Just a few random items for weekend fun!
– Halfway through the month, TD/NOS/NOD stands at 118/327/548. April’s totals were 191/769/931. Filings tend to pick up as a month goes on. It looks like TDs are on an upswing again, but nowhere near their peak of last fall. NOSs are on January’s pace, and will probably top out at over the record of 770 set in March. NODs are exploding, and I think they will end the month somewhere north of 1200, 30% up from last month’s record of 931. Not a great sign of a stabilizing market.
– The majority of closed units at the Belvedere are now in some level of default. The building keeps getting yanked from it’s TD date. GSR now has about 20 TDs recorded, and a couple more units go into default every week. If someone could PLEASE explain to me how the GSR’s business model made any sense to anyone, I would be much obliged.
– There was a comment this week that Toll Brothers had closed all their sales office around here. I stopped by their new models at Sonterra in Somersett, and sure enough, there is a sign up that saying "Sales are temporarily suspended at this community. We are open for sale at Dorado at Damonte Ranch. Please visit that community or call 775-852-3331 for further information." Wow. When it is cheaper to close down 4 of your 5 sales offices and not have a prayer of a sale than to at least staff them says a lot. I suspect that their product mix is about to be seriously downgraded to meet the market. I have heard about some of their projects where the street-front elevations remain the same to preserve consistency, but the depth of the homes have been cut in half. It is sort of a Hollywood back lot look.
– Altmann-Ott had remained pretty much unscathed in this mess, until they received a NOD this week on their Pinnacles development. The first phase was 45 homes, and 2 sold (APNs 518-481-08 and 09). How would you like to be propping up that HOA?
– Hey Waterstone Attached Homes resident – the trustee’s sale is scheduled for June 3 at 10 AM on the courthouse steps. It is TS # NV0233585, and you can check the progress and results by entering that number on this site. Good luck. I think you will be safe, and might want to try to renegotiate your rent downwards while this is all going on.
– And what’s an update without a Montage report? 26 units of 380 closed so far, though none in the last 11 days. 18 filings to cancel purchase agreements have been filed to date, including 4 since the Montage closed its last unit. TICOR, who is handling the closings on behalf of the Monty has filed an interpleader lawsuit, basically saying "we’re holding the units, there are disputes, and we don’t know what the heck to do about it". In the mean time, the Montage is now sending notifications to contract holders who have chosen not to close (80% or so is my rough guess) , indicating that they will start proceedings to recapture the deposits in 20 days. This is all really a side show to the owner/lender’s descent into to purgatory. Corus Bank is seemingly on life support (thanks bondstevebond for the initial link). There is some interesting speculation that buyers who have closed may be bought out at a profit as a convenience to the new owners, if a vulture fund buys the Montage and needs to dismantle the HOA. Curious times, indeed.
– The Montage isn’t Corus’ only local deal – the are underwriting Barone Tanamera in the South Meadows. Fleur de Lis is sinking, quite literally, according to the filings, and the rest of the project has seen significant "price erosion". Kevin, we haven’t heard from you in a long time – what’s happening with the project?
Hope that’s enough to generate some interesting observations from ‘yall over the weekend. Let me know it there are other things you would like to see me dive into. As professor Harold Hill once sang, "Idle hands are the Devil’s playground , and that’s TROUBLE!".
Worried Guy
Sounds Great!…Anybody got a parachute?
Grand Wazoo
Let me summarize your post Mike:
“Better than porn”.
Waterstone Resident
Yup – I have the NOS and talked to the office today – they didn’t know about it… clueless I guess.
The issue is that I will be out of the country on June 3 and for a while afterwards too. No idea what will happen. I assume June 1 rent goes to the current owner but July will go to the new owner. I’ll be back before July 1, but would hate to get a 48 hr eviction notice while overseas.
DownButNotOut
Reading this site, and not disagreeing in general with most postings,a thought has come to mind;
– Most of the long time posters here are very astute about the RE on goings in the greater Reno area. It’s not a stretch to say way ahead of the rest of the pack.
– This blog is one of the few sites that accurately continues to predict the RE market downturn to the degree it has happened that I’ve come across nationwide, but certainly the best RE site in the Reno/IV area for the purposes of discussing and projecting a downward trend.
– I’d venture to say more people read this site before they will purchase in this area than ever before.
– The Reno market is becoming one of the worst markets, well in the country, according to some of the previous statistics posted.
So my point is, is the content in this blog becoming a self fulfilling prophecy?
Joe
Went to the sales office at Mountain Gate today. They told us that the builder is closing up shop, no more building for quite a while. Over 200 homes planned, less than 60 built. She also mentioned Toll brothers was closing several projects like Saddleridge and one in Arrowcreek. It was kind of a depressing day, although we like where prices keep heading. Guess we’ll keep waiting.
