October 31, 2006

“It Will Get Bumpier Before It Gets Better”: California

The Sacramento Bee reports from Califonia. “It might seem the worst time to start building houses in the Sacramento region with prices dropping and so many homes for sale. But a pair of deep-pocketed newcomers, divisions of a U.S. timber products giant and a major Japanese conglomerate, are positioning themselves to make sizeable new splashes in the region’s home building market.”

“‘Personally, I would like to see the upside last a little bit longer. But there are opportunities in a down market as well,’ said David Ragland, VP for Los Angeles-based Pardee Homes, which plans 4,000 new homes in the coming years in Natomas, Rancho Cordova and north Stockton.”

“Also new to the local market is Irvine-based MBK Homes, which plans to start constructing the first of its planned 600 homes in the region within weeks in Citrus Heights.”

“‘We have almost 4,000 lots and over $100 million invested and committed in Northern California markets as we speak,’ Ragland said.”

“A division of the Japanese general trading firm Mitsui & Co. Ltd., MBK plans still more houses in Folsom and Roseville. Long-range, it’s eyeing expansions into the East Bay, Interstate 680 corridor and Reno from a Sacramento-area headquarters. ‘We have the capital and desire to grow,’ said Jon Tattersall, president of MBK’s Northern California unit.”

“‘I don’t see the trend slowing down in Sacramento,’ said said Kathryn Boyce, an analyst in Hanley Wood’s Sacramento office. ‘I see the boom has stopped. The craziness has stopped. But builders are going to keep coming in here.’”

The Sierra Sun. “The nationwide housing trends are mirrored in the Tahoe-Truckee area, where sales volume slumped by 24 percent in Tahoe and 11 percent in Truckee in the first six months of 2006, according to a Chase International market report.”

“Now, with winter approaching, sellers are either pricing their homes aggressively in attempts to sell before winter, or taking them off the market and ski leasing them, said broker Gayle Blair.”

“The local market is still softening along with national trends, she said. The change does not surprise her. ‘I’ve been in the business for 30 years and I’ve seen it go up and down and sideways,’ said Blair.”

“Shari Chase, president of Chase International, warned of the market cool-down in the company’s market report released during the summer. ‘The period of huge increases in home values has come to a screeching halt,’ she wrote.”

The Desert Sun. “Home sales in the Coachella Valley dropped nearly 39 percent in September compared to year-ago figures. In September, 704 new and resale homes and condos sold across the valley, compared with 1,142 properties sold during the same month last year, according to DataQuick.”

“A month earlier in August, 788 homes sold; that represented a 41 percent drop in home sales compared with August 2005. Realtor Douglas Balog said the valley is in a ‘contraction period’ that should bring about price corrections.”

“Greg Berkemer, executive VP of the California Desert Association of Realtors in Palm Desert, said the local real estate market ­ based on third-quarter MLS figures looks as if it will get ‘bumpier’ before it gets better. ‘The (economic) fundamentals are in place to make it more short-lived than the last time we went through this nine years ago,’ Berkemer said. ‘The first thing that comes down in a market shift is asking prices. And that’s the toughest thing for sellers.’”

“New-home sales dropped 19.6 percent to 267 in the valley last month, while closings for resale condos in the Coachella Valley plummeted 62 percent to 109 condos. The weak sales in condos may have helped send asking prices downward, because the median price for resale condos in the valley dropped 10.6 percent from a year ago to $283,500.”

“The inventory of existing homes in the valley climbed to 8,358 on Monday compared with about 4,700 last year, which has some sellers realizing there’s a lot more competition out there. Buyers are realizing they may have to adjust their asking prices and overall expectations, said Patrick Veling, founder and president of Real Data Strategies in Brea.”

“‘This is the biggest slowdown we’ve seen, locally,’ said Resa Harbord, manager of North American Title Co. in Rancho Mirage. ‘In Orange County, I’ve seen these kinds of slowdowns several times, but not out here in the valley. Buyers are few and far between.’”

