The Housing Bubble

The Mail Tribune reports from Oregon. “There is no argument that Jackson County’s real estate market is far afield from what it was two years ago. Median prices arced higher and higher during the first half of the decade, sputtered then stalled and have slowly lost elevation in the past 18 months.”

“‘It’s still a changing market,’ said Colin Mullane, an agent in Ashland and a member of the Statistics Committee of the Rogue Valley Association of Realtors. ‘Last year, we were beginning to see signs of the market changing and slowing down and the statistics are reflective of the same kind of market.’”

“In White City, the median price slipped below $200,000 during the first three months of 2007. For the quarter, it dropped 20.6 percent to $179,900. In places such as Central Point and Talent, lower-priced new construction may well contribute to lower median prices.”

“‘People are looking for value and a good deal,’ Hall said. ‘Buyers just aren’t paying the prices they used to pay because there is higher inventory. That makes buyers more selective and they’re able to get nice houses for the money. It’s one of those things where the developer recognized the market was not strong, and selling lots so builders can make some money, too.’”

“Mullane said downward pressure on prices is apparent in a new development by Charlie Hamilton in Talent. A four-bedroom, two-bathroom, 14,000-square-foot house with granite counters, stainless steel appliances with hardwood entry and a gas fireplace is selling for $314,000.”

“‘There were similar houses built a couple of years ago that sold for $270,000 to $300,000, depending on the square footage, and some of those people are wanting to sell for $340,000 or $350,000 now,’ Mullane said. ‘Those houses didn’t have those extras and it’s hard for the secondary market to beat that when the new ones are selling for $35,000 less.’”

The Seattle PI from Washington. “There are more homes on the market in Seattle these days. The number of homes increased by nearly half in March from March 2006, according to data the Northwest MLS.”

“Karen Woo saw the market change as she spent more than a year looking for a new home, she said. She found one in Laurelhurst last month. ‘There were months that would go by that there was nothing,’ she said. ‘Recently, I have found there were more.’”

“But the competition for those good houses still was intense, Woo said. ‘If you don’t see it the day it’s (listed), you’re probably not going to get it.’”

“‘We’re rushing stuff to market. The people who were waiting till May and June, I’m telling get it out now,’ (said broker) Gordon Stephenson.”

“In King County, the number of homes on the market in March was up 36.8 percent from March 2006, while closed sales were down 1.4 percent and pending sales dropped 8.1 percent. For all 19 counties in the Northwest MLS, listings (were) up 46.4 percent, closed sales down 7.7 percent and pending sales down 9.2 percent.”

“The MLS condo numbers do not include many new condos, because developers sell them directly, outside of the listing service.”

“(Broker) Dick Beeson in Tacoma, said, ‘It just feels like a normal market with well-priced homes seeing offers in 30 days or less and sellers of overpriced properties having a gut check and a motivation check to see if they really are serious about selling.’”

The Bellingham Herald from Washington. “The average time it takes to sell a home in Whatcom County was 109 days in the first quarter, up 58 percent for the same period last year, according to Lylene Johnson of The Muljat Group South office in Fairhaven.”

“Housing sales and prices in the county were slightly higher in the first quarter this year compared to the same period last year, according to the report.”

“The rise in home prices has little to do with recent price appreciation and more to do with the fact the market has changed in the past 12 months, said Julie Hansen, an economics professor at Western Washington University.”

“‘Housing prices didn’t really start to flatten out until midyear (in 2006), so that hasn’t showed up in the numbers yet,’ said Hansen. ‘From the data that’s coming in, we’re still in a flat market when it comes to prices.’”

“Johnson added that sales continue to be strong in the high-end housing market, which could be skewing the average price.”

“‘It is still a situation where if the house is priced correctly, it will sell fairly quickly. If it’s priced too high, it will sit on the market. Buyers know they don’t have to be in a rush to buy, because there is plenty of inventory to choose from,’ Johnson said.”

The Olympian from Washington. “Thurston County single- family home and condominium sales dropped 7.5 percent in March, though last month’s results were softened by a surge in the condo market, the Northwest MLS reported Thursday.”

“Total active listings for single-family homes increased 38 percent to 1,802, up from 1,303. Total active listings for condos increased 133 percent to 49 units, up from 21. Single-family home sales, meanwhile, dropped to 365 homes last month, down from 421 last year, a decline of 13 percent, according to the data.”

“The torrid housing market of 2004 and 2005, with its high rates of price appreciation and short selling times, was an abnormal period, said broker Ron Hill. ‘It’s now a normal market,’ Hill said. ‘It actually involves work to sell a house, but that’s OK. That’s why people hire us.’”

