The Housing Bubble

The San Francisco Chronicle reports from California. “It may take the California housing market three years to recover from its downturn because homes have simply gotten too expensive for most buyers, whose salaries haven’t risen nearly as fast as housing prices, economist Ken Rosen, at UC Berkeley said.”

“‘This is not a one-year event and this is not a six-month event,’ Rosen said. ‘It’s going to take three or four years for incomes to catch up to housing prices.’”

“‘We are at the beginning of the correction in the housing market in terms of prices,’ said Stephen Levy, director of Palo Alto’s Center for Continuing Study of the California Economy. ‘The prices now are way out of line with the income and income prospects of people.’”

“The California Association of Realtors predicts a more-modest decline of 2 percent next year, according to Leslie Appleton-Young, the group’s chief economist. ‘It’s going to take another 18 months or so to work itself out,’ she said.”

“Appleton-Young, like Rosen, said that sellers who are refusing to drop their asking prices are dragging out the decline. Sellers will need to readjust their expectations, and lower prices, in order to get the market moving again, she said. ‘The period from 2002 to 2005 was unique — we had an extremely strong market and it was not sustainable,’ Appleton-Young said.”

“The number of buyers who purchased their homes with unconventional loans, or mortgages that start out with extremely low payments and in some cases allow borrowers to rack up more debt than equity, also raise concerns about the stability of the housing market, Rosen said. ‘Anyone who could fog a mirror could get a 105 percent loan,’ he said. ‘And that means anybody.’”

“Rosen also pointed to buyers canceling sales of new homes as another factor weighing down the market. Developers often sell homes before they are complete, taking a deposit of typically about 3 percent. Buyers are walking away from those deals in record numbers, swelling inventory.”

“‘They had lots of orders with a small down payment, those really weren’t sales at all,’ Rosen said. ‘They were options, and many of them have been canceled.’”

The San Bernardino Sun. “The national housing market may be staggering, but anyone looking for too much weakness in the Inland Empire will have a hard time finding it. Yes, sales may have been down 21 percent from a year ago in October, but the median price of a home in San Bernardino County still went up and houses are still selling.”

“‘We are going to see some weakness in the market in the short term,’ said Redlands-based economist John Husing, who studies the Inland Empire.”

‘”Three things need to happen before the market fully recovers,’ Husing said. ‘We need to work through some of the inventory on the market. We have to deal with the properties that are in foreclosure, the people who bought homes in 2005 and haven’t had a run-up in equity. And we need to get the speculators out of the market, the ones who bought properties to flip them.’”

“If there’s a complicating factor, it’s that the area has extremely low affordability. Only 6.7 percent of residents can afford to buy the median-priced home sold in the San Bernardino-Riverside- Ontario area in the third quarter.”

The Daily News. “The Los Angeles area remained the nation’s least affordable for house hunters in the third quarter, according to a survey released Monday. This is the eighth consecutive quarter that Los Angeles remained the hardest place to buy a house, according to the National Association of Home Builders.”

“In the Los Angeles-Long Beach-Glendale market only 1.8 percent of new and existing homes sold during the third quarter were affordable to those earning the area’s median family income of $56,200.”

“‘It’s a very critical thing,’ said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. ‘In all the uproar of the slowdown in housing this has sort of gone into the back of the room and nobody is discussing it.’”

“The index tracks the change in value of the same pool of properties. In the Los Angeles area some homes in Calabasas, La Ca ada Flintridge, Encino, North Hollywood and Studio City are included in the pool. ‘There is more inventory. Things that are not perfectly priced last a long time on the market. But we are definitely not seeing a bursting of a bubble,’ said Katherine August-de Wilde, chief operating officer.”

The Record.net. “Despite a cooling housing market and some slight price declines, buying a home was increasingly out of reach in many areas of California, including San Joaquin County, an industry trade group reported.”

“‘This market that we have has never been particularly driven by the local median income or average income; it has always been driven by the Bay Area market,’ said (broker) Mike Collins in Stockton.”

“‘California’s at risk for losing its college graduates and young families,’ Robert Rivinius, association president warned. ‘If they can’t hope to buy a home here, more and more of our best and brightest leaders of tomorrow will leave California for communities in other parts of the country where homeownership is still a realistic possibility.’”

The Record Searchlight. “Home sales in Shasta County in October fell for the fourth straight month, according to DataQuick. The slowing pace of sales and falling prices in the north state reflect a nationwide trend as the once-booming housing market fizzles.”

