The Housing Bubble

The North County Times reports from California. In North County, the weighted average price for a new detached home in the last quarter fell to $885,683, a 4 percent drop from the second quarter this year, according to a MarketPointe survey. The survey said the weighted average price for a new attached home, such as a condominium, dropped 9 percent, to $380,086, from $417,865.”

“Sales and prices of new homes and condominiums in North County continued to decline from the second to the third quarter this year. Sales of new homes and condominiums in North County declined 36 percent, to 866 last quarter, from 1,343 in the second quarter of this year, according to the quarterly survey.”

“The number of new area detached homes sold dropped from 534 units sold in the second quarter to 358 in the third quarter. The number of unsold attached homes available decreased from 2,095 units in the second quarter to 2,093 in the third quarter.”

“For all of San Diego County, the pace of average net sales of new homes and condominiums reached the lowest level since 1999, MarketPointe said, dropping 38 percent.”

The Voice of San Diego. “In October, the local Realtors association saw declines in total sales volume to the tune of nearly $200 million in attached homes like condos and townhouses, and more than $400 million for single-family, detached homes compared to the same month a year ago.”

“The report attributed the financial fall to a 35-percent decline in the number of attached homes sold and a 29.22 percent decline in the number of detached home sales in October 2005).”

“Median prices in both markets suffered year-on-year drops — down 4.63 percent to $370,000 in the attached market and down 3.5 percent to $550,000 for detached homes.”

“A Japantown development in San Jose appears to be the latest casualty of the softening housing market, as a $26 million deal collapsed in a dispute over land values. The Seal Beach-based company lowered its offer to $18 million for the five-acre site, said John Weis, deputy director of the San Jose Redevelopment Agency.”

“Land brokers have reported that deals negotiated at the height of the housing market have fallen through now that both sales volume and prices have declined. But Weis said he doesn’t believe values in Silicon Valley, particularly San Jose, have dropped. ‘We think the market is not going south,’ Weis said.”

“He speculated that the company and now feels the need to pull back because prices especially in the central part of the state have fallen.”

“Two Santa Cruz County real estate offices affiliated with Century 21, have merged under new ownership. Randy Ziganti said the downturn in the real estate market was a consideration in the merger and acquisition. ‘Many companies will be cutting back services to try to save money,’ she explained.”

The LA Times. “Emeryville-based online brokerage ZipRealty Inc. lowered its full-year forecast and said the slowing housing market prompted third-quarter profit to plunge 80%.”

The Orange County Business Journal. “Newport Beach-based William Lyon Homes Inc. on Thursday reported a 72% decline in third-quarter profits, the latest local homebuilder to feel the effects of a cooling housing market.”

“Orders for new homes fell 40% to 501 homes in the third quarter, even though the average number of sales locations was up 31% to 55 housing developments. Buyers backed out of 39% of the contracts made during the latest quarter, compared to 15% a year ago. The company also said it took an impairment loss on real estate assets of $14 million for the third quarter.”

“The company sells in California, Arizona and Nevada. Softening has continued through the year in many of its markets, the company said.”

The Fresno Bee. “In the central San Joaquin Valley, prices have dropped, and thousands of new and existing houses are for sale. Gary Kittredge said families who bought when the market peaked and are now trying to sell will not fare so well.”

“Overall in Fresno County, the median price of an existing home has fallen almost 5% this year to $290,670, according to the California Association of Realtors. ‘There are some really good bargains out there,’ added Joan Jolly, president of the Fresno Association of Realtors.”

“Jolly thinks many neighborhoods have already reached bottom. ‘A lot of areas have already seen a 12% decline,’ she said. Jolly noted that some areas and price ranges have seen greater declines than others. ‘The $325,000 to $425,000 range is where the unsold inventory is. I have five or six listings in that price range, and all have come down $20,000 from first expectations.’”

“Home builders also are under pressure. The amount of unsold inventory has climbed 82.3% in only three months in Fresno, Madera and Merced counties, while sales fell 3.3% in the same period, according to The Gregory Group.”

“The average price fell 2.5% for the quarter and 2.8% for the year as builders attempted to clean up their inventories.”

“The greatest year-over-year decline in new-home price was 21.5% in Atwater. Madera and Fresno experienced year-over-year price gains of 3.3% and 2.1% respectively, while the average price in Clovis has slid almost 2% in the last year.”

“‘We definitely have had some standing inventory,’ said Craig LeMessurier, spokesman for KB Home. Developers are holding sales, offering buyers incentives, trying to sell excess lots or taking other steps to cope with a sluggish market.”

“Sandi Ehrastom of Sierra Residential Appraisal Services said some would-be home sellers are in denial. ‘Some areas are holding their value, but some others have dropped 10% in two months,’ she said.”