Worried Guy
From what I am seeing on the ground, it looks like very complacent, delusional, and in some cases, arrogant sellers of property. I feel for these folks, but the next 6 months might see a price collapse far worse than the last year’s drop. The pervasiveness of the deflation has to run its course. There is a group that believes the Gvt. can fix all by magically printing their way out of this mess. I say it can’t be done. How are we down 50% now from peak 2005 levels if the Gvt. can use largess to overcome debt destruction? They can’t and that’s the point. The bottom will be a quiet affair with savers snatching up properties at prices once thought impossible.
BanteringBear
DownButNotOut posted:
“So my point is, is the content in this blog becoming a self fulfilling prophecy?”
Oh, please. A blog causing the price of real estate to fall? Are you serious? If you are, I’m absolutely astonished that somebody could be so… well… naive to put it politely. It didn’t take a PhD to forecast what was coming down the pike, just common sense. Local wages have always dictated prices around Reno, and anyone familiar with the market knew that. It’s only the short bus speculators who couldn’t figure it out.
We’re merely returning to affordability by local wage standards, and are over correcting due to a massive, massive inventory overhang, and a dearth of qualified buyers due to, but not limited to, stolen future demand, a weak economy, tight credit, and overpriced used homes.
bondstevenbond
“better than porn”
eeeeeeee hehehe!!! Hey Grand Wazoo. It is 5.45AM I just read that and laughed so hard that I woke up the neighbors! Good one 🙂
“self fullfilling prophecy”?
BB is right. DownandOut is wrong. We live in the land of free speech, supply and demand, and market capitalism. Or at least we used to!!! This blog searches for the truth through battle in the arena of ideas. Many of the posters on this site have reached their negative conclusions not by stating simple minded opinions such as “self fulfilling prophecy”. Instead, they brought data, they analyzed it logically, and then they stated their honest opinions. Is there any better way, DownandOut???
Brain Surgeon
mike – check the source of the NOD’s – that 30% increase is probably from NOD’s filed by HOA’s.
Reno Ignoramus
Mike, the “business model” for the GSR was nothing more than the Greater Fool theory. There is no finer example than the GSR of the theory that it doesn’t matter what you pay for something because some Fool greater than you will come along and pay even more. How else can anybody explain what possible intellectual process was employed to justify paying hundreds of thousands of dollars for a warmed over hotel room?
There is perhaps no finer example of this than the GSR, although our whole town was infested with an entire array of builders and developers and mortgage brokers and realtors and appraisers and title companies that thought the Greater Fools would last forever.
Martin
I agree with RI that the GSR stands out as the most stupid and foolish example of the bubble mania. It gets the Monument to Dumb award. I believe that about 99% of the people who bought those things were from out of town, so at least the financial carnage that is emanating from them is not being experienced by locals. Except for all the cute air head “sales executives” at the GSR who have lost their job peddling those things.
We shall discover if there are any Fools left out there if we see one of these resale REOs actually sold.
Worried Guy
Thoughts on this Bill?…
http://www.leg.state.nv.us/75th2009/Bills/AB/AB149.pdf
Reno Ignoramus
WG,
That bill has received some attention here on the blog in the past. If it becomes law, it will work to slow down the foreclosure process in those cases wherein the borrower requests mediation. But I fail to understand what real difference it will make because I fail to see what sanction befalls the lender who refuses to agree to a loan modification in mediation. All the lender is required to do is to show up at the mediation, not to agree to a modification.
This is a feel good piece of legislation that allows the politicians to say they did something for the citizens of Nevada, which, as we all know, has the worst foreclosure rate in the nation.
SkrapGuy
This legislation is only going to make the situation worse.
The housing market is not going to find a bottom until the foreclosures stop. As long as the REOs are driving comps down, no bottom will be reached. This legislation will do nothing more than prolong the downturn by prolonging the length of times it takes to finaly work through all the foreclosures. RI is right, this bill does nothing to require lenders to agree to loan modifications, it only requires them to show up at mediation. This will just add weeks, if not months, to the foreclosure process in those cases where the borrower asks for mediation.
This is another example of how the politicians, under the guise of doing something helpful, are actually only making things worse.
Raymond
This bill is just one more way we, the taxpayers, are getting stuck. There are still 1000s and 1000s of NODs being filed in Nevada every month, mostly in LV, then here in Washoe, and then in all the other counties. If only half of the borrowers seek mediation, who is going to pay for the mediators??
One way or the other, it’s taxpayer money.
DownButNotOut
BB, if you read what I wrote, I was agreeing with your statement ‘It didn’t take a PhD to forecast what was coming down the pike, just common sense.’ I was questioning if there was a relationship between potential buyers here that have access to this information and the fact Reno RE is sliding possibly more rapidly than the rest of the country. One which you and Bond heartily dismiss. I don’t agree.
I don’t think it’s ‘naive’ to think well informed people in an area can set trends, or at the very least cause fluctuations in ongoing cycles. One might be considered naive to think they can’t, to put it politely.