“Home sales dropped by double digit percentages in most cities across the valley, with the exception of Coachella and a portion of Desert Hot Springs, DataQuick reported. In Palm Desert, for example, 65 homes sold, more than a 60 percent drop in overall home sales from September 2005. In Palm Springs, 92 homes sold, more than a 40 percent drop in home sales compared with year-ago figures.”

“Home sales in Cathedral City dropped 57 percent, while La Quinta showed a nearly 55 percent decline from the same time a year ago.”

“Mikki Wood, a real estate broker in Indian Wells, noticed that sellers have begun responding to the changing market. ‘There have been 78 price reductions throughout the valley (Monday) alone,’ Wood said. ‘The market had to make a correction, and it’s doing that now. I think it’s for everybody’s benefit that this is happening, because homes were becoming too unaffordable.’”




“The Numbers Are What They Are” In Colorado

The Durango Herald reports from Colorado. “Durango home prices are up 11 percent compared with a year ago, but home sales have fallen 39 percent. The median price of a Durango home was $436,050 in the third quarter. Durango’s newest median price is $12,000 lower than last quarter’s record high of $448,000.”

“The story is similar throughout La Plata County. The median price of a Bayfield home in the third quarter was $306,000, up 13 percent from a year ago. But home sales dropped 57 percent.”

“It is too early to make concrete forecasts about the local housing market, said Dave MacLaird, president of the Realtors Association, but this could be the beginning of a buyer’s market. ‘They are definitely negotiating a lot harder than they were at the beginning of the year,’ MacLaird said.”

“Don Ricedorff, a broker associate in Durango, said that median prices are affected by the sale of expensive homes. As Durango settles into a more balanced market, median prices will come down. ‘When we get into more of a balanced market where we have buyers throughout all price ranges, those median prices will actually come down some,’ he said.”

“Liza Tregillus and her husband, Peter, bought a home in 1989. ‘If we moved here today, we couldn’t afford the house,’ she wrote. ‘Our son just paid more for a one-bedroom condo than we paid for our four-bedroom house. We had to loan him money for the down payment.’”

The Rocky Mountain News. “A Dallas company plans to auction about 75 foreclosed homes in Denver next month, a sign of the continuing high rate of foreclosures plaguing Colorado. Colorado foreclosure activity jumped 24 percent from the second to the third quarter, with 14,374 properties entering some stage of foreclosure, the eighth-highest foreclosure total in the nation.”

“Some local experts, including Kathi Williams, executive director of the Colorado Division of Housing, and Chris Holbert, president of Colorado Mortgage Lenders Association, question whether RealtyTrac’s numbers are accurate.”

“‘We are not trying to make the numbers worse than they are,’ Rick Sharga, a VP at RealtyTrac said. ‘But if I were representing a state-based mortgage lenders association or a state political entity of some sort, I would really want to downplay the numbers. But the numbers are what they are.’”

“Such auctions were common in the late 1980s, during the last foreclosure crisis. But in recent years, most of the auctions in the Denver area have been for expensive real estate rather than distressed properties.”

“‘Basically, they go to the highest bidder,’ said Dave Webb, co-owner of Hudson & Marshall. ‘They can be opportunities in a declining market,’ he said. ‘The lenders are motivated to sell.’”

“He said he expects to hold more large auctions in Denver as the market continues to worsen. He said that foreclosed homes aren’t the bargains they were in the late 1980s, although he said there likely will be opportunities at the auction to buy homes below the asking price. ‘Back in those days you could buy a HUD condo for $12,000,’ he said.”

The Denver Post. “Personal incomes rose faster than expected in September, boosting hopes that the U.S. economy can overcome the drag of a housing downturn.”

“Economists are divided on whether weakness in housing will tip the economy into recession, but most lean toward a ’soft landing.’ Consumers are leery and not spending as robustly as they have in the past, said Jeff Romine, an economist in Denver.”

