Abandoned Homes

First it was homeowners walking away from foreclosures. Homeowners who knew they couldn't make their payments were walking away from their houses before they were foreclosed on, so that they could get other housing before their credit was ruined.

Now banks are walking away, as well.

The NYTimes reports that banks are finding it less valuable to take possession of a foreclosed home than to just walk away from the whole ordeal.

It sounds like this could be a silver lining for some homeowners, but that's not the case:

According to the NYT, "The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure."

Finding out who owns the mortgage is the same problem that foreclosure mitigation specialists and lawyers run into when they're trying to either have a bank with a homeowner or file a class action lawsuit.

Says one industry inside: “The whole purpose of foreclosure is to take title of the property, sell it and recoup what money you can. It’s just a sign of the times that things are so bad no one wants to take possession of the property.”

And that's crazy, that something that is most Americans' largest investment, just isn't worth the court costs and legal fees.

Wal-mart's Smiling Face

Walmart, beloved by Midwesterners and people who live for blue smocks and value (and, really, in this economy, who doesn't?), is a bright spot in the retail sector.

Retail sales were up 0.7 percent in February compared with sales from that period last year, but it was due to Walmart, the nation's largest (and some would say, most powerful) retailer:

"Without Wal-Mart, overall retail sales would have fallen 4.1 percent. As Ken Perkins, president of Retail Metrics, noted in a report Thursday morning, 'it’s still ugly,' but Wal-Mart 'dressed up' the month nicely."

According to the NYT, the numbers underscore the fact that consumers are still only buying the essentials.

For Wal-mart (and its investors), the numbers translate into a 15 percent increase in the company's dividend, to $1.09 per share.

The economy is continuing to hurt clothing stores, and not just at the high-end. At Neiman Marcus, same-store sales are down, but it's the same story at Dillard's, the Gap, J.C. Penney, Macy's, and Stein Mart.

On a somewhat related note, if you haven't seen it, you have to check out Jon Stewart's rant about Rick Santelli and CNBC re: the economy. He mentions in particular their interview (around minute seven) with Sir Allen Stanford of Stanford Financial.

Foreclosures or Bust

Last weekend, instead of lounging around in my pajamas and watching cartoons, I took up realtor Jason Gaia on his invitation to attend a bus tour of foreclosed homes now on the market.

It was super-interesting; we saw a really wide range of homes, from those that had us saying, "It smells in here," to those that I couldn't afford even at the foreclosure price. (The thing they all seemed to have in common was a smoke detector with low batteries — I haven't heard that much beeping since the last time I was on Union Avenue!)

See for yourself:

http://www.memphisflyer.com/memphis/Content?oid=oid%3A56715

(A note, two things have changed since last week: it's not as long, and it's not as shaky. I still sound like I've swallowed a bottle of Xanax, though.)

Mitigating the Mortgage Crisis

The city is still pursing a lawsuit against national mortgage lenders as part of its response to area foreclosures, says city CFO Robert Lipscomb.

Lipscomb and a team of public/private partners went before the City Council yesterday to update them on local plans to mitigate the mortgage crisis.

Co-chairs of four committees presented several strategies to the council, including job fairs, a sort of monster.com for Memphis residents, and asking the Postal Service and MLGW for information on vacant homes.

(Inside baseball alert: My colleague John Branston and I talk a lot about how many foreclosures and vacant homes there are, exactly. County assessor Cheyenne Johnson, who is co-chair of the committee looking to MLGW, has one number. RealtyTrac and other data services have others, and it's very confusing, b/c it just doesn't seem like anyone really knows.

Johnson's committee, the IT and fiscal planning committee, says that the postal service knows when a house is vacant and MLGW knows when they get a cut-off notice and they're trying to collect as much data as they can.)

The city and county also are expected to receive a combined $14 million in Neighborhood Stabilization Funds from the federal government.

Housing and Community Development deputy director Beverly Goines said the city expects the neighborhood stabilization contract to come from HUD within the next 30 to 60 days. Within 30 days of getting the contract, the city will execute its program.

