The Housing Bubble

The Denver Post reports from Colorado. “Since it was established five months ago, the state’s foreclosure hotline has received more than 11,000 calls from people in jeopardy of foreclosure, said Zachary Urban, the administrator of the hotline. ‘The majority of people don’t even know what kind of loan they have,’ Urban said. ‘That in itself is scary.’”

“A big surprise was that 75 percent of those surveyed were refinancing, rather than purchasing, said Kathi Williams, director of the Colorado Division of Housing and co-chairwoman of the Foreclosure Prevention Task Force.”

“‘It’s very obvious that people were inspired by ads to pull cash out to pay off higher-interest credit cards,’ she said.”

The Rocky Mountain News from Colorado. “‘It is not just the homeowner and the lender who is being impacted,’ Williams said. ‘The community as a whole is taking a hit.’”

“For example, she said she has seen estimates that homes in Montbello in northeast Denver lost an average of 4.3 percent of their value in 2006 from 2005 because of foreclosures.”

The Greeley Tribune from Colorado. “Northern Colorado sales tax reports for January show a growing downward trend in residential construction, indicative of a sluggish real estate economy.”

“Significant losses in building permit sales taxes brought overall tax growth down to 3.47 percent down for January. In all, sales taxes on building permits in Greeley were down 57 percent from the same time last year and 58 percent below what was expected.”

“‘It’s symptomatic of the economy,’ said Tim Nash, city finance director. ‘We’ve got a combination of being overbuilt with tightening credit, and foreclosures, so fewer people are in the housing market.’”

“‘Last year wasn’t a stellar year,’ Nash said. ‘At this point, we’re just hoping to match 2006. To start out less than last year is a little disconcerting; 2006 was the bottom of the trough, and it may continue at that level.’”

The Arizona Republic. “A year ago, the 40 homes in the El Pedrigal development, an infill project of high-end duplexes in northwest Mesa, were sold, awaiting the inevitable influx of ex-urbanites drawn to the area’s proximity to the Valley’s center.”

“But the area’s housing slump hasn’t spared El Pedrigal, or any of the other housing developments that neighborhood leaders were counting as key components of west Mesa’s revitalization.”

“At least eight homes in El Pedrigal were listed as available last week by the builder, Engle Homes, in addition to one listed with an agent.”

“It’s a sign of the trying times the industry faces, said Jason Jarvis, Engle Homes’ director of land development, and like builders from Johnson Ranch to Maricopa, Engle is offering incentives to entice prospective homebuyers.”

“‘Pretty much anything, from no closing costs to a deep discount on upgrades and move-in today specials. You name it,’ Jarvis said. ‘I think a lot of people are signing contracts and want to move, and they’re signing contingent on selling their current homes.’”

“‘That was not anticipated until everything started to stall. That wasn’t something just at El Pedrigal that we ran into, I think most builders ran into that in the Valley, with people that were starting to cancel for one reason or another,’ he said.”

“As the market started slipping last year, Steve Villarreal found financers were less willing to commit to his proposed development at 715 N. Country Club Drive so he and his partners reworked the product.”

“‘It was a difficult thing because the lenders were wary of where the values would arrive at because there was so much speculation that there would be a 20 to 30 percent drop in home values,’ Villarreal said.”

“‘Because of the rising cost of single-family detached structures, we found that we weren’t going to be able to get enough out of that site with that design. Changing to condominiums enabled us to get some more density which was pleasing to the lenders.’”

“He’s not concerned about the estimated 5,000 high-end condos planned for the area in and around downtown Tempe, just a few miles away. ‘No, because mine’s going to be priced way less,’ he said.”

“Critics like (analyst) R.L. Brown have their concerns. ‘Much of the infill development that goes on is not the kind of development characteristics that suburban buyers are seeking,’ Brown said. ‘Typically, they want to build maximum density, and you find the three-story attached product. That is not a lifestyle that young families have cleaved to traditionally in this region.’”

“Fiesta Towers made a dramatic statement about the potential of a reinvigorated Fiesta District with four high-rise glass-and-steel buildings, but the project has turned into a scaled-back Fiesta Lofts proposal.”

