The Housing Bubble

A housing report from the Idaho Statesman. “Treasure Valley housing sales fell 13 percent in 2006 because the market deflated in both Ada and Canyon counties during the second half of the year. According to the Intermountain MLS, 15,506 homes were sold in the Valley last year, down from 17,917 in 2005, but 15 percent ahead of the 13,515 sales recorded in 2004.”

“‘If we had 2004 numbers, we would all be happy,’” said Paul Rhoades, co-owner of Pioneer Homes in Nampa. ‘I think 2005 was an aberration.’”

“Trey Langford, (who) tracks local building-lot availability, subdivisions and new construction, said the housing industry struggled late last year because too many homes were built during the boom. ‘We over-built, over-sold and sold to people who weren’t going to live in the houses,’ Langford said. ‘Now we have all these empty homes.’”

“A possible sign of a recovery in 2007 is a shrinking inventory of homes for sale. The MLS year-end figures showed 5,887 available homes at the end of December 2006, a drop of 6 percent from the previous month.”

“But Don Hubble, owner of Meridian-based Hubble Homes, worries that inventory numbers are not falling because of new sales, but because frustrated sellers are taking their homes off the market.”

“As a result, builders have drastically scaled back their construction plans. The number of building permits issued in Ada County fell from 2,826 in the first half of 2006 to 1,223 during the second half, a decline of 56 percent. Canyon County permits declined from 1,797 during the first six months to 1,150 during the last six, a drop of 36 percent.”

“For the year, the number of permits issued fell 45 percent in Ada County and 3 percent in Canyon County.”

“The impact of the residential housing slump was felt throughout the Valley. The downturn is affecting local-government revenues. The Ada County Highway District reported that impact fees it received from builders to offset infrastructure costs were down $4 million in the latest quarter, or 30 percent. That occurred even though ACHD raised its impact fees in October.”

“Hubble said the duration of the downturn remains unknown. ‘Historically sales will start to increase in January and February,’ he said. ‘If they don’t, we’re going to conclude that the negative trend continues.’”

The Denver Post from Colorado. “Matt Rivette, a broker in Greeley, throws cold water in the face of home sellers unwilling to accept declining values and an extended stay on the market.”

“‘If you want to sell a house you bought five years ago, chances are that here in Weld County it has less market value than what you paid,’ Rivette said.”

“Large swaths of the Front Range from Fort Collins to Pueblo struggled with flat or declining median home values, according to Trulia.com. Home gains in Arapahoe, Boulder, Denver and Douglas counties were positive, but fell far short of covering the commission a seller would need to pay to get out of a home if they hire a real estate agent.”

“Anemic price gains contribute to foreclosures, making it harder for homeowners to sell. That, in turn, depresses surrounding home prices. Breaking the cycle is hard, particularly in Weld County, home to Greeley. Last year, more homes entered foreclosure in Weld County, 2,073, than were sold, 1,870.”

“The backlog of unsold homes in Weld County is huge. Assuming no other homes were listed for sale, it would take 27 months to clear out the inventory of unsold homes at the current pace of sales, according to data ProRealty has collected.”

“Once concentrated in Weld, Adams and Arapahoe counties, foreclosures are spreading south and west. ‘The guys who work foreclosures tell me that new filings in early January are just racing despite the weather,’ Boulder-based mortgage banker Lou Barnes said.”

“The inventory of unsold homes rose 30 percent last year in El Paso County, according to Stuart Scott, a broker working in Colorado Springs. Builders had to push hard to find buyers for about 1,000 speculative homes they had built or that were already under construction, said Scott.”

The Rocky Mountain News from Colorado. “A new state law has barred 10 people from registering as mortgage brokers. Some 3,465 people have been registered under the Morgtage Brokers Registration Act, which took effect Jan. 1, said Geoffrey Hier, spokesman for the Colorado Department of Regulatory Agencies.”

“‘It is too early to tell whether it is working because it has only been in effect for 16 days,’ Hier said.”

“Legislators passed the law last year after concerns continued to rise about record foreclosures, some of which can be traced to real estate scams and predatory lending.”

“One of those who was denied is Steven Thompson, who in 2003 was accused of bilking homeowners out of more than $1 million using sophisticated mortgage scams.”

“Mortgage broker Jim Spray, a longtime advocate of cracking down on mortgage fraud, helped several homeowners investigate Thompson in 2003. ‘If the others were denied for similar reasons as those which caused denial of Mr. Thompson, Colorado mortgage consumers should feel very relieved this new law is working as intended,’ Spray said.”

“‘If someone can’t afford $200 to get a bond, they need to get out of the mortgage business and go work at a car wash,’ added Spray, a broker in Wheat Ridge. ‘I have seen a million dollars disappear in mortgage fraud in a week.’”