Worried Guy
It’s a little bit ridiculous to think that potential buyers reading a blog are all collectively driving down RE prices in Reno..And even if that were true, then your argument is that if they didn’t have the information, then they would gladly pay huge premiums for insanely overvalued RE prices. What about the actual market?…How about supply and demand?…The fact is that the RE markets in the U.S. and elsewhere in the world went through an unprecedented debt bubble of unheard proportions in human history. It is the unwinding of that debt bubble and the subsequent fraud that was perpetrated on the system that is a fait accompli…Not a bunch of buyers trying to figure out how to circumvent this madness for their own well being…That is what rational participants do in financial markets contrary to the actions of the Federal Reserve, U.S. Gvt. FNM, FRE, Mortgage Originators & Others down the totem pole that literally feasted off this scam Ponzi scheme for years. Welcome to Deflation Nation.
BanteringBear
I read what you wrote, DBNO, and it said: “…is the content in this blog becoming a self fulfilling prophecy?”
Self fulfilling prophecy- a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior.
I think your question is quite clear, and naive. The idea that this blog has any appreciable effects on Reno real estate prices is absurd, IMO.
Phil
Has anybody seen the plans for the Lazy 8 casino? Holy cow! There is a 4 story parking structure which seems to be larger than the hotel and casino combined!
I can only wonder who is all going to fill it up?
BB, I am not taking any sides here, but have you ever considered the “butterfly effect”. I am not saying there is a huge effect, but it is obvious there is a infinitesimal bit of an effect, as people have taken into account some of the advice here. Has it made a difference? I have no doubt it couldn’t be measured in any way.
SkrapGuy
A while back Diane put up a thread about “how much green has this blog saved you?”. A few people commented that because of this blog they decided not to buy. I have no doubt that those few people, and probably a few more, have been directly influenced by this blog. But to suggest that this blog has had a direct influence on the Reno/Sparks market as a whole is a stretch.
But, I do think that this blog, for at least the past several months if not longer, has been read by the folks at the RGJ and the UNR people who like to pontificate about the market to the RGJ. It seems to me that recent stories in the RGJ have been more realistic and less happy talk. The same thing from the UNR people. I think this blog has had an influence on the people who comment about the market in the paper. This blog has probably been more influential in that regard than by directly impacting potential buyers.
Worried Guy
Do the people at UNR/RGJ understand that a cash buyer in the Reno market today is not going to put up with arrogant sellers that are asking ridiculous asking prices based on yesteryear bogus FHA Gvt.-Banking Oligarchy Ponzi schemes? I have news for sellers in the Reno market. If you get a cash offer, you better come to the table and negotiate, negotiate, negotiate because you will regret not doing so later by the end of this year and next. Welcome to Deflation Nation.
DownButNotOut
BB an Bond- if I read you correctly your saying this blog has no sway in how consumers buy/ don’t buy RE in Reno. Fair enough. Keep posting.
FutureRenoHomebuyer
I’m that guy you are all talking about. I’m the one who will buy a house in Reno next year. I’m educating myself through this site. I also like Trulia and RealtyTrac.com for data/stats, FWIW.
I currently live overseas (US Navy). Want to retire to Reno with wife/kids next year. She was raised in Reno, and I’ve always loved the Sierra Nevada.
If I lived there right now, would I buy? Would this blog affect that decision? Hard to say. While I think prices have further to drop, I think interest rates are destined to rise. So when will be the perfect moment of price value with low interest rates. Unfortunately, no one will ever be able to predict that.
What I will say is that I feel much more in tune with the Reno market because of this site. I am grateful for every post I read. You all have something of value to add.
Would my decision to buy be affected by this blog? Well, if I lived in Reno right now, I’d drive a harder bargain. I’d have more patience. I’d low ball that desperate seller. If he weren’t that desperate, I’d find one who was. All because of the confidence and knowledge gained through this site. If everyone on this site were talking up the market like now is the buying opportunity of a lifetime, I’d probably be a bit more nervous and itchy with the trigger finger.
Looking forward to being your neighbor next year. Please keep up the great posts.
GratefulD_420
This Blog has ZERO effect on the market price or direction of the market. It can have however have an enormous effect on the decision making of specific individual reader (e.g. How much green has this blog saved you?).
For example… let’s say this blog is all “doom and gloom”… and if everyone who reads the blog decides not to buy. If the prices are o.k., and the market is o.k. someone from outside the blog will buy and the only result for the “educated” reader of this blog is they will have missed an opportunity.
The blog cannot hurt NOR can it fix the market. Remember, most conclusion are made here based on data and facts. This blog cannot help the fact the banks allowed Subprime loans and wall street bought them (demanding more). It cannot help the fact that when subprime was over they invented Alt-A and pick-a-pay programs. It cannot change the fact the median pay in Reno couldn’t afford the median Reno house (by 2.5x’s !!). etc., etc., etc.,
The moral of the story is this blog does not make the market… instead this blog discusses, reads and disects the market in hopes of learning where it is headed at some point in the future.
