The Housing Bubble

It’s Friday desk clearing time. The UK, “Alliance & Leicester recently changed its rules so borrowers, except first-time buyers, do not need to provide proof of their income if they can put down a 25 per cent deposit, giving them leeway to inflate their earnings.”

“Simon Tyler of Chase de Vere Mortgage Management, an adviser, said: ‘The continued growth in the property market could not have happened without lenders’ increased generosity. If they had stuck to their old systems, most people would have been priced out of the market years ago and property prices would have crashed, it’s as simple as that.’”

From Spain. “More than 500 people took part in a demonstration in Barcelona’s Plaza de Sant Jaume last night organised by the Assembly for Affordable Housing. ‘Nobody lives here,’ and ‘What’s going on?, were some of the slogans chanted while they passed round two huge white ballons that represented the housing bubble.”

From Australia. “The latest quarterly figures from the Insolvency and Trustee Service Australia have shown record levels of bankruptcies in NSW. Bankruptcies in the otherwise booming local economy of Western Australia are on the rise too. With the holiday season just around the corner, Paul Leroy, partner at Hall Chadwick advised consumers against maxing out their credit cards. ‘Proceed with caution – there may be a few more bumps on the road ahead.’”

In Canada. “Gregory Klump, the Canadian Real Estate Association’s chief economist, says ‘What’s happening in Calgary is sales are gradually cooling and..the market also is seeing a lot more listings.’ Kevin Clark, president of the Calgary Real Estate Board, said the amount of available houses on the market is up at least four times what it was from earlier this year.”

“He also said as of Monday 40% of the detached homes currently listed had reduced their price by an average of $27,000.”

In Kentucky. “The Lexington housing market continued its downward spiral in September, and the president of the Lexington-Bluegrass Association of Realtors sees little improvement before early next year. The slowing of the market and the recent flood of new listings has created a 7.6-month supply, 5,596 properties, at the current rate of sales.”

“‘I don’t think it’s all doom and gloom,’ said Tom Kelley, president of the Home Builders Association of Lexington. About one fourth of the 808 houses sold last month were new houses.”

From Tennessee. “There are signs of the Memphis market slowing as sales and sales volume posted smaller increases, and a larger supply of homes on the market has some analysts worried about a drop in prices. MAAR recorded 10,962 home listings in August, up 18.9 percent from 9,217 in August 2005.”

“With more homes on the market and the possibility of falling prices, now is a good time to consider buying, said Jennifer Burda, general manager of Chandler Reports. ‘It is more of a buyer’s market,’ she said.”

From Arkansas. “Home prices are dropping ‘because there is so much inventory,’ said Jonie Burks, an agent in Little Rock.”

“‘It’s all about consumer confidence,’ said Kathy Deck, at the University of Arkansas. ‘In this case, the media’s attention certainly exacerbates the issue, but the same thing was true [when home sales were soaring ]. When it is good, everybody is on that bandwagon. And when it starts to turn, certainly you can get a downward trend exacerbated by the [publicity ].’”

In Texas. “For the third month in a row, Tarrant County has registered more than 1,000 foreclosures, and the number of homes posted for the November auction appears to be a record high. Some unfortunate buyers combined ARMs with 100 percent financing. Randall Dunn, who buys homes from homeowners facing foreclosure, hears from them all the time.”

“‘Those are the ones who say, ‘Please buy my house,’ Dunn said. ‘But they have no equity, so how can I buy their house?’”

“Home foreclosure postings in the Dallas-Fort Worth area have surged to their highest level since the 1980s. Nearly 4,000 homes in Dallas, Tarrant, Collin and Denton counties have been posted for possible sale in November, up 49 percent from the same period a year ago.”

“About 80 percent of the properties posted for foreclosure are worth $200,000 or less, George Roddy said. Still, a small portion of homes have values over $500,000. ‘It’s safe to say that all walks of life in the D-FW area are affected,’ he said.”

From Arizona. “Asking prices in the Phoenix area have dropped about 25% this year, says agent David Khalaj. Existing single-family home sales tumbled 34% in the first nine months of the year, and condo sales were off 24%. Construction permits for single-family homes were down 23% through August.”