“Olympia Real Estate broker Heather Macy said she has recently seen more listings expire or get cancelled because sellers were unwilling to adjust their expectations.”

“‘The most important thing is for real estate agents to educate their sellers,’ she said. ‘It’s a good time for them to sell, but they’re only going to get what the market will bear.’”

The Baltimore Sun reports from Maryland. “An Edgewater house with a new siding-and-stone facade. A five-bedroom in Hanover, two-car garage attached. A West Friendship mansion on nearly an acre of gently sloping land. A million-dollar Colonial in a Columbia development so new, the sales office is still open. Symbols of affluence. And, as recently as the past few weeks, all in foreclosure.”

“Foreclosure filings rose four times faster last year in Baltimore’s suburbs than in Baltimore, up 15 percent versus less than 4 percent in the city, court records show. To the south in Montgomery, one of the nation’s wealthiest counties, filings were up more than 30 percent.”

“Consider, for instance, a western Howard County home whose lender filed for foreclosure last month: Built last year, it’s nearly three times the size of an average new house, with a double-door entrance, a circular driveway and a four-car garage. Balance due on the loan: about $1.5 million.”

“‘Either they’ve fallen behind in payments or it’s just gotten to the point that the debt is strangulating them,’ said Mark F. Scurti, a Baltimore bankruptcy lawyer who has seen the number of people looking for Chapter 13 protection because of mortgage problems increase ‘dramatically’ in the past few months.”

“‘People are getting these large mortgages with variable rates that are just outrageous,’ Scurti added. ‘What they got in at, they could afford. Now they’re paying almost double.’”

“Some homeowners are in trouble before their first reset. One foreclosure filing in affluent Howard County last month, for an almost $1 million home in Columbia, affects an owner whose interest rate isn’t scheduled to change until 2011. Not one dollar of the principal had been paid off at the time of the court filing.”

“Three days later, another lender filed for foreclosure on a $480,000 split-level in Ellicott City with an adjustable-rate, interest-only mortgage that also hasn’t reset. The home changed hands only last summer.”

“The problem isn’t limited to subprime loans. Baltimore-based First Mariner Bancorp, which doesn’t offer subprime products, said bad loans contributed to its nearly $4 million loss in the last three months of 2006.”

“‘They can’t sell their property and they can’t refinance their property and they can’t get a tenant, and you’re seeing them throw up their hands and say, ‘You know, I’m out,’ said Brett Carter, president of First Mariner Mortgage.”

The Lancaster News from Pennsylvania. “The calls, said Bob Thomas, don’t always come from poor people. ‘One prospective client makes $100,000 a year,” said Thomas, (who) provides financial counseling. But he, too, had gotten a mortgage with low, low ‘teaser’ rates that soon leapt to the stratosphere; and he, too, was worried he couldn’t make the higher payments, and might lose his home.”

“M&T Bank, with several branches in Lancaster County, announced last week it would not auction off $883 million worth of loans to investor groups, a typical move in the banking industry, because it would lose money on the sale, according to an article in The York Dispatch.”

“Though these particular loans weren’t subprime, ‘There’s a lot of skittishness. Investors have shown less interest in any product that’s not a traditional prime mortgage,’ bank spokesman Michael Zabel told The Dispatch.”

“Frank Christoffel of the Lancaster County Association of Realtors (said): ‘When you look at our market overall, it’s still doing rather well,” he said. ‘Prices are still going up, not as much as they were, but we’d been drinking out of a fire hydrant.’”

“‘We’ve long seen a steady volume of folks coming in with subprime loans,’ said Patrick Cicero, an attorney in Harrisburg who has worked with struggling Lancaster-area homeowners. ‘But anecdotally, over the last six months, the numbers have been higher. When the housing market was hot it allowed people to purchase homes who shouldn’t have been buying them. We were selling them the American dream, and giving them a nightmare.’”

The Sharon Herald from Pennsylvania. “A Sharon homeowner closing in on his 80th birthday thought he latched onto a deal of a lifetime. The elderly man needed his roof replaced and a leaky basement repaired. With only a monthly Social Security retirement check to support him, he didn’t know how he could pay for these home improvements.”

“Then along came an out-of-town contractor who said he could complete the work for $30,000. The contractor hooked the man up with a Pittsburgh mortgage broker who specialized in subprime loans.”

“When the homeowner was unable to pay the monthly loan bill, the subprime lender began foreclosure proceedings against him and his home was scheduled to be sold at sheriff’s sale.”

“Although Sharon attorney Tom Dill was able to halt the sheriff’s sale of the man’s home, he wonders why the lender agreed to the loan in the first place.”

