Archive for the 'Foreclosure Crisis' Category

One of the major retirement community developers in the country is seeking cash infusion to avoid turning the chain into property for sale.

The Erickson Retirement Communities is heavily laden with debt taken out during the peak of the housing market. With the languishing economy, many retirees can no longer afford to stay in retirement communities.

In a letter sent to the company’s nearly 23,000 residents, Erickson’s founder and chairman John C. Erickson explained that he signed an intent letter with a potential investor. However, he said that the company must still restructure its huge debt before it can close any deal.

In September, the company failed to pay an interest on its junior corporate loan amounting to $48 million. As of July, the company had a total of $244 million corporate-level debt. In his letter, Erickson explained that the company did not foresee the extent or duration of the crisis that hit the country’s economy and drove the number of property for sale to the roofs.

The company manages 19 retirement communities across the country. Erickson helped pioneer the continuing-care communities which offer various care services such as assisted living, skilled nursing and independent living. The company’s Seabrook Village located in Tinton Falls, New Jersey is home to over 1,000 retirees.

According to data, the business of retirement communities saw its growth during the peak of the credit market. The sector experienced more growth compared with other senior housings. Data from the National Investment Center for the Seniors Housing and Care Industry showed that there are 330,000 retirement communities, 32 percent higher than the figures three years ago.

Many retirement communities are suffering because their prospective residents have fallen into financial despair and could not afford the sizable entrance fees required by these continuing-care communities.

In July, Erickson’s retirement community development in Hilliard, Ohio went into foreclosure. When banks foreclosed on the property, the company immediately returned the deposits paid by residents of the Hilliard community.

Additionally, Erickson’s two retirement communities in Chicago, Illinois warned bondholders that the company may file for bankruptcy protection under Chapter 11 because of the low number of move-ins.

Industry experts warned that the number of property for sale in the continuing-care communities would increase further if the economy would not improve soon.

Repo properties for sale and short sales accounted for 31 percent of all sales of existing homes in August, based on a report released by the National Association of Realtors.

The distressed properties also pulled down the median home sales price as these properties are typically priced about 20 percent lower than traditional properties.

Total home resales also decreased in August, surprising economists and analysts who are hoping for a continued rise in sales so the housing market can recover more quickly.

Sales of existing homes dropped by 2.7 percent from July, but rose by 3.4 percent from August last year. Home resales increased by 15.2 percent in the previous 4 months.

According to the NAR report, total house sales in August decreased to an adjusted yearly sales rate of 5.1 million housing units, compared to 5.24 million housing units in July.

Ian Shepherdson, an economist working with High Frequency Economics, said the pending home sales index for July indicated an increase in adjusted sales to 5.4 million housing units or more. The Briefing.com estimate also showed an increase to 5.35 million units.

Nonetheless, Shepherdson explained that the difference between the actual and predicted figures has occurred before. He also reiterated that the reduced median home prices and sales of repo properties for sale do not explain the sudden drop in overall home sales.

In addition, despite the drop in home resales, the supply of pre-owned homes for sale declined substantially in August. Overall inventory dropped by nearly 11 percent to 3.62 million pre-owned homes for sale. The total represented a supply for 8.5 months, a decrease from the 9.3-month supply posted in July.

The biggest decline in home resales last month occurred in the Midwest, with home resales dropping by 6.6 percent from the previous month to an adjusted rate of 1.14 million. The median price also dropped by more than 10 percent to $149,900.

The smallest drop occurred in the Northeast, falling by only 2.2 percent to an adjusted rate of 910,000 units. The median price also dropped by over 10 percent to $241,000.

Meanwhile, NAR chief economist Lawrence Yun has called on the Obama administration to extend for another year the $8,000 federal tax credit to boost home sales. He said that the incentive is needed to help absorb the expected rise in repo properties for sale over the next several months.

Prices for single-family houses in 20 major cities in the U.S. increased by 1.4 percent in June, marking the second consecutive monthly increase after dropping every month since the middle of 2006.

According to the Standard & Poor’s/Case-Shiller 20-City Home Price Index for June, home prices increased in 18 of the 20 major cities compared to May. The biggest increases were in Cleveland, Minneapolis and San Diego. Only Las Vegas and Detroit showed price declines in June. Last year, home prices declined in all 20 major cities.

Meanwhile, foreclosed for sale slowed down in certain areas as various foreclosure prevention programs delayed foreclosure actions and as foreclosure inventories were reduced significantly by first time home buyers and investors in prior months.

In June, according to a nationwide foreclosure sales study, the percentage of foreclosure and distressed sales dropped to 31 percent, a significant decline from the 45 to 50 percent share in the first months of 2009.

Compared to June last year, home prices declined by 15.4 percent, marking an improvement from the 19-percent year-over-year decline in January. Compared to the peak home price in the middle of 2006, home prices dropped by 31 percent.

Meanwhile, a separate report from the Federal Housing Finance Agency showed that its home price index increased by a seasonally adjusted 0.5 percent in June and its quarterly home price index dropped by 0.7 percent.

The FHFA quarterly price index showed that home prices dropped by 6.1 percent compared to June last year. FHFA sets its index by comparing repeat transactions for home loans financed through Freddie Mac or Fannie Mae.

According to the FHFA index, home prices dropped in all states except in 4 states. The biggest price drops occurred in Florida, Nevada, California, Arizona, Utah, Oregon and Hawaii.

The S&P/Case-Shiller home price index monitors the prices of repeat home sales in 20 major cities over time.

Robert Shiller, co-developer of the Case-Shiller home price index, said the home price upward trend is a positive sign, but he said expected foreclosures in the coming months could push down home prices again.

In contrast, RBS Securities chief economist Stephen Stanley said that home prices have reached bottom, based on various indicators. But he added that prices would not increase much over the next couple of years because many home buyers are property investors who buy only if there is great potential for profits.

One of the top executives in the mortgage servicing industry has remarked that the foreclosed home prevention program of the Obama administration is costly to mortgage loan servicers.

The U.S. Federal Reserve has released results of its economic survey across the country. The survey, based on information gathered from the agency’s regional bank districts across the country, showed many regions are experiencing a weakening commercial estate market.

The loan refinancing portion of the Obama administration’s repo property prevention program is running slowly, according to officials of the Mortgage Bankers Association.

As the number of foreclosed homes auctions continued to rise, the number of multifamily and commercial mortgage loan originations declined by 70 percent in the first three months, compared to loan originations in last year’s first quarter, according to the Mortgage Bankers Association.

Despite the continued rise in the number of foreclosure properties in most areas nationwide, confidence among home builders jumped in April to its highest level in 6 months, as mortgage rates fall and as foreclosure prevention efforts step up.

The Office of the Comptroller of the Currency and the Office of Thrift Supervision have issued a report showing that the number of homeowners falling into delinquency and foreclosure properties continues to increase despite aggressive efforts of mortgage lenders to prevent foreclosures.

Families renting in apartments and houses in inner cities have become the latest victims of the housing market crisis as more and more properties have been added on foreclosure listings.