“‘Last year was just one of those atrocities that happens rarely,’ in terms of bidding wars and soaring prices, says agent Camille Sullivan. ‘I’ve never seen it before, and I’ve been doing this for 25 years. It was a very difficult time.’”

In Washington, DC. “Financial planner Jim Ludwick says a client who had to sell a suburban D.C. condo started with an asking price that made it the second most expensive of 15 on the local market. She sold it only after cutting the price to make it the second cheapest. The lower take may have been disappointing, says Ludwick, ‘but there are still 13 other condos that haven’t sold.’”

From Idaho. “Indications are that the price of local housing is persuading more and more people migrating to Ada County to rent homes rather than buy, said Marilyn Grimsley, president of the local property manager’s association. ‘People just can’t buy houses as easily anymore,’ Grimsley said. ‘For the first time in awhile, buyers are not able to get into a single-family home. And lenders aren’t giving out loans as easily as they were.’”

In Oregon. “The latest Lane County housing market data signal a return to a more ‘normal’ market, Realtors say. Pending sales were down 23.4 percent and closed sales fell 20.5 percent. ‘A lot of people are making their moves now that the bubble has stopped expanding,’ said Cory Neu, president of the Eugene Association of Realtors. ‘If we see any depreciation, I think most of it will happen in the upper end,’ he said.”

From Alabama. “David Lereah, chief economist of the National Association of Realtors, delivered good news Wednesday to the Rotary Club of Birmingham: The nation’s housing market isn’t as bad off as the media would have you think.”

“Lereah encouraged the Rotarians to tell the news media that real estate is a local market and shouldn’t be judged against the rest of the country. There are some major metro areas in the country that are experiencing ‘big pain,’ Lereah said, citing Miami and Las Vegas as prime examples.”

“He said two-thirds of the country is currently experiencing a real estate recession and the news media pundits apparently expect that decrease to spread to the rest of the country. Lereah expects real estate prices to continue to fall in most U.S. markets. In areas that experienced the largest price appreciation in recent years, a correction is needed, he said, this time citing San Francisco as the best example.”

“Lereah’s latest book, ‘All Real Estate is Local,’ will be released by Doubleday in February.”

The Sacramento Bee reports from California. “California’s slowing housing market has dampened sales at Sacramento’s largest high-rise condominium and hotel project. John Saca’s 53-story project has presold a little less than 50 percent of the 799 units to date, and sales in August and September have been particularly slow. ‘Our sales are slower than I’d like,’ Saca said, ‘but I think that things will get better when the housing market improves.’”

“‘Some people may have planned to use home equity to pay the deposit,’ Saca said. ‘A lot of people don’t have that kind of cash laying around.’ The sales slowdown may also reflect a change in buyer psychology, said Bob Bronswick,of Coldwell Banker Residential Mortgage’s Sacramento-Tahoe region. ‘A lot of people are sitting on the sidelines, waiting to see what will happen next,’ he said.”

The Orange County Register. “The grand mystery to many watchers of the Orange County housing market remains, ‘Who can afford these prices?’”

“By researcher Chris Cagan’s math, Orange County has 79,000 of these ‘exotic mortgages,’ loans that delay big house payments at risk, and 18,601 mortgages will default in the next five years. Bankers and loan investors will lose $3.9 billion on these busted mortgages. Cagan insists that’s a manageable pain.”

“So, the housing market must wait to see how many lending mistakes were made, and what’s the fallout from the ensuing mess.”

The Desert Sun. “Longtime Coachella Valley real estate agent Michael Lambert admits it has been awhile since he’s seen many foreclosure signs in front of valley homes. But on Tuesday he put out his second in only a few months, notifying potential buyers of a home being listed for $799,000 in an exclusive, high-end Palm Springs neighborhood.”

“Initially, the owner had hoped to recoup about $925,000 by auctioning off the property, Lambert said, but now it’s in foreclosure. ‘I think this is the tip of the iceberg, unfortunately,’ said Lambert, a broker in Palm Springs.”