The Journal World reports from Kansas. “Mayor Mike Amyx knew this news was coming. As a follower of the local real estate market, Amyx has been hearing for months about Lawrence residents struggling to sell their homes. ‘You hear the stories over and over again that people aren’t getting anything close to their asking price,’ Amyx said.”

“Dale Roubison has been trying to sell his house for 13 months. His original asking price was $365,000, but now it’s down to $338,000 for the four-bedroom, three-bath custom-built home. That’s $18,000 below the market value the county has placed on the property.”

“‘I had to drop it down because I wasn’t getting anybody to offer anything on it,’ Roubison said. ‘I think it will bounce back, but I’m stuck in the middle of a bad time right now. I had no idea it would take this long to sell.’”

“Lawrence real estate agents say the moderation is part of a nationwide slowdown in the real estate market. Gary Nuzum, president of Coldwell Banker McGrew Real Estate, said the slowdown was a natural reaction. ‘We had five to six tremendous years, and there is just not a lot of pent-up demand,’ Nuzum said. ‘That time period really opened the door to home ownership for about anyone who had any aspirations to buy a home at all.’”

“‘The $200,000 to $400,000 market has taken some licks this year,’ said Mark Buhler, VP of Stephens Real Estate. ‘Oversupply is part of it. You are seeing a lot of homes in that price range that are being shown that are vacant.’”

“Douglas County Appraiser Marion Johnson said some homeowners should be prepared to see their home values actually decline from where they were a year or two ago. ‘We probably have had to adjust more values downward than we’ve ever had to since I’ve had the job,’ said Johnson, who has been the county’s appraiser since 1991.”

The Herald Leader from Kentucky. “Ohio leads the nation with a 3.32 percent foreclosure rate, compared with Kentucky’s 1.76 percent. Chris Evans, president of the Mortgage Bankers Association of Kentucky, said the state’s economy is ‘the true driving force’ behind the delinquency rate, but there are other factors.”

“‘I think we have had some aggressive lending practices in Kentucky,’ Evans said, especially involving so-called sub-prime loans made to borrowers with credit problems or low income.”

“‘In the process of growing the number of people who have home ownership in Kentucky, you are ultimately going to grow the number of foreclosures,’ Evans said.”

“Borrowers aren’t the only groups affected by rising foreclosures, however. ‘We have seen numerous sub-prime companies literally close — companies that were buying loans from brokers and banks,’ Evans said. ‘They shut their doors because they had gotten a little bit too broad on what they were allowing to come in the door, and their delinquency rates are hitting them.”

“‘The industry can’t survive with excessive delinquency rates,’ he added.”

The Cincinnati Enquirer. “Foreclosure notices were tacked to the front doors of more than 10,000 homeowners in almost every neighborhood of Greater Cincinnati and Northern Kentucky last year. For the seventh straight year, foreclosure filings hit record highs not only here but in all of Ohio and Kentucky.”

“Foreclosures rose disproportionately across Greater Cincinnati in 2006. The number of new filings rose an estimated 27 percent in Butler County and 22.8 percent in Clermont County.”

“Real estate broker Butch Magner in Fort Mitchell, sells foreclosure homes in ‘as is’ condition for about 10 lenders. Most properties, he said, fetch less than their previous selling price. Most bring down the value of homes around them.”

“‘Over 2½ years, foreclosures have tripled or quadrupled,’ he said. ‘They’re everywhere, from the inner city of Covington and Newport up to Edgewood and Burlington and Fort Mitchell.’”

“Homeowners aren’t the only losers when foreclosures happen. Banks themselves stand to lose a bundle on loans that go bad and collateralized homes worth barely more than the ground they stand on, said Kirk Sampson, a Cincinnati lawyer who has filed foreclosure cases for lenders for 32 years.”

“‘Lenders are getting killed by this stuff,’ Sampson said. ‘Lenders lose a lot of money on foreclosures. By the time they complete the foreclosure process in Ohio, they take a huge bath - 50 cents on the dollar sometimes.’”

“Among lenders, the biggest losers are those that lend to the riskiest customers, so-called ’subprime’ borrowers with the worst credit.”

“The combination of easy credit and free spending is fuel on the foreclosure fire. ‘It’s a social epidemic, but one that will eventually run its course because lenders will realize that their rate of return on these loans is not what they expected and they’ll stop making these types of high-risk loans,’ Sampson said.”

The Boston Globe reports from Massachusetts. “Massachusetts single-family housing sales had their worst December since 1991, and the median sale price for a single family home fell 8.1 percent to $310,000 in December 2006. Those are among the conclusions of a report issued today by the Warren Group.”