“‘I think the market bottomed out a month ago,’ (realtor) Brad Garbutt in Redding said. ‘The market is in slow motion. Retirees still want to move here, but they can’t liquidate the property they’re at now so they can’t move.’”

“Last month, Shasta County recorded 127 home sales, down from 149 in September and 198 in October 2005, DataQuick reported. The median sales price in Shasta County in October was $248,000, compared with $270,000 in September and $249,000 in October 2005.”

“Sales in California fell 28.6 percent in the third quarter. In Shasta County, home sales in the third quarter declined 37 percent from a year ago. For the year, home sales in the county also have dropped 37 percent. Shasta County’s numbers include new and used home sales.”

“Garbutt, a board member of the Shasta Association of Realtors, thinks buyers are wary despite a market tipped heavily in their favor. ‘The American dream is on sale right now. Prices are 10 to 15 percent off their peak,’ Garbutt said. ‘We’re dealing with a psychological market.’”

The Review Journal from Las Vegas. “Earlier this month, the Greater Las Vegas Association of Realtors reported 1,689 single-family home sales in October, down 34.4 percent from the same month a year ago. It was the 10th straight month of double-digit, year-over-year sales declines.”

“‘It’s an absolute correction,’ association President Linda Rheinberger said. ‘We needed to have this. What’s interesting is prices are fairly flat. But we absolutely needed a correction and across the country; it’s helped with affordability. We have an affordability issue here in the county we’re going to have to deal with.’”

“In Las Vegas, new home builders pulled 864 permits in October, the lowest total since January 1993, Home Builders Research reported. ‘We never thought the monthly permit total would ever again get below 1,000,’ Home Builders Research President Dennis Smith said.”

The Las Vegas Business Press. “Nevada’s unemployment rate jumped to 4.2 percent last month, up from 4 percent in September. The housing slump, say officials, has caused the increase. The construction industry reported fewer jobs in October after months of strong employment gains.”

“‘We’ve been hearing for a while that Nevada’s housing market was losing momentum,’ DETR Director Terry Johnson said.”

“The construction sector (is) the primary driver of Nevada’s employment growth. The construction industry added an average of 2,000 jobs per month from February through September, continuing the strong growth trend seen in 2004 and 2005. October is the first drop, with construction losing 700 jobs statewide in October.”

The Reno Gazette Journal from Nevada. “The median price for an existing single-family home in the greater Reno-Sparks area dropped for the fifth consecutive month in October. The median price slipped to $312,400 in the Reno metro area, down 13 percent compared with October 2005, according to the University of Nevada.”

“That is down from the all-time high of $370,000 in January this year and down slightly from $315,000 in September. The once red-hot housing market has seen month-over-month decreases in all but two months this year. ”

“Home sellers might have to wait through winter, a traditionally slow time for the Reno-Sparks housing market. Because of that, Stephen Haley, president of the Reno-Sparks Association of Realtors, and analyst Brian Kaiser agreed February could be the most telling month of whether the market has hit bottom.”

“‘We’re not going to see much of an improvement in the market until after the first (of the year),’ Kaiser said. ‘These last two months of the year are traditionally very slow anyway for resales, and with the market at or near the bottom I wouldn’t expect the November and December 2006 numbers to show much of a reversal in this year’s slide.’”

“The median price for a single-family home in Reno rose to $380,000 in October from $370,000 in September, but that was still down 11 percent from October 2005, according to the report.”

“In Sparks, the median fell to $294,200, down 12 percent from October 2005, and the North Valleys fell to $260,000, down 12 percent from the same year-ago period.”

“The Sparks City Council considered changing an agreement with developer Trammell Crow Co. to reduce the sales price of land needed for housing projects planned on Victorian Square.”

“The price tag for the property would change from $10 per acre or $1.4 million to at least $100,000 plus possible revenue sharing of up to $2.9 million.”

“What happened: The city council voted 4-1, to change the development agreement. Developers said the original agreement for the land did not take into consideration market declines in property values, and increased costs for construction materials and labor.”

“While council members were concerned about the potential risk of loss to the city, many agreed that plans for the revitalization project had progressed too far to deny the price reduction.”

The Journal Online reports from Wisconsin. “The secret to Wisconsin’s soft landing from the 2000 to 2005 U.S. housing boom? Caution, said Marquette University economist David Clark, whose company has a contract to analyze Realtor data. ‘California, Washington, D.C., Virginia and Florida, where they had active new construction with quite a bit of speculative building, those are the ones more likely to see price reductions now,’ he said.”

