The Housing Bubble

The Register Guard reports from Oregon. “The median sales price of homes sold in Lane County hit $223,000 in September, continuing a trend that saw median home values rise 50 percent from 2000 to 2005. In contrast, median household income in Lane County went up 30 percent in the same time period. But appraiser Tawfik Ahdab says a measure of relief may be on the way for home buyers.”

“Many Lane County communities now find themselves in a ‘contraction phase,’ Ahdab said, meaning that the number of houses on the market is increasing faster than demand, relieving pressure on prices.”

“‘But more buyers are now ‘waiting out’ the market, to see if there will be price reductions in the future,’ Ahdab said.”

“At last week’s open house, real estate agent Mike O’Connell said,’ At a price of $209,900, some of them would be stretching themselves to the absolute limit,’ he said. ‘With the market the way it is, they need to ask themselves if they really should be buying a house right now.’”

“Mortgage broker Paul VanderPlaat agrees. ‘The old rule-of-thumb was not to pay more than 29 percent of gross income for housing, and not to have total debt, including housing, of more than 41 percent of gross income,’ VanderPlaat said. ‘Now many lenders are financing 100 percent of the sales price of a house, with an overall debt of 63 percent.’”

“Counting on continued price inflation that would allow homeowners to realize big profits after just a short time could lead many consumers to disaster if the market sours, and lenders have an obligation to educate home purchasers about the risks involved, he said.”

From KTVZ.com. “The month that ended with Halloween had both tricks and treats for Bend’s home sellers and buyers, with a big drop in sales, a big run-up in inventory (and) some big price reductions.”

“October home sales were off about 60 percent from the peak of Bend’s real estate boom a year ago, broker Rob Eggers said. Overall, there’s more than a year of housing inventory on the market, with the biggest run-up on the Westside, at 17 months of inventory, Eggers said.”

“‘Sellers have had to get very aggressive with their pricing to stand out amongst the competition. Unfortunately, for some sellers, selling their home is not something they would like to do, but rather, something they have to do,’ Eggers added. ‘As a result, those sellers have had to sharply lower their prices to get offers.’”

The Oregonian. “The Portland-area housing market has seen better days. New figures show the median home price in October was $270,000, about $5,500 lower than in September. The number of homes for sale is growing, and the pace of sales is falling.”

“‘There is a national housing downturn, and Oregon is participating in it,’ said Bill Conerly, an economist in Lake Oswego.”

“Local real estate agents and builders that the restrictive Urban Growth Boundary and the area’s ability to attract new residents shield it from the national housing slump. ‘If I were a praying man, I’d say thank God for Californians and the UGB,’ quipped agent Rob Levy.”

“The October RMLS report showed the market has 4.6 months of inventory, about double the amount in the fall of 2004 and 2005. By the end of the month, there were 11,533 homes on the market, 82.8 percent more than a year ago.”

“Closed sales fell 14.3 percent in October, compared with October 2005, the RMLS report said. That’s no surprise to Dave Hrabal, an agent with the Hasson Co. A year ago, he had two houses for sale and yearned for more, knowing they would fly out the door. Today he has 28.”

“‘The offers I’m seeing are just low,’ Hrabal said. ‘It’s definitely a buyer’s market. There’s just hoards of supply out there, and there’s just not that many buyers.’”

One reader suggested this topic. “Lawsuit rumblings are starting: Were you sold a Puffed Overinflated Home Value by a Developer? We’re looking for other folks that were ‘puffed’ on a home purchase that was supposed to appreciate to a value to cover the downpayment and never even came close.”

“Also, told it would rent for about the mortgage value and will never rent for near that. We are seeking a competent attorney that can help represent others like us to come out with some fair amicable solution with these developers. Can anyone can help us prevent a financial disaster?”

The Arizona Republic. “Complaints against real estate agents are on the rise, with consumers accusing them of everything from selling property without a license to cutting corners to make a sale.”

