The Housing Bubble

Friday desk clearing time for this blogger. “Economist Irwin Kellner on Friday said Long Island’s financial outlook is the same as the nation’s: It’s good, but factors that could sour it loom on the horizon. ‘Long Island in one of the real bubble markets,’ he said. And the number of unsold homes on Long Island is 86 percent greater than last year. Normally, that number gains 5 percent a year.”

“‘It would take 16-and-a-half months to exhaust inventory, the highest since 1991,’ he said.”

From New Jersey. “The numbers do appear staggering: In September 2005 in New Jersey, there were 967 filings of lis pendens, the first stage of foreclosure. This September, there were almost 1,650 filings, a whopping 71 percent increase. ‘In some cases, these monthly payments are doubling,’ economist Celia Chen said. ‘A good share of these buyers were barely qualified for a mortgage even at those lower interest rates.’”

From Ohio. “It’s probably not surprising that over the last 12 months housing values have been plummeting. ‘It is a real weird thing,’ said real estate broker and developer John Hoty. ‘You get a lot of people in a certain price range who can’t sell their home, and that one leaps to another segment, and so on.’”

From Georgia. “Hundreds of Georgians lost their homes Tuesday. The houses, taken from debt-laden homeowners, were sold to bidders on courthouse steps statewide. ‘About 40 percent of the people we talk to have a mortgage with an adjustable rate,’ credit counselor Susan Hunt said. ‘And that is true across the board. We have people who live in Alpharetta in great big mansions. Their adjustable rate escalates, too.’”

From Mississippi. “After the foreclosure of several homes purchased through an investor brought to light a problem with mortgage flipping scams, one local realtor is warning buyers to beware. ‘There are so many people who get caught up in mortgage companies that may be deceptive in their fee structure, and I think the public needs to be aware,’ Mary Tucker said.”

“The fraud is also causing lack of trust even in well-respected realtors. ‘This is my living, and I don’t want people to mistrust realtors. It’s not true of all realtors,’ Tucker said.”

From Iowa. “Veldon King has 51 years of experience in real estate sales. He said the difference from last year at the Ottumwa office he works from is significant. ‘I don’t know what’s happened. A year ago the last quarter we couldn’t keep up. This year it’s the opposite,’ King said.”

From Nevada. “USA Capital controlled $962 million in assets for investors when it filed for Chapter 11 bankruptcy court protection in April. Compass Partners made the apparent highest and best bid of $67 million Thursday for the assets.”

From Canada. “If there ever was a housing price bubble, the air is now coming out. Real estates sales slowed further in November in Greater Vancouver, the latest statistics from area realtors show, while active listings are way up from a year ago. The price of a typical Greater Vancouver detached house edged down again in November to $647,500, down about $12,000 from September.”

“‘I don’t think it was a bubble,’ economist Helmut Pastrick said. ‘For for those who did or still do, the trend in the last six to 12 months of declining sales and increasing listings suggest if it was a bubble it’s probably less so now that market conditions are easing.’”

From California. “It’s a nail-biter to see if (the Orange County) price will fall below the year-ago level for the first time since 1997. What’s clear is that November will be the 13th straight month that total sales can’t keep pace with the previous year’s pace.”

From San Francisco. “When Laurian Rhodes and her husband Sluggo bought their house 2 1/2 years ago, the couple did what had become the new norm: They went out and bought a house before they put their old home on the market.”

“Laurian and her real estate agent settled on a list price of $715,000. But as soon as the property hit the market, it became apparent that something was wrong. ‘Nobody was coming to see it. Hardly anyone was showing up at the open houses,’ she says. They lowered the price repeatedly, from $715,000 to $695,000, then to $675,000.”

“‘Since we’d refinanced at $635,000, we couldn’t afford to sell it for $650,000 and still pay the realtors,’ says Laurian. Since then, the couple has pulled the home from the market and decided to rent it to some friends for a year.”

“Laurian seems philosophical about her new financial conundrum: the month-to-month double mortgage. ‘Savings? Who has savings? We live month to month. Someday maybe we can retire by selling our house and moving to an even more podunk place. We’ll be in Montana pitching a tent. But we’re artists. It’s never been my goal to be rich.’”