To make the point further on “How much green has it save you?”…. imagine if the blog was doom and gloom, yet the points were unfounded OR untrue? Then readers would be missing opportunities and losing green.
The Reno market is soooo much bigger than this blog. To think this blog has any effect on the overall market is very naive.
p.s. – I read this blog daily as a great source of information.
SouthBay
To FutureRenoHomebuyer:
You also have to contemplate the $8,000 tax credit on homes that close prior to December 1 2009 into your “buy now or wait” theory.
Suprising this stimulus has not caused a lot of renters to buy up the $80K foreclosures in Fernley.
bondstevenbond
Castles don’t float in the air forever, tulip bulbs aren’t precious, and monkeys don’t fly. The Reno market was headed for disaster with or without this blog.
But just for fun, let’s suppose this blog DID impact the market. Is THAT so wrong? Not in my book. Not in the least. Do you have a problem with that, DownbutnotOut? It just means that homes are more affordable now for everyone.
I am sick and tired of realtors, media, and governments taking the side of supply over demand. Are producers/owners who wish for a higher price any standing on a higher moral plane than consumers who dream of a lower price? Let’s let homes foreclose and auto companies fall. Let’s let the invisible hand of the market work.
The EU’s 1.5B fine against Intel last week is an example of the same flawed thinking. And what was Intel’s horrific crime? Producing chips at too low of a price in a market that THEY created! Every time a producer lowers the price of a chip or a house, or a car; a potential buyer rejoices.
Worried Guy
“You also have to contemplate the $8,000 tax credit on homes that close prior to December 1 2009 into your “buy now or wait” theory.
Suprising this stimulus has not caused a lot of renters to buy up the $80K foreclosures in Fernley.”
I like this scam from the fellows in Washington. How many folks buying an $80,000 home in Fernley will have the total income to receive all of the $8,000 tax credit back in the same year? How about a credit against income or a direct rebate dollar for dollar. Then, home prices, in some instances, are dropping by the amount of the tax credit every few months or so. This is just another reminder of how Fedzilla in the ivory tower can’t put back together the humpty dumpty zeppelin that they partly created.
GratefulD_420
Worried Guy –
“how many folks buying an $80,000 home in Fernley will have the total income to receive all of the $8,000 tax credit back in the same year?”
This is a true CREDIT and it doesn’t matter your income level. If you paid zero or owe zero they will send you the $8,000 cash.
With this in mind, Southbay’s comment “Suprising this stimulus has not caused a lot of renters to buy up the $80K foreclosures in Fernley,” is not so out of line. I actually though about taking advantage of this by looking at $100k properties [20% down, 80% (30yr@4.6)] in Reno. Since the government will then give you 8% back, you have some nice padding on downward pricing trend. Unfortunately I just haven’t found the $100k properties worth $100k.
Worried Guy
Grateful ID:
I stand corrected. I believe this is what you are talking about here:
“I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).”
daily
This blog is a great source of information for a nice city in northern Nevada. I’ve found the information, opinions, rants, and general tidbits about Reno R.E. insightful. But, I have also sifted out the spin, agents writing “undercover” and ego driven comments.
All said, this is an excellent resource and well worth noting for anyone contemplating in buying into this area.
Would this blog influence me 100% as to making a financial decision in R.E. without utilizing anything else? I think not. To insinuate a blog, any blog, is influencing the evolving economic melt down is bust out laughable. I’m glad I wasn’t drinking my morning coffee or it would have been spit all over my key board.
DownButNotOut
BondSB- I don’t have a problem IF this blog impacts the market at all. In fact I think any impact it might have is to the savvy buyer that is looking to sharpen their final strategy, or as SkrapGuy points out, in keeping UNR and the RGJ a little closer to reality, as well as keeping Realtor BS in check. That is why I posed it as a question and not a statement. Admittedley I used a poor choice of words with ‘self fulfilling prophecy’ as I really meant exasperating an ongoing situation, but with BB’s pocket dictionary always available I was able to quickly see the error of my ways.
I meant the question in the context that Reno seems to be doing worse than other similar cities in the same situation, and wondered whether anyone thought there could be a correlation between a well read, well written blog in an area, and an over compensating RE downturn.
I not sure why asking this question would cause someone to spill their morning coffee (presumably laughing). As we heard, others read this site that are actually considering buying.
Lastly, I asked this question in all seriousness mostly because I was tired of hearing the same thing over and over, (we have a ways to go yet in downward housing prices) even though I agree with it and it’s true. Just trying to spark a little intelligent discussion about something different.
