Wednesday, September 23, 2009

When Will House Prices Regain Their Peaks?

There's no 'national' bottom in housing yet, and we're still a long way from the bottom of the Charlottesville market.  But already Moody's is making projections about when house prices will once again go back up to bubble values.

Virginia, as a whole, is expected to regain those lost values 14 years from now, in 2023.  The national number is the year 2020.

Via The Big Picture; see also HousingWire.  

Click for larger image in new window.



Related Reading

"Delayed Foreclosures and Shadow Inventory," via CR.  Google the quoted phrase and WSJ for complete content.
Stock market rising, despite banks and housing being socialized, but consumers struggling. 
The disaster that is the FHA.
Credit Risk and Ben Bernanke.

Thursday, September 17, 2009

Glenmore's Michael Comer: Price Reduced Again on Primary Residence, Now Asking Less Than What Was Paid

Current Asking Price: $998K for 2930 Milton Village Road.

The property, MLS# 467792, had an initial price reduction to  $1,175,000 on September 5, dropped from the original $1,348,000.

A further price reduction of $177K or -15.1% came on 9/16.   This is $32,800 less than what the Comer-Kesslers paid in 2005 at the peak of the Bubble.

 The original asking price had an expected return of $317K in a market where higher-priced sales are stagnating. 

Glenmore's troubled ex-Country Club Prez, ex-Treasurer of the Homeowner's Assoc Michael Comer also reduced the Asking Prices of his two "investment properties" in late August.

2930 Milton Village Road is assessed at $1M.

Related Reading:
Glenmore Assoc. Reaches Out of Court Settlement to Pay Back Alleged Embezzlement
Comer: The Unanswered Questions 
Statement from Kandi Kessler Comer 
The Glenmore Audit

Wednesday, September 16, 2009

Concerned About the Cost of Government Health Care Reform?

If so, there's much more that should worry anybody who's a homeowner, Realtor, prospective buyer, or prospective seller--wait a sec, let's just include everybody here and say "American Citizen."  What is of grave concern is the amount of money the Federal Government is spending, without the consent of Congress and certainly not the American citizenry, to prop up the housing market. 

For example:

  • The US Government owns or guarantees 90% of all new mortgages written in the past year.  
  • The US Government now guarantees half of all mortgages of Fannie and Freddie.
Why so much intervention?  Because the housing bubble created fake valuations.  And the US Consumer is tapped out.  Here are a few details on 
  • declining values
  • foreclosures
  • underwater mortgages
  • evaporating home equity
from Charles Hugh Smith's above-linked post:

$5 trillion was extracted from home equity during the bubble. That propped up the "consumer spending" on which the world depends. That's gone.

Consumer debt is $14.5 trillion, or 134% of disposable personal income. Much of which, it should be noted, is devoted to debt service. Translation: consumer is tapped out.

9.6% of mortgages in the U.S. are in default. 50 million mortgages = 5 million in default.

Home equity has fallen from $13 trillion in 2006 to $8 trillion today. Home equity is now less than mortgage debt, and highly vulnerable to further reductions in valuation. Mortgages + equity= $18 trillion. A further 20% decline in home prices would be $-3.6 trillion, dropping home equity of the entire nation to less than $5 trillion.

About 25 million homes are owned free and clear.
That remains the one bit of light in this darkening picture. Not everyone mortgaged their home to the hilt and squandered the proceeds.

40% of the home sales in 2005-6 were openly speculative.
Add in fraud, lies and half-truths (Uh sure, I'm gonna live here as my primary residence, heh), and you get 50% of all sales in the bubble years were entirely speculative.

There are some 18 million empty dwellings in the U.S. right now.
Maybe 4 million qualify as true "second homes" for the upper classes; the rest are, well, just empty.

Fannie and Freddie floated $5.4 trillion in mortgages off of assets of $114 billion.
So leverage of 50-to-1 is just normal business practice now. Or could that have had something to do with their demise?

