The Housing Bubble

A report from the Virginia Pilot. “For the first two months of this year, the number of Hampton Roads individuals trying to hold onto a home or other major asset by means of a Chapter 13 bankruptcy jumped 84 percent to 373 from slightly more than 200 for the same period last year, according to the U.S. Bankruptcy Court’s Eastern District of Virginia.”

“Jeffrey Flax, a Norfolk attorney who handles personal bankruptcies, witnessed an increasing number of homeowners squeezed by rising costs while their incomes failed to kept pace. ‘Some people got into houses they really couldn’t afford,’ Flax said. ‘Home values have gone down, rather than up,’ and these homeowners ‘are stuck.’”

The News Journal from Delaware. “Delaware real estate agents are scratching their heads about a report that mortgage insurers have marked Kent County as a ‘distressed or declining’ market and have tightened standards for insuring home loans there.”

“‘It’s very confusing,’ said Ann G. Riley, president of Wilmington-based Gilpin Mortgage. ‘We read it and said, ‘That’s news to us.’”

“‘That conjures up a picture of nothing going under contract, nothing selling at all,’ said Cynthia Witt of Woodburn Realty Company in Dover. ‘I don’t see it that way.’”

“Based on the 335 deeds she collected in January and February, the median home price in Kent County so far this year is about $233,000, down from $239,900 in 2007. ‘Based on that, it has gone down a trifle. But the problem with looking at Kent County is the amount of data is so small, you can see some false trends,’ Witt said.”

The Daily Times from Maryland. “The Hagerstown metropolitan area is Maryland’s fastest growing, according to new data from the U.S. Census Bureau. However, Washington County Planning Director Michael Thompson said development has declined since the census analysis.”

“Development peaked in Washington County between 2004 and 2006, by Thompson’s estimation. Census data supports him — from July 2005 to July 2006, the metro area’s growth rate was 2.7 percent.”

“‘We were seeing a lot of people coming up from the metro areas, and they were willing to drive another 40 minutes,’ Thompson said. ‘They came primarily because the cost of housing was so cheap here, and of course the cost of gas wasn’t so high here either at that time. People used to say the mountain was the barrier between us and the metro area, well, all of a sudden that mountain seemed to get flat for a while there.’”

“And while Matthew Mullenax, geographic information systems coordinator at the Berkeley County Planning Commission, said they’ve had a ‘tremendous boom,’ there’s still been a slight slowdown.”

“‘You’ll see a 100-acre subdivision that has only one or two houses built, and all the infrastructure is there — roads, sewer and water, things like that,’ he said. ‘They’re just laying there and waiting for somebody to come by and build a lot or order a house.’”

The New York Times from Maryland. “The foreclosure crisis has been hard on counselors, and some veterans are burning out, said Lisa R. Evans, deputy director of St. Ambrose Housing Aid Center Inc., Baltimore’s oldest nonprofit housing group.”

“‘Volume has doubled or tripled,’ she said. ‘Families in the past were losing their homes because they lost a job or had a medical expense. You could fix that with a couple thousand dollars. But now we have families coming in where the loan is two times the value of the property, and there was never any income, and there’s just nothing you can do for that person. One counselor said, ‘I’m exhausted.’ And the phone keeps ringing.”

“In private, Roy Miller, a nonprofit housing counselor, talks forcefully about the predatory loans he has seen in this neighborhood. But to the class, he took a different tack.”

“‘When people say it’s the banks, or it’s the lenders, or it’s the real estate agents — it’s not their fault. You’re the one who said, ‘I want it,’ he said.’”

The Morning Call from Pennsylvania. “The number of homes sold at sheriff’s sales in Northampton County more than doubled to 99 properties during the first three months of the year, according to the county’s sheriff department, which handles the sales.” “In Lehigh County, 94 homes sold at sheriff’s sale in January, February and March, nearly double the number in 2007.”

“What’s notable about the current mortgage lending crisis is that people of various income levels are entering the foreclosure process. Jack Gross in Bethlehem, who sells foreclosed properties for many banks, said he is handling more homes priced at $200,000 or more than at any other time in the past 15 years.”

“‘Years gone past, the bulk of our inventory was concentrated in center city Allentown, the south side of Bethlehem and downtown Easton,’ Gross said. ‘And that is the not the case anymore. We are more in the suburbs.’”

“‘The person who bought a house with as they say ‘no skin in the game,’ now they owe $250,000 on a house that’s worth no more than $180,000,’ said Bethlehem economist Kamran Afshar.”

“He added, ‘With someone in the neighborhood in foreclosure, it will affect everyone.’”

“Afshar said residents who don’t plan to sell their homes soon will probably not see a big impact. In the short-term, however, he said ‘If there are two houses that are foreclosed, prices of all houses in the neighborhood drop at that moment.’”

“Not long ago, alarmed planners in the Lehigh Valley scurried to figure out how to stop developers from chewing up more than 4 square miles of open space each year. It turns out all they really needed was a good old housing slump.”

“The number of building permits issued in 2007 dropped 45 percent over just two years earlier, while land approved for development decreased by more than 800 acres, or 1.3 square miles, in the same period, according to a Lehigh Valley Planning Commission report to be released today.”

