The Housing Bubble

From the Voice of San Diego. “Sales in September for detached resale homes were down 16.2 percent from August and 33 percent from last September throughout the county, according to Robert Brown, an economist at the University of California, San Marcos. For attached homes, such as condos and townhomes, sales rates were down about 23 percent from August.”

The Union Tribune. “San Diego County home prices dropped last month by nearly 4.5 percent, double the rate in August and the biggest year-over-year decline since 1993, DataQuick Information Systems reported. The $476,000 overall median was down $6,000 from August and off $22,000 from September last year, the biggest year-over-year dollar reduction DataQuick has reported since it began keeping local records in 1988.”

“The latest overall figure represents a drop of $42,000 or 8.1 percent below the all-time peak of $518,000 reached just 11 months ago. With housing back to its early-2005 levels, many sellers who bought since then will be lucky to get what they paid for their property at the peak of the five-year buying boom.”

“Meanwhile, sales continued their two-year slide with the total off by more than 35 percent to 3,207 transactions, the biggest year-over-year downturn since 1991. It was the 27th consecutive decline for the category on a year-over-year basis.”

“Charles Jolly, president of the San Diego Association of Realtors, interpreted the news as further indication that home buyers are in the driver’s seat. ‘I’m working with buyers now and they’re making offers,’ Jolly said. ‘They’re negotiating for the first time in six years.’”

The North County Times. “For the second straight month, local single-family home values failed to appreciate in September when compared with a year earlier, and home sales plummeted 34 percent from the same month in 2005, according to a new report compiled for the North San Diego County Association of Realtors.”

“The total amount of dollars changing hands in the single-family market fell almost as much, by 32 percent, from $721.8 million in September 2005 to $494.4 million last month, the report showed.”

“The condominium market didn’t fare much better. Both the number of sales and the dollar volume plunged 36 percent year over year, the North County Realtors group reported.”

“In another signal of trouble ahead for the market, foreclosures countywide have reached 127 for the year to date, 10 times the number for all of 2005, Carlsbad real estate agent Dennis Smith said.”

“‘I don’t foresee an avalanche,’ he said. ‘I do foresee an increase in those numbers because we are not seeing an increase in value to make up for the poor decisions of some buyers to purchase with the loans that they used.’”

“He said he was referring to families with interest-only adjustable loans and approaching balloon payments who were counting on refinancing into fixed loans. ‘So, is the bubble bursting? No. Is there a little air coming out of it? Yes,’ Smith said.”

The Fresno Bee. “Steven Cochrane, senior managing director at Moody’s Economy.com., said that Fresno’s prices simply climbed too much, too fast. ‘There was a lot of speculative money coming into the housing market. That was the case throughout the Central Valley … Fresno, Visalia, up to Sacramento,’ he said. Out-of-town buyers, mostly from the Bay Area, bargain-shopped in the central San Joaquin Valley, pushed prices up and now are leaving, he said.”

“The market is correcting itself and prices are falling, he said. ‘You can apply that word ‘burst’ or ‘crash,’ he said, because of the double-digit drop that is predicted. ‘There are two things going on [in Fresno],’ he said. ‘One is that there is an oversupply of houses, and demand is down.’”

“Joan Jolly, president of the Fresno Association of Realtors, said there is a current problem with surplus inventory and not enough buyers. ‘The bubble is deflating. The air is coming out of the bubble, but it hasn’t popped,’ she said.”

“Robert Kleinhenz, deputy chief economist at the California Association of Realtors, said predicting what will happen in the housing market in the next few years is tricky.”

“‘This is a market different than anything we have seen before,’ he said. ‘A downturn in housing usually signifies the economy will be slowing down in the future.’ ‘But, we didn’t see that. … We are in unchartered territory.’”

The LA Times. “Economist Christopher Thornberg of Beacon Economics described the residential real estate market as ‘a slow-moving train wreck. We don’t know how bad it’s going to be,’ he said.”

The Arizona Republic reports on the September numbers. “The Valley’s resale housing market continued to slow in September as the market struggled to find a bottom. The number of houses sold fell and, for the first time in a decade, the median price was down from the same time last year, according to ASU.”