Guess what FHA's leverage is: 50-to-1. Yes, FHA's "reserve" is 2% of its portfolio--and losses are driving that toward zero.

U.S. households have lost $5 trillion in home equity, $2 trillion in retirement accounts and $8 trillion in the stock market. Depending on how you add it all up, that comes to a loss of about a third of all household wealth in the past few years.
The link again: read the entire article here.  
 
Related Reading:

Tuesday, September 15, 2009

The Financial Meltdown, One Year Later - What's Going On In Housing and Banking?

On the September 15th one-year anniversary of the collapse of Lehman Brothers, the largest bankruptcy ever, a look back at where things are after a year of global financial turmoil.

 LOCALLY, 2009 brought (s)lower sales than'08, which was lower than '07, which was lower than '06....And the bottom isn't here yet.   Area home sales just keep declining.  Sales of detached single family homes in Albemarle and Charlottesville were either at the lowest point for a decade, or hovering 30+% lower than 2008 during the summer months, even with the expected seasonal uptick, historically low interest rates,  reduced prices, and the $8k federal tax credit.   Regional sales remained 30-50% lower than in last year, depending on season. kind of property sold, and area.  The upper part of the market, $800K skyward, was essentially frozen.

Now to national links, and what's being discussed this week:

Housing

Bloomberg: US Foreclosure filings top 300,000 for sixth straight month

CNBC:  US Home Prices Could Fall Another 25%

NYT: Seven New Rules for First Time Homebuyers.  #1: Don't stretch to get into that first home.  Read more here.

WSJ: Your House:  It's Just A Home, not a way to make money quickly or a nest egg.

 WaPo: Nearly 90% of All Home Loans Are Now Funded or Guaranteed By the Federal Government.  Uncle Sam's in lotta folks' backyards.  Or bedrooms. 

WSJ: No Easy Exit For Government as Housing Market's Savior.  This link is a preview; Google the title, including "WSJ" to receive the Google free version. SeekingAlpha: Five Questions About the Government's Role in the Mortgage Business

The Credit Score Impact on Mortgage Choices:  Doing a loan mod, short sale, foreclosure, or bankruptcy all change a credit score, some more than others.  And overall, US credit scores are significantly down due to the housing crisis.  Via Calculated Risk. 

Bloomberg: Housing Recovery Has Long Road, Fannie Mae CEO Says


What's Wrong With the Banking System?

Timeline:  A Year of Turmoil

 Lehman Had to Die So Global Finance Could Live 

Interactive: The Giants of Finance, Shrinking then Growing

NYT: On Wall St., President Obama's Been Pushing For More Banking Regulation Since Campaign Days.  Monday was no different.

Bloomberg: Nobel-winning economist Joseph Stiglitz: banking problems are bigger than pre-Lehman.

 TBP: Barry Ritholz on the anniversary of the crisis,  various media appearances

Mish:  Greenspanism is the root cause of this Depression.  You read that correctly: "Depression."

 CalculatedRisk - Failed Banks and the Deposit Insurance Fund  and 
Latest Problem Bank List - September 11
  
HuffPo: Tales from Lehman's Crypt


NYT: Wall Street's Math Wizards Forgot a Few Variables - Humans

NYT: A Year Later, Little Change on Wall Street

HuffPo: Priceless: How the Federal Reserve Bought Economists


Ron Paul: Audit the Fed

Abolish the Fed - Petition

And finally, some fluff: Think the prices for fixer-uppers are inflated in, say, downtown or Belmont?  This place hasn't been updated in 36 years...including kitchen and bathrooms, wiring, and plumbing, and a 3rd fl that needs to be gutted.  But it's within spitting distance of the Obamas' old ChiTown house.