“Bethlehem Township farmer-turned-developer Mark Wagner said he believes some local developers who were riding the housing wave only two years ago won’t make it out of this drought. ‘Guys who built on speculation are in trouble,’ Wagner said. ‘I know guys sitting on 30 or 40 homes they can’t sell. It’s tough to carry that kind of inventory and ride though a drought this long.’”

“Wagner said his own near-death business experience during the last drought prepared him for this one. Like many, he rode a development boom in the late 1980s and began building homes on speculation.”

“But when the so-called ‘New Jersey invasion’ market went sour in 1990, he was stuck with rows of homes he couldn’t sell. The three-year lull nearly ended his burgeoning development career.”

“While 17,348 homes were listed for sale last year in the Valley, only 7,231 sold, according to the Lehigh Valley Association of Realtors.”

The Daily Local from Pennsylvania. “‘Existing home sales are down in the Philadelphia area; we’re in the midst of a significant decline that began in the fall,’ according to Steve Storti, Prudential Fox & Roach senior marketing VP. ‘We’re in the midst of a demand slowdown at the end of a wild ride for home sales.’”

“Broker Bob Hallowell made the point that the local housing market isn’t nearly as bad as in other parts of the country. However, he added, ‘That’s not to say we aren’t down — because we are. Everyone uses 2004, 2005 and 2006 as benchmarks, when during these three years more existing homes sold across the country than at any other time in U.S. history.’”

“Hallowell, whose office sold 80 to 90 houses a month prior to the halcyon days of 2004-2006, sold 120 to 140 a month during those three years. He declined to predict how many units his office is selling per month right now, preferring instead to say, ‘We’re seeing and sensing caution. You just can’t go through the three boom years we had without a correction.’”

“Associate broker Marie Griesser said that in the first three months of 2008, she and her colleagues are seeing lots of people moving up and down in their housing choices. ‘Last year, everyone who bought did so because they had to,’ she said.”

“Said local agent Dyan Nelson Blass, ‘Realistic sellers are the ones selling their homes. Whether you’re in a $300,000 home or one valued at $1 million, you’ll sell your home if you price it right to start with.’”

“Most of the homes that Blass sells today are for 90 percent or more of the asking price.”

“For some, however, there is a silver lining. Keller-Williams’ Blass, for one, is breathing a sigh of relief. ‘It’s not the crazy market we saw three years ago and and I’m glad. I’m no longer going nuts.’”

The Philadelphia Inquirer. “Lily Khalif of Philadelphia is a long-term investor, and she continued to pick up Center City properties during the boom. ‘Prices never went up so much to deter us,’ she said.”

“This is, however, a much better time for long-term investors. ‘I wish we had access to more capital to buy, especially for new construction,’ Khalif said. ‘Builders never have been as willing to negotiate price as they are now.’”

“Alex and Beth Cerrato of Haddonfield waited five years for prices in Ocean City to drop before buying a condo last fall. They found a property that was selling $125,000 below what others were going for in the neighborhood. And by negotiating directly with the seller, they were able to get a house already listed at a bargain $475,000 for $400,000.”

“‘A real estate agent had complained that it was a little smaller than the others, but it’s five houses from the beach, and the owner was a contractor who filled it with top-of-the-line everything, including furniture,’ he said.”

“In turn, the seller, who owned the house outright, put the money down on a house on the beach listed for $1.2 million. ‘I think he got it for $1 million,’ Cerrato said.”

“‘In Ocean City, where there is a lot of unsold inventory, there are plenty of bargains, with prices maybe 20 to 30 percent lower,’ said Jerome DiPentino, owner of Premier Properties in Longport.”

“Second-home sales nationally took a big hit last year as speculators disappeared from the market in the face of tightening credit, the National Association of Realtors reported yesterday.”

“Vacation-home sales dropped 30.6 percent in 2007, to 740,000 from a record 1.07 million in 2006, while sales of investment properties fell 18.1 percent, to 1.35 million last year from 1.65 million in 2006.”

“Investors ‘are being wrung out of the market,’ said Mark Zandi, chief economist of Moody’s Economy.com in West Chester.”

“‘The housing market has gone from boom to bust as the investor frenzy has flamed out,’ he said. ‘Both flippers and long-term investors have fled the market. The long-term investors will eventually come back, but the flippers won’t be back in our lifetime.’”

The Citizens Voice from Pennsylvania. “More than two dozen people will board a bus Sunday in Clarks Summit to stroll through foreclosed houses. The two-hour-plus tour will stop at six vacant houses that banks reclaimed through foreclosures.”

“At least 26 people will tour homes priced between $55,000 and $127,500 and ranging from fixer-uppers to ready-to-occupy. ‘These are people looking for homes to live in or investment properties,’ said Davis, who will host the tour with co-worker Sara Levy. ‘Once they see what’s out there, they are going to want to invest in something.’”

“The tour represents housing and investment opportunities, not commercial capitalization on the misfortunes of people who lost their homes, Farrell said. ‘These are properties the banks want to unload,’ he said. ‘They are lost already. They are gone.’”

“Classic Properties will host another tour April 27 and Farrell expects buyer interest to expand substantially by then. ‘We’re anticipating a 20 percent increase in foreclosed listings by that time,’ said broker/owner Steve Farrell. ‘We’re going to have to get a bigger bus.’”