The Housing Bubble

The Albuquerque Journal reports from New Mexico. “Remember the investors who swarmed the local residential real estate market, buying up lower-priced new homes just a few years ago? Well, they’re back— only now they’re in selling mode. The number of existing single-family homes on the market is double what it was a year ago and greater than it has been since 2000.”

“That was the last year inventory surpassed 4,000, as it has again in recent months, according to statistics from the Albuquerque Metropolitan Board of Realtors.”

“‘Normally, we’d see two or three for-sale signs in a neighborhood (of ours). Now you can see six to eight,’ said Joe LaMendola, Centex Homes’ VP for sales and marketing. ‘We’ve always had resales as competition, but not to this extent. We find ourselves having to discount a little bit more to meet what the resales are asking.’”

“‘Look for how many homes are empty. There’s lots of them,’ LaMendola says. ‘We don’t have that many people transferring out of Albuquerque to have that many houses empty.’”

“‘When we see a whole bunch of (for-sale) signs on one street and run the ownership (through county records), very frequently we’ll find that almost the whole street will be owned by California investors,’ said (broker) Kate Southard. ‘I know that’s what’s happening because the tax bills are being mailed to out-of-state owners.’”

The Arizona Republic. “Dave and Karen Rysdam got a jolt when pricing their Glendale home to put on the market. They wanted to sell in the low $600,000s, but their agent recommended an aggressive price in the low $500,000s.”

“Surprised, the couple consulted an appraiser, who offered similar advice. Reluctantly, they listed the house for $519,900.”

“The Rysdams are among a record number of Arizonans trying to sell their homes in today’s slowed market. More than 50,000 houses and condos were listed in March, according to preliminary figures from the Arizona Regional MLS. A healthy market typically carries about half of that number, analysts say.”

“Investors are unloading homes. Those left over from the boom are trying to get rid of houses that are declining in value. ‘They are the amateur speculators of last year or the year before,’ Valley housing analyst RL Brown said, noting that big inventory means price softness. ‘Their ‘wink-wink’ loan of two or three years ago is about to change into a serious burden.’”

“The Rysdams spent about $20,000 upgrading the house for sale. The couple bought their house for about $205,000 in 1994 and didn’t pull ‘a penny’ of equity out. They are averaging a showing a day, but if they don’t get an acceptable price, they are prepared to walk away from a $30,000 deposit on a new house.”

“‘For us, the only real variable is what we get out of this house,’ he said. ‘The market doesn’t care how much I owe on my house. It’s irrelevant to what the market will pay for your house.’”

“Some agents say they are going on listing appointments only to find cranky and argumentative sellers. Agents are turning down listings because sellers won’t budge from their target prices.”

“‘If you go to a lawyer or a doctor, you are paying a lot for that opinion,’ said (realtor) Doreen Drew. ‘But in real estate, they argue with you, even though they are paying huge amounts for you to sell their house.’”

“But buyers still hold the upper hand, she said. And she has seen that directly at one of her listings. ‘The buyers want everything,’ she said. ‘Sellers don’t want to give up everything. In this house, the seller has reduced the price $50,000. In her mind, she has done all she could do. And now the buyer wants her two favorite chairs.’”

The Review Journal from Nevada. “The number of single-family homes, condominiums and townhouses for sale in Las Vegas rose for the third straight month, the Greater Las Vegas Association of Realtors reported.”

“Single-family inventory climbed to 21,287 in March, up 22.4 percent from the same month a year ago and 8.4 percent from February. There are nearly 6,000 condos and townhouses for sale, a 63.5 percent increase from a year ago.”

“Meanwhile, sales have plummeted. Realtors sold 1,605 single-family homes in March, down 36.3 percent from a year ago. Condo sales were down 47.2 percent to 341 units.”

“To assure recovery and accelerate absorption of excess inventory, prices must adjust to reflect the ‘realities of the market,’ especially buyers’ expectations, Houston developer Jim Noteware said.”