“Romine said a study he did a year ago found that 20 percent of retail spending was due to the ‘wealth effect,’ or consumers cashing in on higher home and stock values. ‘We are moving into an economic slowdown and will probably have a soft landing,’ he said. ‘The big question is what will happen this Christmas.’”

“U.S. Bank regional economist Tucker Hart Adams, who has forecast a recession for the second half of next year, said wage gains won’t overcome the hole of debt that consumers have dug for themselves. ‘The problems are too large for a little jump in income one month to help out,’ Adams said, noting that many homeowners face large increases in their adjustable-rate mortgage payments next year.”




Price Declines Are “Almost Inevitable Now”

The Washington Post. “A housing developer who had offered to give a Virginia town an unprecedented amount of money to build a luxury subdivision has abandoned plans for the community, blaming a cooling housing market as a factor in the project’s failure.”

“‘I am personally saddened by the prospect of not moving ahead with the . . . project,’” Centex Division President Robert Davis wrote. ‘Unfortunately, in my world, as in yours, everything must be couched in terms of economic and political viability; it is a harsh reality for all of us indeed.’”

“Centex’s announcement this month ended any hope for a new deal. ‘All in all, it’s a significant disappointment,’ said Town Council member John V. Albertella. ‘Then again, we understand the commercial reality of the present time.’”

“A recent report from the National Association of Realtors showed that there was a record number of unsold homes on the market during the summer, when home prices declined for the first time in five years.”

The Delaware State News. “If you look in the real estate section these days, you’ll probably notice two words rarely seen in the past few years - ‘price reduced.’ It’s something homebuyers have been longing to see - a sign that the pendulum has swung in their direction.”

“Experts knew it was only a matter of time before the real estate bubble would burst. ‘It was an anomaly and it couldn’t be sustained,’ said Ruth Briggs-King, executive VP of the Sussex County Association of Realtors. ‘It would’ve priced too many people out of the market.’”

“And with the housing market slumping in other areas, Mr. Martin said there aren’t as many out-of-state buyers coming to Delaware, because they are having a hard time selling their homes. ‘The New Jersey and Pennsylvania markets are not as healthy, and they do have an impact on our market,’ he said.”

“‘Sellers are beginning to realize that they’re not going to get premium price for their property, but more realistic values,’ said Charles Martin, president of the Kent County Association of Realtors. In the $200,000-plus range there are so many options that it’s driving prices down. ‘The market is slower at the top, because there are lots of additional properties and not as many buyers,’ Mr. Martin said.”

The Times Online from Pennsylvania. “When Lisa Kusko put her house up for sale last year, she never dreamed she would still own it more than a year later. ‘I had no idea at all it would take this long to sell. I knew it wouldn’t be instant. … I just didn’t think I would own it at this time, this year,’ Kusko said.”

“Kusko said her initial asking price of $112,000 was competitive with other homes in the area. ‘I thought I was starting low, and I guess with the market the way it is, that wasn’t low enough,’ she said. She dropped her asking price to $99,000 a few months ago, and Kusko said she considered a lower offer of $92,000 that fell through.”

“Frustrated with the situation, Kusko, who now lives in Lake Geneva, Wis., decided to take her home off the market Friday and rent it out.”

“Kusko said initially she thought the problem was with her house because it does need some work, but then she realized newly remodeled homes aren’t selling, either. Statistics for home sales in Beaver County show that the drop in sales affected every municipality in the county.”

“‘We’re pretty much seeing a pretty down market, and it’s difficult to keep saying it because we don’t want to discourage people,” said Sally Heimbrook, a real estate agent in Beaver. ‘But there are many, many, many more houses out there than there are buyers.’”

“While Heimbrook said she hasn’t seen many sellers pull their homes off the market, people have reduced the prices of their homes. The decline in the housing market was predicted last year on a state and national level, Heimbrook said. ‘Many people didn’t believe it because we were still booming, and all of the sudden, it came. It’s in Florida and California, too,’ she said.”