Related Older Posts:

Graphs of Declining Sales in Cville Area    
Q2-09 Cville Market Compared to Rest of Virginia  
Unemployment in the Cville Area
Higher Priced Homes Sell at Snail's Pace
VHDA's August Forecast for Cville Area

Monday, September 14, 2009

John M. Donnelly, Confessed Ponzi Schemer, To Be Sentenced Today

John M. Donnelly of Albemarle County plead guilty on May 11 to charges relating to a 10-year Ponzi scheme that may have bilked investors out of as much as $11M.  He faces up to 48 years in prison and $6M in fines, plus restitution.

The SEC charges and related links are here. 
The FBI statement regarding his guilty plea is here.
A post about his home near Crozet, used to guarantee bail, is here. 
The Hook's coverage, by Courtney Stewart, of the guilty plea is here.

Thursday, September 10, 2009

Charlottesville Area Vacancy Rates in Properties For Sale, and Accidental Landlords

 If you can't sell your house, should you rent it out? 

The number of vacant properties is holding pretty steady at give or take 1/3 of all available properties for sale.  Realtor Jim Duncan, who blogs at REALCentralVA, keeps track of the data and periodically updates the distribution.  His graph and chart appear, below.

How many of these vacancies have been converted to rentals?  Last year, this blog featured some of the "Accidental Landlords" (links still on sidebar; scroll down).  But this year, it seemed (anecdotally, via Craigslist) there were many more: in the City, it seemed the rentals were clustered in the neighborhoods of Belmont, Fifeville, and 10th & Page; while in Albemarle County, they were "everywhere."

Sellers become "accidental landlords" for basically two reasons:

1.  They can't lower their price: they bought during the bubble and/or have taken out a HELOC and now still hoping to make back the same $.

OR

2.  Seller believes, evidence to the contrary, that the market will "turn" and they will be able to make the profit that others made during the bubble years. 

How many vacant properties are now rentals?  Data is hard to come by and typically anecdotal. But at least one local Realtor, Julie Gee, recently featured in a Hook cover story, has built a business around property management of unsold houses. 

But the pitfalls of renting when the intent is to sell are numerous.  A recent WSJ article highlighted this nationwide trend, and the issues surrounding it.  Experts generally advise against becoming a landlord in order to recoup lost value.

Consider the example of a house from the WSJ article:

[A homeowner] rented out his 4,700-square-foot house after failing to sell his home, which he listed for $790,000. Now a tenant pays $2,995 per month—a shortfall of $2,000 from the $4,995 mortgage payment. The homeowner "feels that two years from now, the market will improve to the point where he can recapture that." 

Really?  In two years, that's $48,000 down the proverbial drain.  As one commenter pointed out, "Factor in hassle, maintenance, tied up equity, leasing agents etc and the overall cost will be upwards of 60k, IF and only if, they sell it for their current asking price in 2 years. If they are able, the best thing to do is cut their asking price by 50k and get rid of it."

Another commenter opined, "Unless you’re doing this professionally, the only gain you have a chance of making is the appreciation in the property minus selling commission, takes 3 years ownership just to cover that 6% alone. Including adjustments for money paid to principle, most people will barely cover cash flow. "

Then there's the Capital Gains issue: "Renting for an extended period can eliminate or diminish the value of capital-gains tax exclusions. Federal tax law requires you to live in the house at least two years of the previous five in order to qualify for the full capital-gains tax exclusion upon sale of $250,000 for a single person or $500,000 for a couple, with some exceptions."

The exceptions to this example? A home whose mortgage has been paid off, or a home in an area where prices are not still falling.

See the WSJ article here.

Via REALCentralVA, the following vacancy rate visuals:

Click on image for larger pic in new window.

And a breakdown of the numbers:
Click on image for larger pic in new window.

Glenmore's Michael Comer's Asking Price for Primary Residence Reduced By $173K

Glenmore's troubled ex-Country Club Prez, ex-Treasurer of the Homeowner's Assoc, Michael Comer,  already reduced the Asking Prices of his two "investment properties" in late August.