The Seattle PI reports from Washington. “Shopping for a home in Seattle? The median sales price appears to be rebounding somewhat, after drops in August and September from July’s median. Those numbers do not account for homes that sit on the market for months.”

“In a news release Thursday, Northwest MLS director Dick Beeson said floods, snow and ice contributed to November’s sales slowdown.”

“But wet weather only can soak up so much blame. It did not, for instance, seem to dampen the market in January 2006, whose 11.65 inches of precipitation was not far off the January record of 12.92 inches (set in 1953). That, of course, was in the midst of a frenzy of frequent bidding wars and rapidly rising prices.”

“‘I still have a lot of people looking but not as many people making the move, pulling the trigger,’ said (realtor) Susan Robinet. ‘I just think it’s the uncertainty the national news has created.’”

“‘It seems like there’s quite a few homes on the market right now,’ Chelsey Hays said after looking through a Phinney Ridge home.”

“(Realtor) Bill Garrison said he normally is working with three or four active buyers, but has none now. ‘Last December was one of my busiest months of the year,’ he said. ‘This year I’m getting a lot of home projects done.’”

The Seattle Times. “In King County the number of houses and condominiums on the market was 32 percent above the previous November. Pending sales were down 11 percent compared with a year earlier. Those trends were reported in most of the 19 counties within the MLS region.”

“Broker Greg Hoff last month’s falloff is a return to normal, not the bottom falling out of the market. ‘The question I get is, ‘Where’s the bubble?’ he said. ‘They think it’s bursting because it’s not going up the way it used to.’”

The News Tribune from Washington. “Pending Pierce County home sales dropped 16.17 percent in November compared with the same month last year, the Northwest MLS said.”

“The inventory of unsold homes in the 19 Washington counties covered by the Northwest MLS rose more than 35 percent from November of 2005, the report said.”

“That increase, which could foreshadow price softening, was particularly dramatic in Pierce County, where the number of homes on the market in November grew from 4,124 last year to 6,012 in November this year, up 45.78 percent.”

From the Oregonian. “The Portland area housing market will further weaken in 2007, two economists told a gathering of home huilders. Some areas, such as the condo market, could see even more downward pressure on prices because of oversupply.”

“Sellers who think they have the upper hand now, despite buyers who argue the other way, could be in another world next year. ‘It’s going to be a shift to a buyer’s market,’ predicted Jerry Johnson, of (an) economic consulting firm in Portland.”

“Housing permits and starts are ‘in the throes of a sharp correction,’ said Dae Baek, acting chief economist for the state. The problem of high inventory may be ‘darker than it shows in statistics,’ Baek said, because sale cancellations might not be fully reported in those figures.”

“‘It’s not a demand problem, it’s a supply problem,’ Johnson said. The supply of homes for sale may be rising, Johnson said, but only because builders haven’t pulled back enough. Building permits should have fallen 10 percent this year, but they fell 6 percent, he said, ’so we still have some more to go.’”

“Johnson was particularly concerned about the condo market. Although there are about 4,000 urban condos in the works, there are about 16,000 planned throughout the region, he said.”

“All that inventory could increase the number of buyers withdrawing from sales contracts and lead to falling prices, he said. This seems to be at odds with the view of many real estate agents in the urban market, who consider their market distinct from the suburbs.”

“‘If you bought a spec condo last week it was probably a bad buy,’ Johnson said. ‘But if you bought it two years ago it’s probably OK, but will be giving some (value) up.’”

The Mail Tribune from Oregon. “The watch and wait real estate market is in full swing, or on hold, depending on if you are a buyer or seller, real estate brokers say.”

“November figures from the SOMLS show the median sales price for a single-family residence in Jackson County has declined modestly over the past year. The latest compilation for the county shows a 3.6 percent decline to $268,000 for the quarter ending Nov. 30, compared to $277,950 for a similar period in 2005. Sales activity for the year is down 35.3 percent.”

“‘We’re consistently seeing price decreases more than actual new listings right now,’ Ward says. ‘If sellers want to sell, they’re going to have to lower their prices.’”