Kevin Kearney
Mike,
Somebody mentioned you asked about how we were doing in context of Corus Bank. It wouldn’t be appropriate of me to comment on what’s happening with Corus. They’ve been pretty fair with us and we’ve paid down our obligation to just a small fraction of where it was originally underwritten. I’m sad to see some of the people I’ve worked with there disappear from the organization but that’s the nature of the beast right now. The Resort at Tanamera is fortunate to be in a position to not have to compete with the various banks out there on 80% of the transactions. We’ve had a few units foreclosed here and other than one which will be going to auction towards the end of the month all of the foreclosures have been absorbed. We know there’s long term value here and we have staying power. So we have adjusted our plans and we’re executing on a long term strategy. Thanks for asking Mike. Great job to you, Guy, Diane, and JoAnn on the blog.
BanteringBear
“Admittedl
ey I used a poor choice of words with ‘self fulfilling prophecy’ as I really meantexasperatingexacerbating an ongoing situation…”There, I fixed it for you.
smarten
I think this blog has had a direct effect on the local residential real estate market. When I first starting reading this blog several years ago, many agents, including Diane, were in denial as to what was going on around them. But over the years, that has all changed. In fact, I personally know several former Chase agents who have admitted to me that I and some other posters here caused them to look at the data differently and now they are singing the same tune as the majority of you. Many have their own blogs and anyone and everyone can see the effect this blog has had on their blogs [and clients].
Also, take a look at what Eric Crosby, Charlene Meenan, Robin Coons and even Michelle Plevel are saying. Whereas a year ago most were chastizing their colleagues for presenting disgustingly low ball offers, now this technique has become one of their staple marketing strategies! The cheerleaders are gone.
So did this blog cause the local market to be what it is? Of course not. But has it caused the market to see what some on this blog were seeing several years ago and is that now having an effect? Absolutely!
Now I don’t want to rain on anyone’s party but I suggest that you all stop slapping each other on the backs and start looking at what is going on in the marketplace. I don’t follow Reno as closely as I can that other little improvement district by the Lake in Washoe County, but I [and others I’ve spoken to] sense there has been a change [and it’s not even June]. You have to look deeper than just the raw numbers to see what’s going on, but the “steals” and incredible valued properties out there are quietly being plucked from the vine. YTD there have been 22 SFR sales in Incline Village [and none in the month of May]. Yet there are currently 17 SFRs in escrow! What do these would be buyers know that the rest of us don’t, or are they simply fools?
Also I can report first hand that the mortgage market has loosened up from where it was a year ago. Loans ARE being made, and I’m being told lenders are swamped with applications. Also look at the rates: forget about conforming loan amount mortgages for the moment [where there is a flourishing secondary market]. It’s the jumbo market that is making news. Rates on jumbo loans have come down substantially – 4.5% and zero points on a 5/1 ARM, and 5.625% and one point on a 30 year fixed rate mortgage! 5.625% jumbo fixed rate mortgage money; incredible value for your dollar if you know where to look; and a $8K tax credit to reimburse you for your loan fees if you haven’t lived in a property you own for the last three years; are all ingredients in a dish that I’m sorry, DOESN’T spell train wreck.
As has been stated many times on this blog, you won’t know a bottom until it has passed you by. We may be there right now in Incline Village. Now does this mean that there still aren’t delusional sellers out there? Of course not. But I submit that the nice stuff that is aggressively priced IS in fact selling. And it may actually be happening in Reno as well. I say keep your eyes open and don’t be afraid to pull the trigger just because so many on this blog are preaching the opposite. Just my opinion!
Waldo
What happens in the Incline Village housing market is absolutely, completely, and totally irrelevant to the Reno/Sparks market.
They are absolutely different markets with nothing in common other than they happen to be in the same county.
The fact that 17 well off people happen to have decided to buy houses priced at 5, 6, 7, or 8 times the median in Reno means nothing for the Reno market. Zip.
Different kind of buyers. Different kind of market.
17 buyers in escrow is a big deal? There are probably 17 people in escrow in Malibu too. And that’s about as relevant for the Reno market as what’s happening in Incline Village.
IMHO, whatever is happening in IV with the rich, or at least very comfortably well off folks is totally unpersuasive in Reno/Sparks.
When I see 200 condos priced under $100K in Incline, then maybe I will change my mind.
Mick
Glad to know that a 50% drop in the median is not a trainwreck.
Glad to know that 80% of all sales being REO or short sales is not a trainwreck.
Glad to know that close to 1000 NODs in May is not a trainwreck.
I wonder if Diane Cohn, who is trying to sell her house for about $300K less than she has in it, would agree there is no trainwreck?
Worried Guy
“Disgustingly Low Ball Offers”…
The only thing disgusting is the “Hi Ball” offers that were tossed at real estate during the nexus of this Ponzi scam charade over the last decade. Smarten, it’s a little disingenuous how you don’t mention this in the same sentence with your recent supposed “Low Ball” offer argument. It’s part of the Debt Bubble-Inflation scam perpetrated by the confluence of Gvt. and Banking. The current unwinding is a justification of free markets to undo inherent corruption of pricing brought by an unsavory group of characters that quite honestly should be behind bars right now.