“The price drop rattles one of the fundamental assumptions of Phoenix housing: Buy a home and it will probably be worth more next year. It’s another reason for skittish buyers to stay on the sidelines. ‘The problem gets to be what is the incentive to move into the market?’ said Jay Butler, head of the real estate center.”

“It’s also bad news for people who bought at the peak of the market who are finding their houses no longer are worth what they paid. ‘If you bought last year and you don’t need to sell, bite the bullet and wait for the appreciation,’ said (realtor) Diane Watson in the northeast Valley.”

“Scottsdale residents Kyle and Jaci Olsen are seeing that phenomenon firsthand. They bought two investment homes in Scottsdale last year, and one has been on the market for 10 months. They paid $415,000 for it and dropped in $40,000 to $50,000 in renovations. Now, it’s now listed for $435,000 after coming to market at $499,000.”

“‘It’s a nightmare,’ Kyle Olsen said. ‘It’s priced really well. We’ve had a lot of lookers but no one is coming to the plate.’”

“The couple will list the other house this weekend. They spent $45,000 to completely remodel it, something they hope sets it apart. They bought the house for $430,000 and will try to sell it for $529,000. They originally hoped to get $599,000. ‘That’s how much the market has come down,’ Kyle Olsen said.”

“Broker Jim Sexton..said there are plenty of condos for sale and sellers are offering incentives. Sexton said it’s pointless for sellers to obsess over last year’s prices. They’re not going to get them. ‘Comparing to last year, you’re setting yourself up to find a six-story building to jump from,’ he said. “You can’t be too greedy.’”

“Ahwatukee Foothills experienced a $20,000 drop in its median home price from August to September, according to the Arizona Real Estate Center. Ahwatukee experienced a $15,000 drop from a year ago.”

“Like much of the Valley, Ahwatukee Foothills had a ‘good percentage of investor homes,’ noted Jay Butler. Butler said he doesn’t expect the Valley’s housing market to improve soon. ‘We probably aren’t going to see much changes coming,’ he said. ‘People don’t really want to look for a home during the holiday season.’”

“As the prices continue to decline, some families may be in danger of owing more on their homes than the homes are worth, Butler said. ‘Its really a question of how much debt did they get into their home,’ Butler said. ‘It’ll be sort of an ongoing case thing to look at in the next several months.’”

“In September, the median price in Gilbert was $318,500. That’s down from $325,000 in September 2005. The number of resale homes sold also dropped, from 565 in September 2005 to 265 last month.”

“Paul Hanus is selling his Gilbert house in preparation to move out of state. Hanus said the response in the three weeks the house has been on the market has been slow, as he expected. ‘We’ve had people look, but there’s been no offers,’ he said.”

“Hanus said he hasn’t lowered his asking price but is considering it. ‘I just think there’s a lot of uncertainty, and it’s causing people not to buy,’ he said.”

“Chandler’s numbers were also down year over year, falling below $300,000. In September, the median price of a resale house was $292,500, compared with $295,000 in September 2005.The median price in August was $308,000, according to the real estate center.”

“The number of resale homes sold in Chandler also dropped, from 715 in September 2005 to 315 last month.”

“Only half the number of homes sold last month as the same month a year earlier, according to ASU. ‘A lot of it is the buyers aren’t out there,’ said Butler. ‘The days of the big (price) increases are gone, at least for a while, so the buyer is very cautious about what they’re going to do.’”

“The slowdown has caught some sellers short, forcing price reductions that still don’t attract buyers.”

“‘It’s so depressing and frustrating because I probably am like 20,000 other people out there,’ said Craig Bohall, who cut the price on his family’s Mesa home and offered other incentives like a trip to Hawaii but still hasn’t had a buyer step up. ‘You have a beautiful home, there’s nothing wrong with it, but there just aren’t any buyers.’”

The Connection reports from Virginia. “Stephen Good, a financial planner, just bought a three-level townhouse in Fairfax last month. The end-unit, which includes a garage, sold for $460,000 in April of 2005. Good paid $430,000. After studying the market and working with his Realtor, Good felt comfortable buying.”

“‘I felt I could get what I want, not that I would necessarily get a deal,’ said Good. ‘I don’t think I bought at the top [of the market], but I don’t think I bought at the bottom either.’”