The Mail Tribune reports from Oregon. “Even though sellers have been reluctant to lower prices, it appears that has been one way of attracting buyers during the calmer market. Jim Torrey, who bought a house in Medford last month, said he noticed a trend of price reductions when walking through the Roosevelt Elementary School neighborhood.”

“‘We looked about 45 days,’ Torrey said. ‘It seemed on a weekly basis in the east-side hills that we saw at least a couple of reduction signs.’”

“He discovered sellers were more willing to negotiate than in previous purchases and more willing to accommodate certain requests.”

“Sorting through the sheer number of properties available was a task in itself, he said. ‘It was almost overwhelming, every time we put our preferences in the computer it would come back with 35 or 40 properties.’”

“Some of the county’s markets saw higher median prices, some lower. Eagle Point’s median tumbled 14 percent to $239,000.”

The Register Guard. “Building permits for home construction dropped sharply statewide, down 14 percent from August and down 30 percent compared with a year ago. ‘Oregon continues to feel the impact of the national housing slowdown,’ economist Tim Duy said. ‘The depth and speed of the housing slowdown has prompted some commentators to issue recession warnings.’”

“There is a risk, he said, that consumer spending will slow sharply if falling home prices curb people’s ability to tap into their home equity.”

The Oregonian. “For a variety of reasons, much has changed in the past few months, both in the southwest suburbs and across the country. Compared with some cities where markets collapsed almost overnight, however, it’s becoming clear that the slowdown creeping through the southwest suburbs portends, at worst, a return to more sane and sustainable market conditions.”

“In recent weeks, the air has been hissing out of the balloon. Housing inventories grew to 4.5 percent in September, and signs of the slowing, or, as some agents prefer to call it, the ‘adjustment’ — are showing up everywhere.”

“Some large residential builders, for instance, are offering incentive programs to coax hesitant prospective buyers off the fence. In the existing-homes market, many buyers are reducing their asking prices, often dramatically.”

“Larry Hilton, a broker and residential land specialist in Tigard, recently saw firsthand an example of the new sluggishness: While preparing a market analysis for a house in northern Marion County, he had trouble finding comparable examples needed to set a price.”

“The reason? ‘Because there are no recent sales in that area,’ Hilton said. ‘None. We’re seeing more and more of these things across the board these days.’”

“The housing market in Clark County has slowed considerably in recent months, Sebastian said, as has Portland’s east side, where a glut of houses remains.”

“‘Right now, it’s all a matter of having quality product in the right spot and building the right thing,’ said Drew Prell, who recently completed a retail and commercial project near downtown Lake Oswego. ‘But if I’m glad I’m not out in Hillsboro trying to sell houses, I’m certainly glad I’m not in Las Vegas, New York and Southern California.’”

“Analysts widely agree that real estate ‘bubbles’ in all three of those locations, as well as once-incandescent pockets elsewhere, have burst in recent months. But those same analysts also agree that no such bubble formed in Portland, which should help soften the effect of slowing sales and increasing housing inventories.”

“‘Everyone in the residential food chain, from contractors to mortgage originators to materials suppliers, is going to feel the slowdown,’ economist Bill Conerly said. ‘And it may take two to three years to work off the excess of housing we now have in the works.’”

“People who bought their houses as prices peaked may sustain the most economic damage, particularly if they financed the purchase with adjustable-rate mortgages, said Sandra Carlton, owner of Arrowhead Mortgage in Lake Oswego.”

“‘What all of that means is that foreclosure rates are going to be high next year and for a few years into the future,’ Carlton said. ‘At the very least, 2007 will be an interesting year.’”

“She predicted that a cooling real estate market will result in a significant thinning of her colleagues, particularly newcomers. ‘If you are chasing re-fis, your days are numbered,’ she said.”

The Arizona numbers are out for October. “The local single-family resale market had a slight upturn in October 2006, as recorded sales rose to 4,985 transactions from 4,875 sales in September, but still well below the 8,420 recorded sales of last year. This is the lowest monthly level for October since 4,860 sales were reported in 2001.”

“So far in 2006, there have been a total of 57,375 sales, while it stood at 97,165 sales in 2005 year to date. Although the median home price improved slightly from $256,900 in September to $257,000, it was again below last year’s $259,900. The record to date was June 2006 at $267,000.”

“‘Limited home appreciation and household income continues to raise concern about the ability of some homeowners to maintain their homes,’ said Jay Butler, director of the Arizona Real Estate Center at Arizona State University’s Polytechnic campus. ‘This may be especially evident for those that have used some of the more creative financing instruments, such as option payment plans and initially low interest rate adjustable mortgages.’”