“With houses languishing on the market, buyers remain more apt to take their time. Ward has a Pasadena, Calif., client, who has made several recent shopping trips to Southern Oregon. ‘We drive around for a week and look at 15 or 25 houses at a time,’ says Jim Ward, an agent in Rogue River. ‘I’ve written four offers so far and if there is one little glitch, he cancels and says there are more homes to see.’”

“The median price has stayed above the $400,000 mark in Ashland. But in neighboring Talent, where the median price has gone up more than 100 percent over the past five years, prices have fallen 12.4 percent, according to the three-month rolling measure, in the past year.”

“In the tourist towns of Jacksonville and Shady Cove the declines have been 20.9 percent and 23.8 percent, respectively, over the past year.”

“‘The only way to get a house sold fast is getting the price down,’ agent Jeremy Neff says.”

“A three-bedroom, one-bath house with just over 1,000 square feet built 30 years ago drew an offer of less than $180,000. ‘The house next to that one sold last February for $205,000,’ Neff says. ‘There are houses on the same street, built about the same year, that are sitting and sitting.’”

The Denver Post reports from Colorado. “Metro-area home sales fell at a double- digit rate in November and resale prices remained soft, according to housing statistics released Thursday. The number of homes sold fell 13.7 percent in November to 3,565, down from 4,133 in October. In November 2005, 3,705 homes sold.”

“The median price of a single-family home sold in the metro area in November fell to $240,000, down from $247,600 in October and $242,000 in November 2005. Median condo/townhome prices were more mixed, rising to $155,750 in November from $152,000 in October. But they remain below November 2005’s median price of $164,950.”

“Gary Bauer, an independent real-estate analyst, pins about 80 percent of November’s results on seasonal factors, with the remainder representing an additional slowing in the market.”

“The inventory of unsold homes fell 7.3 percent in November to 27,530. While an improvement from the 29,722 unsold homes in October, it remains too high, said one real-estate broker. ‘We have to absorb 27,000 listings, and then we can be happy again,’ said Mike Easley, broker in Thornton.”

“The metro area will likely top 18,000 foreclosures this year, setting a record. That contrasts with a total sales volume of around 52,000 homes.”

“More sellers are finding they have to sell their homes for less than the mortgage balance, Easley said. That is discouraging some homeowners from listing their properties.”

The Rocky Mountain News. “Rising foreclosures as well as typical seasonal forces took their toll on homes sold in the Denver area by Realtors last month. The foreclosures are concentrated in places such as Adams County, north Aurora and northeast Denver.”

“‘I would say that foreclosures are impacting the market,’ said James Browning, who specializes in selling real estate-owned homes, that have been acquired by banks after homeowners default on their mortgages. He said there are homes in Montbello and Green Valley Ranch whose prices have dropped between $20,000 and $40,000 in the past 12 to 18 months.”

“‘These are homes in the $115,000 to $160,000 range,’ said Browning, a broker.”

“However, lenders aren’t selling homes at fire sale prices. ‘The banks have taken a stand, they will not give them away,’ he said. Typically, foreclosures can be purchased at no more than a 10 percent to 15 percent discount to the rest of the market, he said.”

The Denver Business Journal. “There’s plenty of bad news to go around, the most telling being the number of days on the market it takes to sell a residential property. The average days on the market for a condo are 134, nearly approaching five months. That’s almost a 14 percent increase over the time it took last year in November to sell a condo.”

“Single-family detached home sales are taking an average of 103 days on the market to sell. That doesn’t sound quite so bad, but it’s almost a 20 percent increase in sales time compared with last year’s figures.”

“‘There’s several things happening here,’ said broker Lance Chayet. ‘People are giving up and taking their houses off the market. Some of it is seasonal factors. Another thing is that short sales and foreclosures are exerting negative pressures [on home values] and forcing some people out.’”

“Other noteworthy numbers? The number of homes under contract is down nearly 14 percent over October 2006. That number is about 4 percent less than the same figure in November 2005. ‘It’s going to get worse before it gets better,’ Chayet said.”

From Inman News. “Home sales across Colorado were down 7.2 percent in October compared to the same month last year, while the statewide median home price lost 2.1 percent, according to statistics released by the Colorado Association of Realtors.”

“The most dramatic decline in sales activity occurred in Montrose, a western Colorado town, where sales plummeted 86 percent between October ‘05 and October ‘06, from 488 to 70, while the median sales price of a home sank 1.6 percent to $193,333.”

