The Housing Bubble

The Statesman Journal reports from Oregon. “Real-estate agents, such as Bob Riggi, spend their days working with buyers and sellers concerned about the recent cool-down in the housing market. Question: Has Salem experienced any consequences from the cooling of the national housing market?”

“A: I think it has. There is a 15 percent increase in active listings in the Willamette Valley MLS right now. Sales year to date are off about 4.5 percent.”

“Q: Subdivision developers have discussed building more than 5,000 housing lots in the Salem area. What effect will all these new houses have on the market? A: With the new construction, we are probably talking about South Salem and West Salem. There were 151 new construction sales, year to date, in West Salem. There’s currently 117 on the market. That means inventory is sitting out there. I think the upper-end homes are going to be a little more challenging to market.”

“Q: Is there any danger of an oversupply situation that would pull down prices across the board? A: I don’t know. My gut-feeling is there is going to be some corrections on the newer product.”

The Oregonian. “Klamath County broke new ground Tuesday by becoming the first in Oregon to rezone property in response to a Measure 37 claim, setting a precedent that could open thousands of acres in the rural Southern Oregon county for development.”

“Already on Tuesday, the commissioners heard 13 additional similar requests, said county planner Alwin Turiel. ‘It’s hard to even imagine the amount of development capacity that’s being created,’ Turiel said. ‘It’s almost mind-boggling.’”

“As of this month, individuals and companies have filed about 3,400 claims totaling roughly a quarter-million acres statewide under Measure 37, according to Portland State University. About a third of those seek the right to build four or more homes.”

“About 9,000 acres are the subject of claims in Klamath County, Oregon’s fourth largest in area and about the size of Connecticut. ‘We have one ranch that’s 5,600 acres, roughly the size of Klamath Falls, that would like to have one-acre minimum lot size,’ Turiel said.”

The Bend Bulletin. “Central Oregon’s slumping housing market may have cast a fog over sellers and builders this year, but it looks pretty bright to Carie Romain. The San Diego widow snapped up a house in Renaissance Homes’ new subdivision this week, paying ‘nowhere near’ the $770,000 asking price.”

“‘It’s a good investment,’ Romain said. ‘It’ll be soft for awhile, but it’ll come back.’”

“That may be true, but the 20-or-so brand-new homes that still stand empty in Romain’s new neighborhood bear silent witness to the 2006 market’s key factors: lots of inventory trying to attract a suddenly reluctant pool of buyers.”

“Buyers closed on only 102 single-family homes on 1 acre or less in Bend in October, down 59 percent from the red-hot October of 2005, but also down 48 percent from the not-so-red-hot October of 2003, according to the Central Oregon MLS.”

“Redmond has seen a similar fall, with single-family home sales slipping 26 percent below 2003’s monthly pace in September, and 53 percent off the pace of September 2005. October data was unavailable.”

“Price reductions are the rule of the day for homes that have not sold yet, an indication that sales prices may be on their way down. Of the 128 Bend homes that entered pending contracts in October, 70 percent had reduced their list prices in order to sell, according to broker David Foster.”

“The inventory of homes available for sale in Bend shrank slightly last month, from 1,429 at the end of September to 1,361 by the end of October, according to Foster’s analysis. But October’s number is still 259 percent higher than the inventory on Jan. 1, sticking the market with about a 9.5-month backlog of unsold homes, given the average sales levels of the last 12 months.”

“Some Central Oregon sellers have pulled their homes off the market, opting to rent them out until prices rise again, broker Becky Ozrelic said.”

“For the most part, she said, a standoff mentality has entered the market. Buyers who are interested and able to buy are waiting, hoping that prices will drop further. And sellers are snipping their prices incrementally, hoping to lower them just enough to entice a sale but not so much that they give too much away.”

“‘At some point, there will be equilibrium,’ Ozrelic said. ‘I think it’ll be a little while. But who knows how long a little while will be.’”

A housing report from the Kansas City Star. “The metropolitan housing market was down again in October compared with last year’s booming pace but still did better than the nation as a whole. The number of single-family unit permits issued last month was 666, down 39.7 percent from October 2005, according to the Home Builders Association of Greater Kansas City.”

“Kansas City is behind the pace that led to five consecutive years in which more than 10,000 units of single-family housing were built from 2002 to 2005. ‘The biggest concern locally is that too many consumers, municipalities and even home-building professionals are making decisions locally based upon what is happening in Phoenix and Atlanta, not what is happening in Kansas City,’ said Tim Underwood, the association’s executive VP.”

“There were 5,621 new homes on the market in October, up 7 percent from last year, and 13,863 existing homes listed, up 14 percent from 2005. There were 2,686 new and existing homes sold last month, down 5 percent from October 2005. There were 580 new homes sold, 20 percent fewer than a year ago, and 2,106 existing homes sold.”

“Overall, the region had a 7.3-month supply of new and existing homes. There was a 6.6-month inventory of existing homes and a 9.7 month supply of new homes.”