MLS #467792 - 2930 Milton Village Road now has an Asking Price of $1,1750,000 from the original $1,348,000.  The house was purchased in '05 for $1,030,800. That was an expected return of $317K in a market where higher-priced sales are stagnating. 

2930 Milton Village Road is assessed at $1M.

The reduction of $173K or 12.8% came on September 5.

Nice kitchen.

Related Reading:
Glenmore Assoc. Reaches Out of Court Settlement to Pay Back Alleged Embezzlement
Comer: The Unanswered Questions 
Statement from Kandi Kessler Comer 
The Glenmore Audit

"Final Draft" of Places29 Master Plan Available to the Public, and Hollymead Open House Today.

There's no local, state or federal money for infrastructure, but they can dream, can't they?  Currently, Albemarle is so strapped for cash that its turning to interns to fill the employment gap.   And the County has so little money that the "Master Plan" uses crucial economic data that hasn't been updated from 2005.

Chapter 3, Existing Conditions and Future Trends:  "[T]he Charlottesville Metro Area’s unemployment rate was among the lowest in the country. Only 3 percent of the Metro Area’s labor force was out of work."

Currently, Cville unemployment is at a 20 year high, about double what the Master Plan says. The DIA/NGIC jobs that are projected late 2010 and beyond are already spoken for. From where will other jobs--not minimum wage positions--come from?

The "Master Plan" skips the past four years of available real estate sales.  It recognizes these facts: "Over the last five years (2000-2005), Charlottesville Metro Area housing prices have escalated by 71.78 percent. Over the same period, the median household income in the Charlottesville Metro Area increased by only 13.9 percent." [emphasis ours]

The "Master Plan"
ignores the glut of new and existing houses available for sale, and projects have been canceled or put on hold, or buildout delayed for years (Belvedere). The County should look into the projections of the Virginia Housing Development Authority to get a more accurate vision of where residential real estate may be headed. A look at past sales from 2005-2009 is in order as well. 

However, it's not like jobs and housing are going to bounce back any time soon.  While Places29 is long-term, the "new normal" needs to be addressed.
Current demographic info through August 2009 for Albemarle County, Virginia is available here--as prepared by the State of North Carolina.

Citizens can bring any errors they find in the downloadable Places29 Master Plan, to the attention of Albemarle County's Department of Community Development at the following "open house," today:

September 10, 2009, 4:30-6:30 p.m. - Hollymead Fire Station Community Room

Monday, September 7, 2009

Labor Day 2009: A Look at Unemployment in the Charlottesville Area

How's Charlottesville area unemployement?  Two words:  Not Good.  Which is just a little bit better than "Bad."  Tomorrow, September 8, it's likely to get worse, as Governor Timothy Kaine (again) announces, in a special news conference, more budget cuts to cover revenue shortfalls.

Locally, unemployment has about doubled since last year, and is at its worst in a couple decades.  The City is at 7%, while the County is at 5.3%.  At 6.4% for the Metropolitan Statistical Area, it's better than other parts of the Commonwealth and the US.  Try telling this to somebody who is unemployed or underemployed, however (like lots of housing industry folks, who may not even be counted in stats) and ya just might get a big punch in yer snout.

The area's largest employer, UVA, has already embarked upon a two-year period of wage and hiring freezes, and is losing jobs due to attrition.  But outgoing President John Casteen has prepared the community for more cuts and losses. 

The other bad news?  Private sector job growth has ended in this area.  1054 jobs were lost in 2008; 2009 numbers will clearly be higher.   The areas impacted include Charlottesville, Albemarle, Greene, Louisa, Nelson, Fluvanna.  See The DP article,  which details the Charlottesville Reagional Chamber of Commerce report.

The Chamber's report chronicles the past 13 years of job growth, while the following graphic  shows just the past few years.  Click for larger image in new window.
Here's the pic that's worth a 1,000 words (or that will prevent somebody from making a $350,000 purchase).  Click for larger image in new window.
Nationally, the unemployment rate just went to 9.7%.  Including workers who are "underemployed" and those who have stopped looking for work, the number is a staggering 16.8%.  In the past 10 years, the private sector, nationally, has lost 203,000 jobs.  Meanwhile, the government has created over two million jobs in the same period, mostly teachers.  This is the weakest job growth in two decades (see TBP.)