I think we might have talked about this program before. More than once.

Council member Barbara Swearengen Ware asked Goines if the program is going to help homeowners whose houses have been foreclosed on: "[If] they desire to be back in their homes, is that money available to them?"

"They would have to be able to qualify for a 30-year fixed-term loan and it would probably be difficult to do if you already had a foreclosure," Goines replied.

"So this program will not help a person who has lost their home?" Ware persisted.

"It might help them in terms of a rental property, but not home ownership," said Goines.

The money is really intended to shore up neighborhoods (thus the name). It's not going to help Joe Schmoe who just got kicked out of his house.

I'm not sure this was the way to go. It seems it might be a good idea to try to keep people in their own houses instead of letting them get kicked out under a foreclosure procedure, buying the house, renovating it, and reselling it. I mean, first question: Reselling it to who?

But under the federal guidelines, the city and county are only allowed to use the money in very specific ways. They're allowed to use the funding to acquire land for a land bank, for instance, but they're not allowed to use it to maintain the land in the land bank.

The city plans to acquire and rehab about 145 vacant homes with help from local community development corporations.

Post-Hot Odds and Ends

Now back to our regularly scheduled seriousness ...

Speaking of regular schedules, more than half of U.S. TV stations will shutdown their analog signals February 17th, as originally planned, according to USAToday.

Though President Barack Obama wanted to delay the switch from analog to digital until June, many stations in small and medium sized cities will shut down analog signals in February. The major broadcast networks, mostly in larger cities, have pushed their plans back to June 12th.

On a personal, selfish note, I would love it if they would go ahead and make the switch in February. I've made the switch and though most of my channels come in crystal clear, Channel 5 — yes, Joe Birch, I'm talking to you — generally looks like a cubist painting.

I'm talking blocks of color, maybe you can make out a face or a sitcom set, but mostly not. And I've heard, though I don't have this confirmed, that they're not yet broadcasting their digital signal at full strength.

On a more unselfish note, waiting is probably not a bad idea. It doesn't hurt anyone to wait, and it gives people who aren't ready a little more time to get there. All the funding for the converter box coupon program has been used. I think the boxes cost about $50 and though that's not a huge amount, I could see it being cost-prohibitive, especially now.

Last month, statistics showed that about 5 percent of U.S. households weren't ready for the switch. That doesn't sound like a lot, but it comes to about 5.8 million families.

You could say, TV is a luxury, and that's true. But when you think about how many people get their news from television (I hate to admit it, but it's true), it behooves us to make sure they don't get left behind.

— Here's another interesting story, also from USAToday: A Chinese house-hunting group is looking for the American dream, at a bargain.

"More than 40 affluent house hunters from across China will begin a trip to Boston, New York, San Francisco and Los Angeles on Feb. 24 in search of cheap homes to buy. Their goal: to find investment property and housing their children could use when they go to the USA to study or work. Their budget: $300,000 to $800,000 apiece."

— "Not to freak you out or anything," says a Slate reporter at the beginning of a piece about regenerating — and potentially immortal — jellyfish. Having watched the video, I can say that, yes, it does freak me out. It is freaky!

Did I say we were going back to seriousness? I think I might have lied. Sorry, an immortal jellyfish is too good (bad?) not to share.

On Beales Street

Thank god The O.C. went off the air in 2007 — there's no way the writers could have written about 2008.

For its January issue, GQ recently sent reporter Charles Bowden to Southern California's Foreclosure Alley, "ground zero of the collapse of the late, great American dream," where home values are worth 39 percent less than they were a year ago:

"Across Southern California, nearly 500 families lose their homes to foreclosure each day; Foreclosure Alley has the highest concentration of such homes because the construction is newer and the financing looser. It is a kind of malignant tumor of the real estate bubble, a region where not much was going on until about ten years ago, when a boom occurred in a new product: bedrooms. Southern California — like Florida, Arizona, and Nevada — became a perpetual-motion machine of real estate profit, a place where everyone assumed they would have perfect teeth, large engines in their cars, and endless home equity."

