes, too few princely buyers

As spec mansions lie unsold across Southern California, stressed sellers may deflate the housing market's high end by lowering their prices.

By Peter Y. Hong
October 4, 2009

Two years ago, Larry Igarashi bet he could build a sprawling house in Orange County's foothills that would sell for at least $10 million. These days, you can easily guess how that turned out. On Saturday he put the eight-bedroom house in the gated Coto de Caza community on the auction block and got a high bid of $6.6 million -- less than he was willing to accept.

Igarashi had gone all-out when he built the "Santa Barbara ranch" house: The master bedroom suite alone is 3,200 square feet, a bit smaller than the 10-car, climate-controlled garage, which measures 4,000 square feet. The driveway is long enough for a firetruck to turn around, and there's a wine storage enclave with room for 1,400 bottles.

The 16,500-square-foot hilltop house -- in the community that was the setting for "The Real Housewives of Orange County" television show -- is just one of dozens of unsold mega-mansions across Southern California conceived during the real estate bubble, when builders waged an ill-timed arms race to ever-increasing extravagance.

Comparably deluxe houses now lie vacant in droves along the coasts and hillsides of Southern California, from Manhattan Beach to Irvine. Their owners could afford to keep them on the market for months, sometimes years, hoping to find buyers who would pay their asking prices.

That holding pattern has kept the most expensive segment of the home market from posting the kinds of sharp price drops seen just about everywhere else. But it's now clear that there are too many palatial properties and too few princely buyers.

As more sellers like Igarashi decide to cut their losses and move on -- or are compelled to do so by their lenders -- the most expensive homes could slip from their perch at the top rung of the market.

"Sellers there now have to unload, and in order to do so, they must reduce their prices," said Chapman University economist Esmael Adibi.

Spec mansions are now amassed in some areas like rising floodwater behind a dam. A search of homes for sale built since 2007 and priced above $3 million shows 39 such properties in Newport Beach and Newport Coast, 27 in Laguna Beach, 19 in Manhattan Beach, 18 in Irvine and 11 on the Palos Verdes Peninsula.

There are also hundreds of other multimillion-dollar homes for sale in Southern California that were not recently built, but sellers who live in homes they bought before the housing bubble are less likely to be under the same pressure to sell as speculators stuck with vacant properties and construction loans coming due.

As speculators and recent purchasers who must get out of mortgages that exceed their home values slash prices to find buyers, other sellers will have to lower their prices to compete. In much the same way that foreclosures pulled down market prices for lower-priced homes, stressed sellers could deflate the high end by unloading luxury homes at bargain prices.

But even at cut-rate prices, few multimillion-dollar homes are selling. With so many to choose from, even those with enough money are taking their time.

"There's no sense of urgency among buyers," Igarashi said. He had hoped that the prospect of snaring a good deal through Saturday's auction would motivate those who have been delaying a purchase to get off the fence. But it turned out to be a double disappointment.

Igarashi had two houses at auction. The other was a six-bedroom Tuscan-style house he had once listed for $5.75 million. He finished the 10,500-square-foot house in 2007; it sat unsold as the even grander second house was built. It drew a top bid of $3.1 million, below Igarashi's undisclosed minimum. After the auction, Igarashi began negotiating with the high bidder on each property, and was still talking with them at the end of the day.

Near his houses, another six-bedroom home is being auctioned later this month with a starting bid of $3.9 million. It had failed to sell when listed at $9 million. Auctions can backfire. In December, five new homes in Manhattan Beach were auctioned with opening bids of more than $1 million -- none were sold.

Buyers will eventually emerge as prices fall, Adibi said. Still, it's hard to know how much real demand there is for super-sized homes, even among the very wealthy.

Spec home builders were motivated to ramp up square footage to justify higher prices on their projects. But buyers today who are more likely be looking for a long-term home than a place to flip may not want the trouble of maintaining such large houses.

A bigger question also remains: What if the giant spec homes just never sell?

Stefanos Polyzoides, a Pasadena architect who is an advocate of more dense, compact residences, said sometimes economies change in ways that make the original uses of buildings obsolete. The grand mansions of Newport, R.I., for example, have been converted to condominium buildings or inns, he notes.

Polyzoides doubts such reinventions could work for many of the latest spec mansions. "Some of these are huge albatrosses in exurbia surrounded by nothing. Many of these could face a very hard ending," he said.

Igarashi acknowledged that he miscalculated the market. As he showed a reporter around his Coto de Caza project -- a sprawling tile-roofed building measuring 218 feet across -- Igarashi said it was easy to do in the go-go years. Though he made a fortune as a titanium golf club manufacturer, Igarashi had been building spec homes as a kind of working hobby since 1980 -- turning profits on all six homes he built in Orange County before his two latest.

"I just didn't expect this would happen," Igarashi said of the housing crash. "I don't think Wall Street or even the president of the United States believed this could happen."

He now hopes to get what he can for the houses and move on. He'd like to pick up land at today's fire-sale prices and build more homes. But Igarashi said he'll take a different approach next time. He plans to build apartments.

 

Going, going... almost SOLD: Inside the luxury auction of a historic NJ home

BY Jason Sheftell
DAILY NEWS REAL ESTATE CORRESPONDENT

Friday, October 2nd 2009, 10:45 AM

The Froh Heim Mansion in Far Hills, New Jersey was expected to reach about $6 million but did not even exceed the buyer's initial purchase price.

