Harrisburg uses National Guard to board up houses; Clean and Seal; South 15th Street

The following story from WHP tv-21 attracted some attention this week in Central Pennsylvania:

The 400 block of Harrisburg's S. 15th Street looks like a war zone. And that was before the five-ton truck pulled up onto the curb Tuesday, and several uniformed Pennsylvania National Guardsmen got out.

The City and the National Guard are engaged in a:

. . . joint effort to board up abandoned buildings to prevent children and drug dealers from getting inside. The Guard runs a Counter Drug Program that features a "Clean and Seal" team. That is who will be hard at work on the streets of Harrisburg in the coming days.

First Sergeant Sean Whelan told CBS 21 News that his people will be in the city through Friday, boarding up at least 15 vacant structures.

This program does not address the more fundamental problems that have prevented the real estate in question from achieving its maximam potential, such as title defects resulting from prior tax sales. We will explore those issues in future posts.

Detroit's consolidation moves forward - large areas to be demolished - urban planners watch and wait.

I have written previously on the City of Detroit's plan to downsize by abandoning large portions of the city and consolidating into a smaller area, with hopes to convert the abandoned real estate to agricultural uses.

Detroit has taken another step in this process by announcing plans to demolish 3,000 homes this summer (as part of a larger goal to demolish 10,000 homes in the mayor's first term). That the consolitation is proceeding with such major steps should interest urban observers everywhere, including those in Pennsylvania's cities. Detroit differs from Pennsylvania only by degree.

Philadelphia property tax increase.

The Philadelphia City Council has approved a 9.9% hike in property taxes, together with increases in trash fees. This will have the usual dampening effect on real estate values in the City. As costs increase (especially taxes), net operating income declines and sale prices decline. On the bright side, with comparable sales numbers declining, those owners who manage to hang on to their properties will have a better chance at challenging their tax assessments.

The tax hike awaits final approval next week.

NBCPhiladelphia.com reports that the tax hike is supposed to be "temporary" - lasting only two years. But do not count on this tax increase going away, regardless of how they characterize it now.

Commercial real estate mortgage backed securities; Yields fall and prices rise despite decline in commercial real estate values.

Richard Daughty summarizes the problems plaguing commercial real estate right now:

. . . . [W]e are still left with the problem of the sheer tonnage of what I do not know about commercial property, except that after being overpriced for years, commercial property is said to be in a tailspin, which I assume is because people aren't buying things with that legendary American "abandon and stupidity to excess" because they finally, after bingeing for years on accumulating debt, continual government deficit-spending and the Federal Reserve creating more and more money to finance the whole deal, now owe So Freaking Much (SFM) that they can't make ends meet, and are in no mood to spend more borrowed money, meaning that businesses are closing up shop for lack of customers, leaving the commercial property owner left with bittersweet memories, a few bad checks and more vacancies.

May 1, 2010 - "Trickle of Nonsense"

Daughty's latest column expresses concern that investors are buying securities backed by commercial mortgages to such an increased extent that yields have fallen. The mortgages can be only as safe an investment as the underlying commercial real estate.

Harrisburg, PA bankruptcy discussions.

It is not news that Harrisburg City is considering bankruptcy as well as tax increases to deal with the city's fiscal crisis. Real estate values in the city (and beyond) will depend on how the city chooses among its options.

Click here for previous posts on Harrisburg tax increases and bankruptcy considerations.

Strategic Defaults; Mortgage Foreclosures; Arnold Ahlert

I have written previously about "strategic defaults." This column from Arnold Ahlert summarizes the issue:

Welcome to the brave new world where clever vocabulary confers absolution on rotten behavior. "We weren't in any financial distress, but the value of the house had declined so precipitously that continuing to stay in this house and paying this inflated mortgage made no sense," said Chris Schreur of California, who contacted a company called You Walk Away, which helped him literally walk away from a freely-signed contractual obligation. "My degree is economics, so I understand that you don't keep putting money into a losing proposition just because you already put money in," he added.


Apparently they don't teach ethics along with economics, which might explain a lot about the current state of the country. Mr Schreur continues: "Objectively the hardest part was the hit to the credit rating. Defaulting on a debt is the hardest thing to accept."

Keep in mind also that Pennsylvania law allows a bank to pursue the former homeowner for a "deficiency judgment." This fact should affect any decision that one might make in this regard.

New records for foreclosures in 2010.

Foreclosures set records across the U.S. in the first quarter of 2010:

A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.
RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago.

This record comes after foreclosures had set a new record in 2009, both for the year and for the first six months.

Click here for foreclosure predictions from September 2009 and commentary on the effect of foreclosures on the market in general and real estate fraud in particular.