“The special privileges granted to Fannie & Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions……. Furthermore, the holders of the mortgage debt will also have a loss. The losses will be greater than they would have been otherwise had government policy not actively encouraged over-investment in housing. Like all artificially created bubbles, the boom in housing prices can not last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out.” -Ron Paul.
DonC
Since we’re on the topic of foreclosures, I’m unsure if this has been posted before, but today’s WSJ had an article about the markets with the highest percentage of homeowners who are underwater. There are a few arguments about the percentages, but the fact is Reno is high on the list.
http://finance.yahoo.com/real-estate/article/107041/House-Price-Drops-Leave-More-Underwater
Having negative home equity at more than double the national rate is quite important and not a good sign. Empirically we know that being underwater is the key factor in predicting whether someone will default on their mortgage, so extremely high negative home equity rates is a good predictor that there will be more defaults moving forward. (Nevada has its two major metro areas in the top four which is really horrible for the state as a whole).
What I can’t tell is whether the numbers include condos. My guess is that condos are included, which suggests that the SF situation may not be as dire as they numbers would otherwise suggest.
Worried Guy
Yes, short sales and REO’s operate in their own parallel universe…Seriously, where do they get these people?…
“Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, said underwater estimates can be too high if they use price data that includes a large number of foreclosures. Foreclosed homes tend to sell at a discount, he said, making it appear that prices have fallen more than they actually have.”
DownButNot Out
Thanks BB for the correction. I’d like to say I did that on purpose, but alas it was just poor spelking.
Sully
Ahhh, I get it now. These falling prices are just a delusion! They aren’t really down, just an aberration in the data; which makes about 80% of the data an aberration. 🙂
DonC
smarten — To add some support to your view, homebuilder sentiment went up as expected in April to the best levels in about eight months. Not great but it’s different and off the recent floor.
I’m thinking that IV may be different than Reno so your experience there may not be directly transferable. Also it’s possible that we could drop again though I’m with you in thinking that we’re putting in a bottom.
Worried Guy – Trying to pin the financial debacle on Fannie and Freddie is akin to claiming an acorn is an oak tree. This seems particularly pointless since there are plenty of oak trees in plain sight.
After the financial collapse of the 1929-1931 the most dangerous banking practices — which lead to overleveraging — were outlawed. We had fifty years sans problems. Banking was boring but the economy flourished.
Then, starting in 1980, we decided that capital markets were self organizing and self regulating and all we needed to do to unleash a torrent of prosperity was to get the government out of the way. By 2000 we had lifted the restrictions and let banking be exciting. Since then we’ve careened from one financial crisis to another, starting with the S&L disaster.
Time to make banking boring again. As for getting rid of Fannie and Freddie, that would be a very good idea but hardly of primary importance.
Worried Guy
If builder sentiment is higher, then why are Toll and Ryder closing sales offices and discontinuing their product offering “temporarily”?
CommercialLender
Smarten,
I hear you on IV, but I think (welcome your input) that these buyers are simply a unique set of fairly affluent, retiring folks. They retired and have cash, so why not get into a great home at recently reduced price in tax advantaged IV. CA taxes went way up, both sales and income, so this will continue to drive more affluent people to great areas such as IV. Granted, its a small set (22 YTD and 17 pending). I think about it everyday when I buy, oh anything, and see a blood-boiling 9.25% sales tax added on.
Reno, on the other hand, is not a retirement community despite the crazy – in retrospect – ideas that were being talked about during the boom that tons of Californians are moving over the hill. (Somersett, anyone?) Reno is home to largely a local, entry and moderate level housing demand and will climb out of this mess at a much slower rate than IV on the lake.
DownButNot Out
CL – I’m not so sure Reno isn’t a retirement destination. Maybe not in the classic sense like Palm Springs or Arizona. And certainly not for the affluent retiree with plenty of options, but I’ve met many that have the same view we both have of CA taxes and upon retirement moved to Reno. A couple that sits next to me at the ACES games did this 8 years ago and love it. They’ve never regretted the decision of moving out of the Bay Area.
Unfortunately this type of retiree doesn’t drive the economy much. And your right, few are moving over the hill to scoop up new housing. Those developments just fall under the heading of ‘MISTAKE’.
inclinejj
YTD there have been 22 SFR sales in Incline Village [and none in the month of May]. Yet there are currently 17 SFRs in escrow! What do these would be buyers know that the rest of us don’t, or are they simply fools
17 SFR’s in escrow..if half need jumbo financing forget it..half will actually close escrow..
Btw fyi picked up another property the other day total debt owed $269,720 picked up the property for $117,000.
inclinejj
The Montage isn’t Corus’ only local deal – the are underwriting Barone Tanamera in the South Meadows. Fleur de Lis is sinking, quite literally, according to the filings, and the rest of the project has seen significant “price erosion”. Kevin, we haven’t heard from you in a long time – what’s happening with the project?
