San Diego County seems to be in the best shape in California and in better shape than most around the United States when it comes to recovering from the recession in terms of residential construction.
Jonathan Smoke, executive director of research for Hanley Wood LLC, gave a forecast of new home building in San Diego County at a Building Industry Association breakfast program Thursday and said San Diego County is closer to recovery based on data and research.
Smoke, a builder-turned-researcher, first mentions that San Diego is set to recover sooner rather than later since the county was one of the first infected by foreclosures, which led to people renting instead of owning and current supply versus demand data.
“Homeownership declined first in San Diego,” said Smoke, to a room full of homebuilders. “Expect San Diego to recover first in California because it got into this (mess) first.”
Smoke said to have avoided the vacancy of almost no new home construction the past few years, builders should have stopped building in 2006, based on supply versus demand analysis at that time. He added that supply of homes for sale was greater than demand in 2008 and 2009, but that in 2010 supply and demand for home sales and homeowners has started to level off.
“San Diego banks outsold builders five-to-one in 2010,” said Smoke, adding that he expects one more year of foreclosures, and then it will take 18 months for banks to sell them before builders are out selling again. “You, followed by San Jose, are the best home-buyer markets in California right now.”
Smoke added that the bright spots in San Diego County for homebuilders right now are Carlsbad and the city of San Diego, and traditionally the coastal region and the North County inland area are the most stable areas.
Smoke finished his discussion by telling new homebuilders in the audience that they should pay attention to age demographic trends, especially to the baby boomers now because the younger generation that does buy homes tends to buy used or foreclosed homes.
“Baby boomers are retiring at an older age than their predecessors,” Smoke said. “You need to find out what will they do? Will they buy a new home? Remodel their current home? Retire in a rest home? Will they move out of San Diego? Probably not, but baby boomers have different tendencies than their predecessors.”
Smoke said to avoid the same mistakes as before, homebuilders cannot go off their gut instinct. It is not a winning formula anymore when it comes to knowing where and when to build.
“Construction industry officials need to understand why one community is better than another so builders can make better business decisions,” Smoke said.
“I hear builders say, ‘I know a good piece of dirt when I see one,’” said Smoke, comparing it to the quote “I know talent when I see it” in the book “Money Ball.” He added that builders need to go away from gut instincts and follow leads based on research and data to tap new market opportunities.
The biggest home in Los Angeles County is ready for a new nickname: The 56,500-square-foot Manor, dubbed Candyland after owner Candy Spelling, has been sold to another wealthy socialite, British heiress Petra Ecclestone, in an all-cash deal for $85 million.
On the market for more than two years at $150 million as the highest-priced house in the U.S., the 4.7-acre Holmby Hills estate is designed for a life of glamour and grand living to which Ecclestone is no stranger. She is the daughter of self-made Formula 1 billionaire Bernie Ecclestone and former Armani model Slavica, who are divorced. The Ecclestone family ranked 254th this year on Forbes’ list of wealthiest people, with a net worth of $4.2 billion.
The 22-year-old, a beneficiary of the family trust, also is no stranger to property ownership. She already has a Georgian mansion in Chelsea, England, valued at an estimated $90 million.
Ecclestone’s new L.A. digs are about 1,500 square feet larger than the White House. An Ecclestone spokesman was quoted last month in London’s Daily Mail as saying she will be using the U.S. residence only part time.
In her 2009 book “Stories From Candyland,” Spelling tells of her unfamiliarity with the building process: “We didn’t set out to build the largest house…. Because I couldn’t read blueprints, I was often surprised by what was eventually built.”
Spelling’s book recounts how she relied on the instincts of her dogs in helping select an appraiser and later the agents who landed her mammoth listing. Passing muster with her Wheaton terrier Madison were Hilton, Hyland and Sally Forster Jones, who is with Coldwell Banker, Beverly Hills. Hilton appears to have been a particularly fortuitous selection because he and David Kramer, also of Hilton & Hyland, represented Ecclestone in the purchase.
In one respect, the $150-million price tag for the Spelling mansion made the jobs of the listing agents easier. “Rick Hilton and I had no problems with pre-qualifying buyers,” quipped Jeff Hyland of Hilton & Hyland, Beverly Hills, an affiliate of Christie’s International Real Estate. “If they or their party were not on the Forbes list, it was very easy to decline the showing.”
Spelling will be downsizing to a 15,555-square-foot condominium on the top two floors of the Century, a 41-story tower in Century City. She got it for $35 million, down from the $47 million she originally agreed to pay when the building was under construction in 2008. That price had included about an additional 1,000 square foot of space, fixtures and other work she opted to do on her own.