“The 10- to 19-story buildings shrink to three five- and six-story buildings in the latest proposal filed Tuesday.”

“Although ‘the high-rise towers would make more of a statement,’ said Mesa Planning Director John Wesley, the new plan ‘may be easier to accomplish; it’s better to get something that gets done.’”

“There were doubts from the start about whether there was a market for so many luxury high-rise condominiums in Mesa, especially with similar towers being built or proposed in Tempe and Phoenix.”

“Developer Thomas Roszak, an acclaimed architect, could not be immediately reached for comment. He has said repeatedly that his project would set its own market in Mesa, where there are no similar condominium offerings.”

“In Tempe, where an estimated 5,000 condos will be built over the next five years, developers are upping the ante in their fight for residents.”

“In addition to high-dollar ad campaigns, companies are going out of their way to get customers to their sites with everything from extravagant parties to sweepstakes prizes.”

“‘In Tempe where there are so many projects announced and you’re trying to distinguish what’s real and what’s not, especially before you go vertical, we’re trying to convince the community that this project is real,’ said Justin LaMar, principal at the firm behind the 21-story Mosaic building.”

“Last month, Campus Edge Lofts threw a splashy party on its Apache Boulevard worksite. More than 350 people ate, drank and scaled a 30-foot-high scaffolding to the music of a DJ. Plus, nine people reserved condos.”

“SunCor Development, the brawn behind the Hayden Ferry Lakeside development, gave away a trip to Tempe. (Canadian) Robin Egler won the trip (and) brought her longtime friend. Of course, they toured the Hayden Ferry Lakeside condos. They said after returning home that they have no plans to purchase one of the condos.”

“‘It was an interesting take on salesmanship,’ Egler said.”

WFAA reports from Texas. “On the southwest edge of Cedar Hill, the development’s custom homes on oversized lots make a clear statement of prosperity. But unexplained house fires, foreclosure postings and empty houses send another message: This is a beautiful place teetering on the edge of decline, an apparent victim of lax lending practices and subprime loans.”

“The three story brick-and-stone house at 419 Golden Pond caught fire on December 3. Cedar Hill Fire Marshal Randall Jordan said it was intentionally set. Now the charred ribs of what used to be a peaked roof stick into the sky. It was the most expensive house on the block, listed on tax rolls at $640,000.”

“On Mallard Point, about a mile away, a bare foundation is what’s left of another home that burned. It was still under construction. ‘We’re very worried,’ Elaine Thieroff said of her neighborhood. ‘We invested in our dream house out here and it’s such a beautiful area that we don’t want our property values to go down.’”

“But that’s what’s happening. The house across the street from the Thieroff’s blackened neighbor is vacant. It is listed on tax rolls at $580,000. But this house has been foreclosed upon by a subprime lender. It’s now on the market for $150,000 less than the tax valuation.”

“Off the crest of the ridge, about a mile-and-a-half away, is a street called High Valley. Of nineteen houses, four are foreclosures. Half appear to be empty.”

“In all, 26 properties in Lake Ridge were posted for foreclosure in March. Steven Nichols has seen all of this before in his 20 years as a real estate appraiser, but he had not seen so much in one place.”

“‘This is phenomenal,’ he said while driving around the property. ‘About every other house appears to be vacant.’”

“Most alarming to Nichols are a number of houses under construction in Lake Ridge which appear to have been abandoned by builders. ‘You’re in a neighborhood of decline,’ Nichols said. ‘It’s not a very optimistic outlook for a neighborhood when you see several homes like this dead in the water.’”

The Dallas News. “Dallas-Fort Worth’s apartment leasing continued to lag in the early months of 2007. Only 480 net leases were recorded in the area during the first quarter, a fraction of the more than 5,600 units leased in the same quarter of 2006.”

“With home sales slowing, analyst Greg Willett said, the weak apartment demand must be due in part to economic conditions.”

“With the slowdown in leasing, apartment construction far outpaces demand. Builders completed more than 1,300 units in the first quarter. About 10,600 units remained under construction at the end of March.”

“About 6,300 apartment were taken out of the market during the year ending in March due to demolition or conversion into condominiums.”

