Wednesday, July 29, 2009

The Return of Cram-Downs, Condo Reconversions and More

by Calculated Risk on 7/29/2009 04:00:00 PM

First a graph from Effective Demand on Ventura County sales and inventory by price (Effective Demand covers Ventura and the San Fernando Valley in LA)

Ventura County Sales and Inventory Click on graph for larger image in new window.

This graph from Ventura County Demand versus Inventory - July 2009

Most of the activity is at the low end, and inventory is pretty low. This is true for many of the low-to-mid end areas. There are more foreclosures coming, but the timing is uncertain - will it be a flood, or will the banks just bleed the foreclosures into the market?

But for the mid-to-high end - expect bad news! Not only is financing tight, but there is a dearth of move-up buyers.

And from Bloomberg: ‘Cram-Down’ May Be Revived Unless Lenders Modify More Mortgages

[House Financial Services Committee Chairman Barney] Frank said he will re-attach the cram-down provisions to any new legislation requested by the industry, “unless we see a significant increase in mortgage modifications and foreclosure- avoidance.”
...
Cram-downs let federal judges lengthen terms, cut interest rates and reduce mortgage balances of bankrupt homeowners, even if the lender objects.
Not much on Corus or Guaranty Bank (Texas), although both will probably be seized by the FDIC soon. Talk about seizing: Corus Bank seizes Aventine apartments
A company affiliated with Corus Bank seized the 216-unit Aventine at Boynton Beach apartment complex.

In a July 16 filing in Palm Beach County Circuit Court, Aventine Marketing released Boynton Pinehurst from the $25 million remaining on its mortgage with the Chicago-based bank in exchange for the deed to the property. ...

Boynton Pinehurst ... planned to convert Aventine into condos when it took a $37.2 million mortgage from Corus Bank in 2006. It paid $48 million for the property that year.
Looks like another property with the value cut in half - and more apartments back on the market (aka "reconversions"). And here is another condo project being converted to apartments: Novato's Millworks condos switch to rentals after only two of 124 units are bought (ht Rich and others)
Millworks, a 420,882-square-foot residential/commercial project at De Long and Reichert avenues, had a grand opening in May but has only sold two of 124 condominiums situated above a Whole Foods grocery store slated to open next spring.
...
Starting this week, the condos will be rented on sixth-month and one-year leases for about two years before Signature intends to crank up sales efforts again, Ghielmetti said.
The condo reconversions and new condos being rented is part of the reason there has been a surge in rental units in recent years, pushing the rental vacancy rate to record levels.

Stock Market Crashes The last graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.