Related Reading:
Map of Layoffs in Virginia
Unemployment at 9.7%: Graphs - Calculated Risk 
Unemployed, Discouraged, No Longer Looking - NYT 
Unemployment Hits 9.5% in July
Blast from the past: Treasury Announces Plans to Take Over Fan & Fred

Saturday, September 5, 2009

Glenmore Associates Reaches Out-of-Court Settlement to Pay Back Michael Comer's Alleged Embezzlement

In an effort to avoid a "lawsuit and resulting publicity that could have hurt property values and home sales," Glenmore Associates, the Developer of the Glenmore community near Keswick, has reached an agreement with the Glenmore Homeowner's Association to pay back funds, according to The DP.

Now that $ repayment issues are hammered out, the Developer and the Homeowners Association can start sorting the IRS and property ownership/tax issues.

The missing $647K funds were allegedly channeled by ex-County Club President / ex-homeowners association treasurer Michael Comer to the Developer, Glenmore Associates.  Comer disappeared July 1 before a meeting to discuss missing monies with external auditors; after disappearing for nearly a month--somewhere--he was arrested and charged with five counts of embezzlement.  In the interim, three properties in Comer's name were put up for sale. Meanwhile,  Comer is currently free on $50K bail.

The article quotes Jeff Gaffney, the brother-in-law of the alleged embezzler, and Chair and CEO of Real Estate III in Cville, on behalf of Glenmore Associates, and Trevor Joscelyne for the Homeowners Association.   Josecelyne notes that some homeowners wanted to pursue litigation; Gaffney is thankful for his neighbors.

Glenmore Associates has paid back $300,000 and has reached an out-of-court agreement to pay the $347,000 plus attorney's fees, and other undisclosed fees within a year; Glenmore Associates has proferred liens on properties to the homeowners association as part of a promissory note.

Michael Comer will next appear in Albemarle County General District Court on October 1, at 10:30a.m.

Read Bryan McKenzie's ariticle here.

Friday, September 4, 2009

935 Monticello Avenue: Price Reduced, Again. MLS # Change, Again.

935 Monticello Avenue, the little house that could...what?  Keep getting new listings?  For years now.


The previous listing read "house is being sold As Is," and had an Asking Price of $257K.  This time, the listing says "owner has completed renovations."  The current Asking Price is has dropped to $245K, and the current MLS # is 469308.

However, back in the bad old days of February 2009, the Asking Price was $149,900.

In Spring 2008, the Asking was $267K.  

The house last sold in early 2003 for $82K.

We're going to save the sellers a lot of time here.  Here's the issue:  The house is situated just steps from Monticello Avenue near Carlton Road and, like the rest of Monticello Avenue, gets at least 20,000 cars passing by a day.  However, unlike many houses on Monticello Avenue, this one is at a traffic light.  Spitting distance.  Location location location?  Yup. 

Solution: Noise-proof windows.  Giant hedges.   Or move the house to the rear of that nice big lot.

Related Reading:
Price Reduced.  Again.  And Again.
The VHDA August 2009 Forecast
Cville MLS Compared to Rest of Virginia in Sales
Half of All Mortgages Underwater by 2011

Thursday, September 3, 2009

Update: Glenmore's Michael Comer Due in Court...Again

The status of Glenmore ex-homeowner's association and ex- Country Club President Michael Comer embezzlement case is now "pending."  Michael Comer is scheduled to be back in Albemarle County General District Court on October 1, 2009, at 10:30 a.m.