The Aspen Times. “While by some reports say Colorado ranks first in foreclosures in the nation, the Western Slope is lagging far behind. Homeowners on the West Slope are in a better position than their neighbors on the Front Range when it comes to the housing market, said Colorado Division of Housing spokesman Ryan McMaken.”

“West Slope homeowners ‘can always sell…because there is so much demand,’ he said.”

“Overall, McMaken said people fall into foreclosure because they make bad financial decisions. ‘People miscalculated how’d they be doing now when they bought their home,’ he said. They got into risky mortgages because they thought they’d be able to make up the difference once the hoped-for raise came in.”

“But the Colorado economy didn’t live up to expectations. Cuts in wages, loss of jobs and higher costs of living have all contributed to less spending power these days.”

“‘The saving rate continues to be zero,’ McMaken said. People ’spend like they’re making more money. Clearly, people are spent out.’”

“What drives foreclosures here is ‘over-extensions,’ said Chief Deputy Public trustee Bob Slade, and ‘100 percent lending,’ now a common mortgage feature.”

The Express News reports from Texas. “The party isn’t exactly over for San Antonio real estate, but the champagne has stopped flowing. Home builders, feeding off of the anxiety of the national real estate meltdown coupled with the typical seasonal slowdown, have started offering deals and incentives not available a few months ago. KB Home even has started to lay off employees.”

“‘I’m hearing more people being concerned than I am (hearing them be) ecstatic,’ said Michael Moore, vice president of the Greater San Antonio Builders Association.”

“The new home market party started when Fortune magazine anointed San Antonio the nation’s strongest housing market, predicting an 8.3 percent home price appreciation in 2006, luring investors who helped push the market to record levels.”

“As a result, one segment of the real estate market already has a hangover: single-family home rentals. Out-of-town investors flooding into San Antonio this year have glutted the market with rental homes, and the average rent has dropped $202 a month since this time last year, from $1,301 to $1,099, according to the San Antonio Board of Realtors.”

“At the end of October, renters had their pick of more than 2,000 homes. So far this year, more than 10,650 homes have gone onto the rental market, 22 percent more homes than last year.”

“Kevin Knight with Liberty Management Inc. said the out-of-state investors had a different mentality than local landlords, who traditionally bought fixer-uppers. The out-of-state investors wanted new homes that required little maintenance.”

“‘San Antonio investors used to buy for positive cash flow,’ Knight said. ‘In California, they buy for appreciation. They’ll buy a house here and lose $200 to $300 a month and they don’t care.’”

“That’s helped contribute to a drop in rents. ‘We’ve had owners who are used to getting $1,100 a month in rent and we tell them they have to drop their price,’ Knight said. ‘They don’t want to hear that.’”

“One such owner is real estate agent Missy Stagers. She owns five rental homes that used to be moneymakers, but now are breaking even. ‘They’ve ruined our rental market,’ Stagers said of the investors, many of whom cashed out of the East or West Coast markets and planted their money here. ‘You can now rent homes cheaper than you can buy.’”

” A recent report from the Federal Reserve Bank of Dallas said builders across the state have pulled back on starting homes and have increased incentives to sell rising inventory. ‘On the new home side, we’re starting more houses than we’re selling,’ said Bob Gardner of Gardner Financial Services.”

“Centex Homes recently offered as much as $25,000 in incentives on its homes. Such deals were unheard of a few months ago. ‘We hit a wall at Halloween,’ said Leslie Mullins, operational marketing manager for Centex Homes in San Antonio. ‘It’s not just us. We’ve spoken to all of the other big builders in town.’”

“No one can say when the party might be over, but as Travis Kessler, CEO of the San Antonio Board of Realtors, puts it: ‘At some point you can’t go up forever.’”

The Dallas Morning News. “Laurie Minchew said she made the right decision to buy the three-bedroom house in Red Oak. The appeal was both the lifestyle and investment potential of homeownership. ‘It was about 50-50,’ said Ms. Minchew.”

“(Realtor) Kim Fowler just sold a two-bedroom condo in Oak Lawn to Laurie Self. ‘Mortgage rates are good now, and it’s a buyer’s market,’ Ms. Self said.”