The American Statesman. “The subprime mortgage shakeout is being felt in Austin, as builders cut new home starts by nearly 28 percent in the first quarter compared with a year ago, according to a report from Residential Strategies Inc.”

“As lenders tighten credit requirements, some buyers will not be able to get mortgages, said Mark Sprague, head of Residential Strategies’ Austin office.”

“‘The large-production builders are battling inventory issues elsewhere in the country, and are thus conservative right now,’ Sprague said. ‘Moreover, with the rules being changed today regarding mortgage qualifications, builders are being careful until they can determine the extent of the fallout.’”

“Builders started work on only 3,327 houses, down from 4,613 a year ago, which was a record. On an annual basis, they started 15,468 homes in the 12 months that ended in March, down 4.3 percent from the year-earlier period.”

The Caller Times. “For many it was the answer to achieving the American dream. A mortgage loan, even at high interest because of a low credit score, equaled owning a home. The so-called subprime loan - a no-money-down, adjustable-rate mortgage, was the only alternative for many in Corpus Christi and nationwide.”

“Those adjustable rates adjusted upward, faster than a significant percentage of borrowers could afford. Steven Perez, a mortgage banking lender for Wachovia in Corpus Christi, said the situation in the subprime market has caught the attention of the nation because changes started happening, literally, overnight.”

“About three weeks ago, lenders started losing faith in subprime loans and started to regulate themselves be-fore the government could step in.”

“‘Most of these loans came with no money down and adjustable interest rates that helped these people get the house of their dreams,’ Perez said. ‘The bad side is that due to their credit history, they didn’t have the discipline to keep up with their payments. And then came the foreclosures.’”

“‘The truth is some of us had been waiting for this to happen because once these loan payments jumped and the people with bad credit histories couldn’t make the payment, we knew the foreclosures would eventually happen,’ Perez said, ‘but never at this magnitude.’”

“Molly Trice, associate district manager for GMAC Mortgage in Corpus Christi, attributes the subprime loan problems to lenient guidelines for borrowers.”

“‘A lot of people maybe had bad credit and didn’t have the money for a down payment on a home and were tired of paying rent,’ Trice said. ‘These loans allowed for them to qualify.’”

“‘The lenders have started to place tougher restrictions on themselves, but I think Congress will eventually step in,’ Trice said.”

“Trice and Perez predict that this may hurt Corpus Christi’s healthy housing market. Top officials with the Corpus Christi Association of Realtors said they did not want to comment on the issue.”

Some housing bubble news from Wall Street and Washington. “Hopes for a housing rebound this spring selling season were further diminished Thursday, as Ryland Group Inc. said lower home prices will likely drive write-downs and a quarterly loss as subprime-mortgage fears weigh heavily on the market. The Calabasas, Calif.-based home builder said it expects to post a first-quarter loss on an impairment charge of about $65 million.”

“‘At the end of the fourth quarter, we were cautiously optimistic that pricing had begun to stabilize,’ said CEO Chad Dreier. ‘However, as the first quarter progressed, it became clear that aggressive pricing strategies persisted in several markets, requiring us to write down the value of some of our assets,’ he said.”

“‘Ryland’s strategy of trying to hold pricing was likely unsustainable given the deteriorating market conditions, and was only delaying land charges,’ said analyst Daniel Oppenheim.”

From Briefing.com. “Like many other leading homebuilders, Ryland has been stung by high cancellation rates and a glut of unsold homes driving prices lower, as soft market conditions persist.”

“Preliminary sales for the quarter fell 26% year/year to 2,989 units. The company closed 2,302 units during the period, or about 54% fewer than in the same period last year, amid slowing demand and ongoing concerns about the meltdown in the sub-prime mortgage market.”

From Reuters. “The percentage of home owners with subprime mortgages who are dangerously falling behind on monthly home loan payments rose to a record high in February, according to a First American LoanPerformance report.”

“‘It’s going to get worse,’ said economist Richard DeKaser. ‘Whether delinquencies, foreclosures, what have you, there will be further bad news as the year plays on.’”