For the story, Bowden rents a five-bedroom mini-mansion on Beales Street in Lake Elsinore, California. The home was bought before the crash as a flip, and the flipper, a man name Brian Groen, is happy to rent it. But he also roams around the neighborhood, looking at brown lawns, empty pools, and vacant houses.

At one foreclosure, he goes into the house:

"The recently departed was a lawyer; his garage is stuffed with nice executive desks from wherever the law office once thrived, and the nicely framed law certificates have been left behind. In the family room o the kitchen, several Jeppesen ring-bound air manuals are piled up: The attorney was also a pilot. Books are stacked on the floor — a biography of Bill Clinton, Michael Crichton’s State of Fear, a six-box video set of the Jenny Craig library for getting lean and mean. On the kitchen counter is a bottle of Jose Cuervo Especial. Empty.

... There is something maybe a little sad about all of these possessions, bought and so easily discarded in a moment’s desperation. And something scary, too. The people who owned these things are the foundation of our consumer society. They mow their lawns, collect their DVDs, and buy cars they slave to pay for. It is not a question of whether they deserve a seat in the lifeboat. They are the goddamn lifeboat: the family-raising, credit-card-spending American Buying Machines."

It's quite a picture. He also interviews a Ukranian immigrant family who have come to this country to live the American dream, and they, too, are struggling to meet their house payments. Worth a read if you have the time.

Friday morning odds and ends

— The Midtown North Collaborative will host a one-day community market and Thanksgiving celebration tomorrow from 10 a.m. to 2 p.m. (perfect for those of us who aren't early risers). Though it's late in the season for produce, the market will feature late falls items and "late fall items and baked goods including greens, sweet potatoes, pies, jams and jellies."

The market will be held in the parking lot of the Hollywood Community Center at 1560 N. Hollywood Street (north of Chelsea). The Midtown North Collaborative plans to begin a weekly small-scale farmers market next spring and through the summer.

— A painting by artist Danny Broadway graces this year's holiday card from the Church Health Center. The suggested gift from each card is $10 and the cards can be sent in memory or in honor of someone.

Public Relations and Communications Coordinator Jeff Hulett says, "Once we get their list of people they want to send the cards to, as well as what they want to say, we have an army of volunteers who hand-inscribe word for word what they want to say. And then we mail it for them."


For more information about the Church Health Center holiday cards, call 272-7170 or visit churchhealthcenter.org.

— Local government is set to receive $12 million in HUD neighborhood stabilization grant money, only those funds can only be used to buy and renovate foreclosed properties, demolish blighted structures, and create land banks for redevelopment.

But with the economy the way it is, the idea of people buying property as a way out of the foreclosure crisis is a little suspect. AlterNet says to "Keep It Simple: Stop the Foreclosure Crisis with the Right to Rent."

From the story:

"Congress can temporarily modify the rules on foreclosure to give families facing foreclosure the right to rent their homes at the market rate for a substantial period of time. Rep. Raul Grijalva proposed such a change in the Saving Family Homes Act, which would allow homeowners the option to remain as renters for up to 20 years following a foreclosure.

This bill would immediately give families security in their home, so that if they like the home, the neighborhood, the school for their kids, they would have the option to stay in the house for a substantial period of time. This also has the great benefit for the neighborhood that homes will remain occupied."

It also gives banks an incentive to negotiate with the homeowner, something that, even now, people close to the crisis say banks are not eager to do.

— On the opposite side of the issue, USAToday has a story about several areas that escaped the mortgage crisis altogether. They are mostly small cities surrounded by rural areas that never saw any of the housing boom and where many of the residents own their home outright:

"Some mortgage-free clusters are in declining areas that have suffered job losses and dwindling populations for years. Residents who remain often have lived in their homes far longer than the conventional life of a mortgage.

Others are in thriving retirement communities popular with seniors who earned enough equity on the sale of their old homes to buy their retirement nests without borrowing money.

Being mortgage-free doesn't shelter people from a worldwide recession. Although their homes are paid for, they're still feeling the pain of a sinking stock market, threatened pensions, layoffs and credit squeeze."