“Lenders notified 3,040 homeowners in Riverside County during the third quarter that they were in default of their loans. That was a 140 percent increase compared to 1,266 default notices sent out during the third quarter of 2005. In San Bernardino County, 2,548 default notices were sent out during the third quarter, nearly a 101 percent increase compared with 1,269 a year ago.”

“John Sloan, real estate agent in Palm Desert, said fewer and fewer investors are buying the foreclosed properties. Sloan said some homeowners who now are finding themselves in trouble took out home-equity lines of credit and bought cars and other personal items during robust economic times, and now they’re trying to make payments on the original loan and a home-equity loan.”

The Union Tribune. “As San Diego’s housing market continues to slow, home sellers have started turning to a new tool in hopes of drumming up buyers, the auctioneer. Tomorrow at Bressi Ranch in Carlsbad, 16 furnished, landscaped model homes will be up for sale via auction in what is believed to be the largest event of its kind in the county in years.”

“A group of three Los Angeles area lawyers who purchased the 16 model homes from Bressi developer Lennar Communities, bought the Wisteria model for $853,500, according to county deed records. How much will it go for at auction? That depends. It may not sell at all.”

“William Lobel, one of the partners in Model Homes, said the key to getting homes sold is to generate a lot of traffic from buyers. ‘The fact is, San Diego is not the hottest place right now to sell homes,’ Lobel said.”

The Press Enterprise. “In a real estate market described as tepid at best, sellers are trying something different to drum up excitement and stand out from the crowd. They’re putting their homes on an auction block. On a recent Saturday morning, a small crowd gathered on the front lawn of an attractive two-story house in Highland as an auctioneer issued the challenge: ‘Who is going to win today?’”

“In less than five minutes, the Highland auction was over. The four-bedroom, three-bath house with swimming pool on a quarter-acre lot sold for $528,000, including a 10 percent premium to pay the auction company.”

“After some deliberation, the owners, a middle-age couple looking to downsize and cash out their equity, accepted the bid. The buyers, young parents buying their first home, sat under a blue awning on the front lawn and signed papers opening escrow.”

“Auctioneer Mike Grigg said he has seen mounting interest in auctions as the Southern California housing market softens, beginning with investors who are no longer able to ‘flip’ houses.”

“The young couple who bought the house in Highland, got ‘quite a deal,’ said Sharon Smith, an agent in Fontana. Smith said a similar house on a similar lot in Highland closed escrow in early August, after 168 days on the market, for $97,000 more than the Amads’ winning bid.”

“The sellers, Henry and Joyce Higginbotham, said they were happy to avoid the months-long wait, a period during which prices could fall. They put the home up for sale about a month ago, intending to auction it. Henry Higginbotham said his selling price was about $30,000 to $40,000 less than he hoped but he wanted a quick sale.”

“‘We were worried about the value dropping too fast and not getting what we actually paid for (the house),’ Joyce Higginbotham said.”

“The Higginbothams said they bought their house two years ago for about $400,000 and paid for upgrades, including the swimming pool, spa and landscaping. In hope of feathering his retirement, Henry Higginbotham, said he plans to reinvest in Texas real estate.”

“The biggest argument for auctions, auctioneers say, is an explosion of resale listings. The number of homes for sale in the San Gabriel Valley and Inland counties, excluding the Coachella Valley, have more than doubled in the last year.”

“Auctions are not suitable for all sellers, said Todd Wohl, an auctioneer based in Manhattan Beach. ‘We turn down probably nine to 10 auctions for every one we do for the reason the seller has unreasonable expectations or believes he can control the sales process.’ he said.”

Some reports from the Arizona Republic. “For the first time in a decade, median prices for resale homes in the Valley dropped last month compared with the same time last year. ‘We’ve had a major correction,’ said Lyn Truitt, a real estate broker in Surprise. ‘The market has slowed considerably. The new-home market is impacting the resale market.’”

“New-home builders are loading up on incentives for buyers that artificially maintain the price. The reason: It allows builders to maintain the price point and not infuriate recent homebuyers who paid top dollar.”