“The assessment wasn’t far off from what George Mason University economist Stephen Fuller told a crowd of about 500 real estate professionals at the Northern Virginia Association of Realtor’s 10th annual Economic Summit. ‘Buyers are out there,’ said Fuller. ‘They want to buy. They don’t want to buy prematurely.’”

The News and Advance. “A controversial town home development in the New London community did not get the rezoning approval it needed Tuesday to move forward. Huddleston Supervisor Roger Cheek said he did not support the development because of the problems of congested roads and schools.”

“‘We have enough use by rights to drown us in housing,’ Cheek said. ‘I think we need to start listening to our taxpayers.’”

The Washington Post. “It’s taking longer and longer to sell homes in the Washington area, and even longer in the outer suburbs, a new survey reports. Real estate experts say homes are languishing because some sellers do not set realistic prices and some buyers are waiting on the sidelines for prices to drop.”

“The report also shows the average median price, the level at which half sold for more and half for less, rose in September, compared with a year earlier. The sharpest price drops were in Loudoun, which was down 9.3 percent to $440,000, Fauquier, down 9 percent to $365,000 and Fairfax, down 8.3 percent to $445,000, the survey shows.”

“John McClain, a George Mason University economist, said these housing prices suggest the market is ’still strong for neighborhoods that don’t involve a lengthy commute, given today’s rising gasoline prices and traffic congestion,’ an MRIS news release said.”

The Daily Times from Maryland. “Rows of new houses sit for sale in neat, upscale new subdivisions, but a glut of new projects like them and a slowing real estate market in Worcester County has left them looking a little lonely.”

“A change in the market in 2005 that national housing industry experts are now calling a full downswing is affecting Worcester County equally despite the fact it’s the only oceanside community in Maryland.”

“It’s going to start affecting jobs, experts predict. ‘There are currently 1,300 members of the (Coastal) Association (of Realtors),’ said Realtor and County Commissioner Bud Church. ‘A few years ago that was 700 and it doubled because of the market. But we’re going to see a thinning out of agents.’”

“And Church, who has sold houses for 30 years, said the downswing could last a while. ‘I don’t see the market changing until next spring or summer,’ he said. That’s bad news for a market that has seen listings steadily increase for more than a year already. In February 2005, there were 396 houses listed with Realtors in Worcester County, but in August 2006 there were 765, a 93 percent increase.”

“Condos on the market have grown at an equal rate with 1,870 being on the market in the county in February 2005 and 3,541 in August 2006, an 89 percent increase. ‘We’re a little saturated right now, but I think we’ll catch up,’ said new Coastal Association of Realtors President Kevin White. White said he felt inventory was up because of the combination of so many new projects, but said the inventory wasn’t ‘completely out of whack.’”

“The problem is that saturation of the market with new homes isn’t about to stop. Glenn Riddle has only built about 100 of 600 planned homes. Summerfield developer Mark Odachowski plans to build its first 300 homes in Snow Hill in the next 15 to 21 months while the entire development is planned to be 2,000 homes.”

“If the downswing goes beyond the next year, an ADC Builder’s Inc.-proposed 1,000-home development in Showell, developer Troy Purnell’s proposed 150-home Purnell Crossing development in Berlin and a Highland Development Corp.-proposed 127-home division on Stockton Road near Pocomoke City could all see slow returns on their substantial investments.”

“‘I would not want to be sitting on a big project right now,’ Church said. ‘One of the things we’re seeing with major projects and developments is a lot are dropping their prices $100,000, $150,000, even $200,000 (per house).’”

“‘What happened nationally and in our market, prices have gone up so dramatically that people got sticker shock,’ Church said. ‘(The market) is like a skydiver jumping out of a plane and falling, and you’re waiting to see when they’re going to open the chute. I don’t think we’re going to hit the ground, but I don’t think we’re going to see the market change into next spring or summer.’”

The Palm Beach Post from Florida. “CB Richard Ellis’ big-picture report on the U.S. office and industrial space markets pegs West Palm Beach as a national player in both sectors. There are problems: Fuel prices and ‘the bursting of the speculative bubble in residential real estate’ are cited as potential stumbling blocks.”

“The authors write, ‘Markets having the greatest exposure to inflated housing prices may have the most difficult time in dealing with the fallout’ from soaring gas prices and plummeting housing valuations. That would seem to describe Palm Beach County.”