“It grates on Badger State realty agents that consumers here seem as alarmed as those in high-flying states. ‘People are reading the news, people are watching the news, and it’s all about the housing slowdown. You hear it enough and you think the sky is falling,’ said Scott M. Heyerdahl, chairman of Greater Milwaukee Association of Realtors.”

“What’s lost in the hype, Heyerdahl said, is that despite ballooning inventory and slipping sales, metro Milwaukee’s market remains strong.”

“Milwaukee County’s median price rose 2.6% to $162,900. But median price slipped 2.2% to $253,100 in neighboring Waukesha County, however, home to the state’s highest prices. North Woods territory took a price hit, Vilas County by 8%, Sawyer County by 6.4% and the Ashland/Bayfield area by 5.1%.”

The Wisconsin State Journal. “In Dane County, existing home sales plunged 18 percent to 1,991, down from 2,427 during the same quarter last year. The report is the latest indicator of a shrinking real estate market and is consistent with a sharp drop in housing starts reported over the past several months.”

“The county’s deeper decline may be because the market was hotter than other parts of the state during the real estate boom, said John Deininger of the Realtors Association of South Central Wisconsin. ‘I think we’ve just had more inventory,’ he said. ‘We’ve had more houses being built because there has been a bigger demand here in the past.’”

“‘This is the first time I’ve ever seen a slowdown in the face of low interest rates,’ (realtor) David Stark said. ‘I think buyers started to get very skittish based on the national reports.’”

The Gazette Extra from Wisconsin. “Rock County joined a nationwide housing market slowdown during the third quarter, but there’s no local real estate bubble to burst, according to Julie Raese, president of Rock Green Realtors Association.”

“It depends more on the price ranges, because in Janesville there’s a ‘pretty big’ inventory on higher-end homes, she said ‘What it causes us to do is do a better job on pricing,’ she said. ‘There’s just a bit more inventory and more too choose from.’”

The Detroit Free Press from Michigan. “Metro Detroit homeowners were hit harder than the rest of the nation in the third quarter. The median price of a single-family home in the area, termed Detroit-Warren-Livonia, fell 10.5% in the third quarter, falling to $154,100. In the same quarter a year ago, the median sales price was $172,100.”

“In Grand Rapids, the median price fell 2.9% to $136,600 and in Lansing-East Lansing, the price fell 6.2% to $139,800.”

“‘And for sellers, it’s almost a nightmare,’ says (realtor) Mark Hull in Detroit. ‘A property can be marketed with every kind of tool you can think of, and unless there are really, really great incentives that make the property 20% below what the market price should be, they’re just sitting there.’”

From ABC Local 12 in Michigan. “Real estate agent John Cunningham says more than one-third of the home sales pending right now in Genesee County are in foreclosure. He’s personally handing 43 homes that are in the process of foreclosure. ‘Buyers have a misconception that people are going to have to pay what somebody owed on the house,’ Cunningham said. ‘People are owing on this house over $190,000. Now the home’s for sale for $149,900.’”

“The downside for sellers is that the rest of the market is competing with all those foreclosed homes and that’s pushing down prices. ‘Trying to sell and move out is bleak,’ Cunningham said.”

“Banks are getting very aggressive offering great deals. The inventory is sky high: more than 7,100 homes are for sale in Genesee County alone.”

The Herald News from Illinois. “Third-quarter sales of existing homes were down 19.4 percent in Will County, down 13.7 percent in Grundy County, and down 12.3 percent in Kendall County. In Illinois, sales were down 14.7 percent statewide and 18 percent in the Chicago region.”

“Robert Zoretich, president of the Illinois Association of Realtors, said the housing market is stabilizing, noting, ‘Sellers are offering competitive pricing in line with current market conditions.’”

“The statewide median price dropped 0.5 percent to $209,000. The Grundy County median price was $190,000, down 2.4 percent. In Kendall County, the median price was down 4 percent at $237,000. The Chicago metropolitan region registered a 0.8 percent increase in the median price for single-family homes at $252,000.”

The MetroWest Daily News reports from Massachusetts. “For Realtors, it was the slowest, or, at least, ,more relaxed,’ summer in a decade. Single-family home sales plunged 23.4 percent during the July-to-September quarter, further shifting the market to the buyer’s side as prices continued to soften.”

“Condo sales also dropped sharply over the summer, sliding 22.3 percent compared to a year ago. The report yesterday from the Massachusetts Association of Realtors shows the housing slowdown continuing for a sixth consecutive quarter.”

“‘The more relaxed sales pace during the third quarter is the result of a waiting game buyers and sellers have been engaged in over the past year,’ said David Wluka, the association’s president. Buyers are waiting to see if prices will go lower, while sellers are still reluctant to reduce what they’re asking for.”

