Buildfax says its remodeling index, based on construction permits filed with local governments, hit its highest level since the index was started in 2004. That's not much of a history, and the index measures only the number of permits, not the value or size of the project. Even so, the year-over-year, 24 percent increase in the index shows something's going on. Click here to see the whole Buildfax release and fever chart for the indicator, which I was unable to reproduce.

Here's the canned quote:

Viewing the Economic Recovery Through Remodels

"As millions of Americans believe that they will not be able to secure a new home due to a variety of factors including tight credit, limited buyers and challenging job prospects, they are more and more turning to renovating and remodeling their current properties, sending remodeling activity to record levels," said Joe Emison, Vice President of Research and Development at BuildFax. "However, this remodeling boom is leaving many of these properties under-insured, as the value of these renovations are often not being captured by the homeowners' insurance companies."

Posted by Jay Hancock at 8:46 AM | Permalink | Comments (1)
Categories: Real estate
        

The temporary but seemingly endless economic slump is prompting lots of once-and-for-all, this-time-I-really-mean-it, finally-the-meaning-of-the-universe-has-been-revealed conclusions and advice. Just as the Internet bubble prompted the Maryland state treasurer to proclaim that stocks never go down (and invest state pension funds accordingly), people now conclude that recent short-term trends are permanent.

In the past few weeks I have heard from various people: 1) You can't buy and hold stocks. You must have professional managers who know how to trade in and out. 2) Homeownership is for suckers. 3) Capitalism is dead. 4) America is finished.

I'll leave the weightier topics to philosophers. James Altucher is getting a lot of attention for his amusing rant on topic No. 2, (You figure out if he really means it) , "Why I Am Never Going To Own A Home Again." My favorite reasons:

E) You’re trapped. Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is low. You can’t argue the reverse, since new adults are always competing with you.

F) Ugly. Saying “my house is an investment” forgets the fact that a house has all the qualities of the ugliest type of investment:

Illiquidity. You can’t cash out whenever you want.
High leverage. You have to borrow a lot of money in most cases.
No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be.

F) Choices. I feel when I rent I always have the choice to leave. To live wherever in the world I want whenever I want. Adventure becomes a possibility even if I never take advantage of it.

UPDATE: Barry Ritholtz says the huge attention given to Altucher's post is a contrarian indicator that the dive in house prices is nearing an end, and he gives top reasons why you SHOULD own a house. And Venezuela's Hugo Chavez says capitalism is to blame for the fact that there is no life on Mars.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (20)
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Sunday's column was about Hosea and Bernice Anderson of Columbia, who figured in an important court case a few weeks ago. When Deutsche Bank tried to foreclose on the Andersons' house, they challenged it on the basis of inadequate paperwork, that it couldn't prove it owned their mortgage and had the right to foreclose.

As noted in the column, there was also an interesting recent case in Massachusetts, in which a court drew the opposite conclusion. For further reading and extra credit, Megan McArdle had a series of good posts on this last week.

Why shouldn't banks be able to foreclose without adequate paperwork?

Given that Massachusetts courts have reversed foreclosures, is it safe to buy a foreclosed house from a bank?

The Democratic solution to the foreclosure mess: Give everybody their house for free?

The libertarian solution to the foreclosure mess.

The moral and policy case against walking away from your mortgage.

Posted by Jay Hancock at 10:05 AM | Permalink | Comments (3)
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The worst government policy, any business person can tell you, is uncertainty. Consumers and business owners need reliable information on the future to make informed decisions about buying, hiring, investing and ordering. Finn Kydland and Edward Prescott won the economics Nobel a few years ago because they showed the damage that can result from inconsistent government policies. What's even worse is when government sends mixed signals about its possible intentions to be inconsistent!

That's what the Obama administration is doing with regard to the homebuyer tax credit. The economy is terrible, elections loom and the administration is getting a little frantic. Home sales plunged after the expiration of the last (second) home-sale credit, and now there is talk of reviving it. But offhand discussions of resurrecting the credit will almost certainly make home sales even worse. The credit probably won't be brought back, but the happy talk of doing so is going to make people hold off on buying a home with the expectation of more free money from the government.