The Department of Justice’s Victim Notification System sent a notice of the expected guilty plea this month. Andy Narraway, an investor who claimed he lost his life savings to McConville, forwarded us the notice.
Federal prosecutors charged McConville with money laundering and wire fraud last May. The charges related to a scheme that stretched across California, involving hundreds of condos bought with the help of so-called straw buyers who rented the man their identities so he could get more mortgages from banks.
In the case of the more than 80 condos we looked at in Escondido and San Marcos, McConville’s team obtained mortgages for far more than the units would have sold for otherwise and pocketed more than $100,000 per condo under the guise of “marketing fees” before letting them fall into foreclosure.
The feds found the fugitive McConville last June hiding in Bakersfield with three large rolls of cash in his pockets.
Several other defendants in the scheme have pleaded guilty, including the escrow officer who admitted she created two versions of the official transaction papers, one the banks would see that didn’t show McConville’s take, and one that he and the sellers saw.
By last March, we estimated the federal government’s mortgage companies, which had purchased these shaky loans, had already lost upwards of $7.8 million. McConville’s operation had been going for several years by the time he bought the San Diego County units, but these deals were especially egregious because they slipped through the cracks in 2008, when banks and governments had decried the excesses of the housing boom and vowed to strengthen their oversight.
The straw buyers’ credit scores were ruined when McConville stopped paying the mortgages on the units in their name, and the ones involved in the San Diego deal said they were never paid the $10,000 per unit he promised them in exchange for their signatures.
McConville is expected to appear July 20, about 1:30 p.m. in Oakland to enter his guilty plea.
A guy who probably just wanted to get a little something for himself, finds out that seeing a project through to the end can be a bigger challenge than it appears:
If this might be your cup of tea and want more details, here are other clips that didn’t make the first cut:
After years as the lending market’s undesirables, aspiring home buyers with less-than-stellar credit are being offered home loans again—with some of the same conditions and catches critics say tripped up subprime borrowers five years ago.
According to analysts, a handful of private investment firms have started making home loans to borrowers who fail to meet banks’ requirements, which got tighter post-crash and have largely stayed that way. And for now they are holding them on their books, which is novel. At least two, Athas Capital Group, of California, and New Penn Financial, which is owned by Shellpoint Partners, of New York, are also making jumbo loans, or loans in most parts of the country that exceed $417,000, as the federal government appears to be scaling its support of that market.
The loans are designed to include borrowers with credit scores deemed low by banks’ standards; they also have more-flexible requirements for proof of income. Banks have been too slow to extend credit to such people, the firms say, leaving otherwise responsible borrowers out in the cold—and potential profits on the table. “It’s often a minor detail, why banks won’t approve them,” says Brian O’Shaughnessy, chief executive at Athas Capital.
Banks are following standards set by the market and reinforced by regulators, which focus on avoiding risk and losses with the uncertainty that exists now, says Bob Davis, executive vice president at the American Bankers Association.
The firms say this is far from the subprime lending of the go-go years. While they may embrace slightly riskier borrowers, they require higher down payments, around 40% on average at Athas Capital, compared with roughly 10% for a bank loan, says Keith Gumbinger, vice president at HSH Associates. And while they are willing to be flexible with income documentation, accepting a workplace pay stub or a series of bank statements in lieu of tax-return documents, they still require documentation as proof a borrower can repay the loan. This opens the door to otherwise qualified borrowers who have been foreclosed on, for example, or who may be self-employed or recently unemployed but are now back to work, says Chip Cummings, president of Northwind Financial, a consultant to mortgage lenders.
Critics say the loans are similar enough to the subprime mortgages of old that would-be borrowers should beware. They often have a so-called balloon structure, which requires the borrower to pay the remaining balance after five or seven years, or to refinance. And they are expensive, with interest rates of as much as 13%, the loans can cost more than double the average for bank mortgages. “You’d have to be fairly desperate to take that in the current market,” says Guy Cecala, publisher of Inside Mortgage Finance.
Given the recent economy, that includes a lot of people. With housing prices still so relatively low, many people may want to buy, which analysts say could fuel a boom in this sector.
Also, starting in October, the government is expected to lower the limit on the loans it guarantees to as low as $271,050 in some places, in some cases a drop of almost $100,000. That, too, could open the door for these private financing companies.
“There are a lot of borrowers out there who aren’t being provided for,” Mr. Cummings says. “Private investment firms are filling the gap.”
SAN DIEGO —Home sales in San Diego County dropped 11.4 percent in June, compared to the same month a year ago, while prices dipped by 1.6 percent, a real estate information service announced Tuesday.