“As of June, the number of complaints opened with the Arizona Department of Real Estate had jumped 53 percent since 2003, the year before the housing boom took the Valley by storm. Complaints forwarded for discipline increased 150 percent in that same time.”

“Part of the spike in complaints reflects the rush of new agents who flooded the market to take advantage of the housing boom of 2004 and 2005. The number of new brokers and agents rose 38 percent in the past three years, well behind the pace of complaints.”

“Elaine Richardson, the state’s real estate commissioner, said she was alarmed by the trend of new complaints exceeding the number of new brokers and agents. ‘If we don’t get a handle on it, that brings us back to people getting bilked out of their money,’ she said.”

“Patti Schubert of Fountain Hills recently filed a complaint with the real estate department and other agencies, accusing her agent and a condo developer of mishandling her paperwork. She said she and her husband, Steve, lost nearly $92,000 in earnest and upgrade money as a result.”

“‘I honestly think the agents got caught in the frenzy of the market,’ Schubert said. ‘They were making a lot of money. They forgot their responsibility to their clients.’”

“David Khalaj, an agent in Ahwatukee, thinks some of complaints come from the frustration of a slow market. ‘There’s just no traffic out there,’ he said. ‘Everybody is frustrated right now with the way the market is.’”

The Denver Post. “The Denver/Boulder Better Business Bureau has received 20 complaints about Altus Real Estate during the past three years, more than any other mortgage company in Colorado. Five involve allegations that Altus brokers lied or misled them about loan terms.”

“Deceptive practices by some brokers are helping to push homeowners into foreclosure, experts say. ‘It’s a serious problem. People are getting into loans they can’t afford,’ said Colorado Attorney General John Suthers. ‘That puts them at a higher risk of foreclosure.’ The state’s foreclosure rate has led the nation for eight consecutive months.”

“Loans with higher rates or prepayment penalties can boost the lender-paid broker commission by one to three percentage points, or up to $9,000 on a $300,000 loan. A former Altus broker said Altus tried to put customers into high-commission loans. ‘I was asked by a manager ‘Why aren’t you selling the option-ARM?’ said the former broker, who asked not to be named.”

“Barbara Mattern said she was told by an Altus broker that the monthly payment on her $556,0000 loan would be less than $1,000. But when her first mortgage-payment stub arrived in mid-2005, the principal-and-interest payment was about $3,000, she said.”

“Mattern walked away from the home she loved. The loan was just one factor in her foreclosure. Now she’s living with a relative in Nebraska, and her belongings are in storage. ‘I don’t know what I’m going to do,’ she said. ‘I’m just kind of lost right now.’”

“Mitch Hyder cringes as he looks through the loan-refinancing documents he signed in December 2005. There, on one document, is the 7.46 percent interest rate. Another document spells out details of his option ARM, an adjustable-rate mortgage with a variety of payment options.”

“Hyder called Altus after hearing a radio spot offering no payments for 12 months. Hyder said the broker quickly talked him into a different loan, with a 2.9 percent interest rate for five years. The broker never told him it was an option ARM or that the low numbers were for a payment that would cause his loan debt to grow up to 125 percent of the original balance, Hyder said.”

“He admits he didn’t read the closing documents carefully, relying instead on what the broker told him. ‘I now call myself Capt. Dumbass,’ said Hyder.”

“Hyder’s $244,000 loan and an accompanying $48,800 equity line of credit were through lender Washington Mutual. Altus collected $11,100 in fees, $7,800 from Washington Mutual and $3,300 from Hyder. ‘We’re making the minimum payment and losing all the equity in our home,’ Hyder said. ‘It’s going to be a very expensive lesson.’”

The San Francisco Chronicle reports from California. “The average price of a home area has fallen by about $100,000 to the high $300,000-range at Centex Homes developments in Sacramento, said John Ochsner, Centex’s executive VP of the Northern California region. The decline in new- home sales in the Bay Area has been apparent in Contra Costa County, where the price of a new home fell 20.5 percent from $717,000 to $570,000 between October 2005 and October 2006, according to DataQuick.”

