The Housing Bubble

The San Francisco Chronicle reports on a ‘parallel real estate market.’ “Condos for sale on cruise ships. May be coming to Bay Area soon. It may be a stretch to call it a real estate tsunami, but putting plush condominiums on seaworthy cruise ships is drawing interest from developers, investors, entrepreneurs and gilt-edged hotel companies eager to plumb a new market.”

“Condominium ships are ‘a very small piece of the market,’ according to Michael Paladino, a Fitch Ratings analyst who follows the cruise ship industry. ‘Certainly the large cruise operators haven’t expressed interest in this market.’”

“Pitched by their champions as exotic and novel alternatives to traditional condos for landlubbers, privately owned waterborne condos exist on just one major ship, the World. Four years ago, when condo buyers on the World felt disgruntled about the ship’s ports-of-call itinerary, they formed an owners association and bought the ship. The vessel is now a co-op.”

“Condo Cruise Lines President and CEO Mark Boyd said his company’s first ship, presently a floating casino in Hong Kong, will be converted into a condo carrier this fall in Singapore. Boyd said suites on the 560-foot-long ship are listed from $500,000 to $1.2 million for one-room units to three-room penthouse suites.”

“In addition, there’s a $20,000 monthly fee for a package that includes all shipboard meals, television hook-ups, a health club, housekeeping services and Internet access, Boyd said.”

“Many shipboard units have been sold to Californians, he said.”

“‘They’re buying property in Arizona and Las Vegas, where prices are more sane. We have what those people are looking for: No property taxes, you don’t have to buy furniture, don’t have to set up cable TV, every meal is free.’”

“According to Boyd, ‘We get a range of buyers, (a) guy who says, ‘I’ll never set foot on it. I can rent it for four times my mortgage, rather than two times my mortgage, as it is on land.’ For condo owners who want to rent out their units, the company says it will charge a 30 percent rental management fee.”

“Mixing condo owners who want to live full-time or nearly full-time aboard ship with vacationers who rent for short periods could create an uncomfortable mix, said Fitch Ratings’ Michael Paladino. ‘There could be a difference in how people take care of the units, and you could get different types of people,’ he observed.”

“‘Given that his company’s first ship is reportedly 80 percent sold, Boyd said he plans to push ahead and amass a fleet of five ships. ‘This is a parallel real estate market,’ he said.”

A pair of rare reports on housing in Alaska. “Homer was rich in modest homes on a couple acres of land for prices the average Homer wage-earner could afford. The tide began to shift in the late ’90s. The average sales price of a Homer-area home crept upward from $119,000 in 1999 to $132,000 in 2002. In 2003, that number jumped nearly 8.5 percent, and by last year, it had soared to $190,000.”

“In some areas of Homer, the leap was even more dramatic. What cost $136,000 in 2002 was suddenly worth $215,500 in 2005.”

“While home prices have risen dramatically, wages have not. The average household income in the Kenai Peninsula Borough in 1999 was between $40,000 and $50,000. A retiree who just sold a home in California ma be able to afford those prices, but the average Homer resident still can not.”

“Census figures show an increase in residents with those kinds of bankrolls, but the vast majority remain well below such income ranges.”

The Alaska Journal. “Still growing, but slowing, best describes residential real estate sales in the Matanuska Valley, which have cooled a bit in the wake of a surge of development. ‘It’s common knowledge that there are more active listings of real estate than there were at the same time last year, but the cause of that is somewhat in question,’ said banker Taka Tsukada.”

“‘The market has changed,’ Anchorage demographics consultant Sue Fison said. ‘It’s the affordability issue.’ Those families who could qualify financially for a certain-sized home a year ago may not qualify now, she said.”

“Another real estate agent selling property in the same subdivision had a different vision of the market, saying several builders constructed homes on speculation last year.”

“One prominent developer, Chuck Spinelli, acknowledged that the market has slowed down considerably, probably by 25 percent. ‘It’s a mystery,’ Spinelli said. ‘It probably had a little to do with (rising) interest rates, gas prices, and might have a lot to do with the number of unlicensed residential contractors operating out here.’”