From Pittsburg Live. “Two homebuilding associations from Southeast Pennsylvania say they want to set the record straight about the housing market performance in the state — specifically, about the so-called burst of the ‘housing bubble.’”

“‘The bottom clearly has not dropped out of the housing market in our state,’ said Joe Gartner, president, Home Builders Association of Bucks and Montgomery counties, and Ted Moser, president, Home Builders Association of Chester and Delaware counties.”

“They said home builders in the state are ‘troubled’ by news stories that ‘exaggerate the impact of this year’s slow-down in the housing market.’ According to Gartner and Moser, ‘local and regional homebuilders in Pennsylvania are isolated from some of the market volatilities faced by national builders in their operations elsewhere in the country.’”

The Philly Burbs. “Real-estate industry insiders often disagree over what’s going on in the housing market, but this week that disagreement got a little ridiculous. ‘Alleged’ housing bubble? ‘Ostensibly little additional research?’ Them’s fightin’ words.”

“We’ll overlook for a moment that fact that all possible measures of home-sales activity, from the number of sales to the amount of time it takes to sell a house to the median sales price to the inventory of unsold houses to the number of building permits issued, points to a slowing market. We’ll note that most market procrastinators expect prices in this area to hold firm, even as they fall elsewhere.”

“The final comparison numbers show that the number of permits issued in Bucks and Montgomery counties in the first half of this year is down from 2003, as it is from 2005.”

“Spokesman Scott Elliott said the release’s tone was due to frustration on the part of some of the associations’ members. ‘They were concerned that the public was getting the wrong message,’ Elliott said.”

“But what the right message is can be a little difficult to decipher. I heard presentations by Mark Zandi, chief economist at Economy.com, and Bernard Markstein, director of forecasting for the NASB, that I can best described as a one-two punch that should TKO any expectation the housing market might be starting to recover right now.”

“‘You overdid it,’ Zandi told builders. ‘I do think there’s too many homes out there, too many new homes.’ Price declines next year, Zandi said, are, ‘almost inevitable now.’”

“‘Based on our forecasts, clearly we’re not in a soft landing,’ Markstein said. ‘We’re past that.’ It will probably take another year to work out a ‘huge overhang’ in housing inventory and get the housing market back on track, he said.”




“Florida’s Boom Winds Down To It’s Apparent End”

The St Petersburg Times reports from Florida. “As Florida’s real estate boom winds down to its apparent end, Dade City has realized only a tiny fraction of the development seen in areas like Wesley Chapel and Land O’Lakes. At one time, city officials talked of plans to control the growth they saw ahead. Turns out they don’t quite need them.”

“Even the ever-expanding Wal-Mart noticed. This month, company officials announced that they would delay building the city’s first Wal-Mart Supercenter. They want to see more ‘maturation’ in the local market before building the new store.”

“In Dade City, it seems, the development wave has receded before it ever began. When officials for Wal-Mart, the nation’s largest retailer, scope out sites for new stores, they look at several factors. That last factor is based not on projected housing starts but on actual new construction.”

“‘We’re only going to build stores once the homes already exist,’ said Eric Brewer, Wal-Mart’s senior manager for public affairs. ‘Certainly in a place like Florida, you don’t want to be getting in a position where retail construction gets ahead of residential construction.’”

“Earlier this year, Dade City officials approved 2,000 new homes and received applications for 2,500 more. Ten months later, developers still have approval to build the same number of homes but are apparently electing to do so on a more conservative time line. ‘Instead of having 2,500 in two years, because of the slowdown in the real estate market, it will probably be over a period of five years,’ said Karla Owens, the city attorney and planner.”

“She’s confident the neighborhoods will be built, eventually. Why? Because the property has changed hands. ‘I just find it hard to believe that large tracts are going to stay vacant forever,’ she said.”

“The housing slowdown put a lid on more than home prices. Hotel prices, which had been driven by swarms of beach luxury condo/hotel developers, have stabilized at about $79,000 a room across the Tampa Bay market. That’s the same as a year ago, according to Marcus & Millichap.”