“According toFirst American LoanPerformance, 12.4 percent of all subprime borrowers were at least 60 days late on their mortgage payments in February, the highest level the mortgage research unit has recorded since it began its data series on the loans in 1989.”

“Additionally, 14.3 percent of subprime loans sold by Wall Street were at least 60 days behind on payments as of January, the highest level for securitized subprime mortgages since LoanPerformance began tracking them in 1997.”

“‘Too many lenders got too carried away,’ said Jeff Thredgold, (an) economic consultant to Zions Bank. ‘Too many borrowers got dollar signs in their eyes.’”

“‘About 5 to 10 percent of people who could have gotten loans four weeks ago could not get them today,’ said Bob Walters, chief economist for Quicken Loans. ‘They probably won’t be able to get financing in the near future and by near future I mean the next couple of years.’”

“Webster Financial Corp., one of the largest banking companies based in New England, said on Thursday it is closing a mortgage unit and will incur several first-quarter charges.”

“Net charge-offs will total $5.4 million, triple the year-earlier level, hurt by losses on Florida residential construction loans where Webster sees a ‘high probability of loss based on borrower delinquency and market deterioration.’”

The Charlotte Observer. “HSBC mortgage operations in the Fort Mill, S.C., area are taking a hit from restructurings that have closed branches and shifted work to other units.”

“Decision One, part of London banking giant HSBC Holdings Plc., makes subprime loans to borrowers, often with sketchy credit, through independent mortgage brokers. These loans carry higher interest rates than prime loans to borrowers with better credit.”

“The company closed five branches last summer and another seven last month.”

The Boston Globe. “H&R Block Mortgage Corp. said it is closing its Burlington loan office, and its only Massachusetts location, and laying off all 47 employees.”

“H&R Block Mortgage’s spokesman, Ron Iori, said the decision was part of a planned restructuring ‘to change the way we run or operate this mortgage business.’”

“H&R Block Mortgage, which has a dozen offices nationwide, also is closing the Tampa office.”

“U.S. businesses are sitting back and waiting to see how troubles in the housing and mortgage market will work out, but this caution could lead to slower economic growth.”

“The Institute for Supply Management’s purchasing manager’s index released earlier this week fell in March, showing that a factory slowdown that began last fall continues.”

“‘The slowdown is inventory-related and also related to the spill-over-housing industry woes,’ said Ken Mayland, of ClearView Economics in the Cleveland Area. He added that a declining backlog of orders is no recipe for production and payroll increases.”

“‘If businesses pull back, then we will really have a high probability of a recession, because now job growth will really sputter, housing is already sputtering and consumer spending will consequently sputter,’ said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.”

“‘Because 40 percent of home buyers last year were non-prime … borrowers, housing markets may feel some short-term pains, making it less clear whether housing construction has bottomed and how long the housing downturn may last,’ cautioned Federal Reserve Bank of Dallas President Richard Fisher on Wednesday.”

“The labor market may be wilting just as spring gets under way, with warmer weather highlighting the housing sector’s misfortune and its growing toll on the broader economy.”

“‘Everything is pointing to an increasingly rapid pace of job losses,’ said economist Richard Iley. ‘It’s primarily a housing story.’”

“An unusually warm winter may have artificially supported construction employment figures over the past few months. Skeptics now expect a painful return to earth as the true nature of the housing decline becomes more apparent.”

“‘If the labor market begins to deteriorate then it will spread into prime mortgages,’ said Thomas Higgins, chief economist at Payden & Rygel. ‘At that point, the possibility of a recession would start to rise.’”

“With the dominoes of consumer debt and business caution lining up so neatly with the housing downturn, it becomes difficult to find a source of renewed economic vigor that might prevent the whole edifice from taking a spill. In short, the risk of contagion rises.”

“‘Growth is likely to weaken yet further as housing and manufacturing recessions increasingly infect the broader economy,’ said Iley.”

The Associated Press. “Spurred by a sputtering U.S. economy, bankruptcy filings are on the rise in 2007, an increase analysts predict will continue.”

“In the first three months of 2007, business bankruptcy filings rose 60 percent and consumer filings increased by 70 percent, compared with the first three months of 2006, according to data collected by Jupiter eSources LLC.”