“New-home sales have driven the Surprise market the last few years, and those sales are down significantly this year. ‘The domino effect is affecting all sales,’ Truitt said. ‘People who want to move up can’t sell their homes.’”

“The West Valley’s resale housing market continued to slide in September, which brewed a storm of increased listings, a drop in the number of recorded sales and a decrease in the median sale price. Glendale’s resales slid from 780 to 400, Peoria’s declined from 470 to 190, and in Surprise, the number dipped from 415 to 190.”

“Median year-to-year sales prices from September fell in every West Valley city except Glendale and Sun City West.”

“The process of finding the perfect home can be overwhelming with the large number of listings. ‘It creates a scenario where it takes buyers longer to make a decision because there’s so much inventory,’ said Dave Karrick, a real estate agent in Peoria. ‘Without a doubt, people can be more picky in this market.’”

“For years, buyers in metro Phoenix assumed if they purchased a house, it would increase in value the next year. The drop in median price leaves many potential buyers apprehensive about the future. ‘That fear is keeping a lot of people on the sidelines,’ Karrick said. ‘The market has certainly deteriorated and it seems every month it’s getting softer and softer.’”

“Kim Arnold and her husband, Rufus, have had their 1,900-square-foot Sun City Grand home on the market for six weeks. ‘Sure, if we sold it last April it would have been a piece of cake, but we know that isn’t possible right now,’ Kim Arnold said. ‘For us it’s not aggravating because the market is slow and we know the perfect person will come in eventually.’”

“The Arnolds’ real estate agent, Meredith Andrews said that during last year’s seller’s market, at least 10 people would show up to an open house. One showed up to a recent open house at the Arnolds’ home.”

“Home prices in Scottsdale had increased nearly 17 percent through August, compared with the period a year ago. What a difference a few weeks make. Sales now are way off, and prices are starting to erode in the Northeast Valley, where the number of for-sale signs has nearly doubled from a year ago.”

“With Northeast Valley home sales off 56 percent this year, buyers seem to be waiting for prices to fall. Recent home buyer Donna Vanauken of Scottsdale calls it a ’seller’s hangover’ from last year. Vanauken was determined to wait out the market when she went looking in April at dozens of homes and condominiums.”

“She paid $369,000 in July for a 2,000-square-foot home. That was 13 percent below the asking price. Vanauken said she got a good deal but thinks prices will continue to fall. ‘I kind of wish I would have waited until the fourth quarter,’ she said.”

“There were 5,741 Northeast Valley homes on the market as of last Friday, said Karl Stauffer in Scottsdale. That is up 92 percent from the same time last year. There is a nine-month supply of homes now, compared with a 3 1/2-month supply last October, he said.”

The Arizona Daily Star. “The median price of a resale home last month reached its lowest level since June 2005 as sellers continued to cut prices in a cooling market. ‘We’re seeing people dropping their prices in retail and getting back to what was normal,’ Tucson housing consultant John Strobeck said. ‘We’re falling back to normality.’”

“Paul Olson, president of the Tucson Association of Realtors MLS (said) numbers for September will show a decline in the number of new homes listed for sale. ‘I think it’s a positive thing for sellers, because they’re having a hard time right now with the inventory,’ Olson said. ‘Right now they have so much competition with 9,600 listings that they’re waiting a lot.’”

The Review Journal from Las Vegas. “Like other mixed-use developments in Las Vegas touted as the newest hip place to “live, work and play,” Urban Village on Las Vegas Boulevard South has apparently crumbled before it ever took shape.”

“Several sources in the local real estate industry said the 50-acre, $1 billion project by a resort-style subsidiary of Dallas-based Centex Homes, has been canceled and the sales office is closed.”

“The on-site construction office for Centex Construction and Martin-Harris Construction was locked, dark and vacant Thursday afternoon. A banner on a recreational vehicle parked on the property advertised, ‘Now Selling Brownstones.’”

“Lane Wright, division president for Centex Destination in Denver, confirmed Thursday that the company has discontinued sales at Urban Village effective immediately and will refund deposits to about 75 buyers in the first phase of development.”