“Builder Dennis Byler said he hasn’t noticed any overbuilding in multi-family housing. While the number of large ‘for rent’ signs continue to increase around these properties, Byler said he is not getting any feedback from his customers that they are having trouble renting what they bought from his company. ‘I’m building another duplex right now,’ Byler said.”

“(Homebuilder) Jess Hall was less enthusiastic. ‘We are seeing a slowdown in the market this year compared to the last few years,’ he said. ‘We could be overbuilding, but it’s hard to tell,’ Hall said. ‘We don’t have a permit process,’ which makes it hard to determine just how many new homes are building built, he said.”

Several readers suggested this article on bankruptcy myths. “Here’s how bankruptcy affects your credit, your possessions and your karma. While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing.”

“‘For most people, they’ll pass through a bankruptcy case and keep everything they have,’ says John Hargrave, a bankruptcy trustee in New Jersey. If you have a mortgage or a car loan, you can keep those as long as you keep making the payments (like the rest of us).”

“‘I’ll never get credit again.’ Quite the contrary. It won’t be long before you’re getting credit card offers again. They’ll just be from subprime lenders that will charge very high interest rates.”

“However, if you’re planning to buy a house or a car, you might want to do that before you file. Those loans will be tough to get, and the higher interest rate on such a large purchase would make a significant impact on your payments.”

The Associated Press. “Credit counseling agencies say that consumers are coming in in droves seeking help. ‘My phones are going crazy,’ said Howard Dvorkin, president of a nonprofit credit counseling service in Fort Lauderdale, Fla. ‘Consumers are carrying an exorbitant amount of debt, and they don’t have any savings to fall back on.’”

“The Federal Reserve’s decision last week to raise short-term interest rates for the 17th consecutive time will boost yet again borrowing costs for consumers, likely prompting more delinquencies on credit card bills, as well as on auto loans and mortgages.”

“Credit expert Catherine Williams said rising costs for gasoline and utilities were only part of the explanation for rising credit card delinquencies and increased consumer financial stress. ‘People refinanced (their mortgages) six months or a year ago, so the ‘house bank’ is empty,’ Williams said. ‘Most can’t go back and tap their home equity again.’”

“In addition, she said, consumers can only juggle debt payments for a while. As she put it: ‘You let the car payment go one month, then the house payment. Then you make a lot of little creditors happy for one month, maybe for two months. Then it becomes obvious that you have to catch up on car payments, and everything else slides.’”

The Finger Lakes Times has this report from New York. “While the surrounding real estate market is cooling a bit, Geneva’s houses continue selling at relatively high prices, buoyed by out-of-state investors with deep pockets. So far this year, though, property is selling more slowly, and for less.”

“‘For the past couple years, the market’s been so great, and now we’re seeing more of a normal market,’ said Matthew Parrott, an associate broker. ‘It’s not that it’s down, but compared to the last few years, it’s normalized.’”

“The Rochester association’s statistics show the average sale price of a home in Geneva was around $116,008 last year. Numbers compiled by Parrott indicate the average sales price dropped slightly in the first half of 2006 to around $112,700.”

“Debra Dorn of Coldwell Banker attributed the falling prices to the perception of a lagging market, rising interest rates and jitters over the economy. ‘The media in general constantly talks about the housing market, mostly in a negative way,’ she said, adding that has an effect on buyers.”

“Whatever the reason, she said single-family homes are selling for less than they have in the last few years and have stayed on the market for more than 90 days, an industry benchmark. ‘It is what it is,’ she said. ‘What it’ll turn out to be, I won’t even speculate.’”

“Another reason for the drop in housing prices is the sheer number of homes on the market, said broker Steve Davoli. ‘We have a slightly higher inventory than we had last year,’ he said. ‘When you have more property, you get lower prices. It’s supply and demand.’”

“Davoli said that the second quarter statistics aren’t out yet, but the Rochester association’s figures show a jump in the number of houses on the market, from 96 in 2001 to 207 last year.”

“In hot real estate markets, it’s not unusual for neighbors to put their homes on the market, just to see how much they can get for them, Davoli said. The glut of homes in turn drives down prices over time, he said.”

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