“‘Bankruptcies are definitely on the rise,’ said Jupiter Chief Manager Michael A. Bickford. ‘There’s no question.’” “The AACER database, which receives daily filing updates from every court in the nation, reports that overall daily filing averages have climbed by 26 percent since January. On average, 3,316 cases were filed each day last month.”

“‘It looks to me like the economy is deteriorating,’ said Bickford. ‘A prevalent factor is the increase in residential defaults on home mortgages and the subprime situation that’s going on.’”

“The American Bankruptcy Institute, which gets its information from the Administrative Office of the U.S. Courts, reports a 46 percent filing increase from January to March. Last month boasted the highest filing rate in a single month since the Bankruptcy Prevention Act and Consumer Protection Act took affect in 2005.”

“Data from the Alexandria, Va., organization shows a steady increase in filings so far in 2007, with about 50,000 cases filed in January, 55,000 in February and more than 73,000 in March.”

“ECC Capital Corp. said Wednesday that one of its units is suing a subsidiary of Bear Stearns Cos. for more than $20 million in a dispute over the sale of a residential mortgage loan portfolio.”

“Performance Credit Corp., a unit of ECC Capital, alleges that it lost more than $20 million because the loans declined in value between the time the Bear Stearns unit agreed to purchase the loans and when it actually did.”

“The purchases took place between Oct. 10, 2006, and Feb. 9, according to a filing with the Securities and Exchange Commission.”

“A new U.S. accounting rule that allows companies to change the way they value financial securities may have driven up to $20 billion worth of selling in the mortgage-backed securities market in recent weeks.”

“This accounting change has opened up a one-time chance for banks and other financial companies to clean up their balance sheets, especially those saddled with investment losses stemming from the subprime mortgage crisis, analysts said.”

“Regulators fear some companies may be trying to manipulate the standard’s adoption process to avoid recognizing earnings losses. ‘Banks could take losses without running into their income statements,’ said Walt Schmidt, manager of mortgage products and strategy at FTN Financial Capital Markets.”

The Palm Beach Post reports from Florida. “Palm Beach County Property Appraiser Gary Nikolits said homeowners shouldn’t expect their tax assessments to fall this year. The slumping housing market has caused prices to plateau, not plummet, with exceptions such as downtown West Palm Beach’s condo market.”

“‘There are pockets in this county that have seen significant decreases in market values, particularly in those areas that have been overdeveloped with condominiums and townhouse projects,’ Nikolits said.”

The Naples News. “Builders in unincorporated Lee County, Bonita Springs and Fort Myers Beach pulled 318 permits for single-family houses in March, 62 percent less than in March 2006.”

“Right now, ‘We’re at beginning of 2003 levels, but in 2003 it picked up toward the end of the year,’ said Mary Gibbs, head of community development.”

“Underlying the lower numbers, said Michael Reitmann, executive VP of the Lee Building Industry Association, is the huge inventory of homes for sale, which makes it less attractive for developers to build new ones.”

The Ledger. “The local economy just couldn’t gain much ground in February. Building permits and home sales continued their downward trend, according to The Ledger’s monthly Polk County Business Barometer.”

“In housing, the county’s 347 permits for new home construction fell 71 percent from 1,191 permits in February 2006. Existing home sales totaled 334 houses in February, falling 25 percent from 447 homes the year before. Lakeland had 197 homes sold, a decrease of 28 percent from 272 sales last year, while East Polk had 130 homes sell, an 18 percent drop from the prior year.”

“Bartow recorded seven homes sold, compared to 16 sales the year before.”

The Sun Sentinel. “Liz Randall says she is eager to buy a Lake Mary home that’s on the market for $419,000. But she doesn’t plan to make a move until another deal is reached at Florida’s Capitol.’

“‘I’m going to wait and see what happens with the state Legislature and property taxes,’ said Randall.”

“Real-estate brokers in Central Florida say the Legislature’s ongoing effort to overhaul the property-tax system is having its own dampening effect on a housing market already staggering from a glut of inventory.”

“Those in the real-estate business say such indecision is causing market uncertainty that could worsen, especially with speculation rising that a special session might be needed for lawmakers to winnow down the wide-ranging ideas now in play.”

