Realty Check

Detroit's Project 14

Vicki Mabrey — Wed, 09 Feb 2011 13:59:58 -0500

Project 14 is police code for "return to normal operations." And that's what Detroit is trying to do -- bring the city back to "normal," to stabilize after a debilitating blow to its economy. The project, announced earlier this week, wants to solve two problems with one plan: to get more police presence in the city, and to fill the city's acres of vacant houses. The tagline of the project is "Live where you protect & serve," and the mission statement says it's important because "Project 14 takes two challenges facing Detroit - public safety and vacant homes -- and turns them into an oportunity for neighborhood revitalization."

Commenters to the Detroit Free Press articles were off-the-charts angry. Freep's editors (Freep.com is the paper's website) were busy all day deleting presumably obscene or racist or otherwise objectionable posts. People were up in arms (pun intended) that officers could buy a home in Detroit for $1,000! And they'd get $150,000 to renovate it! All from taxpayer money!

Let's unpack(!) the plan.

Yes, Detroit police officers, half of whom now live outside the city, are being encouraged to come back. Once the law requiring them to live within city limits was struck down in 1999, there was Blue Flight -- probably similar to White Flight of the '60s and '70s. To woo them back, Mayor Dave Bing announced Project 14 -- allowing officers to purchase vacant homes currently owned by the Detroit Land Bank Authority (DLBA) for as little as $1000 DOWN -- NOT $1000 total. They then have to qualify for a mortgage, which the city estimates would run between $500 and $1000 a month, including principal and interest, taxes and insurance. They expect the 200 houses (only a handful of which are listed so far) that will ultimately be in the program to appraise somewhere between $40,000 and $80,000, and so far are in two neighborhoods: historic (and beautiful) Boston-Edison, and East English Village, also an historic 'hood.

The homes will be renovated (not sure yet by whom -- calls to DLBA haven't been returned), using Neighborhood Stabilization Program funds -- yes, otherwise known as taxpayer dollars. In fact, $30 million of federal stimulus funds. The DLBA website says the houses will have "modern floor plans," a "minimum" of two bathrooms, off-street parking, and central air (that's a chunk of renovation $$ right there). Being a lover of old houses, I so hope these won't be gutted and turned into modern blank boxes, despite DLBA's promise to "restor(e) grand architectural features." Hopefully, that will save the mantels and hardwood floors and Detroit's famous Pewabic tiles, which were a proud feature of homes built back in the day. Upgrades over the standard package, whatever they are, will be charged to the officer.

Many angry commenters complained that this was a waste of their tax dollars... that police wouldn't come back... that the program should be open to other residents (the city says next up are firefighters, and possibly EMTs, teachers, and other public servants). All valid issues.

But when your city is looking at bulldozing some sections that are so pocked with vacancies it's no longer cost effective to bring services to them; when your foreclosure rate is dire; when your tax base needs a boost; when you need police on the beat (and living next door), what have you got to lose? The one thing Detroit does have is a city full of gorgeous architecture. You've gotta be creative to save it.

The Dollar House Program brought certain urban neighborhoods back from the brink in Baltimore in the 1970s... In New York, in those hellish days after 9/11, I heard about a police officer who died that day -- we went to speak to his neighbors, and discovered that he lived in one of the city's housing projects, through a program that offered free or low-cost digs to officers willing to make a home and offer some stability there. There are probably dozens of similar programs across the country. If you know of any, fill me in. And do share your (non-racist, non-obscene) thoughts on Detroit's Project 14.

Is home ownership still the American Dream??

Vicki Mabrey — Tue, 24 Aug 2010 18:33:01 -0400

It's been a while since I've posted, but I think I have to say something about the dismal home sales numbers just released today. In case you missed it, the National Association of Realtors reported that the number of pre-owned homes sold during July fell 27% compared with June. Ouch.