Corus bank will explode before the firecrackers on the 4th of July..
Chicago-based Corus Bankshares Inc. disclosed Tuesday in a filing with the Securities and Exchange Commission that it expects its auditor to issue an expression of ?substantial doubt? about the company’s ability to continue as a going concern when Corus issues fourth-quarter results.
The bank holding company said it expects to post a net loss of $317 million, or $5.90 a share, for the quarter ended Dec. 31, compared with profit of $1.9 million, or 3 cents a share, for the same period in 2007. The company blamed ?the severe economic downturn and the corresponding deterioration? in its loan portfolio for the weaker performance.
Corus said in its late-filing notice to the SEC that it isn’t certain when results would be completed but would issue them in its annual report ?as soon as practicable.?
Also according to Tuesday’s filing, Corus Chief Financial Officer Michael Dulberg has taken a leave of absence at his request, effective March 16. His decision isn’t tied to any disagreement with the company or its outside accountant on any matter relating to operations, policies or practices, Corus said.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Monday, February 2, 2009
Corus Bank announces Q4 loss, gives capital warningSouth Florida Business Journal – by Brian Bandell
Print Email Reprints RSS Feeds Add to Del.icio.us Digg This CommentsRelated News
Nearly all of Corus’ South Florida condo loans in trouble
Corus Bank warns of failure, raises loss estimate
Binder to get $1.65 million in agreement
FirstBank Florida taps García-Vélez
Fla. condo lender Corus Bank warns of receivership
A Chicago bank that is one of the biggest holders of South Florida condo construction loans could be facing a capital crunch.
In a news release, Corus Bankshares (NASDAQ: CORS), announced a preliminary net loss of $260.7 million in the fourth quarter, down from earnings of $1.9 million in the same period a year ago. While the bank said its total capital of $758 million was above the regulatory minimum for a well-capitalized bank, it warned that regulators might hold Corus to a higher standard.
“Based on recent discussions with the bank’s regulators, management believes it is likely that the bank will be held to higher capital standards in the near future and, as such, may no longer be considered well-capitalized and may be required to identify additional sources of capital,” Corus said in the release.
It probably won’t be getting taxpayer funds to help it. The bank said the U.S. Department of the Treasury indicated that it intends to reject its application for funds through the Troubled Asser Relief Program.
Corus is one of the most influential players in the fate of South Florida condos. It had $1.38 billion in condo loans outstanding in South Florida as of Sept. 30.
The quarterly results were preliminary because Corus was still waiting on several appraisals of the property it held as collateral to its loans. Any downward adjustments in their values could have a material impact on the bank’s fourth quarter results, Corus said.
In a move that several real estate expects believed was made to influence appraisals, a corporation controlled by four Corus executives bought four units in the Artech Residences at Aventura for $5.5 million in November. The bank also made a $130 million construction loan on that project.
In another event during the fourth quarter, Corus repossessed the Tao condominium in Sunrise.
Corus said it had $1.5 billion in nonaccrual loans at year-end, representing 39 percent of its total loans. It also had $409 million in repossessed real estate.
Those nonaccrual loans were 19.6 percent covered by the bank’s reserves for future loan losses.
Corus said it hopes to release its final earnings by March 16.
Corus shares plummeted 53 cents to 58 cents in early trading, representing a new 52-week low. The 52-week high was $13.05 on Feb. 1, 2008.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Nearly all of Corus’ South Florida condo loans in troubleSouth Florida Business Journal – by Brian Bandell
Print Email Reprints RSS Feeds Add to Del.icio.us Digg This Comments (1)
View Larger Related News
Affiliate of Corus buys units in condo project financed by bank
Corus Bank’s regulatory agreements could spell trouble for Florida condos
Week in review
Chicago bank’s condo woes grow
Banks stash lots of cash in reserves, sink Q1 earnings
Its strategy of funding dozens of condo construction projects in South Florida has gone horribly wrong for Corus Bankshares, which announced that nearly all of its $1.1 billion in loans to South Florida projects were impaired at year-end.
In its 2008 earnings release late Monday, the Chicago-based bank (NASDAQ: CORS) said it lost $456.5 million last year, and its ability to continue operating as a “going concern” is in doubt.
Corus ended the year with 17 loans to South Florida condo construction and rental apartment projects with a total value of $1.11 billion. Of these, the bank said 13, with a total value of $1.01 billion, were nonaccrual. Two more loans valued at a total of $55 million were classified as potential problem loans – meaning they were performing, but the bank had serious doubts about the ability of the borrowers to repay those loans.
That means 96 percent of Corus’ South Florida condo and rental apartment loans were experiencing a significant problem at year-end. Only two South Florida loans, with a total value of $40 million, were not cited in the bank’s annual report.