Here's HUD Secretary Shawn Donovan on CNN last weekend. I've taken the quotes from Calculated Risk, where the comments of economist Tom Lawler on this issue were posted yesterday:

[Donovan said he was] “very concerned,” and would “do everything we can” to stabilize the shaky housing market. While he said that “it's too early to say after one month of numbers whether the tax credit will be revived or not,” he also said that "we're going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers."

The message from Donovan is: Don't buy that house! Stop! Yesterday White House spokesman Robert Gibbs said bringing back the credit "is not as high on the list as many other things are."

Posted by Jay Hancock at 8:47 AM | Permalink | Comments (4)
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David Streitfeld's story in today's NYT reports high proportions of million-dollar mortgages going into default and concludes:

the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

This may be true, but Streitfeld doesn't demonstrate it very well in the story. The "lavish" neighborhoods he cites to back up his lede are mainly in the San Francisco bay area -- Silicon Valley and Orinda (near Berkeley) -- where a starter house basically costs $1 million. If you've ever been there you know that these houses tend to be basic ranchers on small patches of land. Few if any probably have "wine cellars," as the article implies. It ain't Beverley Hills, and these folks probably aren't "rich" in the sense that most people use the word.

As Calculated Risk suggests, they're probably just ordinary folks who bought more than they could afford to live in a fairly ordinary neighborhood whose prices are tremendously inflated by overall local prosperity. As we have seen, in the mortgage bubble just about anybody could borrow $1 million.

Nevertheless Streitfeld incites class warfare. He quotes CoreLogic's economist as saying, “The rich are different: they are more ruthless," and says that "The CoreLogic data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind."

Judging by the story's comments section, he succeeds.

Posted by Jay Hancock at 8:50 AM | Permalink | Comments (2)
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Calculated Risk notes that the increasing time it takes a bank to evict you from your home after you stop paying your mortgage is pumping up the incentive to default. Thanks partly to the glut of defaults and partly to government programs to delay eviction, it takes more than a year, on average, to get kicked out of your house after your last mortgage payment. So if you're struggling anyway, why not just stop paying the note and enjoy the free rent?

CR quotes the NYT:

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics. ... More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property ...

And he quotes a Bank of America executive:

"There is a huge incentive for customers to walk away because getting free rent and waiting out foreclosure can be very appealing to customers."

Posted by Jay Hancock at 8:13 AM | Permalink | Comments (12)
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What am I missing here? Below is an excerpt from Krugman's column. He talks about the lending and banking disaster in Georgia and reprises his "flatland" theory that says the real estate bubble/crash was worst in places with strong zoning restrictions, which limited supply, drove up prices etc. etc. etc. But the examples of real estate catastrophe that he lays out -- Florida, Nevada and Arizona -- are famous for their lack of zoning curbs. They're not Texas, but they sure ain't Portland, Oregon, either. "Phoenix"? "Zoning restrictions"? "Limited the construction of houses"?

Basically, prices rose sharply only where zoning restrictions and other factors limited the construction of new houses. In the rest of the country — what I once dubbed Flatland — permissive zoning and abundant land make it easy to increase the housing supply, a situation that prevented big price increases and therefore prevented a serious bubble.

Most of the post-bubble hangover is concentrated in states where home prices soared, then fell back to earth, leaving many homeowners with negative equity — houses worth less than their mortgages. It’s no accident that Florida, Nevada and Arizona lead the nation in both negative equity and mortgage delinquencies; prices more than doubled in Miami, Las Vegas and Phoenix, and have subsequently suffered some of the biggest declines.

Posted by Jay Hancock at 12:07 PM | Permalink | Comments (3)
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Boccaccio was one of the premier restaurants in an area that needs more premier restaurants and reinvestment. My visits to Little Italy in recent years have made me think the area and its restaurants have been sitting on their laurels. They greatly benefited from the revitalization of the Inner Harbor -- even though some restaurant operators were opposed at the time. They thought nearby competition would drain business. In fact, the crowds at the Inner Harbor revitalized Little Italy.