Why?? There are a variety of reasons, including but not limited to: the end of the tax credits; continued economic instability; everyone's at the beach. The NAR also says we have a "housing hangover," meaning those who were going to buy did so in April or May so they could close in June before the $8,000 tax credit expired.

Whatever the reasons, the numbers inspired quite a discussion at the office today. Some say renters can now stand tall and not be ashamed that they aren't on the property ladder. Others bemoan the fact that people won't be able to pull money out of their house to send to children to college. Some say they'll have to look elsewhere for a retirement nest egg. Which got me thinking: in these times, when many private corporations have killed the gold watch and lifelong pension, do people think of their homes as their pension plan, or do they think of it as the place they'll live in til they die?

What do you think? Is this the end of home ownership as we know it? Will people decide it simply makes more sense to rent than to buy? Will prices drop? (And if they do, will that perhaps lead more people to jump into the home ownership pool?) What does your house mean to you? Did you ever think of it as an ATM for college tuition, retirement, major purchases such as cars or vacations -- and if so, have you stopped viewing it that way? And, finally, if house values aren't rising as quickly as they did during the go-go years, is that really such a bad thing??

The Mysteries of Pittsburgh

ABC News — Fri, 25 Sep 2009 10:21:38 -0400

That's the title of Pulitzer Prize-winner Michael Chabon's first novel, a loving, semi-autobiographical ode written when he was still a student at Carnegie Mellon University in Pittsburgh. It's one of my favorite books, and in it, the main character walks past a smokestack he calls the Cloud Factory, a remnant of Pittsburgh's former glory days as a steel town.

Big steel is all but gone, but Pittsburgh, far from turning into a ghost town, has resurrected itself with new, thriving industries... So much so that the Obama Administration chose the city to host the G-20 Summit. Pittsburgh?! some scoffed. Yes, Pittsburgh. White House officials wanted to highlight the city's renaissance from aging rust-belt has-been to tech-savvy metropolis.

Turns out Pittsburgh has weathered the economic downturn better than most -- it lags behind some other major cities in two important areas: its unemployment and foreclosure rates are well below the national average -- two categories I'm sure they're happy to lose.

"Pittsburgh didn't have the party, so we don't have the hangover," said Paul Culley, president of the Realtor Association of Metropolitan Pittsburgh. Prices remain stable, Culley said, and while they're "not immune" to the foreclosure problem, Pittsburgh has fewer than some other older industrial towns.

"Well-maintained homes are moving well, while some houses that are not in good shape are moving slower in this depressed market," Culley told me by phone.

And what great housing stock the city has. On the low end you can't beat $59,000 for this tiny two-bed, one-bath starter home.

Then there's this: a 122-year-old mansion in the West Allegheny section of town, offered at $525,000. It's on the high end, but take a look at the woodwork and stained glass and the seven fireplaces and you'll see why. Multiply that price by 10 if it were in New York or Los Angeles.

Michael Chabon was right -- Pittsburgh is mysterious to many of us. It's Pennsylvania's "second city." It's got a great modern airport, which is all many people ever see of the city. Lucky me, I have two close friends from “The Burgh," so I wondered what they thought of their hometown being thrust onto the world stage.

My questions unleashed a torrent of memories from Lisa Simeone, host NPR World of Opera, Soundprint, and the Chicago Symphony Orchestra series. Lisa's transplanted to Baltimore now, where she also writes the Glamour Girl column for Baltimore's Style magazine. But Pittsburgh is home, where she grew up the child of a first-generation Italian mother and an immigrant Italian father who arrived after World War II and set up shop as a tailor.

"I ...remember the old J&L (Jones & Laughlin) steel mill still belching smoke when I was growing up," Lisa says. "But it's gone now."