“‘The guy’s house is worth maybe $12,000,’ Dill said. ‘I don’t know why they gave him a $30,000 mortgage on a house worth that much at his age. How is this guy going to pay off a $30,000 mortgage on just Social Security?’”

“Since the mid-1990s, sheriff’s sales in Mercer County have soared from 33 in 1995 to a record 357 in 2006, according to the county sheriff’s department. With 177 sheriff’s sales on the books so far this year, 2007 is on pace to set another record.”

The Pocono Record from Pennsylvania. “A big chunk of homes sold in Monroe County so far this year were houses in foreclosure. In 2006, foreclosed homes accounted for 9.6 percent of all home sales here. That rate more than doubled to 20.4 percent in the quarter ending March 31.”

“While homes in foreclosure were usually six to seven years old in the past, real estate broker Vicki Brockelman now sees many after only two to three years, coinciding with the typical teaser period of adjustable rate mortgages.”

“But Brockelman sees an upside. ‘One person’s loss is another person’s gain,’ she said. ‘As prices go down, more people will be able to buy.’”

The Patriot News from Pennsylvania. “The midstate real estate market is showing signs of slowing, with prices wavering and houses taking longer to sell. For buyers in the local market, the trends could mean they have more bargaining power than they would have had last year.”

“For example, Grayson Homes, a builder from Elliott City, Md., has twice cut the base asking price for its Copper Ridge town houses in Lemoyne since the units were listed for sale last September, said Lee Frey of Grayson Homes. The base price dropped from $369,000 to $329,990.”

“The model home, the most expensive of six units available, started at $616,000. It is now priced at $424,990.”

“Market conditions in the Harrisburg area are better than in southern York County, where Grayson has developed Logan’s Reserve, Frey said. The number of days homes sit on the market there have doubled because of its proximity to the Baltimore and Washington, D.C., metropolitan areas, where the housing downturn is having a greater impact than near Harrisburg.”

“Keystone Arms Associates hasn’t reduced the prices of its new town houses just outside Carlisle that range from $171,700 to $184,700, said (realtor) Pam Hopper. Hopper said about 30 of the more than 190 units available have sold.”

“Even with prices being ‘a little under market,’ Hopper said, the builder is using incentives such as lower closing costs and adding a yearlong warranty to spur sales.”

“Jerrod Paterson, president of the Greater Harrisburg Association of Realtors, said the average sale price and number of days on the market this year are ’skewed’ by sluggish activity for homes priced at $250,000 and more.”

“‘In the higher-end homes we are seeing offers being made and houses not selling for the asking price,’ he said.”

The Daily News reports from Florida. “We hear it every day. Northwest Florida’s housing market is stabilizing, returning to normal, slowing to a more reasonable pace. But what does that really mean? Especially for folks whose ‘For Sale’ signs have started to grow moss?”

“‘If you want to sell your house, you have to lower your price,’ said broker Richard Bell.”

“According to data from the Emerald Coast Association of Realtors, in the fourth quarter of 2006 it would have taken 19.3 months to sell the entire single-family home inventory in the area. It would have taken 54 months to sell all of the condos on the market.”

“‘There are a lot of people who are just walking away,’ Realtor Ray DiTirro said. ‘They do their cash-flow analysis and they say, ‘It’ll cost me less to walk away than to carry this condo.’”

The News Press. “Land is being cleared for a project that will bring 168 homes to San Carlos Park, but it could be a while before the homes are actually built.”

“Real estate agent Joe Batten said it might be difficult for them to drum up sales in the area. Most builders have halted projects in response to a weak housing market. ‘The inventory can’t compete with the resales,’ he said.”

“Batten said Breckenridge is an example of condominiums that aren’t selling well, in spite of their location. ‘Stuff isn’t easy to sell in there,’ he said. ‘Everything’s dropped.’”

“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, the county Department of Community Development reported.”

“‘We’re looking at the budget to figure out how much staffing we’ll need for next year. We’re going to monitor it and then see if it bottoms out and see if we can delete some positions,’ said Mary Gibbs, head of community development.”

“Right now, she said, ‘We’re at beginning of 2003 levels.’”

“Michael Reitmann, executive VP of the Lee Building Industry Association, said the flat permitting numbers aren’t surprising in light of recent layoffs by local builders. Underlying the lower numbers, he said, is the huge inventory of homes for sale.”

The St Petersburg Times. “In a part of the county where new developments used to be a dime-a-dozen, another megaproject has now left the scene. Crosswinds Florida will no longer build 500 homes proposed on 280 acres in southeast Dade City.”

“Dade City officials also confirmed that Crosswinds had canceled its contract to purchase the 280 acres from the Larkin family. Reached by telephone, Jon Larkin II said he had no comment and hung up.”

