Say what you will about a strengthening market, Zillow sees the writing on the wall

New division finds and reports on pre-foreclosure and foreclosure properties. interesting stuff.

UPDATE: Looks like it only searches one zip code at a time, so you must select each of the tow’s zip codes, one at a time, to get the whole picture. Here’s Riverside, for instance.

Greenwich foreclosures

I subscribe to a service, the Warren Group that, for a fee, collects data on foreclosures filed in the land records of three states. It’s a little slow: no data on January foreclosures yet, but it’s useful, so long as you take care to examine what exactly is being foreclosed. For instance, of the 14 foreclosures initiated in Greenwich in December, 11 are lenders foreclosing on their mortgages. Looking at the amount due and making a rough calculation of what these houses are worth today, I doubt any of those 11 are going to remain in the name of their current owner.

The other 3 probably will. 12 Creamer Hill has a foreclosure action against it but it’s been filed by the Greenwich civil engineering firm, Ahneman Kirby LLC, which suggests to me that there is a dispute over what’s owed or at least there’s a sum involved that isn’t large enough to threaten the owner’s continued possession. Similarly, 63 Lismore is a foreclosure brought by a home improvement company. We probably won’t see this on the auction block, just as we won’t the condo at Palmer Point with an association lien being foreclosed on.

Still, that leaves eleven properties that entered the chute in the last month alone. That’s a fair amount of distressed property and owners on those streets where the foreclosures are going on will probably suffer a decrease in their own home’s value.

J.P. Morgan’s mortgage woes

The bank has a ton of bad mortgages and the situation was not helped by its acquisition of WaMu, which, before it failed, was tossing money around with abandon. If Greenwich is typical, Morgan is moving aggressively to deal with this: most of the foreclosure notices I saw yesterday in Town Hall were filed on behalf of Morgan.

Foreclosures

It’s a little sad to prowl though sites like Realtytrac.com and see foreclosures on mortgage amounts that, judging just from address and type and size of the house, seem destined to wipe out any equity the owner has. There’s a $650,000 foreclosure coming on a house in Havemeyer, for instance, on a 1200 sq.ft. house. That’s about the full value for a house that size these days, and my guess is we’ll see it bank owned soon. Similarly, a house on Reynwood Road, $2.5 million mortgage debt, is, judging from its tax card description, worth no more than the land it sits on. What’s a 4 acre building site worth these days? Probably $2.5 million. And there are more to come.

Still crazy after all these years

99 Porchuck Rd

A mortgage foreclosure suit seeking $990,000 has been filed against this owner (it’s in The Commercial Record this week, so please don’t write that I am breaching someone’s privacy). Its history is illustrative of our recent land frenzy and demonstrates that wildly over-pricing houses is not a recent phenomenon. This 4 acre lot with a partially-finished, derelict house on it sits down in a hollow off Porchuck and is comprised mostly of stream, wetlands and woods. It was listed for $1.7 million in September 1999 and sold for full price shortly thereafter. In July, 2001, the buyer having apparently changed his mind about building here, listed it for the same price he’d paid for it: $1.7, and sold it in July 2002 for just $1 million. Hate when that happens.

Undaunted by that seller’s experience, the new buyer waited a bit and in November, 2004, relisted it for the astonishing price of $3,800,000 – I checked; that price did not include a new house – and the listed expired in July, 2005, unsold.

So now it’s started down the foreclosure path. I drove by yesterday to see what price I thought it might fetch and I was stumped (a cruel pun, in view of the trees that have buried this land). The original listing claimed that FAR regulations would permit a 12,000 sq.ft. house but was, perhaps wisely, silent on where wetlands would permit you to site such a building. Even assuming that you could find a dry spot large enough to accommodate that kind of house, you’d end up with all house, no yard.

So suppose you wanted to build a more modest house: you’ll still be down off the road in that h0llow. Porchuck is a fine road, but what’s the value of a house built in this bit of damp swampland? $3 million seems a stretch in this market, especially when you can find a new house in a better location for that price. $2 million? Maybe, but no builder would risk even that without a buyer already signed up (in fact, given new stricter credit rules, no builder could build a house here without a buyer signed up). I don’t think a buyer is going to show up in time to save this from foreclosure. If I’m right, it will eventually become the problem child of JP Morgan. There is bound to be some value for this land, but I don’t see JP getting its million back. Maybe $450,000? Maybe. It wouldn’t astonish me, though, if this ended up trading for ten cents on the dollar.

Why we should streamline foreclosures and get a move on

Several readers have informed me that the owner of 23 West End Avenue and that crazy Victorian on S. Park Avenue, both in Old Greenwich, is stripping them of everything he can before title passes irrevocably to his lender. Stealing appliances from a spec house in foreclosure is a time-honored tradition in the building trade, although usually it’s the unpaid sub-contractors who do the stripping in an attempt to recover something for their labor. But this builder has announced that he intends to take toilets, sinks, baths, window treatments (good riddance to those) and whatever else he thinks may have value. I suppose he’ll get away with this, things being what they are and banks so busy with thousands of other foreclosures but it seems like theft to me: he gave title to the house to the bank when he obtained a mortgage and it’s the bank, not he, who owns those things.