“On a volume basis, December single-family home sales fell 8.4 percent from December 2005 to 4,037, the lowest level for December since 1991, the report said.”

“‘We’re still in the midst of a market correction which began in the latter stages of 2005,’ said CEO Timothy Warren, Jr.. ‘Sales are still falling below year-before levels, and prices are still under pressure, as buyers and sellers are sorting out the market.’”

“The median sale price for a single-family home dropped to $325,000 in 2006, down 5.8 percent from $345,000 in 2005. The 5.8 percent drop was the first since 1993 and the biggest since 1990, when prices fell by 5.9 percent. The annual median sale price for single-family homes had risen 12 straight years, from 1994 through 2005, after falling five straight years from 1989 through 1993.”

“Condominium sales in 2006 fell 12.9 percent, with 30,203 units being sold compared to 34,672 in 2005. The median sale price for Massachusetts condominiums fell 1.2 percent in 2006, to $275,000 from $278,379 in 2005. The drop was the first since 1992.”

“It’s a word that instills fear in homeowners, foreclosure. Hundreds of property owners south of Boston experienced this last year when the housing market cooled and foreclosure notice filings increased at a rapid pace.”

“In Bristol, Norfolk, and Plymouth counties, the total number of filings in 2006 is likely to be more than double that in 2004, according to ForeclosuresMass.com. Foreclosure notice filings in the first 10 months of last year increased 129 percent compared with the same period in 2004. From January through October last year, there were 1,453 filings in Bristol County, 1,130 in Norfolk County, and 1,780 in Plymouth County.”

“There’s no doubt the number of foreclosure notices filed in Massachusetts has increased dramatically in the past two years. The escalation, said Peter Ruffini, who is president of the Plymouth and South Shore Association of Realtors, reflects the conditions of the real estate market as it slumped.”

“One reason for the increase in filings was that properties were staying on the market longer, which prevented some homeowners from selling their property as an alternative to foreclosure, he said. ‘The average market time skyrocketed, to 120 to 180 days. If you’re in that situation and you need to sell, it puts you in a tough spot,’ he said.”

“Sheila Farragher-Gemma, founder of ForeclosuresMass.com, predicted the total statewide foreclosure figures from last year will break the previous record set in 1991. The 2006 figures are still being compiled, but it appears the Bay State will have had upward of 17,000 foreclosure notice filings, surpassing the previous high 15 years earlier.”

“Foreclosures ‘have been steadily increasing since 2004,” Farragher-Gemma said. And there’s no sign this trend is slowing down — at least not yet. ‘I think it’s going to continue this year, and possibly into 2008,’ she said.”

The Intelligencer from Pennsylvania. “Area home prices rebounded in December after falling for three straight months. Some homeowners continue to do well. Marianne and Chris Zoto sold their Doylestown Township townhouse in June for $475,000.”

“The Zotos may have caught the tail end of the housing price wave that drove values higher throughout the area in recent years. Houses in the same Doylestown Township neighborhood are now going for as little as $375,000, said Marianne Zoto, who’s also a part-time real estate agent.”

“‘It’s a buyer’s market right now, not a seller’s market,’ said Stacy Gallagher, who has been trying to sell her Warwick townhouse for three months. Gallagher has already cut her asking price for the three bedroom, 11/2 bath house from $229,000 to $219,000, and says she’s very close to accepting an offer for $206,000.”

“‘I pretty much have to get out of it, so we’re settling for whatever we can get,’ said Gallagher.”

“‘Frustrating’ is how Bill Turner describes the real estate market. Turner and his wife have been trying to sell their three bedroom, two bath Warminster ranch house since October. ‘We’ve had a lot of people come through, but so far no one’s made an offer,’ Turner said.”

“The Turners have cut their price once, from $265,000 to $254,900, and may do so again. They’re moving next month to a 55-and-older community. ‘I don’t know what the problem is, other than it’s just a bad time to sell,’ Turner said.”

“It’s clear that at the moment, as through much of 2006, that is taking longer. ‘Now, it’s almost like a stalemate … in the game of real estate chess,’ said Herman Petrecca, a real estate agent in Warminster.”

The News Press reports from Florida. “A chance at irresistible real estate deals attracted more than 300 sellers, bidders, speculators and spectators to a packed South Fort Myers hotel conference room. A market adjustment started about one year ago and intensified throughout the year, creating a surplus of homes and a buyer’s market.”

“‘”We got a lot of offers. We put a lot of deals together,’ said Jeff Miloff of Miloff Aubuchon Realty Group. ‘A lot of people are bottom feeding.’”