“‘The flippers are pretty much gone from the beaches,’ said Tony DeGeorge, a Clearwater hotel broker.”

From Tampa Bay Online. “Developer Reynold Glanz now wants to turn the former Cone Ranch into one of the biggest residential developments in north Manatee, just a few miles south of Hillsborough County. The California developer filed plans last week for a 1,999-home project.”

“Glanz said it is too early to start pricing homes, especially as sales prices continue to drop throughout the area.”

The Orlando Business Journal. “For the Central Florida housing market, Anthony Crocco, director of Metrostudy’s Central Florida division, says the pace of new housing starts slowed during the third quarter. The Orlando metropolitan statistical area of Orange, Lake, Osceola and Seminole counties posted 6,853 single-family starts in the third quarter, a decline of 32.4 percent compared with 10,142 units a year ago.”

“Crocco says the quarterly starts declined to a level comparable to the summer of 2003.”

“Single-family inventory, comprised of units under construction, finished vacant lots and model homes, totaled 22,794 units at the end of the third quarter, an 8.5-month supply. The majority of the unit increase is in the finished vacant category, which rose 123.2 percent from 3,664 units last year to 8,179 units this year, Crocco says.”

“During the third quarter, 11,197 lots were delivered to the Orlando market compared with 10,316 in third-quarter 2005. Vacant developed lot inventory was 50,760 units, up 29.6 percent compared with 39,168 lots last year. Crocco notes that based on the annual starts rate, this level of lot inventory represents a 19.1-month supply.”

“He notes many potential buyers must first sell their existing home before buying another. Because of this pressure on sellers and the continuing introduction of new projects to the market, Crocco says it is likely that the supply of new housing will remain inflated for at least the short-term.”

“Mike Inselmann, president of Metrostudy, there are reasons to be somewhat optimistic that the bottom of the cycle in the housing sector will occur in the next six months. ‘Cutbacks in new production, aggressive incentives by sellers, the exit of the majority of investors and the fundamental demographic support are positive indicators for a housing turnaround by mid-2007,’ Inselmann says.”

The Orlando Sentinel. “Robert Stroh at the University of Florida, said the full economic impacts of Save Our Homes have yet to hit the state.”

“‘This could affect our population in the future,’ Stroh said. ‘Some people who thought about retiring here are probably having second thoughts: What are your taxes here? The answer to that is going to change dramatically. We’ve already got a problem.’”

“Mohammed Battla knew that he would face a larger tax bill when he moved to a 6,100-square-foot home overlooking Lake Buck in the Lake Nona golf community. Still the shock of going from a few thousand dollars in property taxes to paying more than $35,000 was jarring.”

“‘I just saw my property-tax bill and about had a heart attack,’ Battla said.”




“A Perception That There’s Going To Be Better Deals”

The Journal News reports from New York. “The chill in the national housing market is sending a shiver through the Lower Hudson Valley. Inventories for housing of all types rose by double-digit percentages in both counties, while the number of sales fell sharply. Sales of houses in Westchester fell by 20.5 percent, the largest increase for the third quarter over the past 17 years for which records were kept. Putnam house sales fell 37 percent.”

“Therese Fokine has been trying since January to sell an investment house she owns adjacent to her own in Mohegan Lake. Originally listed at $315,000, it now is being offered for $269,900. ‘Interest rates went up, and that’s a real killer,’ Fokine said.”

“Greg and Joan Patterson lowered the price on their house at Valeria in Cortlandt after they put it on the market in the spring for $610,000. ‘People are waiting. There’s a perception that there’s going to be better deals,’ Joan Patterson said.”

“Some brokers said part of the problem is the reluctance of sellers to take less for their houses than they could have gotten in the recent past. ‘That’s hard,’ said Carlton Gillman. ‘They don’t want to know theirs is worth less than it was six months ago.’”