The Sun Sentinel. “A development group on Tuesday gave up its effort to turn 245 rental apartments into condos in Lauderdale Lakes, the only city in Broward County with a ban on condo conversions.”

“The investors thought there were ’safer places to put their money,’ said Deme Mekras, a real estate agent for members of the group. ‘It was [for] city reasons instead of market reasons.’”

“The decision to withdraw the proposal surprised city commissioners, who were poised to consider repealing the city’s one-year moratorium on conversions Tuesday night. When the issue became moot, the commission dropped its planned discussion.”

The St Petersburg Times. “In the spring, Port Richey officials expected five condominium and townhouse complexes with units priced around $200,000 to break ground by year’s end, doubling the city’s population of 3,200. Another developer planned to replace the Port Richey Mobile Home Park with hotels and restaurants, trying to attract tourists to the city’s waterfront.”

“One of the largest projects, the 170-unit Bay Point townhouses, has stalled. And two mobile home parks, ripe for redevelopment, remain on the market.”

“That’s because a slowing housing market and skyrocketing insurance costs have left the city struggling to get developments off the ground. City officials now estimate just 700 new residents by year’s end, a fraction of the roughly 3,000 predicted earlier this year.”

“Has the rebirth of Port Richey stalled? ‘Everybody knows with the prices of flood and property insurance, we’re struggling to make it,’ said Ed Winch, city building official. ‘It’s affecting the market badly. It’s slowed anticipated growth. With condos, there’s not a market for it.’”

“‘I think people have a wait-and-see attitude,’ said City Manager Jerry Calhoun. ‘With things slowing down, it isn’t just Port Richey, it’s nationwide. We have to back off our projections.’”

“‘Condos was the thing, and they were selling like hotcakes,’ Winch said. But then, ‘the bottom fell out (of the market).’”

The Orlando Sentinel. “Going broke has fallen on hard times these days. In the year since a tougher federal bankruptcy law took effect, personal-bankruptcy cases have plummeted, and consumers must clear more hurdles than ever to get a financial fresh start through the courts.”

“But despite the law’s fallout, many experts say it may be only a matter of time before going broke is thriving again, thanks largely to massive adjustable-rate-mortgage debt many took on during the housing boom. Homeowners, especially those who have interest-only or so-called ‘teaser-rate’ mortgages, could see their monthly payments more than double.”

“‘Some just won’t be able to make the new monthly payments,’ said Jules Cohen, a bankruptcy lawyer in an Orlando law firm. ‘They’ll get two or three months behind, and then you’ll see a lot of them file Chapter 13 bankruptcy in hopes they can set up a debt-payment plan and prevent foreclosure.’”

“Interest rates will rise on about $300 billion in adjustable-rate mortgages this year alone, according to a research group. That figure is projected to skyrocket to more than $1 trillion in each of the next two years.”

“Consumer lawyers say they are already beginning to see some ‘victims’ of real-estate investments during the housing boom. Jonathan Alper, a bankruptcy lawyer in Heathrow, said a couple who recently visited his office faced insolvency after buying two $400,000 homes as investment properties. With annual household income of only $75,000, the couple quickly defaulted on the loans.”

“They blamed the ill-advised venture on tips from a ‘wealth-in-real-estate’ seminar.”

“‘Overall, the real-estate issue is going to be a big problem in the bankruptcy system,’ Alper said. ‘We haven’t seen that much yet, but it is coming. Real-estate lawyers tell me there are a lot of their clients in trouble these days as buyers try to get out of deals before they close.’”

“There may be signs that real-estate troubles are already having an effect. The latest numbers show that bankruptcies are beginning to climb again. New cases in Florida’s Middle District, for example, rose 31 percent from the first quarter to the second quarter this year, the court reported. Last year, cases were up only 13 percent in that period.”

“‘Most people think it’s just a matter of time before the number of people filing bankruptcy gets back to a normal level,’ Orlando bankruptcy lawyer Doug Neway said. Returning to ‘normal’ would be a dramatic change under the new law, which, among other things, set up a ‘means test’ to see whether someone could extinguish all debt by filing Chapter 7 liquidation.”

“Debtors who earn more than their state’s median income, after reasonable living expenses, must file Chapter 13 and pay some of their debt.”

