Equity Conversion Plan

Bloomberg reports that consumer confidence is sinking with home values, reaching lows not seen since 1992.  From the article on the lack of consumer confidence:

Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of bottoming.

The Conference Board’s confidence index declined more than forecast to 57.2, the New York-based research group said today. The S&P/Case-Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the figures were first published in 2001. Separate figures from the Commerce Department showed sales of new homes were the second-lowest since 1991 in April.

The slide in home values, along with gasoline near $4 a gallon and rising unemployment, threatens to hobble the consumer spending that accounts for more than two-thirds of the economy.

“When confidence is as bad as it is on the consumer side, it’s hard to believe we’re going to be buying a lot of homes in the near term,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, Minnesota. “The drag from home-price declines, the credit crunch and oil prices will probably be more severe than some had forecast earlier in the year.”

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Home Owners Associations are feeling the effects of the housing bust as foreclosures and delinquent association payments put the squeeze on budgets.  Homeowners feeling the squeeze of increased mortgage payments have stopped paying their association dues.  In addition banks that are holding REO property in neighborhoods with association dues are notorious for lack of payment, causing the associations charged with keeping up public areas of housing developments to cut back on services.

HOA’s are a familiar sight in newer developments and are responsible for everything from maintaining the common area lawns, to the pools, parks and other amenities of master-planned living.  Now, with revenues dwindling the HOA’s are faced with the unpleasant reality of having to raise the dues of the paying homeowners while cutting back services just to stay solvent.

The USA today covers the plight of a typical HOA in Arizona:

AVONDALE, Ariz. — A modest housing tract, set amid pecan trees here in suburban Phoenix, faces big problems: About 40% of its homeowners aren’t paying their association fees, leaving neighbors with higher assessments and reduced services.

“We’re looking at a very deep hole,” says Kent Miller, president of the Los Arbolitos Homeowners Association in Avondale. “I don’t know how we’re going to get out of it. We’ve put liens on all the (delinquent) properties, but it doesn’t do any good.”

It’s a scenario being repeated across the country. Delinquent fees at condo and homeowner associations have become an outgrowth of the mortgage crisis. Housing cooperatives, in a squeeze because of unpaid fees from struggling homeowners, are scraping to pay for landscaping, maintenance, pools, recreation centers and other amenities.

“It’s happening all over,” says Frank Rathbun, a spokesman for the Virginia-based Community Associations Institute. “It’s a national problem.”

The institute estimates there are 300,000 homeowner and condominium cooperatives nationwide, representing one in every five Americans. Assessments, which resemble self-imposed community taxes, total about $40 billion a year.

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