A total of 3,444 homes changed hands locally last month, compared to 3,885 in June 2010, according to La Jolla-based MDA DataQuick. The median price of a home in San Diego County in June was $330,000, down from $335,500 in June 2010.
Let’s compare last month’s detached-home MLS sales for North SD County Coastal:
June 2010: 256 sales, $385/sf average.
April 2011: 234 sales, $372/sf average
May 2011: 243 sales, $383/sf average
June 2011: 245 sales, $377/sf average.
Sales and pricing are going to bounce around a little, so that is about as steady as possible.
Has there been any increase in sales due to buyers wanting to get in before school starts? Any pressure to pay more, in order to get something done this summer that would be evidenced by more sales?
It doesn’t seem like it, the NSDCC new pendings have been steady too:
New pendings, last 12 days: 101
Previous 12 days: 99
I don’t think the buyers are budging – they’ve waited this long, they want a fair deal.
Here’s the first REO assignment in a couple of months, but I’m not expecting more than a trickle from now on. But at least we can call this a premium location:
Let’s mention the only real perp walk so far – hat tip to AL for sending thislatimes.comarticle:
ALEXANDRIA, Va. — An executive convicted of orchestrating a nearly $3-billion fraud as chairman of one of the largest mortgage companies in the U.S. was sentenced Thursday to 30 years in prison by a judge who accused him of showing no remorse.
Federal authorities say the case against Lee B. Farkas, former chairman of Florida-based Taylor Bean & Whitaker, was one of the largest prosecutions arising from the nation’s financial crisis. The fraud put thousands of employees out of work and contributed to the collapse of Colonial Bank of Montgomery, Ala., which authorities described as the sixth-largest bank collapse in U.S. history.
“He deserves to be punished severely in light of the enormity of his crimes. The losses from this case are, in fact, off the charts,” federal prosecutor Patrick Stokes said in urging a judge to send Farkas, 58, to prison for life. “He has destroyed lives and institutions.”
Farkas, who denied any wrongdoing when he testified at his trial, was convicted in April of all 14 counts, including securities fraud and conspiracy. On Thursday, he acknowledged taking risks and making errors in judgment to keep his company afloat. But he did not directly apologize for any fraud.
“When faced with the prospect of Taylor Bean & Whitaker sinking, I had to take risks,” said Farkas, who was taken into custody after the verdict and appeared in court Thursday in a green prison jumpsuit. “I let Taylor Bean & Whitaker get out of control by letting it grow too fast.”
U.S. District Judge Leonie M. Brinkema told Farkas she detected no remorse as she sentenced him to 30 years — twice the 15-year sentence requested by his attorneys.
The fraud began in 2002 and took multiple forms until Taylor Bean collapsed in 2009 and the scheme unraveled, prosecutors said. Taylor Bean overdrew its main account with Colonial Bank by several million dollars and eventually double- and triple-pledged mortgages it held to a variety of investors. Prosecutors also alleged that Taylor Bean sold hundreds of millions in worthless mortgages to Colonial.
They say Farkas was motivated by a lavish lifestyle, maintaining several dozen classic cars, a private jet and seaplane and multiple houses, including one in Key West, Fla.
Farkas, of Ocala, Fla., is the last of seven employees and executives from Taylor Bean and from Colonial to be sentenced. The other six cooperated with the government and agreed to testify against him to secure lighter sentences.
Prosecutors say Colonial and two other major banks — Deutsche Bank and BNP Paribas — were collectively cheated out of nearly $3 billion in a scheme that spanned more than seven years. They say Farkas and his co-defendants also tried to fraudulently obtain more than $500 million in taxpayer-funded relief from the government’s bank bailout program, the Troubled Asset Relief Program. Neither Taylor Bean nor Colonial ever received any TARP money, even though TARP at one point gave conditional approval to a payment of roughly $550 million, investigators say.
Farkas’ lawyer, Bruce Rogow, said prosecutors had magnified Farkas’ role in the fraud and said that although his client may have made naive or foolish business decisions, he was not a calculating criminal deserving a life sentence. He said each of Farkas’ co-defendants deserved blame for allowing the fraud to continue for years.
Neal H. MacBride, the United States attorney for the Eastern District of Virginia, said he found Farkas’ apparent lack of remorse astounding, comparing him to a child who murders his parents and then begs for mercy because he’s an orphan.
ALEXANDRIA, Va. — An executive convicted of orchestrating a nearly $3-billion fraud as chairman of one of the largest mortgage companies in the U.S. was sentenced Thursday to 30 years in prison by a judge who accused him of showing no remorse.