But more germane to the subject: getting inventory off the market, this kind of behavior just mucks up the work. I was going to show that house on Park Avenue, odd design notwithstanding, because at its new price of $1.495, there might be some value there. Now I won’t. I don’t want to get even peripherally involved with some nut case who thinks that the value of a used toilet is worth risking arrest and, even if we were to strike a deal, who knows what would be left in the house at closing? I’ll wait for him to be removed, thank you, and see what happens at the auction, if that ever happens and my client’s still interested.

I also find it telling that the listing broker can’t provide assurance that a bid of the full asking price would be acceptable to whoever holds the loan because, apparently, no one from whatever institution that is will communicate with her. So you’ve got a whack job in possession of the house, threatening to strip it (having already demonstrated a willingness and ability to do just that at 23 West End Avenue), a lender who’s pulling a Garbo, and an uncertain real estate market. Repeat this strange scenario several hundred thousand times across the country and you’ll have some idea of why our current housing market’s in the mess it is. Those areas that were hit hardest earliest – California and Florida, for instance – seem to have streamlined the process of foreclosure and sales in those states are recovering. We need more of that and not a new federal taxpayer-paid program to keep defaulting borrowers in homes they can’t afford. Tomorrow’s TARP announcement, with its promise to spend billions of our money on people like the builder described here, won’t help.

The bankers are coming, tra la, tra la, the bankers are coming

Banks beginning to foreclose on builders with spotless records. Builders, once prized customers, are now considered risky dead beats by lenders. Non-performing loans that had been being carried in the hope that the market would recover are now being called. I know builders who have never missed a payment in decades of business who can no longer get financing and bankers who had been rolling over builder’s loans who are no longer permitted to do so. The consolidation of banks isn’t going to help – I don’t know if Chase is an independent entity anymore, these days, but you sure aren’t going to find a forgiving heart there the way you might once have at Bailey Savings & Loan. Word on the street is that there are some very, very large loans coming due in two weeks on some very, very large spec houses. You should be able to hear the crash from your living room. 

What will it do to prices if $7 million spec houses get marked down to $3.5? I think you know.

Yohoo, anybody home?

One of the Times’ best reporters, Gretchen Morgenson, has a great article in last Sunday’s paper about the difficulties in finding anyone at a lender with the knowledge and authority to rework a mortgage loan. Much of what she writes of: missing documents, no records of who holds title, no idea who even still holds the loan, is also applicable to the  mess one encounters when trying to buy a house when the borrower’s in trouble.

A commentator to this blog suggested that buyers skip the services of agents and just call the work-out department of a local bank where, he promised, the caller would find any number of helpful individuals eager to do a quiet deal to get a bad loan off their books. If only.

My guess is that the commentator still clings to the vision, accurate thirty years ago, of a friendly hometown bank that loaned money to George Bailey’s pal, Ernie the taxi driver, and then held that loan while Ernie drove fares around Bedford Falls and earned enough to pay it all back. Should Ernie get drunk, wreck his taxi and default on his loan then someone who wanted to buy Ernie’s house could call up Uncle Billy who, eye visor on, sat in a back room toting up figures and calculating what price the Savings and Loan could accept while still remaining solvent.

But Mr. Potter runs Bedford Falls now, not George, and Potter grabs Ernie’s loan, bundles it together with those of all the other borrowers in town and ships the whole package off to Wall Street where wizards combine those loans with a million others, pay Moodys to declare them all safe as all get-out, then slice and dice them and sell off the slices to people all around the world. So now, when you want to buy Ernie’s house, who do you call? Mr. Potter doesn’t have the loan and is in no position to discuss the matter (as if he’d even take your call, the bastard!). The Wall Street Wizards have no idea who owns what slice of Ernie’s loan and don’t even know who Ernie is. And they sure as heck aren’t interested in acknowledging a problem because they sold it off and pocketed their profit five years ago. Forget it, Buddy.

So Ernie’s up the creek. He’s got a buyer for his house who is willing to pay enough, if not to make Ernie whole, then at least enough to pay off most of the loan and reduce Ernie’s liability, but there’s no one around to deal with the buyer or accept his money. The house sits, with a forelorn Ernie languishing inside it, drowning his sorrows with Wild Turkey until a sheriff shows up, throws Ernie over the bridge, with no Clarence to save him, and takes possession of the house for some banker in Shanghai. No maintenance is performed, the house deteriorates and, finally, is sold for pennies. No one is better off.

California’s home sales are up these past few months because so many loans have been foreclosed and title has passed to someone with authority to unload the foreclosed houses for pennies on the dollar. It would seem to make sense for lenders in the east to save time and start recouping their losses by working with buyers and sellers now, cooperating in sales that could bring in more money than a foreclosure sale, years before the actual foreclosure. But no one seems to have any reason to do that. As noted, the loans have been sold off to foreigners and other chumps, the banks are failing anyway and their staffs have all been fired. So unless something changes, I think we’ll continue to see desperate sellers cling to their houses and their prices, frustrated buyers walk away, and sales continue to stagnate. A cheery picture, all in all.

Update: More on the difficulties of finding anyone to listen to a deal proposal. “Loan services are overwhelmed”. I still think that an aggressive lender could get organized, get rid of its crap and be years ahead of its competition when the economy recovers. Maybe Dick Fuld could help, if he’s not too busy.

Signs of the times

Residential foreclosures up 42% this year in Greenwich. Still relatively small numbers (142 in pre and final foreclosure) but growing. The next two months will be interesting, I’m guessing.