As people on Elizabeth Large's blog have suggested, Peter Angelos may be buying the Boccaccio building for sentimental reasons. He was a frequent patron. Whatever his motivation, it's good to see he's interested. He may open a restaurant, although his restaurant record is uneven. But no matter what he does, he brings new investment to an area that could use it.

Posted by Jay Hancock at 9:19 AM | Permalink | Comments (1)
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General Growth Properties has rejected Simon Property Group's unfriendly takeover offer. But there is a good chance Simon will get the bulk of General Growth's properties, including Harborplace, Towson Town Center, Columbia Mall and White Marsh Mall. Simon has the cash, the desire and the encouragement of General Growth's unsecured creditors.

Of course General Growth executives want to stay in charge. But the company has been in bankruptcy court since last year, which loosens the hold of incumbent managers. In the long run, creditors tend to steer the boat in bankruptcy court, and Simon has the wherewithal to please them. Perhaps alone among major mall operators it has husbanded cash in the recession to buy competitors cheaply. Simon would pay off unsecured creditors in full, and even General Growth shareholders would get money, which is unusual.

Stifel Nicolaus analyst David Fick tells the Sun he foresees a bidding war between Simon and Brookfield Asset Management, which according to the New York Times owns some of General Growth's debt. He also sees potential antitrust problems. But Simon has been plotting this deal for months and seems to want General Growth badly. Antitrust concerns could be addressed by selling off some of the malls.

Posted by Jay Hancock at 8:07 AM | Permalink | Comments (3)
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So far we can file this only in the Department of Irony, not Hypocrisy. But stand by. The Wall Street Journal is reporting that the Mortgage Bankers Association, the country's premier mortgage trade group, is selling its headquarters for $41.3 million -- way less than the $79 million it paid for the building three years ago. That's also far less than its mortgage of $75 million, says the Journal, via Reuters.

Will this turn into a short sale? Will the MBA walk away from the difference that it owes a lending group headed by PNC Financial? Will it do what it has urged homeowners not to do? That would be an act of headline hypocrisy for the books. As the Journal's James R. Hagerty reports, MBA executive John Courson has urged families with underwater mortgages to keep making the payments.

"What about the mess they will send to their family and their kids and their friends?" Courson asked the Journal last year.

Now, says Hagerty: "On Saturday, Mr. Courson declined in an interview to say whether the MBA would pay off the full loan amount. 'We're not going to discuss the financing,' he said."

Posted by Jay Hancock at 11:48 AM | Permalink | Comments (0)
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Reader Jim, who says he bought his house in 1993, asks:

My new assessment for my home is 22% less than it was last year. So won't my next Howard County tax bill (as of the new 7/01/2010 lower assessment) be substantially less than it was for 2009?

The answer is no, it might not be. It's true that assessed values of Maryland homes are plunging, as Larry Carson reported this week. But for many Marylanders who have owned and lived in their homes for many years, property taxes are still "catching up" to the increase in values over the last decade, which is substantial despite the recent meltdown. That's because in Howard County and elsewhere counties often don't allow property taxes to rise as fast as home values.

Let's assume Jim's house was worth $300,000 in his 2001 assessment and is a typical Howard County house. In 2007, after two triennial assessments, it would have been assessed at $625,000. In six years that's a 13 percent average annual increase!

But Jim's real estate taxes didn't go up nearly that much because, under the homestead credit, Howard County limits annual, owner-occupied home tax increases to 5 percent. So say Jim was paying $3,000 in annual tax in 2001. The highest it could have reached in six years under the homestead cap is $4020 -- an increase of only 34 percent, while the value of the home more than doubled. (The Howard County rate actually declined, but not by much. Let's just assume it stayed the same.) So Jim was never paying the fully phased-in tax liability on his house when it was assessed at $625,000. That's why he may not see much if any tax reduction now that his assessed value has plunged 22 percent.

Even with the 22 percent drop, Jim's house would still be worth $487,000. That represents annual value appreciation of 5.5 percent, compounded, since 2001, which is still more than the increase he's seen in property tax. So he and other Howard Countians like me who just got reassessed may even see a slight tax increase this year, not a decline.

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (1)
Categories: Real estate