“‘Buyers over there are demanding price reductions and incentives and we’re responding to that,’ Ochsner said. ‘Buyers have all the power at the moment.’”

The Daily News. “Over the summer, John Toole put his Woodland Hills home on the market for $1,695,000 and waited for a rush of prospective buyers. And waited, and waited and waited.”

“He eventually slashed his asking price by $100,000. Nothing changed. ‘It didn’t bring anybody around. Nothing. The market is absolutely dead,’ Toole said. ‘I was amazed.’”

“The number of ‘For Sale’ signs across the San Fernando Valley soared earlier this year and many now feature ‘Price Reduced’ banners. So is this the 1990s all over again? ‘It feels exactly the same,’ said Realtor Raquel Magro. Magro has been selling Valley houses and condominiums for 24 years and has seen both bust and boom.”

The San Luis Obispo Tribune. “After significant speculation about when San Luis Obispo County home prices would decline, the year-over-year median home price recently registered its first drop in eight years, according to the California Association of Realtors.”

“But local real estate agents say they didn’t need an economist to tell them what they have been witnessing for the last several months. Price reductions have been commonplace throughout the county.”

“In nearby Pismo Beach, the median home price is slightly down. Several agents said that buyers are pushing back on the prices being asked for properties there. ‘In Pismo, what we may be seeing is that the views and proximity to the ocean are being overrated by sellers and buyers aren’t willing to pay for it,’ said David Skinner, manager of Prudential California Realty in Arroyo Grande.”

“‘I cannot believe that the median home price had not gone down sooner. We’ve been dealing with price reductions for the last year in North County,’ said Ed Steinbeck, a broker associate in Paso Robles. In fact, Paso Robles is seeing some of the sharpest declines in sales throughout the county.”

“Some of the price reductions are also because of the number of new home developments in the North County. ‘We constantly have new homes that are coming into the market. We don’t have the luxury to just sit on those homes. We have to figure out what it’s going to take to move those homes so we react more quickly,’ explained Chris Bowley, Central Coast division manager for Centex Homes.”

The Press Democrat. “Sonoma County lost jobs for the sixth straight month, shedding 3,100 over the past year, according to state employment numbers released Friday. The biggest job loss in Sonoma County occurred in construction, electronic instrument manufacturing and the service sector.”

“With the real estate market well down from its record high in August 2005, construction has slowed and the sector has shed about 400 jobs since a year ago.”

The Desert Sun. “The ranks of licensed real estate agents have ballooned to nearly 4,200 in the Coachella Valley. Some real estate professionals have trimmed their commissions, real estate agents said. At the same time, some homeowners (are) in a pinch to sell their residences quickly with a flood of some 8,000 homes on the market.”

“Clients need to know about changes in price appreciation and market conditions because ’seller expectations are rooted in a four-year boom that was not sustainable,’ said Leslie Appleton-Young, chief economist for the California Association of Realtors.”

The Union Tribune. “After two whirlwind years of million-dollar sales, professional accolades and hefty paydays, real estate agent John Leverson never expected to find himself selling power wheelchairs and scooters to make ends meet.”

“Leverson’s love affair with real estate began to sour in the fall of 2005, when San Diego County’s housing market reached its peak. Prices flattened and then began to slowly decline as the region’s inventory of unsold homes swelled.”

“Leverson soon found himself struggling to pay the costs of advertising, insurance, multiple listing services, lock box fees, membership dues and gasoline. About three months ago, he called it quits, taking a full-time job at The Scooter Store in Clairemont.”

“Although he still has one listing, he says he no longer can afford to chase the dream of a career in real estate. Without steady sales, ‘your cash flow goes out as fast as it comes in,’ he said. ‘I was forced to go out and find another job where I had a regular income.’”

“One of the most telling signs of a cooled real estate market is the large inventory of homes for sale. The Realtors trade group reports that San Diego County had a 9.8-month supply of unsold, resale single-family houses in September, compared with a 4.7-month supply a year earlier.”