The Detroit News from Michigan. “Metro Detroiters (are) nervous about their futures, which kept homebuyers on the sidelines and created an oversupply of homes that can sit months, even years, on the market. Now, comes home price deflation, the worst in the nation.”

“‘The overall feeling in Michigan is everybody’s knees are knocking a little bit,’ said Nancy Warson, a Livonia Realtor.”

“Would-be homeseller Brian Kurtz knows uncertainty well. The financial planner from Troy has dropped the price on his Sterling Heights colonial by $36,600 to $259,900 and is now paying $4,000 per month for two mortgages. ‘It’s like trying to sell ice cubes to Eskimos,’ said Kurtz, whose home has been on the market since August 2005.”

“Warson said buyers are just not out there. One of Warson’s clients in South Lyon, who is selling their house for about $500,000, has had only one potential buyer look at it in seven months.”

“To jump start the housing market, real estate agents have pulled out all the stops. ‘We’ve seen plasma TVs, we’ve seen $5,000 bonuses, we’ve seen cars, we’ve seen airline tickets. We’re about as creative as we can get at this point,’ Warson said. ‘It’s still not driving the market up.’”

The Detroit Free Press. “The nation’s top realty agent predicted Tuesday that homeowners could see a rebound in the coming months. Pat Vredevoogd Combs, a Grand Rapids Realtor who became president of the National Association of Realtors this month, said the current market transition, what some call a slump, is good news for buyers.”

“‘This window of opportunity will continue into the new year, but inventories are starting to decline and sellers will be less willing to negotiate when conditions begin to balance in most areas around early spring,’ she said.”

“Tell that to Ruby and Willie Jennings, who have been unable to sell their northwest Detroit ranch-style house for the past few months. The Jenningses have cut their asking price to $112,000 from an initial $119,000. ‘It was sold, we thought, at one time,’ Willie Jennings said. ‘The purchaser backed out. No one has made an offer since.’”

From WKRC Cincinnati. ” More signs of a housing slowdown. Home prices in the Tri-State fell 2.6% this past summer. Larry Ritzert almost had perfect timing. He sold his old house in Pierce Township a year ago. But he started building his new house a year ago … and feels today it would cost 20 grand less.”

“‘In this case we were lucky, on one side, and unlucky on the other, but it balances out,’ he said. ‘If you can just wait here, you’re in good shape don’t panic.’”

“Norm Miller at U.C. makes his living watching real estate trends. He sees a slight drop in local home sales and prices. ‘It could last several months this paranoia because it will last in California and Florida for a while, so we’ll hear about this for at least the next year,’ he said.”

“The slowdown we’re seeing locally is partly about demand. ‘It’s like getting a new car you don’t need one every couple years. That’s right so no demand now. You’re right the demand was satiated over the last five years,’ Miller said.”

“Miller does have advice for people trying to sell; he says instead of offering incentives like cars and TV’s, lower the price and offer a buyer’s agent more commission. However, that’s been controversial buyer’s don’t always realize some homes are being pushed because there’s extra money in it for the agent.”

The Arizona Republic. “For sale at public auction: Two parcels of prime real estate next to Chandler Fashion Center. Amenities include a partly built tower called Elevation Chandler. The mortgage holder is foreclosing on the stalled high-rise condo-hotel project, according to documents filed with the Maricopa County recorder. A trustees sale is set for Feb. 5.”

“The larger parcel contains what is supposed to become an eight-story Renaissance ClubSport hotel topped with two floors of luxury condominiums. Construction stopped in April, leaving a partly built structure at Loop 101 and the Santan Freeway. A parking garage and a second tower of residential condominiums were planned for the adjacent 2.5-acre parcel.”

“The beneficiary of the trustees sale…lent $3.45 million to developer Jeff Cline in November 2005.”

“Yet another legal problem appeared for Cline last week when three subcontractors banded together and filed a lien-foreclosure lawsuit. They are asking that the property be sold so they can be paid what they are owed. They also are asking for interest and attorneys fees.”

“Two additional subcontractors have filed lien-foreclosure lawsuits, as well, and three other subcontractors and the general contractor have recorded liens but not filed lawsuits. Altogether, the mechanics liens total about $5.8 million.”

“Sanders Achen, owner of Achen Contractors, was an investor in the mortgage on the project. He since has gotten his money back from Mortgages Ltd. and takes a philosophical view of the situation.”

“‘Unfortunately, somebody is going to get hurt,’ Achen said. ‘In the development business, you throw the dice. Sometimes you win and sometimes you lose.’”

The Rocky Mountain News from Colorado. “Almost 16,000 real estate foreclosures have been filed in the Denver area in the first 10 months of the year, 30 percent more than during the same period last year. And by the end of this month, an 18-year record will be eclipsed, with more homes being lost to lenders than ever before.”

“‘I think that will have to happen,’ said Mary Wenke, Arapahoe County’s public trustee. ‘There’s no sign of them letting up. If they dip for a couple of days, they come right back.’”

