We have all seen the devastating effects of the housing crash as friends and neighbors have lost their homes and jobs as this catastrophe plays out. Not only our neighbors have been hurt; all of us have seen significant amounts of our wealth vanish as 1/3 to ½ of the value of our homes disappears.
But sometimes the effects of the housing situation are more subtle. As a case in point, here is what is happening at the condominium complex in Florida that I help to manage:
I purchased my unit in 2002 for $77,000 in a period of rapidly rising prices. We were devastated by Hurricane Charley in 2004, but by the middle of 2005, our condo complex was completely repaired. In 2006, units (all units are the same) were selling for $135,000, and by 2007, we probably would not have sold our unit for less than $150,000.
In the last year, units have sold anywhere from $65,000 (the owners had both lost their jobs and were desperate for cash) to $105,000, and three units have gone empty, two from the deaths of the owners and one from a walk-away.
In one case the owner had arranged a $195,000 reverse mortgage guaranteed by Fannie-May; in the second case the owner had a $97,000 first and a $43,000 second mortgage; in the third case the owner had received a $102,000 mortgage and had run into serious financial difficulties. All of these mortgages had been taken out in the 2005-2008 period of incredible and unsustainable housing price increases.
All three units are underwater, and no fees are being collected on them. Since they are underwater, there is no point in placing liens on them; unpaid fees will never be recovered. All three units have been visited by “mortgage-service” companies who have broken into the units and changed the locks without notice and without providing a key to the condo association as they are required to do.
A further complication is that the electricity and the air conditioning have been shut off, and if there is no A/C for the summer, these three units will fill with mold and mildew and become uninhabitable. Mold spores will also affect the health of residents of adjoining units.
Attempts to speak with representatives of the mortgage-holders lead nowhere; probably there are so many similar situations that they are overwhelmed. Our association has just decided to do three things: 1. we passed a special assessment to cover the fees we will not be collecting, 2. we will break into the units and change the locks, and 3. we will turn back on and pay for the electricity so we can air condition these units from April through October and protect them from mold. Stay tuned.