“Selling prices fell ‘modestly’ over the summer, dropping 4.9 percent in the single-family market and 2.5 percent in the condo market.”

The Boston Herald. “The Massachusetts housing market’s downturn is accelerating, with sales volume plunging at the fastest pace since 1990 and prices dropping at their steepest rate in 13 years, new figures show. ‘We’re still in a slide,’ Chief Economist John Bitner of Boston-based Eastern Bank said.”

The Telegram. “A continuing slowdown in the state’s housing market has pushed Central Massachusetts sales down more than 25 percent in the quarter ended Sept. 30 from the same period a year ago, while the median selling price for this part of the state dipped almost 4.5 percent to $290,000. It was the lowest summer sales quarter since 1995.”

“Housing sales dropped the most in the southeast portion of the state, down 40.4 percent, while the northeast saw the biggest drop in selling price, off 6.1 percent. Condominium sales fell the sharpest on Cape Cod and the southeast portion of the state, with declines of 33.8 and 36.1 percent, respectively.”

“Some, like William and Kim M. Repa of Southbridge, pulled their home off the market after being unable to sell. The Ripas put their home on the market in October 2005 for $249,000, when the housing market seemed stable, Ms. Ripa said.”

“‘We actually dropped it $10,000 and the agent offered to give money back from her commission. We had an offer, but they wanted us to move out right away,’ she said. ‘They got nervous about the time frame and backed out,’ she said.”

“‘We decided to take it off the market and put it on in the spring,’ Ms. Ripa said. ‘We’ll do some cosmetic work. The house is paid off, so it’s not like we have to move.’”

“Carol Allard Vancil, the agent who worked with the Ripas, said another seller she worked with in Sturbridge had a house on the market for $440,000 in the spring, then dropped the price to $399,000. After another six weeks, the sellers lowered the asking price to $374,000, and got an offer for $30,000 less, even though the property was assessed at $400,000.”

“‘People look at the assessed value, but that’s not what sets the price. It’s the buyers,’ she said. ‘Houses are selling, but the price has to be right. It’s not ‘location, location, location’ anymore but ‘price, price, price.’”

The Boston Globe. “Many empty nesters are being forced to wait for a real estate market upturn, agents and developers said. Falling sales of single-families in Massachusetts have produced a glut of houses for sale, enough to last 13 months.”

“‘There’s a lot of reevaluation going on,’ said Mark Lippolt, executive VP of one of the state’s biggest agencies. ‘The reason is a slowdown in the market.’”

“‘I can’t tell you how many times I’ve heard this story,’ said (Broker) Paul Turcotte. ‘All these people in the suburbs want to move into the city, but they’re hung up because houses are staying on the market so long.’”

“Denise and Patrick Famolare got their deposit back on a condo at Spicket Commons. The Famolares had hoped downsizing from their four-bedroom, four-bath town house along the Saugus River to a two-bedroom condo would cut their mortgage payment by $800 a month.”

“They had one buyer for their home, listed last December for $419,000, but he withdrew his offer days before the spring closing. Before they pulled the house off the market recently, the asking price was $329,000. ‘No reasonable offer will be refused,’ she said.”

The Palm Beach Post reports from Florida. “Palm Beach County’s existing-home sales took the biggest nosedive in the state in the third quarter, plunging 49 percent compared with the same period last year, the Florida Association of Realtors said Monday. Treasure Coast sales also took a beating, falling 44 percent in the same period.”

“As a result of the third straight quarter of declining home sales, inventory has risen to record levels. A total of 21,428 homes were listed for sale in Palm Beach County in October, compared with 8,333 in October 2005, according to Illustrated Properties Real Estate.”

“The median price of an existing single-family home in Palm Beach County fell 5 percent from July through September, to $380,900 from $399,900 in the third quarter of 2005. Treasure Coast prices fell 6 percent.”

“‘No one can afford to live here,’ said David Levin, principal of David Levin & Associates in Delray Beach. ‘Whether sales are down 30 percent or 50 percent, this part of the world is so out of whack relative to median home prices and median incomes.’”

The Herald Tribune. “The Sarasota-Bradenton market led the state during the third quarter in dropping median sales prices. Sarasota-Bradenton posted an 11 percent decrease in median sales price, from $340,900 during the third quarter of 2005 to $302,900 during the most recent quarter, the Florida Association of Realtors reported.”