Homing In

If you haven't picked up your copy of the Flyer yet this week, John Branston, Bianca Phillips, Bruce VanWyngarden, and I did a package on local foreclosures and how they're affecting the housing market, the tax base, and the overall community.

I know, I know. You're thinking, "Foreclosures? Ugh. Boring."

And maybe you don't know anyone who has been foreclosed on and you're not in any danger of being foreclosed on, so why do you care?

But I would say it's a pretty important story.

When tax revenue relies on local property values, a widespread decline in those values could be very detrimental.

And you never know what might happen.

Bianca Phillips' piece is a first-person account of her recent brush with foreclosure when her apartment building was suddenly foreclosed on. It wasn't anything she was expecting — how could she? Just one day, out of the blue, there was a realtor at the building, telling the tenants they had two weeks to get out or they'd be evicted.

The tenants eventually got more time — you should read the piece if you get a chance — but as she learned, in these situations, tenants basically have no rights at all.

Bruce VanWyngarden wrote about his recent experience buying and selling a home. I don't think his experience is necessarily typical, but it is interesting to read a first-hand account of what's going on in the market.

And if that doesn't interest you, well, there's always News of the Weird (page 60).

UPDATE: You can read the stories from the foreclosure package here, here, here and here.

Tent Revival

The tent city is back. With the foreclosure crisis worsening and the economy faltering, more people are living in cars or tents. In Santa Barbara, a parking lot has been designated for people who sleep in their vehicles. In Reno, Nevada, Portland, Oregon, and Chattanooga, Tennessee, tent cities have sprung up.

A recent AP story focuses on Reno and how, a few weeks after the first tents were pitched near the railroad tracks, more than 150 people were living "in tents big and small, barely a foot apart in a patch of dirt slated to be a parking lot for a campus of shelters."

From the AP: "From Seattle to Athens, Ga., homeless advocacy groups and city agencies are reporting the most visible rise in homeless encampments in a generation.

Nearly 61 percent of local and state homeless coalitions say they've experienced a rise in homelessness since the foreclosure crisis began in 2007, according to a report by the National Coalition for the Homeless. The group says the problem has worsened since the report's release in April, with foreclosures mounting, gas and food prices rising and the job market tightening."

In Reno, where even the casinos have started to lay off employees, city officials have let the tent city stay because the homeless shelters are already at capacity.

Safe as Houses

A LA Times story from Monday says that in 2004 the FBI was aware of the impending (at the time) mortgage crisis.

And though the FBI had illuminated the problem, the LA Times said they were focused on other priorities at the expense of the U.S. housing market.

From the story:

"Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it's also clear that the FBI failed to avert a problem it had accurately forecast. ...

The FBI says it now has about 200 agents working on mortgage fraud, but critics say the agency might have averted much of the problem had it heeded its own warning."

The story goes on to say that the FBI had 1,000 agents working on white collar crime and banking fraud cases during the savings-and-loan bust.

On a similar note, CNN has a story on the quality — or lack thereof — of homes on the market right now, citing problems with mold, maggots, trash, and general disrepair.

From that story:

"Most of these mutts are foreclosed properties that have been permitted to fall into disrepair by lenders overwhelmed with thousands of vacant homes. If these houses sell at all, they're going for bargain basement prices that are hurting home values throughout the neighborhood.

'I've never seen so many houses in this condition before,' said Ray Anderson of Buyer's Advantage Real Estate in Auburn Calif., near Sacramento. 'And I've been in the business 20 years. I've seen bank-owned properties in the past. They were never like this.'"

Of course, if you aren't feeling the economic crunch and don't mind having to put some hard work into a place (or paying someone to put some hard work into it), it seems like now would be a good time to buy a house or investment property.

Foreclosed

A recent article in Atlantic Monthly showed the link between Section 8 housing and crime in Memphis, but the link between poverty and a number of social problems line up similarly.

For instance, foreclosures.