The Arizona Republic. “The Valley’s single-family home sales are well off from last year’s frenzy, down nearly 41 percent from October of last year, according to ASU.”

“Last year’s resale market was driven by a buying spree fueled by investors that pushed prices and sales to records. ASUs’ Jay Butler said the market is struggling to shake a hangover from last year, trying to find its footing at a more reasonable pace.”

The East Valley Tribune. “In September, the year-to-date median home price dropped for the first time in more than 10 years.”

“Last month, 15 percent of all recorded sales were for homes priced from $125,000 to $199,999, while 46 percent were from $200,000 to $299,999 and 35 percent were more than $300,000. In October 2005, 21 percent of all recorded sales were priced from $125,000 to $199,999.”

“‘The overall trend is we seem to be bouncing along the bottom here. We’re probably a little bit below our historical norms for these months, but the market is within its range of historical normalcy,’ said Butler.”

The Arizona Daily Star. “Tucson’s median home price in October reached $211,500, a 5.5 percent decrease from $224,000 last year. The number of new homes listed for sale reached 2,886, a 16.7 percent increase from 2,474 homes listed last October.”

“Last month, 9,336 homes were listed for sale, an increase of 75 percent over 5,330 homes listed in October 2005. The market ’seems to be stabilizing,’ said Paul Olson, MLS president.”

“Scottsdale’s median home price fell in October to $548,500, down 2 percent from a year ago and 5 percent from September. Sales of existing homes were off 27 percent from a year earlier when 575 homes were sold.”

“The median price of an existing home in south Scottsdale was $300,000 in October, down $20,000 from September and $10,000 from a year earlier.”

“North Scottsdale’s median price in October was $635,000, a decline of $43,000 from the previous month and off $20,000 from a year earlier. Sales of Scottsdale condominiums and townhouses last month were off 41 percent from a year earlier.”

The Star Telegram reports from Texas. “Existing-home sales in North Texas slipped again in October. The 4 percent drop from year-ago levels was the seventh down month this year. ‘It’s really crazy right now,’ said (realtor) Jane Crook in Colleyville. ‘It’s definitely a buyer’s market.’”

“Crook said job growth and movement into the Dallas-Fort Worth area are solid, but they’re not keeping up with the inventory that homeowners are putting on the market. ‘We’re getting way out of whack,’ Crook said. ‘It’s every area.’”

“In October, there were 45,715 homes on the market, up 11 percent from a year ago. That rise in inventory in an area that is already a buyer’s market, combined with nationwide reports of an overheated real estate market, makes prospective buyers think twice about committing to purchasing a home, said Nancy Stephens in ZipRealty’s Irving office.”

“‘We call it a ‘pause’ in DFW, instead of a bubble,’ she said. She describes it as a time when buyers say, ‘Let’s wait and see what happens.’”

“Builders are adding to the supply of homes for sale, she said, offering aggressive incentives that the average homeowner has trouble matching. ‘The buyers are asking for so much, as far as closing costs,’ she said.”

“A homeowner in northeast Fort Worth has reduced the selling price and increased the remodeling allowance. A seller in Haltom City is offering a $500 Lowe’s gift card to the buyer. Homes in east Fort Worth, Summerfields in north Fort Worth and North Richland Hills are touting pre-foreclosure bargains.”

“The median price of a home sold in October, $143,000, is down 3 percent from the October 2005 level. This is the second month in a row that the median price has fallen. Before last month, the median price hadn’t fallen in two years.”

“Crook said concessions by sellers may be hurting home prices, but she also cited the high number of foreclosures. The number of foreclosure postings has skyrocketed in recent years to the highest levels seen since the late 1980s.”

“”Real estate agents note that buyers are coming from the East and West coasts to buy investment and residential property.”

The Dallas Morning News. “The slump in home sales during the last few months is a sign that the local housing market has weakened. Agents say that potential buyers are in no hurry to make a decision. Some are waiting to see if prices fall.”

“‘My own house is on the market, so I have a different perspective,’ said Jim Fite, president of Dallas’ Century 21 Judge Fite Realtors. ‘We’ve had more than two dozen people look at it, and we’ve had no offers.’”

“‘It’s just a matter of time before the right buyer comes along,’ he said. ‘But we are a little bit discouraged that we haven’t had an offer in 2 ½ months.’”

“‘The unemployment rate is low, and there is no reason for people not to be buying and selling real estate,’ Mr. Fite said. ‘I don’t think we are going to have a serious slowdown – maybe a blip.’”

The Tulsa World reports from Oklahoma. “Shrugging off the national real estate slump has come to an end in the Tulsa area, where home sales dropped 13 percent in September from the month before.”