“Greg Rand, managing partner of Prudential Rand Realty, agreed. ‘The interest is there. What you’ve got is a standoff. I don’t see the buyers buckling,’ he said.”

“Realtor Ilene Goodman in Croton-on-Hudson said ‘quite a few’ of her listings were marked down this year. ‘One of the first things you have to tell people (who sell) is, you can’t set the price and I can’t set the price. It’s the market that sets the price,’ Goodman said.”

“(Broker) Ross Keating in Putnam Valley sees a different dynamic. ‘People hear things are slowing down, so they start waiting, and it’s a self-fulfilling prophecy,’ he said.”

“Inventories for housing of all types rosing by double-digit percentages in both counties, while the number of sales fell sharply. ‘Considering that third quarter closings normally reflect peak market activity in the spring selling season and that this year’s performance was lackluster, there is little reason to expect a turnaround with the fourth quarter results,’ the MLS said in its report.”

“The median price of a house, representing the midpoint of all prices, was $716,125 in Westchester, an increase of six-tenths of 1 percent over the third quarter of 2005. In Putnam, the median was $405,000, a drop of 4.7 percent.”

The Times Union from New York. “Housing prices sagged in September around the Capital Region, the Greater Capital Association of Realtors said Monday. It was the first year-to-year decline since November 2000. The median price of houses sold during the month fell 4 percent to $187,000. The feverish bidding of just a year ago is just a memory, real estate agents say.”

“Norma Jeanpierre of Colonie has cut the price by $10,000 to $249,900 in the two months the house has been on the market. ‘We’re still waiting on the offers,’ she said.”

“The total number of units sold in Albany, Montgomery, Rensselaer, Saratoga, Schenectady and Schoharie counties also continued to decline in September. There were 940 closed sales in September, compared to 1,027 in September 2005.”

“‘It appears that buyers have more negotiating leverage now than they have had for several years,’ said GCAR President John McNamara. ‘That change in dynamics has caused sellers to readjust their thinking about what their home might be worth on the market.’”

The Connecticut Business Journal. “A surge in the number of foreclosures on both the state and local level has real estate watchers worried that the trend may exert more downward pressure on housing prices.”

“Connecticut’s foreclosure rate jumped 20 percent in the first nine months of this year compared to the same period in 2005, according to RealtyTrac. With 372 homes in foreclosure in September, New Haven County ranked below only Fairfield in sheer numbers of foreclosures and hit a monthly high for the calendar year.”

“Low introductory rates have begun to expire on many ARMs issued in 2004 and 2005, and some homeowners are seeing their payments nearly double. Hardest hit are those with sub-prime loans, marketed to those with low incomes or bad credit, which have rates that often start at seven percent.”

“‘A lot of them are bad loans they just can’t afford,’ says Doris Latorre, for a nonprofit agency. Latorre has seen a big jump in foreclosure calls from homeowners in all income brackets and from all over the region. After a period where most foreclosure calls were from Waterbury, she is now flooded with calls for help from Bridgeport, Fairfield, Stratford, Trumbull and New Haven.”

The Asbury Park Press from New Jersey. “A bankruptcy court judge today gave permission to Kara Homes to move forward with the sale and closing of nine homes. Kara had hoped to get permission to restart construction of up to 300 homes, but a lawyer for the troubled home builder said the short-term financing to get the company started again had fallen through.”

“East Brunswick-based Kara, one of the largest home builders in central New Jersey, owes creditors, including banks, suppliers and employees, hundreds of millions of dollars. Customers who have contracts for uncompleted homes are also listed as creditors.”

“Kara said it also wanted to reimburse customers who had canceled their new home contracts before the builder filed for Chapter 11. A lawyer for the committee of unsecured creditors said he supported the sale of the homes. ‘I hope this becomes the platform, reduce real estate and homes to cash, and we can debate who gets it later,’ said lawyer Michael Sirota of Hackensack.”




Bits Bucket And Craigslist Finds For October 31, 2006

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