“Across the Tampa Bay area, only one in 20 homes is now finding buyers within a month. Two years ago, half of all homes found buyers in a comparable period.”

“Centex Homes last week slashed half its 300-person work force in Naples. ‘The housing market’s conditions are not as favorable as they have been,’ said Ken Smalling, Centex’s spokesman.”

The Orlando Sentinel. “HSBC Mortgage Services plans to shutter its collections call center in Orlando and eliminate nearly 110 jobs locally, the company said this week. HSBC is the nation’s 10th largest player in the subprime mortgage industry.”

The Herald Tribune. “Foreclosures in Manatee, Sarasota and Charlotte counties have doubled in the last year. The total foreclosures in process, 2,221 this year, compared with 1,106 at this time in 2006, is the clearest symptom to date of Southwest Florida’s painful hangover from the bubbly days of a heady housing market.”

“‘I would not be surprised to see it double again a year from now,’ says Mark Zandi, chief economist for big Wall Street credit rating giant Moodys.com.”

“Of the 2,221 foreclosures in process right now in the three-county region, 317 are in North Port and 402 are in Port Charlotte. Not coincidentally, those communities were a favored playing ground during the boom for investors. It also was the center of activity for a series of failed home builders.”

“As the three-year-long real estate boom wound down, mortgage lenders such as New Century Financial Corp. came up with a bad idea: Instead of tightening lending criteria as the markets became less liquid, they loosened them in order to keep the party rolling.”

“Those decisions are now coming home to roost across the nation. ‘Not only are we going to see massive foreclosures in the market, but as you can see, the subprime lenders are falling out like flies,’ said Priscilla Gratton, a 20-year Sarasota mortgage banking veteran. ‘There are so many mortgage originators out there whose only goal was closing a transaction.’”

“During the past 10 years, New Century underwrote as many as 4,000 loans locally, property records show.”

The Citrus County Chronicle. “A real estate market that boomed in 2004 and 2005, but began to bottom out in 2006, has left a residual effect, hitting homeowners and lending institutions right between the eyes.”

“Mortgage foreclosure filings are much higher than a year ago as people who received home loans during the good times find they cannot make payments after times went bad. Records with the Citrus County Clerk of Court’s office show foreclosure cases had remained steady through much of 2006, but began increasing in October.”

“January 2007 alone saw 90 mortgage foreclosure filings, compared to 23 in the same month a year ago.”

“‘The trend is increasing,’ said Jack Reynolds, senior VP at the Homosassa Springs Bank. ‘With what the economy has done, real estate taxes up significantly, insurances increases up significantly, people can’t afford their mortgage payments.’”

“‘You have seen some of those borrowers barely able to qualify coming into a position, whether because they have adjustable mortgage rates going up or other reasons, unable to afford the payments,’ he said.”

“Another subtler trend has developed in recent months. Of those foreclosures going to public auction, fewer are being bought by outside bidders, meaning lenders are getting the property back themselves.”

“For example, of the eight sales in January 2006, all but one was bought by outside bidders, often land investors. In 11 sales last January, outside bidders landed just three properties.”

“And this: Of 10 sales in March, all 10 returned to the lender, according to county records.”

“‘That doesn’t surprise me at all,’ Reynolds said. ‘It’s just another sign of the market. Folks expect to make a profit on the sale. You saw properties that turned every three months. That isn’t the case now. Those investors aren’t in that market now.’”

What do you see in your housing market this weekend? Graphs? Some new statistics? There were 30,313 homes available on Long Island and Queens in February, according to statistics compiled by the MLS of Long Island. In January there were about 25,000.”

“The median closing price in Suffolk was $379,000, down $18,000 from the month prior.”

Resale trends? “Ken Klein can remember a time when Long Island homeowners didn’t need to invest much into making over their dwellings before putting them on the market. ‘Two or three years ago you could give [a house] a basic paint job and sell it for 20 percent more than you were buying it for,’ says Klein, a real estate investor from East Meadow.”

“Not anymore. Since Long Island’s real estate market tipped in favor of buyers in late 2005, some sellers say remodeling, especially kitchens and baths, has practically become a necessity to remain competitive.”

Homebuilder reports? “Dominion Homes Inc. became the latest homebuilder to feel the sting of the U.S. housing slump, reporting a 54 percent drop in homes sold during the first quarter.”

Buyers incentives? “A source of mine in the real estate business says one of his associates went to a builder about a new home. The builder told him that he would refund 10 percent of the purchase price to the potential buyer’s real estate broker, who then would hand it back over to the buyer.”

“When asked why he didn’t just knock 10 percent off the price, the builder said he wanted to keep values up.”

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