“Through October, 15,776 foreclosures have been filed in Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson counties. That is less than 8 percent off the all-time record set during the energy bust of the late 1980s. At that time, homes could be purchased for as little as 20 cents on the dollar, which is not the case today.”

“‘It’s not nearly as bad as it was in 1988 and 1989,’ said Sandy Hume, Boulder County public trustee. However, that is little comfort if you are losing your home today. ‘It is just one horror story after another,’ Hume said.”

“Experts blame no downpayment loans, ‘creative’ financing, overbuilding, over-appraised homes and outright fraud as contributors to the growing foreclosure problem.”

The Naples News reports from Florida. “The deadline for closing on properties purchased in an Oct. 21 auction has been moved back to Dec. 6. Auction operator Paul Drake said he wasn’t aware that one of the properties for which he’d announced a high-bid price is now in foreclosure.”

“In legal ads printed in the Daily News, Washington Mutual Bank announced foreclosure on 1121 10th Ave. N., although the ads refer to it as Lot 22, Resubdivision of Block A, Lake Forest. The owner of record, Marjorie Dresner, had numerous properties listed in Drake’s auction.”

“Shortly after the event, Drake said that property at 1121 10th Ave. N. drew a contract price of $341,000. Public records show that Dresner bought the house in May 2005 for $585,000, with an April 26, 2005, loan from Washington Mutual. Mortgage documents show Dresner took out a loan worth $468,000 plus interest.”

“That is part of the problem, real estate professionals protested, before and after Drake’s advertised auction. It was unrealistic, because many of the top bid prices were far less than the mortgage prices, they said.”

“While Drake had denied financial hardship was involved for people who had put their properties up for auction, real estate analysts noted that a few days before the auction, Dresner had taken out a second mortgage on most of her participating properties.”

“News of the auction ignited debate about Naples’ real estate market, and whether sales prices were dropping drastically.”

“Naples Area Board of Realtors President Jo Carter has said her members didn’t object to the idea of an auction, only that the true property values weren’t reflected in the opening price. Drake and Manning listed starting prices at $1.”

The Sun Sentinel. “Buy an Orchid Grove townhouse in Pompano Beach, and send your kid to college on Coscan Homes’s dime. The tuition incentive is one of the more unusual carrots dangled by desperate builders, who continue to be hammered by rising buyer cancellations and declines in new orders since South Florida’s five-year housing boom ended this year.”

“Builders would rather offer incentives because lowering home prices can get them into trouble with existing customers and affect future appraisals, said Ray Puzzitiello, president of Puzzitiello Builders in West Palm Beach.”

“‘If you’ve got a guy who closed on his home a couple of months ago, and he finds out that somebody else paid $10,000 less than him, and he will because they all talk, then he’s going to be upset,’ Puzzitiello said.”

“‘It’s been a very quiet market for many, many months,’ said Al Piazza, CEO of privately held Coscan.”

“‘Are these builders in trouble? Yeah,’ said Anthony Trella, a Deerfield Beach-based home building consultant. Many builders own too much land, he said. In some cases, they’re simply walking away from deposits, figuring it’s cheaper to let go of it now and buy it back later, Trella said.”

From TC Palm. “‘For Sale’ signs sit on front yards everywhere but aren’t as effective as professionals who can offer aggressive pricing information to get buyers in the door, said Will Rosselle, a broker at Rosselle Real Estate Group in Port St. Lucie.”

“The number of homes for sale has tripled, even quadrupled, since last year, according to Rosselle.”

“John Reichard, owner of Southwind Construction and Homes in West Palm Beach, builds new homes from Boynton Beach to Port St. Lucie. To move the properties, he has increased broker commissions and tried making upgrades such as granite countertops and paver driveways standard. Still, he said, he’s seeing home prices in general fall somewhere between 12 percent and 18 percent.”

“‘The profits are less, but as long as you make a profit, you can’t go broke,’ Reichard said.”

“‘There are a lot of amazing deals out there right now. But a lot of people need to sell their house to take advantage of that,’ Rosselle said. To do that, sellers need to look back to prices from two to three years ago, he said.”

The News & Observer from North Carolina. “Sales of existing homes declined for the first time in almost four years last month and the number of houses on the market rose, as one of the Triangle’s leading economic engines continued to sputter.”

“Meanwhile, the inventory of homes for sale grew by 6.6 percent, and the number of sellers cutting their listing prices jumped 17 percent. Hundreds of homeowners have sliced prices to sell their homes. In October, 37 percent of all listings, 3,973 homes, had price reductions, according to the Triangle MLS.”

“Brokers blame the slowdown on competition from home builders offering incentives to move new homes, the inability of transplants to sell their old addresses and potential buyers attempting to wait out further price cuts on resales.”

“‘We’re going though a market adjustment, no question about that,’ said Bernard Helm, a market consultant who tracks Triangle residential trends. ‘The buyer today is going to wait for the pricing to soften.’”

“Shields Pittman, a broker in Raleigh, said, ‘If … [buyers] aren’t in a rush, they’ve got nothing to lose.’”

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