March 25, 2008

A Silver Lining to the Foreclosure Epidemic?

There may be an upside to the nasty wave of foreclosures inundating markets across the United States, according to a Wall Street Journal article. Basically, the wounded real estate market may partially heal itself if the flood of forcs results in hefty price drops—a trend that already seems to be taking hold. Last month the National Association of Realtors recorded a 2.9 percent increase in sales of previously occupied homes over January, the first rise since July, and the median home sales price dropped 8.2 percent. The big question right now is whether prices will drop low enough to keep up with unsold inventory. According to some, the price drops could be good news for middle-class buyers, many of whom couldn't afford to buy properties during the boom years. There's also the possibility that investors will start to swoop in and buy foreclosures in bulk, banking on eventual appreciation. On a side note, the chart above, included in the article, doesn't present a pretty picture of the New York-New Jersey foreclosure scene, though a lot of these are presumably in the 'burbs and exurbs.
Wave of Foreclosures Drives Prices Lower, Lures Buyers [WSJ]
Graphic From First American CoreLogic, c/o The Journal.

March 19, 2008

Closing Bell: Architect of Subprime Crisis Dies

Roland E. Arnall, the founder of the Ameriquest Mortgage Company, died earlier this week. Arnall, whose personal fortune was pegged at $1.5 billion by Forbes last year, was a top donor to the Republican party and was named the U.S. Ambassador to the Netherlands in '06. Ameriquest, which went out of business last August, was one of the largest subprime lenders in the country and was the target of dozens of lawsuits over its allegedly deceptive lending practices. Arnall was 68.
Roland Arnall, Mortgage Innovator, Dies at 68 [NY Times]

January 21, 2008

Exploring Our Preoccupation With Housing

The Times has a review of an intriguing new book called “House Lust: America’s Obsession With Our Homes” by Daniel McGinn (Currency, $24.95) that tackles questions many of us can presumably relate to, like, “How did home renovations come to routinely turn families’ lives upside down?” and “Why do thousands of us now watch reality shows about home flipping or house hunting?” Although the book doesn’t specifically zoom in on Brooklyn, or even New York City, real estate, it does examine larger cultural trends that hit close to home, such as how in recent years (before the subprime fallout, anyway) Americans came to see home ownership as the most valuable investment they could make, leading many to fetishize their homes. For example, McGinn looks at “Fix-Up Fever” in Newtown, Mass., where he finds owners engaged in renovations for the purpose of “one-upping their neighbors.” The author’s conclusion? “Our homes may no longer be making us rich, but living through an era when we thought they might has resulted in a permanent shift in thinking — one that will leave many of us happily obsessed with houses for years to come.”
Who Needs a 401(k)? I’d Rather Have a Castle.
Book cover from Amazon.

Trends: Lower Rents and ‘Condo Reversions’

The Wall Street Journal examines how renters are finding excellent deals in areas of the U.S. that have been most affected by the subprime crisis, areas where many developers have put thousands of unsold condo units on the market as rentals. As with most aspects of the subprime mess, lower rents and “condo reversions” have largely bypassed the priciest segments of the New York City market, though the article name checks 99 Gold Street as an example of a condo-turned-rental. It’s also worth noting that the Real Estate Group of New York found that average rents in Manhattan, with the exception of doorman studios, declined at the end of 2007 (we couldn’t find comparable data for Brooklyn). All this data seems like good fodder for speculation, though: Think ’07 might bring falling rents and more condo reversions to Brooklyn?
Home Sellers' Pain Is Renters' Gain [WSJ]
Half Sold, 99 Gold Throws in the Towel, Goes Rental [Brownstoner]