Archive for the 'Foreclosure Crisis' Category

Since January of this year, over 2,000 commercial buildings in Maricopa County, Arizona received 3-month notices of foreclosure. The total number of commercial properties facing the bank foreclosure list represented $6.3 billion of delinquent real estate loans.

Industry analysts said that the crisis that has been devastating the residential real estate market in Arizona and which put the state in the top 10 states with highest foreclosure rates, has spilled over to the commercial real estate market.

Already, the number of foreclosure filings in Maricopa County is staggering when compared with commercial foreclosure rates in previous years. Analysts said that the foreclosure problem in the commercial market was due to drastic drops in property values and the lack of refinancing options.

And with the state’s growing unemployment rate, warehouse and industrial properties also suffered tremendously. For the second quarter, over 1-million-square foot warehouse and industrial space was vacated.

After the issuance of notices of foreclosures or trustee’s sale, actual foreclosure sale in Maricopa County can take months to happen. Since January, the number of notices of defaults and foreclosures has remained in the range of 300 to 400 per month. But the number of actual foreclosures cannot be established immediately as the repossession of properties in default or sale of foreclosure properties can take months or years to happen.

In Arizona, lenders have two ways to foreclose a distressed property. One is to file a foreclosure case against the borrower, or the lender can immediately call for trustee’s sale which is the preferred way of most lenders as this method is quick and less expensive. However, in order for lenders to place a property on a trustee’s sale, they have to waive some legal rights.

Industry analysts said that there is no indication that commercial foreclosures will wind down soon. They said that many commercial developers are having difficulty maintaining fix construction mortgage payments while reducing rents to attract tenants. Commercial developers have also to cope with the declining demand for rental commercial spaces.

Analysts noted that there are many federal and nonprofit programs that help homeowners avoid foreclosures but no such efforts were made to help commercial loan borrowers avoid foreclosures.

They pointed out that many commercial loan providers are not modifying commercial mortgages even if rental rates declined by almost 75 percent in some places.

The office market in Southern Nevada took a beating from the rising commercial bankruptcies and bank foreclosed properties. In the second quarter, the office market in Las Vegas posted a negative net absorption, for the sixth succeeding quarters.

According to market data, the total contracted office space reach 31.9-square-foot from April to June, a decline compared with 33.7 million-square-foot of occupied space in 2007.

Industry analysts said that many existing office buildings remained vacant because nobody would want to lease properties that are in financial limbo. They added that bankruptcies and foreclosures will continue to haunt the commercial real estate market in the area.

Adding to the growing real estate market problem is the rising unemployment rate. Data released by the Nevada Department of Employment Training and Rehabilitation showed that June unemployment rate rose by 12.3 percent, twice as much as the rate last year.

The largest job loss recorded was in the business services and professional sector which is the biggest user of the office market. For the past 12 months, the sector eliminated 11,400 jobs.

Industry analysts said that as office vacancies are approaching almost 30 percent in some areas, many office landlords will be forced to talk with their lenders about modifying their loans or end up in foreclosure as the balance of the supply and demand will not improve in the coming months.

Furthermore, they said that it will take beyond 2010 for the business services and professional sector to recover, thus putting more financial strain on office landlords.

For the second quarter, the office vacancy rates in Nevada rose to an all-time high record of 22.1 percent, an almost 5.2 percent rise from the previous year for the same period. Analysts said that the growing number of empty and vacant office spaces is due to the nearly 1.6 million-square-foot new office space entering the market since last year despite the growing company bankruptcies, bank foreclosures and increasing unemployment.

Additionally, the available office inventory grew to over 7 million-square-foot, with expected negative net absorption rate of about 500,000-square-foot this year.

But analysts noted that the reality of the economic downturn resulted to a 75 percent decline in the planned office space and 50 percent in spaces under construction. Analysts said that several opportunities await tenants in the current office market, including low introductory lease rates and short-term leases just to generate a steady income.

Renters in Ahwatukee in Phoenix, Arizona liked their apartments well enough. But they have always dreamed of owning their own houses. That is why many of them are excited about the city’s new home-buying program.

Under the program, city officials will use federal stimulus funds to help first-time buyers purchase their bank foreclosed homes sale which will help many Ahwatukee renters achieve their dreams of owning a home.

Some Ahwatukee renters attended a seminar hosted by the city for first-time homebuyers who want to learn how they may apply and become eligible for the home-buying program. Under the program, eligible first-time homebuyers may receive about $15,000 which they may use for down payments and for paying the closing costs when they purchase bank foreclosure houses.

According to industry experts, the program will allow eligible first-time homebuyers to purchase a foreclosed house that needs repair worth $15,000 if they have already received the $15,000 under the home-buying initiative.

The city of Phoenix received about $39.5 million federal funds under the U.S. Housing and Urban Development’s (HUD) Neighborhood Stabilization Program (NSP). The NSP is made possible under the Housing and Economic Recovery Act which was approved in 2008 by the U.S. Congress.

Prospective homebuyers were allowed to meet certain requirements such as income to apply for federal funds to help purchase foreclose houses within the city limits.

Since the program started, about 60 city residents have already applied for federal funds under the home-buying program.

To become eligible to receive the $15,000 federal funds, prospective buyers should be creditworthy, meet the income requirements and should undergo and complete a credit and homebuyer education class.

Prospective buyers who are single should have an income of no more than $55,350, $63,250 for couples and for a four-member family, $79,100. Buyers should never have bought a property and will use the foreclosed homes as their main residence.

The home-buying program is not for people who are looking for bank foreclosed houses to buy for investments. Furthermore, the foreclosed homes that prospective buyers should purchase under the program should be owned by banks, meet certain city code requirements and have a market price below 1 percent of the assessed value of the property.

Industry experts are hoping that the program would help trim the number of foreclosure properties not just in the city but statewide. In the first half of this year, Arizona is ranked second among states in the country with the highest foreclosure rate.

More and more homeowners in East Bay area in California are seeing their home equities drop daily as the economy keeps getting worse and the foreclosure crisis remains unabated.

Moonlight Basin, a five-year-old ski and golf resort located near Big Sky in Montana, is facing a bleak future as it continues to struggle financially, burdened with massive debts. The real estate market collapse has severely affected the resort which is now facing the danger of being placed on bank foreclosure list by its major lender, Lehman Bros.

The Obama Administration’s $75 billion loan modification was able to help only 9 percent of qualified borrower as of July, according to a report released by the U.S. Treasury Department as part of its strategy to force lenders to modify more troubled mortgage loans to trim the growing number of bank foreclosure homes in the country.

Investors should not rush into investing in U.S. home-loan bonds because the recent increases in home prices do not fully reflect the true level of foreclosures for sale inventories in the country, according to New York-based Barclays Capital analysts Glenn Boyd and Ajay Rajadhyaksha.

The foreclosure crisis has reached the trendiest and wealthiest neighborhoods in New York City. In Manhattan, one out five home sellers has experienced a loss on home sales.

The housing market in Quad cities located in the Mid-Mississippi Valley region in Iowa and Illinois are experiencing a sharp increase in the number of foreclosure properties in the first six months of this year, compared with the last half of the previous year.

Foreclosure has started to ease in some cities across the country where the large volume of bank foreclosed houses caused devastation on their housing markets and economies. However, industry experts are quick to point out that the current development could be just a lull before the next wave of foreclosure which they expected to hit some unlikely cities.