“‘I saw how real estate prices were going up like crazy,’ she said. ‘I can flip it in a few years and have some equity.’”

The Queens Chronicle reports from New York. “To hear brokers tell it, now is the best time to take advantage of the 18 month lull in the national housing market and seal the deal on a new home, condo or co op. Likely advice from a real estate agent, maybe, but only a handful of local markets in Queens have stayed hot since the bubble burst last year. In some neighborhoods, prices have dropped anywhere from roughly 5 percent to 10 percent.”

“Above all, brokers say show a little restraint in the home stretch of your search. While prices and interest rates are at a record low this year, the temptation to low ball a seller or toe too hard a line during negotiations should be avoided. And while time is a rare luxury these days, don’t wait too long.”

“‘People have this perception that, because the so called ‘bubble’ has burst, they can just walk in and offer ten to twenty percent less than the market value, and then dillydally while they consider a counter offer,’ broker Tom Vastola said. ‘But when that happens, somebody else usually comes along, sees a reasonable price and takes it.’”

“‘People are getting very good deals. Sellers are thinking that prices could go lower, so they say: ‘Give me an offer that I’m comfortable with and I’ll take it and leave,’ said agent Neal Khoorchand.”

“Khoorchand explained that many Richmond Hill owners still believe they are in the seller’s market of a year and a half ago and have unrealistic expectations, only to watch homes sit on the market for between four and six months. He recently dropped the price of a 2,000 square foot home on a prime 107th Street corner lot from $639,000 to $599,000.”

From Forbes. “When Matthew Haines put his Harlem townhouse up for sale, he still made a crucial mistake. Relying on his broker’s advice, Haines priced the house at $1.675 million–too much in a softening market. ‘People don’t have to fool with sellers who are asking unreasonable prices,’ Haines says.”

“If you’re trying to sell your home in 2007, brokers have one piece of advice: Make sure the price is right. Sellers need to get real, and sometimes that means dropping the price. Unfortunately, many sellers are suffering from housing bust denial. ‘All sellers are human,’ says Sharon E. Baum, a senior VP with Corcoran Real Estate in New York City. ‘Hope springs eternal, right?’”

“Haines had to get rid of his townhouse because he was moving. But the building sat for six months with no buyers. A week ago, his broker called and suggested shaving $100,000 off the price. Haines went even further: He cut the price by $185,000, down to $1,490,000. Within days, two people expressed interest.”

The Hartford Courant from Connecticut. “New England charm has taken Litchfield County far, but that is now faltering when it comes to home sales. Single-family median sales prices in Litchfield slid by more than 8 percent, to $242,700, in the quarter that runs from July through September, compared with the same period in 2005, according to the Warren Group.”

“It is true that Litchfield County, long a magnet for New Yorkers looking to buy weekend getaways, is seeing a significant slowdown in the purchases of second homes after double-digit annual run-ups in enclaves such as Washington, Sharon and Bridgewater.”

“‘There was an expectation that New Yorkers would pay any price,” said (broker) Ted Murphy in Litchfield. ‘But there is a limit to the sky.’”

“Looking deeper into the numbers, the decline is a result of more than New Yorkers retreating to the sidelines, perhaps in hopes that spring will usher in a stronger market.”

“There also has been an overall decline in the appetite for single-family houses priced at $400,000 and above as buyers have turned cautious in the face of possible declines in market prices. Indeed, some sellers in the county have pulled more expensive homes off the market to wait out the current period of uncertainty.”

“(Broker) John Donato in Watertown, agreed that homes at the low end were still moving ‘reasonably well,’ but that the number of homes on the market had increased threefold this year.”

“In the 06779 ZIP code, there were 25 sales, for an 11 percent decline, compared with the third quarter of 2005. The median sales price fell 13 percent, to $203,600, according to the Warren Group.”

“In Watertown’s second ZIP code, there were 34 sales, a decline of 38 percent. The median sales price fell 17 percent, to $255,000.”

“‘The lower-priced houses are the ones that are selling right now,’ said Theresa Gorman, a real estate agent in Watertown. ‘You’re just not seeing a lot of sales over $400,000, and that’s not just in Watertown.’”

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