She also has fond memories of the beating heart of downtown. "I remember it as a thriving, exciting, crowded, fun place when I was growing up," she says. "I used to take the bus downtown all the time, first with my mother, then by the time I was 12 on my own. I loved it. Three big major department stores -- Kaufmann's, Gimbel's, and Horne's. All thriving.” And lots and lots of other stores in between. Also some beautiful parks -- Mellon Square, The Point (where the 3 rivers converge). Great places to stroll and have lunch and people-watch."

But the old industries gone are gone, and downtown rolls up the proverbial rug after 5 p.m. "(S)ad, sad, sad," Lisa says. "It's deserted. Except for the arts venues, Heinz Hall and the Benedum Center, it's empty."

But there is life in many of those old warehouses. "They have done a wonderful job of restoring, renovating, developing in certain parts of town, especially at the waterfront, of which there is an abundance," Lisa said. "With three rivers, there's a lot of waterfront. The old steel mills have either been turned into condos or dismantled and disappeared entirely," she adds.

Another friend and Pittsburgh native is Tamara Tunie, who plays medical examiner Melinda Warner on NBC's "Law and Order: SVU." She grew up one of six children, living upstairs over their parents' mortuary. "I miss the glory days of a thriving downtown Pittsburgh," she says. "However, I have seen it slowly coming back with new restaurants and clubs. Working on developing a night life downtown. And oh yes -- the Strip District. It is a mirror of the Meatpacking District here in New York. Formerly, warehouses and factories, now restaurants, shops, clubs -- and yoga."

Yoga and lofts. Paul Culley said the city is making a big push to get people back into the city, promoting it through websites such as PittsburghCityLiving.com and BuyintheBurgh.com. Not everyone wants a mansion like the one above, but there's a lot of interest in downtown lofts, he said, some affordable, some, like this one near where the G-20 is being held, pretty seriously luxurious and pricey. But it's a great 'repurposing' of some venerable and sound old structures.

Lisa also recalls Pittsburgh being very "neighborly," very much like her adopted home. "Like Baltimore, the neighborhoods have their own distinct styles and flavors and are very proud of them. Like other east coast industrial cities, it's a mixed bag. Lots of poverty in certain places, too, like the Hill District, where (the late playwright) August Wilson was from. Lots of drugs there now, just like Baltimore. But there are a lot of well-preserved beautiful neighborhoods, Shadyside being the jewel in the crown. It's never gone under, has always been beautiful -- the architecture, the trees, the gardens, the restaurants, the shops. Always. It abuts Oakland, another vibrant neighborhood, the education center -- University of Pittsburgh, Carnegie-Mellon University. And the arts in Pittsburgh have always been diverse and healthy...because of all the "robber baron" money: Carnegie, Heinz, Frick, Mellon,” says Lisa.

But what will the G-20 attendees see? Well, right now, they're seeing each other in meetings, and if they venture out they'll see protesters being tear-gassed. Their spouses will see more of the beauty of the city, and all my Pittsburgh correspondents agree, if the delegates do get out and about, they'll encounter a beautiful, proud, thriving city that reinvented itself, and may have flown so low under the radar that the storm clouds of a bad economy may have passed right over.

Location, Location, Location

Vicki Mabrey — Tue, 15 Sep 2009 09:25:53 -0400

Fancy chatting over the backyard fence with a former president? Are you okay with going through a checkpoint to get home? If so, have I got a real estate opportunity for you.

The stately residence next door to the Obama's home in Chicago has gone on the market. Wish I could tell you the price, but the brokers aren't setting one. They're waiting to see what the market will bear. Typical homes in the neighborhood sell for between $1.5 million and $2.5 million. The Obamas purchased their Kenwood/Hyde Park home in 2005 for a reported $1.65 million.

The house has quite a history. It was built in 1906 by a man named A. R. Clark, who actually was the original owner of President Obama's home. During World War II, it housed officers who needed to stay in the area, then became the boarding house for a military school. The current owners purchased the 6000 square foot home from the military school in 1973 -- for $35,000.