“‘Very simply, buyers will not re-enter the market until they are convinced that prices have hit bottom and are beginning to recover,’ he said. ‘Sellers must therefore make price adjustments necessary to bring buyers back to the market. The alternative is continued suspension in transactions, overall market uncertainty and the costs associated with both the carry during this period of suspension and the cost of uncertainty.’”

“Dollar value for homes sold during March totaled $604.8 million, down nearly 37 percent from a year ago. Condo and townhouse sales totaled $79.8 million, down 46 percent from last year.”

“A few years ago, it seemed as if everyone knew someone in Las Vegas who was getting their real estate license and cashing in on the housing boom.”

“Membership in the Greater Las Vegas Association of Realtors grew from 7,959 in January 2003 to 16,379 in January 2007. Statewide, the number of licensed real estate agents jumped from 17,718 in 2000 to 36,785 in 2006.”

“Realtors are working harder to earn their commissions. They’re having to pick up the phone for ‘cold calls,’ knock on doors and spend more money on marketing. Some are finding new careers or taking second jobs.”

“Instead of focusing on inactive licenses, (consultant) Jeremy Aguero suggests observers look at the number of agents in relation to overall population. That figure stood at 19.8 licensed real estate agents in Nevada per 1,000 population in October, the highest rate on record, the Nevada Division of Real Estate reports.”

“That’s 32.9 percent higher than the 14.9 licensed agents per 1,000 population in 1996 and 55.9 percent higher than the 12.7 figure in 2000.”

“‘Regardless of (home) price escalations or declines, it is highly unlikely that the volume of transactions reported between 2003 and 2005 will be repeated during the next 24 months,’ Aguero said, ‘and it will be difficult if not impossible to sustain this level of employment.’”

“Broker Tony Silva said Realtors need to educate their clients and be honest about market conditions. ‘It’s got to be both sides,’ he said. ‘You can’t get greedy on either side, buyer or seller. It’s not 2004.’”

“With subprime lending’s meltdown, Las Vegas will see a resurgence in FHA and VA home financing, Silva said. There are nearly 11,000 homes on the MLS under $304,000, which is the FHA loan cap, he said. Another 1,584 homes on the MLS are ’short sales,’ or homes being sold for less than the mortgage balance owed to the bank.”

The Post Tribune reports from Indiana. “The tiny two-bedroom cottage on Indianapolis Boulevard isn’t flashy, but it’s been home to Belinda Kovacik for 21 years. She and her ex-husband bought it for $60,000 in 1989. Her mortgage lender plans to foreclose because Kovacik can’t afford the $1,010 monthly payment. It was originally $860 a month, but because she got a subprime loan after a divorce in 2004, it started adjusting, and increasing, after four months.”

“Kovacik, like many buyers today, got her loan not from a local bank but from a loan originator. Kovacik didn’t understand the terms when she signed, and she’s still confused. The rate will increase again April 19. ‘When I got the paperwork I was like, ‘Oh my God,’ she said. ‘I’m at my limit. It feels like the stock market.’”

“‘Historically, one of the major factors of foreclosures was divorce or lack of income or unexpected medical expenses,’ said Terrence Conley, of Lake Mortgage Co. in Merrillville, which gives mostly traditional loans. ‘Now we’re seeing foreclosures caused by the inability of people to refinance these subprime loans into a more conventional mortgage.’”

The Beacon News from Illinois. “The number of foreclosure proceedings initiated in Kane and Kendall counties jumped to more than 1,600 last year, after hovering consistently around 1,000 for the previous three years.”

“The number of households spending 35 percent or more of their annual income on mortgage payments, well over the 30 percent benchmark recommended at Old Second Bank in Aurora, has roughly doubled since 2000. Between a quarter and a third of mortgaged homes are now feeling that kind of strain.”