The bank has outstanding loans on 3,059 completed and under-construction units in South Florida. It said that 2,685 were in projects with nonaccrual loans.
For the entire bank, slightly more than half of Corus’ total $4.05 billion in loans were nonperforming at year-end.
Corus said that all five of its condo projects under construction in South Florida had nonaccrual loans at year-end. According to court records, the projects still under construction as of Dec. 31 were:
Fortune International’s Jade Ocean Condominiums in Sunny Isles Beach, which has a $288.1 million mortgage.
RPC Holdings’ Paramount Bay in Miami, which has a $216 million mortgage.
Key International Development’s The Mint at Riverfront in Miami, which has a $191.8 million mortgage.
Roy Stillman Organization’s Trump International Hotel and Tower in Fort Lauderdale, which has a $139 million mortgage.
ATM Holding Corp.’s Dolcevita Luxury Oceanfront Condominium in Palm Beach Shores, which has a $34.2 million mortgage.
In order to help cover construction overruns, Corus has funded loans when developer funds weren’t available to continue work on projects. The bank said it funded $36 million to four nonaccrual South Florida condo loans in 2008 to cover overruns.
Last year, Corus also gained control through foreclosure of one South Florida project– the Tao condo in Sunrise. It valued the 396-unit building at $81 million, and said it planned to complete construction and sell units off individually.
Yet, more Corus foreclosures are coming.
Corus said it has started the process of foreclosing on three condo loans in South Florida with a total balance of $199 million. These projects were not identified.
A search of court filings did not find any pending Corus foreclosures against its South Florida projects. However, the bank noted that it sometimes tries to work through borrowers and mezzanine lenders to secure a deed in lieu of foreclosure, which does not require a lawsuit. That’s how it gained control over Tao.
Corus said it would consider bulk sales, selling individual units or conversion to rental in the condo projects it forecloses on.
The main source of trouble for Corus’ condo projects has been tepid sales.
“Unit sales of condominium buildings are typically a borrower’s sole source of funds to repay our loan,” Corus stated in its earning report. “In the absence of unit sales, the cost to carry the completed building can quickly overwhelm the borrower’s resources. Unless additional funds are forthcoming, this can quickly result in the bank classifying the loan as nonaccrual, and may ultimately result in foreclosure. During 2008, Corus has seen many instances where borrowers could no longer support their loan or where the collateral no longer exceeds the company’s exposure.”
With $8.35 billion in assets at year-end, Corus is under pressure from a regulatory order to improve its capital position and manage its problem loans. The bank ended the year with $2.04 billion in nonperforming loans. It charged off $409 million in 2008 due to problem loans, leaving it with a reserve for future loan losses of $305 million. The bank warned that losses in its loan portfolio that exceed that reserve could further erode its capital base.
In a February agreement with federal regulators, Corus was told to raise its capital ratio levels by mid-July or face further action. The bank’s survival is at stake.
“To the extent that the current conditions in the housing market and the general economy continue or worsen, the level of problem assets and losses is likely to increase, which could result in the bank being placed into conservatorship or receivership, or force the company to liquidate or reorganize,” Corus stated in its earnings report. “If we are unable to return to profitability and if we are unable to identify and execute a viable strategic alternative, we may be unable to continue as a going concern.”
Should Corus go into receivership, it is likely that the Federal Deposit Insurance Corp. would take control of its assets, including its loans to South Florida condo projects.
Martin
I have to agree with all the above commenters that what happens in Incline Village is largely irrelevant to Reno and Sparks. They really are different universes. In IV, a $600K house is a tear down. In Reno and Sparks, $600K buys a beautiful home, but essentially nobody is buying in Reno now in that price range.
The two markets are simply not comparable. There may be “steals” at IV now, but I see darn few “steals” in Reno. I see a whole lot more delusion still in anything around $350K and over in Reno.
john
The only thing similar to IV in Reno is Montreux. Many buyers in Montreux come from IV due to the fact that you get about twice as much house for your money, in addition to less snow, better golf, closer hospitals, an airport, Whole Foods, Home Depot, etc. The same thing that is happening in IV as witnessed by Smarten is also happening in Montruex, as I have pointed over the past few weeks with several 1.5 and up sales closing. The exceptionally good deals, often below replacement cost, are getting plucked from the vine, although on a much smaller scale as there are only 250 or so total homes there. Case in point, a 1.6mil, 4000 sq foot home just sold in Montreux to folks from IV last month.
Worried Guy
“There may be “steals” at IV now, but I see darn few “steals” in Reno. I see a whole lot more delusion still in anything around $350K and over in Reno.”
Yup Martin,
Exactly what I am seeing also. Damn waste of my time…I’ll wait until the end of the year-thank you. Moratorium has come to an end and a lot of shadow inventory is eventually going to have to hit the markets, which will further depress prices. Eventually, these delusional sellers are going to have to crack or take the home off the market.