“‘No surprise, and we expect more to come,’ (realtor) Bruce Hiatt said about the canceled project. ‘Given current market conditions, it’s making it tougher and tougher for builders to succeed,’ Hiatt said. ‘Any new projects coming into the market are going to be challenged.’”

“Buyers are skittish about the market and are just waiting it out, he said.”

“The pool of luxury condo buyers (are) more skeptical about projects in Las Vegas, said Jeremy Aguero, principal of a Las Vegas-based research firm. It’s unrealistic to think the market can absorb the entire inventory of some 90,000 proposed units, he said.”

“‘I don’t think it’s going to be the last major project we see fall off the radar,’ Aguero said. ‘You’ve got a well-positioned, well-capitalized company in a well-located part of Southern Nevada. If that project had trouble making it, how many others are viable? These guys (developers) have a pipeline of projects and the market has changed. The market’s not there.’”"

The News Press from Florida. “Don’t expect Lee County’s residential real estate market to start recovering until the third quarter of 2008, real estate broker Frank D’Alessandro told a business group Thursday. ‘Supply will continue to overwhelm demand,’ said D’Alessandro.”

“He told the general membership of the Greater Fort Myers Chamber of Commerce that there’s a huge overload of single-family houses on the market: 12,654 listed for sale at a median price of $324,900, 23 percent more than the median sales price of $264,100.”

“There are also 7,819 condominiums for sale at a median price of $319,900, 35 percent over the median sales price of $237,500. ‘Right now there are 15 to 16 homes per buyer’ compared to about two buyers per home a year ago, D’Alessandro said.”

“The bottom line: even if builders stopped building in the county completely, it would take 22 months to absorb the excess housing.”

“But construction is still continuing at levels that probably aren’t justified by the market, D’Alessandro said, noting that in September there were 746 single-family home permits issued even though it’s extremely hard to justify putting up new houses with the glut of existing ones.”

“Jim Thomas, VP of Marco Community Bank, said that blunt assessments such as D’Alessandro’s comments could actually spur a quicker recovery by persuading sellers to come down to more realistic levels. ‘The sooner people do that, the better,’ he said.”

“D’Alessandro’s comments clearly had an effect on the audience, however, said Pascual Armand, project manager for a condo conversion project. ‘You can see how one person’s view can change the mindset of a whole room full of professionals.’”

“Lou Presutti of LK Graphic Design in Fort Myers said he’s a pragmatist. ‘I’m positive but we still have to watch our dollars and ride it out. You can’t be scared.’”

The Palm Beach Post. “Speculators hoping to flip their two-bedroom, two-bath slice of Palm Beach County condo heaven for a fast buck are feeling the pinch. ‘People would buy properties thinking they could rent them for what they pay for their mortgage and the world would be good,’ says real estate agent ‘Uncle Bob’ Hansen.”

“Many can’t, though. Take the two-bedroom, two-bath condo on Executive Center Drive in West Palm Beach that sold for $231,000 this month. With an 8 percent mortgage on a $200,000 note, the monthly bill on a 30-year note would be to about $1,467.”

“That’s a few hundred more than the average rental rate in Palm Beach County, and does not include $4,642 a year in property taxes, much less association fees or insurance. The unit rents for less than $1,000 a month.”

“Owners can shoulder some of the gap, but (analyst) Jack McCabe asks: ‘How long can that last?’”

“Condo owners already groaning under the weight of their investments may facing some new and formidable competition. Now that national apartment firms don’t have to compete with condo developers for land, they are starting to rethink building in South Florida, says Jeff Chamberlin, (who) develops multifamily projects. ‘We are just starting to hear rumblings,’ he said.”

“The number of empty apartments may be rising, too. There are some unexpected deals. ‘You can get a two-bedroom, two-bath for $1,100 now, which this time last year you could not have touched for $1,200 or $1,300,’ says Hansen,. Or better: Hansen’s list of lease options includes a two-story, 5,000-square-foot Wellington home for $2,000 a month.”

“McCabe recently came across an apartment complex offering two months of free rent, an incentive he said he hadn’t seen offered in ‘well over a year.’”