Wednesday, September 2, 2009

Glenmore's Michael Comer Due in Court September 3

Glenmore's prodigal Michael Comer, the beleagured ex-treasurer, ex-Country Club Prez of this planned community in Keswick, is due in Albemarle General District Court at 9:30 a.m September 3 to respond to five felony counts of embezzlement in violation of the Commonwealth's code 18.2-111.  The date of the alleged embezzlement is listed in public records as "10/28/2008." 

Thus far, none of the houses listed for sale by Comer and wife, Glenmore County Club Golf Pro Kandi Kessler Comer, have sold.

Charlottesville: Another $800k for Mall Bricks, But Just $30k for Race Relations Consultant

Here's a tip: using the $800k to improve public housing complex Westhaven (and others) would go much much further in improving "race relations" than a bunch of folks sitting around in "study circles" discussing "things."

The DP reports:
"Charlottesville officials are attempting to start a sustainable dialogue on race relations that will address current racial tensions and those created over the years from various events. Those include the city’s role in Massive Resistance to stop racial integration of its schools and the razing of the predominately black Vinegar Hill neighborhoodwhich sent many residents into Westhaven, Charlottesville’s first and largest public housing site — in the name of urban renewal.

The hope is to come up with an action plan to move beyond the racial and discrimination issues some city residents face."

Whether you "believe" in subsidized housing or not, let's not kid ourselves.  "Current racial tensions" go back several Centuries...and run right up the mountain to Monticello.  There's such a thing as being "too" "PC."  Some "chats" are not going to suddenly relieve the racial tensions, gang related issues, and--equally important--economic disadvantage of minority residents, even over a period of several years.

Bricks here.  Race relations here.  Eye rolling here.

Tuesday, September 1, 2009

A Snapshot of Sales Numbers

Below are the publicly reported sales numbers available on the the Charlottesville Area Association of Realtors website.  Note that the August sales may not be the "final" number.  Note, too, that this number is for the entire Central Virginia area, not just the Cville MLS of the City, Counties of Albemarle, Greene, Fluvanna, and Louisa, Nelson, Augusta, plus Waynesboro, Staunton, etc.

More specific sales figures, kinds of property sales, and locations will be available in the coming days. 

The blog shows these numbers because they are the only publicly available record from the trade association that represents most buyers and sellers in this area.   Still, despite lack of specifics, they  show that sales may be starting their pattern of decline for the Fall and Winter. 
The unknown for September's sales?  The up-to-$8k FTHB tax credit, which expires on November 30.  As sales must close by this date, a property should in most cases be under contract by September 30 (Oct 15, according to WSJ).  Will there be a "feeding frenzy," as has happened elsewhere?  
The other, opposite unknown?  Unemployment.  See the graph below, and today's DP article, Private Sector Growth Ends.  The article chronicles the decline in private sector jobs.  Combined with the wage and hiring freeze already in place at UVA...it's not a pretty pic.

Click for larger image in new window; or go to this link.
 
Below, the CAAR numbers.
August 2009 numbers read for "current month"; July 2009 numbers read as "previous month."   Note that inventory for the two months has stayed roughly the same, as have price and DOM.

While inventory is roughly the same, there are many properties that have been turned into rentals, which will come back for sale at some point.

According to the graphic below, sales thus far reported are down 25% for August from July.

July's 273 sales were up 14% from June's 234.
 
Below: June 2009 sales. 

Below:  May on top, April on bottom.
June's 234 sales were 20% higher than May's 188.
May's sales of 188 were about 31% higher than April's sales of 130.
 

 From April to August the average DOM declined by 30+ days, and the median price rose $35k; but in August, the median started declining again.

As stated above, these are just snapshots, and perhaps more August sales will be recorded and/or added in comments.  And info about specific areas, as well as sales of property types, will be available in the coming days.

Related Reading:
What's the cost per car or house in tax credit?  CR answers.

The VA Housing Development Authority Forecast for Cville Market  
Prices Reduced Again.  And Again.  And.... 
August Vacation Reading 
July 1 Snapshot
June 1 Snapshot
Cville Market Q2 Compared to Rest of Virginia