It is a stunner of a mansion -- grand staircase, original stained glass, hardwood floors, formal mouldings, ornate fireplaces, graceful plaster detail. The listing says it needs renovation, and the brokers helpfully note that the buyer can add 4000 square feet -- but really, heating 10,000 square feet in a Chicago winter? Brrrrr....

Livin' Large

Vicki Mabrey — Fri, 21 Aug 2009 10:58:17 -0400

A couple of lighter stories to end the week. No advice, just "things that make you go, 'Hmmm.'"

The first involves a Miami woman who found herself and her family evicted for a day, even though they had scraped up the dosh to save their home from foreclosure. Or so they thought. Due to a court mix-up, the house, purchased three years ago for $260,000, was sold at auction to another buyer for $87,000. When the new 'buyer' came to claim the house, the sheriff ignored the pleas and papers of the actual owners and evicted them. Just for a day, but still.... Plenty of comments at other sites saying they never should have let their payments get so far behind, blah blah blah. I'm sure they know that now.

The second involves Bill Gross, head of Pacific Investment Management Corporation (PIMCO), and his wife Sue, who paid $23 million for an 11,000 square foot mansion on gated Harbor Island just off Newport Beach, CA. The Georgian-style manse, built in 1979, has 9 bedrooms, 12 baths, and comes with 112 feet of waterfront -- enough to house both of your 100-foot yachts. The original asking price was $26 million, but when you're paying cash you can get a deal. And thank goodness for that -- the Grosses plan to tear it down and build their own home sweet home.

Recession? What recession?

Awash in Foreclosures

Vicki Mabrey — Thu, 20 Aug 2009 12:59:33 -0400

If we were looking for the sea of foreclosures to start drying up, it's not happening yet.

The Mortgage Bankers Association reports today that a record 1 in 7.6 homeowners with a mortgage were either late making a payment, or in some stage of foreclosure from April through June.

Foreclosure numbers have been high -- but what's chilling about these latest numbers is that many of those late or not paying at all are homeowners with everyday ordinary PRIME mortgages -- those who have "skin in the game," as the saying goes. Good credit, money down, and they didn't get those super-high, soul-destroying, sub-prime interest rates.

Now we're talking about people who are losing jobs, or -- in smaller numbers, most likely -- people whose homes are underwater and who have decided there's no point in paying anymore. Karen Weaver, an analyst at Deutsche Bank, says they expect that nearly half of all mortgage holders will be underwater by the start of 2011 -- that's revised upward from Deutsche Bank's current estimate of 27%. Unreal.

As an optimist, I believe that what's gone down will eventually come up. So unless I had a really cheaply-made shoebox of a house that was waaaay overvalued when I bought it (and boy, have I seen some of those!), I like to think I would sit tight, having faith that the market will rebound and prices will, too. Pessimists, feel free to burst my bubble.

That New House Smell

Vicki Mabrey — Tue, 18 Aug 2009 15:37:42 -0400

Want a house built from scratch? Then here's good news for you: The U.S. Commerce Department reports housing starts for July, as well as permits for housing starts, are up. Again. That's the fifth straight month of improvement for single-family housing starts, and the fourth consecutive month for permits. "Everything is tenuous, one month doesn't mean recovery, but these are positive signs," said David Crowe, chief economist for the National Association of Homebuilders.

Speaking by cellphone from Chicago's airport, David said they kind of expected July numbers to rise, because July was pretty much the last month to get shovels in the ground to have a new house ready for those who want to take advantage of of the $8000 first-time buyer tax credit.

But permits are up, too -- in fact, they're up way over housing starts -- 1.7% (490,000 units) for housing starts, versus 5.8% (458,000 units) for permits, which is a very good sign. "The increase in permits anticipates the spark of recovery continuing," David said.