“Tulsa home values took a sizeable hit as well. The average price of a home dropped 3 percent from the month before to $146,233, while the median price dropped 4 percent to $121,000, the second straight significant monthly drop.”

“(Broker) David Momper said the cool-off was unexpected. ‘Typically, September is a spike in our market, and it didn’t happen this year,’ he said. ‘We’re not sure why.’”

“Momper said many buyers and sellers are leaving the market due to waning confidence. ‘It’s scared money,’ he said. ‘We’re not sure what’s scaring people.’” “Wheeler said negative news about the national real estate market, especially in coastal areas where prices and sales are plummeting after years of dramatic increases, has influenced local buyers and sellers.”

“‘The news you get on the housing market is negative and depressing, and I’ve heard negativity from the public as well,’ he said. He predicted that local home sales will stay slow through the end of the year.”

Myrtle Beach Online reports from South Carolina. “Skyrocketing insurance premiums and steadily growing inventory have sent real estate sales tumbling on the Grand Strand. Single-family home sales dropped 20 percent to 428 in October from 538 in October 2005, according to the MLS for Horry and Georgetown counties.”

“Condominium sales dropped 34 percent to 423 from 640 last October. ‘In my opinion, that’s going to be a continuing trend,’ said (broker) Greg Harrelson.”

“Most real estate agents say prices are being cut in certain segments of the home and condo market and motivated sellers are offering big incentives. The market has completely ‘done a 180-degree turn from a year ago,’ so large sales drops aren’t surprising, said (broker) Dale Johnson.”

“‘Last year, there was still a tremendous amount of investor interest in the Myrtle Beach area [in October]. But this year, the investor has totally left the market,’ Johnson said.”

“Some condominium owners are having to pay as much as seven times the amount of insurance that they paid a year ago. ‘I give insurance a lot of blame for the condo market,’ said Tom Maeser, market analyst. Indeed, insurance rates are going to lead to foreclosures, Johnson said. ‘If they can’t get insurance, they won’t buy,’ he said.”

“Harrelson said agents need to be prudent about what price they’re listing homes and condos at. Many sellers are just listing property at a high price to see if it will sell, he said.”

“‘I tell my agents, ‘Let’s not take overpriced listings. It hurts the real estate agent, the real estate company, and it hurts the consumer. It oversaturates the market. If we took those [units] off, supply levels would go down,’ he said.”

“Johnson said even price reductions as much as 30 percent are not necessarily making a difference to buyers. ‘I just think that everybody is waiting. The only people buying and selling are those that have to,’ he said.”

From TC Palm in Florida. “Levitt Corp., the parent company of Tradition builder Core Communities, reported that orders companywide for new homes decreased 19.3 percent in the recently completed third quarter from the same period in 2005.”

“‘This remains one of the most difficult periods for the U.S. housing market in over a decade and Levitt’s results reflect the challenges of the current operating environment,’ Levitt CEO Alan Levan said. ‘The homebuilding trends in Florida, where most of our inventory is concentrated, continues to be severely impacted as evidenced by slowing demand, declining new orders, lower conversion rates, and an increase in forfeited deposits on homes under contract.’”

“Despite the concerns from Levitt, the company is looking positively at the future of its Tradition communities. Core Communities has recently broken ground for the 9,500 home Tradition South Carolina, near Hilton Head.”

The Herald Tribune. “Some might view the timing as classic: coming to town to inspire depressed real estate agents just as your mortgage company’s stock drops to a near-52-week low on poor earnings results complicated by Florida’s sagging real estate fortunes.”

“Ike Reighard, HomeBanc’s executive VP and ‘chief people officer.’ HomeBanc has been active in Sarasota for about three years, employing 26.”

“In an unusual mix of marketing, motivation and timing, Reighard visited Sarasota on Wednesday to speak to several hundred real estate professionals. His Atlanta-based HomeBanc, meanwhile, said that next year it would no longer operate as a real estate investment trust, or REIT, because of adverse market conditions.”

“He told the audience at downtown Sarasota’s University Club that he was there developing relationships for HomeBanc and to ‘breathe life into your dreams.’ Reighard offered tips to ‘exchange ordinary living into an extraordinary life,’ through ‘big hairy audacious goal setting.’ ‘Negative people suck the life out of me,’ he said.”

“Some analysts on Wall Street this week might have fit that description for Reighard. Analyst David C. Stumpf downgraded HomeBanc’s stock. The decision to ‘de-REIT’ would allow the company, Stumpf said, to ’significantly cut or possibly eliminate its dividend next year in an effort to preserve capital until the operating environment improves.’”

“Analyst Andrew Wessel said that the company’s heavy exposure to Florida means a recovery in origination volumes will not happen any time soon.”

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