Newsday reports from New York. “Winter is coming, and Long Island builder Steven Klar doesn’t relish safeguarding unsold homes over the winter, paying for snow removal and heating the big, empty insides so the pipes don’t freeze and burst. That’s why he’s offering a new $52,000 Mercedes to buyers of his model homes in his Huntington, Manorville and Locust Valley developments.”

“‘Does that sound desperate? No, it’s making the sale,’ says Klar. ‘It’s definitely generated a lot more traffic and interest than if we just said ‘Take $50,000 off the price.’”

“Sellers and agents hope these deals will keep home prices, agents’ commissions and neighborhood property values up, though some homeowners have become willing to reduce prices. Sellers’ concessions were not unknown before boom years, but the perks nowadays are breaking out of the box.”

“Even open house parties must stand out. In May, one agent threw a party at one of his listings in Oyster Bay Cove, complete with DJ, champagne and models in the pool, though he still has no contract.”

“Samira Johnson decided to forgo Paris and give a seven-day stay at any luxury Marriott worldwide with the sale of her three-bedroom Northport ranch. She will hand over her 115,000 reward points, after hearing a California seller offer a year’s free beer and pizza. She’ll do another open house this weekend after a lackluster response to her vacation offer.”

“Giving up Paris didn’t take money out of Johnson’s pocket, which price reductions will: Since putting the house on the market with a real estate agent in May, she has lowered her asking price from $549,000 to $509,000.”

“As of August, there were 13,999 homes for sale in Suffolk, up 59.3 percent from 8,790 the same time in 2005, says to Mohsen Zandieh, vice president of the Multiple Listing Service of Long Island and treasurer of the Long Island Board of Realtors. In Nassau, the number was 10,041 in August, 66.8 percent higher than 6,018 last year; and Queens’ was 10,005, up 76.2 percent from 5,677 a year ago.”

“He says the slower activity stems partly from sellers hoping for boom-time prices and buyers waiting for more price-slumping. ‘Sellers are living in last year’s market,’ Zandieh says. ‘Buyers are living in the future.’”

“Feeling like the perpetual bridesmaids, Larry and Samantha Brittan decided to shell out $10,000 for closing or property taxes after potential buyers kept on picking ‘the other house.’”

“Already in their new home, the couple pay a mortgage on two houses and see a little relief in the doubling of open house visitors since offering the incentive. Set for another viewing of his Colonial in Northport this weekend, Brittan, working with a real estate agent, is asking $559,000, down from $639,000.”

“When it was Ginger Scarpino’s turn at her $1.1 million Dix Hills ranch last month, she spent hundreds of dollars to create a patio-side gourmet luncheon. She’s also proposed giving a $5,000 bonus to her agents, who declined it, and $11,000 for a buyer’s closing costs. ‘Maybe it’ll work, rather than coming down another $100,000,’ says Scarpino, who already had reduced the house $400,000.”

“Shawn Elliott’s Luxury Homes & Estates last month spent $8,000-plus on an open house for a Gold Coast client who’s willing to buy a Mercedes for the agent who bags a buyer. ‘He feels motivating the brokers is better than giving the house away,’ says Elliott.”

“Some agents worry buyers might wonder if they’re shown good houses or if the agents just want that bonus.’I think it diminishes our profession, somehow cheapens it,’ says Kathryn Martin, an agent in Northport.”

The Andover Townsman from Massachusetts. “It is taking Andover residents nearly twice as long as it did last year to sell their single-family homes, and sellers are getting about 8 percent less.”

“That’s according to third-quarter statistics compiled by New England Association of Realtors. NEAR’s numbers show that single family home sales in Andover are down about 34 percent, reflecting a national trend.”

“‘It’s stabilization,’ local realtor J.B. Doherty said of the current local real estate scene, with which he has been involved for the past 33 years. ‘Wall Street guys are saying real estate is not a bubble. It’s a soft landing and it’s here.’”

“Buyers just won’t overpay, he said, so anyone looking to make a profit from a home sale they made within the last 18 months will be disappointed. ‘There’s not much appreciation if you just got into the housing market,’ he said. ‘It’s more like depreciation.’”

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