Is that smart, I asked, with more than eight months' worth of housing supply out there? Yes, says David.
"The inventory is in existing houses," he told me, hastening to add that that is indeed competition. But new house inventory is low, and the number of months it takes to sell a new house has dropped. Besides, he added, the new houses are being built in places "where people want to live." Ouch. They're not going into the already-overbuilt foreclosure hotspots of Nevada, Florida, California, Arizona. Look, instead, for the sounds of saws and the smell of sawdust in "Texas and the states that stack up on top of Texas: Oklahoma, Nebraska, the Dakotas, Iowa. Places that didn't suffer as much with the downturn are more ready to respond to the upturn."

The dark cloud here is multi-family housing, which is not getting off the ground (yes, pun intended) at the same rate. That's because the purse strings are still tight on commercial lending, which could be a harbinger of slower starts to come. Those numbers are not nearly so rosy -- tying a record low set in April of this year, down 13.3% to 91,000 units. Multi-family permits fell a ginormous 25.5%, to 102,000 units. At least we know where the challenges lie ahead.

So we welcome the builders back into the market. Let's just not get crazy with it like last time.

Just when we thought we saw the light

Vicki Mabrey — Thu, 13 Aug 2009 17:32:11 -0400

Just when it seemed there were far fewer foreclosed houses available in Detroit when I was there a couple of weeks ago...
When home sales were up....
When the jobs report wasn't great, but at least wasnn't as bad as expected...
Just when it seemed that things might be looking up, RealtyTrac releases a gloomy foreclosure report. The foreclosure tracking company reported today that a record 360,149 homeowners were at some stage of the foreclosure process in July, up 7% from the previous month, and up 32% from a year ago.

But, you may be saying, home sales are up -- both existing and new! That's right. I think that's because many people, both investors and personal buyers, are taking advantage of bargains. Because there ARE bargains to be had -- I saw one in Detroit -- a six-bed, five bath, 4800 square foot "gingerbread" house in tony Palmer Woods (where the car execs built their mansions back in the '20s and '30s) for -- get this -- $84,900. Okay, yes, the previous owners had the worst color sense I've ever seen (unless you've got a thing for turquoise), and it needs loads of work. But the major systems are there, the bones are excellent, and it's $85,000 for a 4800 square foot house. Unbelievable!

So I've been telling my property virgin friends that NOW is the time -- prices are low, there's inventory, and there's that $8000 first-time homebuyer tax credit as long as you get the deal underway by November. Do you agree -- is now the time? What's happening to prices in your area??

Good deal? Or steal?

Vicki Mabrey — Mon, 08 Jun 2009 10:43:20 -0400

Today it's Philadelpha, Saturday it was Boston, but yesterday it was New York. About 1000 people packed the ballroom of the Hyatt Hotel at Grand Central Station in Midtown Manhattan on Sunday, all trying to snap up a bargain on one or more of the 120+ houses up for auction. The houses on offer were from all around the metro New York area -- upstate, Staten Island, New Jersey, Connecticut. (Nothing in Manhattan, though -- which would surely have been a sign of a real estate Apocalypse). It was the second auction in this area for the auction company REDC, which previously sold more than $18 million worth of real estate in the NY area (about 200 homes) at auction in March. It was my first time at a real estate auction, and it packed as much drama as a Broadway play.

There were vocal protestors outside, organized by Bail Out the People (Bail Out the People - Not the Banks! is their motto...bailoutpeople.org). Spokesman Tony Murphy said they want a moratorium on all foreclosures and evictions. "These auctions are promoted as a good deal, as a way to put people in houses," he said. But what about the people who were living there already, he asked? "The media often writes that 'one person's misery is another person's gain,' but we say that an injury to one is an injury to all."

"Nobody likes to see foreclosures, they're an unfortunate event," agrees REDC's president, Jim Corum. Standing outside the circus going on in the ballroom, Corum tells me that all the homes being auctioned on Sunday are vacant, have been for at least 90 days, some for as long as two years. And from the pictures projected in the front of the room, the houses appear a forlorn lot. But buyers were snapping them up.