The Journal News reports from New York. “If there is a housing bubble, fresh data suggest that in parts of the Lower Hudson Valley, at least, it may not so much be bursting as perhaps slowly deflating. The data showed fewer homes sold in the quarter, with 459 deals closed, down 20.3 percent from 576 a year ago. Inventories rose, too, with 1,558 homes available for sale, an increase of 40.4 percent above last year’s level of 1,110.”

“‘We’re seeing what we’ve been hearing all along - there’s a decided softening in the market,’ said Ann Garti, chief executive at the Greater Hudson Valley MLS. ‘Prices have risen to the point where there’s just a finite number of buyers,’ she said.”

“This is the highest number of unsold homes in years, said Roberta Bangs, president of the Rockland County Board of Realtors. ‘When upper-end-priced houses are just sitting, it makes the stats look worse than they actually are,’ Bangs said.”

“The price of single family house in Rockland County fell 3.8 percent in the third quarter, as the region’s slowing housing market forced sellers to reduce prices.”

“Median prices for condominiums fell at more than twice the percentage rate of single-family houses, dropping 7.9 percent to $285,493 from $310,000 a year ago.”

The Record Online. “Local Realtors say homes continue to sell, but buyers are more selective and have more bargaining power. In Orange County, the inventory of unsold homes has doubled in the past four years.”

“‘I’m seeing offers coming in $20,000, $30,000 below asking price,’ said (broker) Paula Meloi in Port Jervis. ‘What’s selling is the best-priced property on the market, whether it’s in a low (price) category or a high category.’”

The Long Island Business News. “Dragged down by energy costs and an ebbing housing and construction market, Long Island’s economy will head into a mild recession next year, according to a report.”

“What’s more, Long Islanders who have tapped home-equity loans will also have far less money to spend next year because rising interest rates have depleted the refinancing market, according to the Center for Management Analysis at the C.W. Post Campus of Long Island University.”

“The report’s author, Thomas Conoscenti, a respected economist who also forecasts Suffolk County government’s sales-tax revenue, also notes that the construction sector on Long Island is beginning to show signs of shrinkage, an important development since the industry accounted for 20 percent of the Island’s employment growth in the last year.”

“‘Weakness in the housing and construction industries will pull down the rest of the economy in 2007,’ according to the report.”

Inman News on Connecticut. “The statewide median sale price of single-family homes in Connecticut fell 0.9 percent and single-family home sales dropped 21 percent in August compared to August 2005, according to The Warren Group, a real estate and financial data company.”

“It was the first time since 1998 that the statewide median single-family home price dropped. The 21 percent drop in sales was the largest since 2000.”

“A total of 3,875 single-family homes were sold in August 2006 in the state, which is the lowest sales figure in August since 1995. Statewide single-family home sales have dropped 11 straight months and 17 out of the last 19 months dating back to February 2005, The Warren Group reported.”

“Condominium sales in August dropped 10.8 percent compared to August 2005, with 1,557 units sold. Condo sales have fallen 10 straight months.”

“Timothy Warren Jr., CEO of The Warren Group, said, ‘Home sales have been falling for well over a year, and now we’re seeing sale prices starting to fall. As we’ve seen in Massachusetts, where prices are now falling 5 to 10 percent from year-before periods, buyers are taking their time and driving hard bargains. We expect to see more of this in Connecticut over the next few months.’”

“Single-family home sales have dropped in each of Connecticut’s eight counties during the first eight months of 2006. Fairfield County continues to experience the steepest decline, with sales dropping 22 percent for the year-to-date period and 29.6 percent in August.”

The Hartford Courant. “For the first time in eight years, the median sales price of a single-family home in Connecticut fell, a sign that declining sales and more homes on the market may be starting to pull down prices.”

“Three counties, Fairfield, Hartford and Windham, saw declines in the median sale price of condominiums. The declines ranged from 10.9 percent in Fairfield to 0.6 percent in Hartford. Hartford County saw its median sale price dip to $179,000 from $180,000.”

“Overall, sales of single-family homes in Connecticut in August fell 21 percent. It was the biggest decline in six years. ‘That doesn’t surprise me,’ said Tom Abbate, a real estate agent in Middletown. ‘Buyers have a lot more choices now. There are many more homes on the market.’”

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