“Those data did not include sales for September in Manatee County, a generally less expensive market that might have demonstrated more price erosion. Charlotte County-North Port saw its median sales price drop 5 percent, from $229,100 to $216,500 during the most recent quarter. Naples registered a 9 percent decline while Fort Myers-Cape Coral registered an 8 percent drop year-over-year.”

“Local real estate agents said rather than looking at the quarterly report, they are focused on the big picture: the region’s year-to-date performance. ‘We prefer to focus on the association’s year-to-date numbers, rather than the FAR statistics,’ said Felix Power, president of the Sarasota Association of Realtors.”

“The association said that year-to-date figures show the ‘dramatic run-up in both sales and prices experienced in 2003, 2004 and 2005.’”

The Journal Online. “In the Volusia-Flagler market, Realtors reported that sales of existing homes totaled 2,139 in the third quarter, down 43 percent from 3,730 in the third quarter of 2005. The median price stayed close, though at $213,700, down just 4 percent from $222,200 last year.”

“Stuart Hoffman, chief economist at PNC Financial Services Group, said he thinks the housing market still hasn’t reached its low point. ‘I think the permits numbers point to yet another flight of stairs down on housing before we hit the basement,’ he said.”

From Florida Today. “The Florida Association of Realtors (said) Brevard County housing sales dropped 34 percent in the third quarter. The median sales price dropped 9 percent in that period, to $215,500 from $237,800 a year ago. Brevard’s record-high median sales price was $248,700, set in August 2005, according to FAR.”

“(Broker) Jason Hart said there still is a considerable amount of new-home inventory that must be absorbed. Also, there are more positive comments about the Brevard housing market from out-of-state buyers vs. local sellers. ‘The people coming down to the area are just looking for a good deal,’ Hart said. ‘The locals are awaiting to see what the market conditions are going to do.’”

From TC Palm. “Buyers in the Fort Pierce-Port St. Lucie-Stuart area, which includes Martin County, snapped up 44 percent less than the 2,016 purchased during the same period last year. The median price for an existing home was $252,000, down 6 percent from $267,500 in the same period of 2005.”

“‘The market isn’t going to improve anytime soon, especially on the Treasure Coast and most especially in Port St. Lucie,’ said Jack McCabe, CEO of a real estate consulting firm in Deerfield Beach.”

The St Petersburg Times. “In the Tampa Bay area, third-quarter home sales decreased by a whopping 43 percent. There are lots of houses to choose from. If the median prices seem high, they’re probably being pushed up by big homes, which are still selling well.”

“‘I can tell you this,’ said Bob Memoli, a broker-owner in west Pasco, ‘that every day, I’m getting constant, big price reductions on homes.’”

The Ocala Star Banner. “One of the major engines of economic growth in Sumter County & new home construction has throttled back substantially. ‘It has slowed down significantly,’ said Robbie Rogers, Sumter County’s director of planning and development. ‘From our point of view, it’s the same slowdown that’s being felt nationwide. The bubble has burst.’”

“Data show an 84 percent drop in construction permits for single-family homes in The Villages between January and October. The numbers plunged from 529 permits in January to only 83 in October. ‘They’ve been hit extremely hard,’ said Sumter County Commissioner Jim Roberts. ‘This is a well-oiled machine that is grinding to a halt right now.’”

“‘I think there’s a reaction to the explosive growth that we had last year,’ said real estate agent Tom Grizzard. ‘I’ve heard… how they’ve got quite a few unsold homes on the market, and they’ve cut back on construction.’ The slowdown is countywide, he added.’

The Tampa Tribune. “A waterfront Mediterranean-style home on Treasure Island sat on the market for more than a year listed at $1.1 million. Finally, an offer came along the sellers couldn’t refuse: Someone wanted to pay $1.4 million.”

“But there was an unusual stipulation: $300,000 of the purchase price would go back to the buyers or to third parties, the listing agent said. It took three appraisers, all hired by the buyers, before one came back with an appraisal for $1.4 million. Relieved to finally sell the house, the owners went along with the deal.”

“Such home deals are sweeping the nation. The trend worries lenders, some who say they’ve unknowingly approved loans for inflated prices, and have since discovered they’re on the hook for mortgages worth more than the home. Industry experts say there are hundreds of problem mortgages yet to surface.”

“J.T. Pelt, company president and chief executive for Linsky & Reiber Real Estate and Title Services in south Tampa, said his agency didn’t do anything wrong, and if lenders missed the details it’s because they didn’t pay enough attention. ‘In retrospect, maybe I should have done more due diligence,’ Pelt said. ‘But I’m not the closing police.’”

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