“But the success of the auction is hard to measure until closing time on Tuesday. That’s the deadline for people with property on the auction block to decide if they will accept the bid on their property.”

“The first two properties sold Saturday were waterfront Cape Coral homes. The first went for $385,000, well below the $690,000 value listed on the Lee County property appraiser’s Web site. The second home went for $400,000, considerably above the property appraiser’s value of $255,810.”

“Estero residents Greg and Kim Seiss were there to sell their condominium in The Greens, but left disappointed. The condominium is valued at $163,000, but bidding stopped $120,000.”

“Mary and Clarence Hilbert of Cape Coral don’t know what to expect now that they were successful bidders at $390,000 for a waterfront Cape Coral home. ‘We believe it’s an investment property. It’s in a good location,’ said Mary Hilbert. But they might decide to live there, she noted.”

“‘The price is about where we thought it would be,’ Hilbert said. The bid still has to be approved by the owner, Hilbert noted. ‘Sellers have their needs, too,’ she said.”

The News Journal. “Selling a home in the Pensacola Bay Area used to be all about location and price. But these days, it’s a buyer’s market, and homebuilders and sellers increasingly have to sweeten the deal with a variety of freebies to get properties sold.”

“Doug Gooch, newly installed president of the Pensacola Association of Realtors, said his group is working to get the word out to Realtors and buyers about the array of state and federal lending programs, especially for first-time home buyers.”

“‘An agent in our office just sold a house to a 21-year-old with no money down,’ said Gooch. ‘It’s always been our position to try and help anyone get into a home.’”

The Naples News. “The Naples Area Board of Realtors has released fourth quarter statistics for home listings and sales in Naples, utilizing the board’s local reporting format.”

“New listings are up from third quarter, reflecting both sellers’ renewed confidence in the market as well as new investor/developer units being added to the marketplace.”

“The overall trend for median pricing is holding steady with an upward trend line, reflecting the long-term value of Naples properties. The figure is significantly higher than 2004, although below the record numbers of 2005. The recent short-term down trend in median sold price is likely indicative of some over-extended investors electing to unload the properties at discounted prices.”

“Inventory: 11,000; approximately an 18-month supply.”

The Herald Tribune. “About six weeks ago, Benjamin Ramirez, a framing subcontractor from Bradenton, who has worked in the United States illegally for about eight years, was called to a meeting with Lennar Homes. Ramirez, who had subcontracted for Lennar for three years, was told there would be no more work.”

“No one is certain how much this shift will affect the local economy. ‘That distress is going to percolate through the economy,’ said Ralph Gentile, senior economist with McGraw-Hill Construction.”

“Though the overall unemployment level has remained relatively unchanged in Florida, unemployment claims in construction have risen 63.37 percent since June.”

“That measure greatly underestimates what is going on because of the vast number of undocumented workers in the sector and its heavy reliance on subcontractors. ‘Many of these workers may never have been included in the jobs figures,’ said Mark Vitner, a Wachovia Bank economist.”

“The best documentation of what is happening comes from the workers. Benjamin Ramirez and his brother said construction jobs in Southwest Florida have evaporated. ‘Last year was nice. Everybody had a job. And there were a lot of houses to build,’ Ricardo Ramirez said. ‘This year there’s no work.’”

“Consumers might want to go without wind coverage, and may decide on a higher deductible in return for lower rates, but mortgage companies could keep these options from producing what the Florida Legislature wants: lower property insurance rates for all consumers.”

“Fannie Mae has already indicated it won’t buy mortgages on Florida homes that don’t have wind coverage, said Bret Rock, spokesman for the Florida Bankers Association. The secondary market is also likely to balk at agreements with deductibles higher than 10 percent; the most common policy has a 2 percent deductible.”

“‘It’s just tricky when it comes to that because it puts our members in a position of making decisions knowing that they can’t sell it to the secondary market,’ Rock said.”

The Sun Sentinel. “Just a year ago, the condo conversion craze was reducing the inventory of apartments in South Florida. Now that the condo conversion craze is over and the condo market is in the midst of a slowdown, many analysts expect a number of condos to revert to rental stock.”

“That will occur either by developers abandoning plans to convert to condos or by speculators, who are being forced to rent their units because they can’t flip them.”

“In Miami-Dade County, developers are returning to apartment construction. About 1,000 additional rental units are expected to hit the market in 2007, up from 40 units last year.”

“Kirk Felici, regional manager of the Miami office of Marcus & Millichap, said that investors seeking apartments to purchase are looking for cash flow and yield, and planning to hold onto their assets rather than convert them. ‘They’re returning to fundamentals,’ he said.”

Please post off-topic ideas, links and Craigslist finds here.