The tuxedoed bidding assistants were running up and down the aisles, flashing hand signals like a catcher. One caught my eye and winked -- it's amazing they can keep up with everything going on in their section -- the nods, the hand waves, the slight smiles that indicate bidding (did I mention that NOBODY raises their assigned auction number? Too obvious, I guess). "Sell it!" they yelled. "That's a lot of square footage for the dollar!" said the auctioneer, inbetween his almost-impenetrable price patter. "Time to take advantage!" said another. "What goes down always comes back!" From his lips to God's ear.

In the bare bones brochure, the properties look like wildly good deals -- bidding starts on some as low as $500, but within the space of five seconds (I timed it) they'd usually risen to $50,000 or $60,000. And that's where some stay -- a sad-looking frame house in Elizabeth, NJ went from $1k to $60k in three seconds flat -- but there it stalled, selling eventually for $70,000, though its previous value was listed at $260k. Hard to know if that was a recent value, or overheated pricing leftover from the go-go days of the market bubble.

Corum said most of the buyers were end-users -- about 80%, he estimated. Purchasers were sent to one of two places after their winning bids -- investors stayed in a roped-off area inside the ballroom (the better to be near the action), while those buying only one property were sent to a separate annex nearby. The annex was much busier.

Anita Walker from East Orange, NJ came to see what would happen to a vacant property near her. It sold for $42,500, despite being what she described as "trashed." "I have dual feelings," she said. "I feel bad for some families who lose their homes, but there are some really irresponsible people out there."

One winning bidder who agreed to talk (but not give his name) was a slight man, also from New Jersey, who paid $300,000 for a house he said was worth about $100,000 more than that. "My heart was pumping, my face got red, I was nervous," he told me of the bidding process. The house was an investment, he said. And though he's owned other investment properties before, he said this is the only one he'll have now.. "I try not to be greedy," he laughed, as he headed east on 42nd Street.

Leading By Example

Katie Escherich — Thu, 23 Apr 2009 18:19:55 -0400

Back to Detroit again... where the real estate news remains deplorable. This round is not only deplorable, but shameful as well.

Turns out Detroit city councilman Kwame Kenyatta and his wife walked away from their beautiful home. I won't recount all the details in full here; instead, check out this Associated Press article. I interviewed Kenyatta when that other KK (former Detroit mayor Kwame Kilpatrick) refused to step down, so I wanted to get the story directly from him.

On the phone Tuesday afternoon, he said they had bought the house about four years ago, with an adjustable rate mortgage that had since climbed to nearly 7 percent and was scheduled at the end of 2008 to adjusted upward again. Apparently it had a cap of 11 percent. At the time they abandoned the home they were paying about $2,600 (he said that includes principal and interest, PMI, taxes and insurance), and it was headed up to over $3,000.

Kenyatta said his wife contacted the bank (the house is in her name) before the rate adjusted upward, asking what they could do to bring it down, considering rates now are just south of 5 percent. She says they were told they did not "qualify for any programs," because they were paying their mortgage on time and had not missed any payments. He says they asked about a deed in lieu of foreclosure, and was told they should sell.

Sell? In Detroit? Not for the $225,000 they originally paid, or for the $204,000 he says they still owe. Backing up here a second, he also says theirs is not the only house on the block in foreclosure. Judging from what happened with a nearby home, he said, he knew his would go for less than $100,000 -- if it sold at all.

Still, I couldn't believe that a city councilman, someone elected to serve and care for the city, could walk away from his home, his neighbors, his community. Kenyatta said they weighed their "personal situation," and they were facing rising payments on declining value. When asked what kind of message that sent to his constituents he said, "I stand on my public record which is untarnished. My ability to deal with public funds has never been called into question."

As he's considering a run for mayor, or at least wants to hang on to his council seat, I wonder if the voters in Detroit will see it that way?