There were more than 40 cars and 100 people for an auction of only six qualified bidders. A television crew of 15 shot a pilot and promotional video. Four valet parking attendants took the keys to the silver and black sedans that cruised into the circular driveway of the great estate.

The object of attention was Froh Heim, a mansion in Far Hills, N.J., that was up for bidding on this Saturday. Families and couples sat in the gardens and took in the view from the pool. Brokers from Sotheby’s International Realty, the listing broker for the house, manned the door.

The mansion’s owners, a three-person development team who bought the home for $2.1 million in 2006 and spent $1 million refurbishing, huddled.  Bankers with financing papers, architects and contractors eyed potential winners. Champagne on ice waited under the auction tent. It was clear this was an important day. “Someone’s life will change,” said Frank Trunzo, the auctioneer for Froh Heim.

The house stood behind him on a hill. The Spanish Renaissance home, with its terra cotta roof tiles, white stucco and a centuries-old stone base, looked more South of France than horse-country New Jersey. The property’s highlights included three chimneys, a 47-foot grand dining room with a Prohibition-era secret passage, bridge parlor, butler’s quarters and stables.

This was no modern monstrosity. The duke and duchess of Windsor dined here. Silent-film star Mary Pickford made the 1915 “Madame Butterfly” in the home. The town was named when the wife of the first owner admired the distant land, allegedly proclaiming, “Look at the far hills.”

Froh Heim (which means “happy home” in German) was built in the late 1880s by Grant Schley, whose father bought 2,000 acres after a profitable partnership with J.P. Morgan. The house was rebuilt by the original owner’s son in the 1930s and then restored two years ago by Heritage Premier Properties, the ownership trio’s firm.

It had been nearly three weeks since Concierge Auctions announced the live sale. Since then, ­Prominent Properties Sotheby’s International Realty’s Lorraine Hunt Kopacz held open houses every weekend and weekdays leading up to the event. Only 75 people visited the house, which was priced at $8.9 million after refurbishment and recently reduced to $5.4 million before the owners went the auction route.

At a time when real estate buyers, sellers and developers are having difficulty determining value for luxury homes, auctions may be a way to let the market select the proper worth. It’s risky, but the process guarantees a quick sale. Two weeks ago, the auction of a 57-acre ranch in Teton Valley, Idaho, priced at $5.9 million, which sold for $4.2 million. Buyer and seller celebrated on the front porch.

“Auctions give a sense of urgency and ensure qualified people who want to purchase are on site. These houses can be expensive to carry in terms of maintenance and taxes, so you usually have willing sellers." Home carrying costs and a desire to move on to other renovations propelled the Froh Heim owners to consider an auction.  “The owners felt this was the quickest way to obtain a fair price,” said Kopacz. “This could be the wave of the future. I wanted to be familiar with the process.”

At auction time, attendees descend on the tent like swarming bees. Even the parking attendants inch forward. Six participants have paddles. Jody Jorgensen, one of the three Froh Heim owners, does not. Jorgensen took charge of the house redesign, working with contractors and Morristown architect Jim O’Brien to modernize the air, heat and electrical systems as well as refurbish architectural features. She secured the house for a designer showcase that updated interiors. The house earned the 2009 Award of Excellence for Best Historic Residential Renovation by the Homebuilders Association of New Jersey.

As upbeat classical music played, the auctioneer took the microphone, telling the audience he would move more slowly than he would at an event for antique or art sales. Still, his voice accelerated as if he were announcing a horse race. The initial asking prices declined from $5 million to $3 million before settling at $1 million. The first bid came, at $1 million, from a local (who asked later to remain anonymous, so his wife would not know he was there). A neighbor who shared a driveway with Froh Heim upped the bidding to $2.1 million. A phone bidder in Boston bid $2.2 million. The neighbor, who someone said would sell Froh Heim after a shared driveway was removed, bid again.

Bidding slowed at $2.4 million. Jorgensen, a formidable personality in all black leather with a ruffle-collared white shirt, raised her hand to put in a bid $2.5 million. She conferred with the other owners, now noticeably nervous. If the house sold at $2.5 million, the owners would lose money. If Jorgensen’s bid won, they could restructure their partnership, and hold out for a better market and new buyer.

The neighbors called their banker for more financing. The auctioneer played the theme from “The Pink Panther.” “The drive behind big decisions is to make a better life,” he said.  Jorgensen stood like a superhero, one leg forward, tapping her foot. Finally, the auctioneer closed the bidding. The neighbors passed. Jorgensen had claimed full ownership of a house she partly owned. She wanted the first taste of Champagne.

“I cried the first time I ever walked in here and it’s been my life for two years,” she said. “I’m not disappointed. It was clear the right person for this house was not here. If it sold at that price, they wouldn’t have paid for our kitchen. I’d rather keep it and sell it at a higher price to the right family.”

Her bid, however, had not been in order. Jorgensen was not a registered bidder and had acted on impulse, with her bid accepted in error. Days later Concierge would annull the bid; her $2.5 million would be tendered as an offer to the ownership group. The owners would have a few days to consider, and other bidders would be notified that new bids would be considered.

“Ms. Jorgensen wants the house, but her offer does not count as a bid,” said Brady, who said her organization and brokers would still be compensated. “We’re not a fly-by-night company. If the owners choose to accept her offer, that is up to them. One thing is for sure — in a nonenthusiastic market, this was one exciting auction.”