“Word has gotten out that the days of fast money for agents is over, said Kathleen Monaco, director of (a) real estate school in San Diego. Enrollment in her classes ‘is down significantly.’ ‘I hate to see prices go down, but the idea that they could keep going up 30 percent a year was crazy,’ she said.”

“Back at The Scooter Store, Leverson hasn’t ruled out a return to real estate, but for now he plans to focus on his new job and rebuilding his finances. ‘The priority is paying bills and eating,’ he said.”

What do you see in your housing market this weekend? Auctions? New statistics? The Lowell Sun. “Several real estate experts have been quick to say that the current housing slump is nothing compared to that of the early 1990s. But in at least one sense, it is. A total of 12,945 foreclosures were initiated in Massachusetts through Sept. 30. At the current pace, that would result in a full-year total of 17,307 — a couple hundred higher than the all-time state high set in 1991.”

The Washington Post. “Offers to purchase homes can include all sorts of requirements for things that must happen for the deal to go through, known as contingency clauses. For sellers, the most troublesome is the home-sale contingency, in which the purchase depends on the buyers in turn finding buyers for their own home.”

“Such clauses were rare during the real estate boom of recent years. However, as the market has slowed, they have begun to reappear. ‘Here they wanted to string my seller out for basically four months, and then there’d be no guarantee that come February there would even be a closing,’ said agent Jane Fairweather (in) Bethesda. ‘What they were telling the sellers was that they didn’t want any risk in this deal.’”

From New Zealand. “Signs of uncertainty are creeping in to the local residential property market as the monthly median selling price suddenly slipped, soon after reaching peak levels.”

“After hitting a record $370,000 in September, the median plunged $25,000 to $345,000 last month in Tauranga, and the volume of sales, in what is supposed to be the busiest time of the year, dipped to 151, from 165. ‘It’s hard to gauge what people are thinking - there is very little action in beachfront properties,’ said Max Martin, Harcourts franchise owner.”

The Houston Chronicle. “‘We’re building too many homes in Houston,’ said Smith. ‘Builders in Houston have come to believe that Houston is cushioned and immune from the housing weaknesses nationwide,’ he said. ‘We’re starting to build up excess supply,’ said Smith, who grew to prominence in 1985 when he predicted the dramatic fall in real estate prices at a time when developers were enjoying a great market.”

The Naples News reports from Florida. “Ross McIntosh sold his home for $735,000 when there were several other homes in his neighborhood listed for $790,000. Some lowered their prices to $760,000 and, after months on the market, one recently sold for $675,000.”

“‘There is a lot of speculation about how far (down) the market is going to go and how long the (downturn) is going to last,” said McIntosh, a Naples-based real estate broker. The slowdown in the housing market is already greater than anyone had expected and it could get a lot worse before it gets better, he said.”

The News Press. “Naples’ real estate market seems to be in a nosedive from last year’s heights. Home sales in the first nine months of the year, for both single-family homes and condos, were off 50 percent. The inventory of properties on the market is up 300 percent, to a 21-month supply.”

“During the real estate boom, the Naples market was overrun with investors who helped drive up prices far beyond what a median-income family could afford. ‘The valet parkers at hotels were buying (property on speculation) and saying they’re going to flip it, and they’re all getting caught,’ says agent Karen Van Arsdale.”

The Palm Beach Post. “The prices buyers paid for the brand-new homes on Fleming Way tell the tale of what happens when a market cools. In a handful of deals during the last several months, Miami-based builder Lennar Homes slashed prices on the street by as much as 51 percent, unloading the last of its houses in the Martin’s Crossing development to select investors.”

“That means residents such as Mark and Kim Andersen, who locked in $506,400 when they signed a contract for their five-bedroom home in early 2005, are living just down the street from a nearly identical five-bedroom home that Lennar sold to another buyer for $250,000 in late October.”

“That buyer flipped the home three days later, reselling it for $425,000, records show.”

