Underwater Borrowers Becoming Accidental Landlords

Maria Wells said she never intended to be a landlord. She sells real estate; she doesn't invest in it. Now the Florida resident owns two properties. One was her son's, but he had to move to take a new job.

The other was hers, but she got married and moved in with her husband. She can't sell either because she is underwater on both mortgages, so she rents them. Maria is one of a growing cadre of what the Realtors have dubbed, "Accidental Landlords."

"When I get enough equity, I will definitely sell," said Wells, who has been able to manage the properties because the rental market is so good that the income covers the mortgage payments and taxes. She does not use a property manager, as she wants to make sure the homes are well-maintained and keep their value. She's had some good tenants, but also some nightmares.

"One of the tenants certainly surprised me. They decided to change a water filter and go out of town, and then I got the call that 500 gallons of water had gone into my home. Fifty thousand dollars later…," she recalled. Read more >>

New York to use public housing and school property for luxury high-rises

In a move intended to begin the privatization of public housing stock, the New York City Housing Authority (NYCHA) announced last month that it will accept requests for proposals from private contractors to build luxury housing on the property of eight of its developments in Manhattan.

Developers will be allowed to build over three million square feet of market-rate apartments. The property will be leased for 99 years to building owners, and payments to NYCHA will be frozen for the first 35 years. The property is currently occupied by parking lots, playgrounds, and other open areas inside of and adjacent to the developments.

Over 400,000 low-income and poor New Yorkers live in the 335 NYCHA developments citywide. NYCHA housing accounts for approximately 9 percent of the city’s rental apartments, and provides some of the only affordable housing in Manhattan. Read more >>

Pending Sales of Existing U.S. Homes Plummets 30%

Buy, consume, spend. Recovery is right around the corner. (Image via Wikipedia)

Remember, 1 in 3 U.S. home sales in the first quarter was a foreclosure property, and foreclosures accounted for 31 percent of all residential sales in the first quarter of 2010.

From Bloomberg:

The number of contracts to purchase previously owned houses plunged in May by more than twice as much as forecast after a homebuyer tax credit expired.

The index of pending home resales dropped 30 percent from the prior month, figures from the National Association of Realtors showed today in Washington. The drop was the biggest in records dating to 2001 and compared with a 14 percent decrease forecast in a Bloomberg News survey of economists.

The decline shows that the industry at the center of the financial crisis remains vulnerable in the absence of government support. A stabilization in housing will depend on gains in incomes and employment that may stem foreclosures and give Americans the confidence to start buying again.

Bloomberg - The Ministery of Truth

Some of Bloomberg's misleading headlines come straight out of Orwell's Ministry of Truth. Consider this act of misdirection from a headline written by Bloomberg's Brian Swint:

U.K. Housing Market Improves as London Index Rises

The U.K. housing market improved last month as more London real-estate agents and surveyors said home values increased rather than fell for the first time in 20 months, the Royal Institution of Chartered Surveyors said.

The rest of Swint's piece is filled with plastic green shoot optimistic blather and even an admission that house prices are likely to fall further into next year before stagnating in 2011 based on a PricewaterhouseCoopers LLP report. And yet another admission that in May, house prices dropped 12.5 percent from a year earlier.

Now consider this Guardian UK headline published on the same day:

House prices will stay in the doldrums for years

The Guardian's Larry Elliot writes: PricewaterhouseCoopers said recent signs of a recovery in the market which had been detected by a fresh survey of estate agents were a "false dawn". John Hawksworth, the chief economist at PWC, said prices would experience a gentle decline for the next 18 months and then pick up slowly over the following years. PWC said it was more likely than not that real house prices in 2015 could still be below average levels seen in 2008, after adjusting for inflation. Even in 2020, after five years of relatively strong growth, the consultancy saw a 30% chance that real house prices could be below 2008 levels.

"Although the estimated average UK house price overvaluation of around 25% in mid-2007 has now been largely eliminated, our analysis suggests that house prices could still have further to fall over the next year.

"Despite some recent reports of rises, we are not out of the woods yet by any means. It is important for buyers to take a long-term rather than a short-term view."

And Jeremy Leaf, The Royal Institution of Chartered Surveyors' own spokesman had this to say:

"Although the market is showing signs of improvement, it is unlikely that there will be a sustained upturn while mortgage lenders remain risk adverse. A lack of stock on the market is providing a platform for modest price increases. While supply remains tight, the market may continue to show tentative signs of firming but instructions are starting to increase in some regions and this could dampen any meaningful recovery as long as economic conditions remain quite so uncertain."

John Hawksworth, the chief economist at PWC went on to say: "What would be a surprise would be if house prices now started to recover strongly in a sustained way. That would go against the lessons of history. There may be the odd month where the market seems to be going up but it is a false dawn because there is no underlying strength."

He added: "The pace of recovery in house prices seems likely to be relatively modest until the middle of the next decade, although it could pick up again beyond that as supply shortages reassert themselves, credit conditions return to normal and negative memories of the current housing bust fade."