Polar Donkey sent me this great (and I use that term loosely) map of 2007 foreclosures. The little blue dots are foreclosures — there were more than 8,000 in Memphis last year — and median household income is delineated by color. Bright red represents $0 - $13,627 a year; dark orange is up to about $25,000 a year, and light orange is up to just over $35,000 a year. The three shades of greens go from $61,783 to $179,542.

(If you're wondering about that fire engine red spot in the lower right area inside the loop, it's the University of Memphis.)

And, though foreclosures are happening everywhere, regardless of income, ours seem to be clustered in the orangy areas. Predatory lending, much?

Of course, it's not just us.

In an effort to turn the tide in Fairfax, Virginia, the government is looking at foreclosed properties as affordable housing. Fairfax County has committed to spending $10 million on as many as 200 foreclosed properties. Under the program, they'll buy some homes outright, but will also help middle class families buy others through subsidized loans.

And here's a fun fact from The Christian Science Monitor:

"Some 44.5 million homes in the US now stand next to an empty house, resulting in a drop of at least $5,000 in property value per house. By that calculation, a total loss of home value of $220 billion across the US can be attributed to the vacancy problem.

'This is a man-made disaster that's had more dramatic impacts on real estate markets than natural disasters [have]," says Bruce Katz, a housing analyst at the Brookings Institution, a think tank in Washington. "In a way, we have a lot of mini-Katrinas across the country.'"

While the mortgage crisis causes blight from vacant, foreclosed homes, it also diminishes the surrounding property values. And because we have a local tax system based on property values, we ought to be concerned.

Farming in Foreclosures

Here's an idea that could take root in Memphis. So to speak.

A nonprofit group in Detroit — Memphis' unofficial sister city — is farming derelict land to grow food for the needy.

NPR's Morning Edition says Urban Farming has a 20-plot pilot program in which volunteers tend the gardens and the city of Detroit picks up the water bill. The plots aren't fenced off, so anyone can pick the produce for free and anything leftover is donated to a food bank.

If that weren't enough, the program fights blight in a city that last year, with more than 7,000 idle properties, topped the nation in foreclosures.

"Turns out that urban farms do attract people, says Gail Carr, one of Detroit's city managers. She has houses boarded up nearly every day and sees what a dramatic difference the gardens have on communities.

'People are coming out of their homes who wouldn't come out under other circumstances because they didn't think there was still a community or a neighbor or a friendly person nearby,' she says."

The last time I looked at vacant property here, Shelby County was the "proud" owner of about 3,000 parcels it couldn't get rid of. There was talk of creating a land bank with the city — part of the problem is that when property owners default on their taxes, they default to both the city and the county.

The other part of the problem is that those properties weren't earning taxes for anyone, but were actually a drain on the coffers because of maintenance, mowing, and in some cases, demolition. But the alternative, letting them deteriorate even worse, is even more expensive.

Orange is the New Red

In what's headlined the Map of Misery, the Economist has a story (with map of misery, natch) this week that suggests the nation has only hit the halfway point in the housing bust.

The map, from the Federal Reserve, shows the change in the housing price index by county from the last quarter in 2006 to the same time in 2007. And it's color-coded. The hotter the color, the worse things are in that state (sorry, California and Florida and, um, Nevada? I get Vegas, but this was done by county.)

I've heard that, generally, Memphis is immune (or more immune than other parts of the country) to these types of market fluctuations. Mostly because real estate prices here haven't been driven up by enormous demand or boatloads of Memphians with gobs of extra cash to spend. So even if the market corrects itself downward, it doesn't have that far to go.

But if you look at Memphis' little corner on the map, you might notice that it's light orange.

So home prices aren't decreasing, but they are staying roughly the same. Because of the conventional wisdom about demand here, I can only assume that the supply side of the equation (foreclosures?) is driving down prices.

And here's more good news from The Economist: "The discrepancy between supply and demand suggests that prices could fall a lot more. By historical standards there is a huge glut of unsold homes on the market. The homeowner-vacancy rate—which includes all vacant homes for sale—has soared to a record level of 2.9%, which means that there are some 1.1m 'excess' houses for sale compared with the average between 1985 and 2005."

Well, at least they came up with an appropriate title for their map.