“‘Generally speaking, I think a lot of these discounts we’re seeing today are kind of shocking,’ said Alex Barron, a San Francisco-based analyst. ‘And they’re much more aggressive, I think, than most people realize.’”

“From Palm Beach County to Indian River County, many big national homebuilders are heavily discounting prices, with the biggest cuts showing up on the Treasure Coast, said Brad Hunter, a housing economist for West Palm Beach-based Metrostudy. ‘They’re offering extraordinary value, just to get rid of the standing inventory,’ Hunter said.”

“Jupiter resident John Icart closed in August on a three-bedroom, 2,176-square-foot house at 896 Fleming Way. The price: $245,000. That’s $165,000 less than what Daniel and Claudette Henry paid for the same model house.”

“The Henrys signed up for their home in early 2005, when many homes were still selling themselves. ‘At that time, they were hyping that they were sold out, or were selling out, and that they only had two lots available,’ Daniel Henry said.”

“Donna Mau, is trying to sell the Henry house and four others in Martin’s Crossing. ‘I hope prices stabilize in there, because my people are going to get hurt,’ said the agent.”

The St Petersburg Times. “Year to year, overall housing prices in the Tampa Bay area still show small increases. But don’t be fooled. So large is this area’s unsold inventory of homes and so comparatively few the buyers, most housing prices have actually retreated 5 to 15 percent.”

“It’s not so much prices are coming down, it’s that prices should never have been there in the first place,’ said Craig Beggins, owner of a Century ‘21 franchise in southeast Hillsborough and Pinellas.”

“Look what happened to the investment dreams of Jodi and Jeffrey Roberts. The real estate climate was so balmy the past few years, the Robertses’ investment homes showered them with hundreds of thousands of dollars in easy gains.”

“Now they are bracing for a different forecast: stormy with a chance of foreclosure. Four Pasco and Hillsborough county properties they bought at the tail end of the property boom can’t find buyers willing to offer more than the Robertses paid for them.”

“Price cuts aren’t doing the trick. In west Pasco’s Gulf Harbors, the couple listed a home for $50,000 less than what they paid. The result? Zero buyer interest. ‘I know how it feels to be poor,’ Jodi Roberts said as she contemplated her combined $15,000 monthly house payments.”

“‘Investors bought lots of new construction, held for several months and now they’re getting at the end of their fun time,’ said Hillsborough Realtor Craig Eaton.”

“The fun time has ended for Leonard and Joyce Sondheimer. In October 2005, the Bradenton couple bought a $338,900 MiraBay townhome on Aberdeen Pond Drive. The bayside investment home with stone counters, hardwood floors and stainless steel appliances was sure to appreciate to half a million dollars. Or so the Sondheimers thought.”

“After a year on the market, no one has nibbled. Their Realtor chopped the price to break even. The tax bill alone on that single investment, $8,900 a year, is draining the Sondheimer’s nest egg.”

“‘I was retired and now I’ve had to go back to work. I’ve got to pay all these bills,’ Leonard Sondheimer said of his new job as a mattress salesman. ‘It’s getting sickening.’”

“”The get-rich-quick atmosphere has already bypassed southeast Hillsborough. As Beggins gathers his agents, he explains the new rules. Look to sales prices from late 2004 or early 2005. Sellers don’t want to hear they won’t make 20 to 30 percent as before. ‘Ninety-seven percent of people selling their homes are p—– off at me,’ Beggins said.”

“Jodi and Jeffrey Roberts say they are more angry with themselves. They say they made $310,000 last year, a combination of salaries as employees of MI Homes and gains from flipping investment homes. The home in Gulf Harbors, Pasco’s highest flying neighborhood during the boom, drew so little buyer interest that Jodi Roberts moved in with her family of six to wait out the slump.”

“The $185,000, 1,500-square-foot house in Wood Trail Village north of State Road 54 hasn’t fielded an offer of more than $175,000. Roberts is three months behind on payments for a Carrollwood condo she bought in December with no cash down. ‘These houses are a ticking time bomb depending on how fast the mortgage companies come after me,’ Jodi Roberts said.”

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