“‘The way things are going, I wouldn’t want to sell my house right now,’ said Senator Steve Geller of Hallandale Beach.”

“Mary Ann Sigurdson, a Casselberry loan officer, said she sees the effect of the property-tax debate every day, with clients once eager to buy now getting cold feet. ‘We’re finding that you can’t close a deal,’ said Sigurdson.”

“The Orlando Regional Realtor Association reported last month that the number of homes and condominiums sold in the region fell in February by nearly 39 percent from the same month a year ago. Listings by local agents also grew that month to an all-time high of 22,055.”

Tampa Bay’s News 10. “Jennifer Beheler has lived in her house ever since she had her first child, But between the cost of insurance, property taxes and the mortgage it’s a struggle, ‘Our payments have almost doubled in fact they have doubled since we moved in.’ She may lose her home.”

“Jennifer’s not the only one having trouble holding on to her home. Foreclosures increased by 80-percent in Florida since last year. And around the bay it’s the same situation.”

“Polk increased by 55%. Hillsborough 76%. Pinellas 79%. Pasco 111%. Sarasota/Manatee 182%. Lee County had the highest increase since last year at 376-percent.”

The Herald Tribune. “In Florida the furniture industry is in one of its ugliest downturns in years. The housing boom that fueled huge sales at some furniture stores has turned into a housing bust, and some longtime furniture chains are shutting down or packing up and fleeing the state.”

“Spectrum Home Furnishings shut its eight stores from Sarasota to Naples in the fall after more than 20 years in business. Modernage on Florida’s east coast is holding a ‘Save Our Stores’ survival sale but warns it may close.”

“Everyone agrees that the housing slowdown is causing ripples across the Florida economy, and furniture stores are feeling it worse than most. In Florida, sales of existing single-family homes fell 23 percent in February compared with February 2006. Sales of existing condos fell 28 percent, according to the Florida Association of Realtors.”

“The developers behind City Marketplace, the 520,000-square-foot hotel, retail and residential project planned for downtown Punta Gorda, are heading back to the drawing board.”

“Changing market conditions, namely the huge slowdown in Southwest Florida’s condominium and residential housing market, has prompted developers to rethink the design and makeup of the project.”

“‘The market has changed. The concept we had before, we had to design the whole thing and build it at once,’ said Ron Oskey Jr., head of the Charlotte County Development Corp. ‘Now phasing is really important.’”

The Times Union. “Brooklyn Park, a heavily anticipated development on Riverside Avenue, is significantly changing its focus, transforming from a residential neighborhood to a retail-heavy project designed to be a destination for nearby residents.”

“The switch comes as Jacksonville’s housing market has cooled off substantially. The number of condominiums sold by Realtors in Jacksonville fell 42 percent in February when compared to February of last year, according to the Florida Association of Realtors.”

“‘The slowness in the housing market forced us to look at what other options were out there,’ said Miles vice president of development Jason Perry. ‘We like to get in and get out, not wait around for pre-sales.’”

The St Petersburg Times. “Richmond American Homes has pulled out of a contract to develop 85 lakeside homes on Lake Patience Road.”

“‘We’re not involved in that project any more,’ said Michael Murphy, who handles land sales at Richmond American. ‘The development cost just became too high. The deal just didn’t work for us.’”

“The pullouts came amid signs that the housing market still has not bottomed out. Inventories grow. Tampa Bay area home sales still struggle, falling 23 percent in February compared with a year earlier, according to the Florida Association of Realtors.”

“Recent problems in the subprime mortgage market, which lent to high-risk home buyers, have sparked a wave of foreclosures and hundreds of lost jobs at Tampa mortgage firms.”

“Developers have apparently tapped the brakes on even big projects like the 5,000-acre Wiregrass Ranch in Wesley Chapel.”

“As if last year’s dismal market performance wasn’t bad enough, the number of residential permits issued in Pasco County continues to slide this year.”

“Pasco sent out 552 permits in the benchmark category up to April this year, compared with 1,870 this time last year. Foreclosure suits rose 87 percent last year in the county.”

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