“When Jacqueline Hollins and her daughter moved from a rented Lombard apartment to the Lakewood Springs subdivision in Plano, they thought they were home for good. A year later, their belongings are back in boxes while a Realtor shows their house, bought for $132,000, to potential buyers.”

“If she cannot sell the house or find another way to catch up on several thousand dollars worth of mortgage payments by July, the home will be auctioned off at the county courthouse.”

“Hollins fell behind on her mortgage payments during a long-term illness, which has kept her home from her $20-per-hour public service job since last summer. An officer first knocked on Hollins’ door a few days before Christmas, six months after she started falling behind on her mortgage.”

“‘He came and handed me the letter,’ Hollins recalled. ‘It had a court date. I just started packing then.’”

“Kendall County Sheriff’s Deputy Wayne Dial has noticed ‘a sharp incline in the evictions in the past three months.’ Courthouse auctions of homes here doubled at the end of last year, from five to 10 per month. Dial said he and his colleagues now are handing out three to five foreclosure notices a week, including quite a few in Lakewood Springs, Jacqueline Hollins’ subdivision.”

“In the past five years, lenders have offered riskier loans, and borrowers have not hesitated to take them. ‘When you didn’t have the work history or the down payment,’ said Unibanc Senior Consultant Juan Chavez, ‘there was always a lender trying to change guidelines.’”

“The number of sub-prime loans brokered at Unibanc in Aurora went from one out of five in 2004, to one of two in 2005, Chavez said.”

“At Old Second Bank in Aurora, VP Steve Weber faults companies’ willingness to offer riskier and riskier loans. Others blame residents for accepting those offers. ‘They didn’t think about the fact that in three years they’d have to earn more money,’ said Steve Lindberg, a Naperville foreclosure and bankruptcy attorney.”

The Chicago Tribune from Illinois. “Last week, I asked readers to opine on why the housing market can’t seem to climb out of its slump, and the results are in: We’re all to blame.”

“Everybody, it seems, who has any connection at all to the market merits a finger-wag in the face, according to my puny, wholly unscientific sampling of public sentiment.”

“‘There simply aren’t enough buyers to absorb all the new homes that have been built,’ wrote Debra O’Shea, who lives in the Old Irving Park area of Chicago, where she described a ‘glut’ of homes for sale.”

“‘Buyers are expecting more for less, and the developers are offering incentives like multiple free mortgage payments and significant upgrades for free, etc. The seller of an existing home…simply cannot compete with this,’ O’Shea said. ‘So, ultimately, if they want their home to sell, they have to drop the price, and so the spiral continues.’”

“‘(Real estate agents convince) the sellers their home is worth the price, and in their mind, they think that a windfall of profit is just a matter of time,’ wrote one e-mailer who didn’t identify himself. ‘Everywhere I drive around, I see for-sale signs, but the asking prices are still way out of line.’”

“‘Sellers have the continued expectation of asking for, and getting, the moon,’ wrote Chicago real estate agent Mark Reitman. ‘On the other hand, buyers are now expecting bargain prices. This has left a huge gap in expectations.’”

“‘Yes, buyers today have a harder time affording as much home as they could two years ago, but this is the lending institutions’ fault for giving anyone with a heartbeat a loan,’ wrote Chicago real estate agent Josh Feeney.”

“And then there is the ‘I want it all. Now!’ mind-set of the American consumer, as voiced by attorney Diana Brodman Summers. ‘Once the house-buying craving sets in, the potential buyer wants a house NOW without doing their homework about how much they can afford or working at fixing their credit history.’”

“And, yes, the news media took some jabs, for spreading hysteria and weakening consumer confidence.”

“Among the articulate media critics was real estate agent Reitman, who said he has seen buyers back away from deals after hearing negative news. ‘Repeated news reports about the impending ‘bubble’ in the market have convinced buyers to sit on the sidelines and wait for those predicted prices to drop before buying. The delay in purchasing has made these reports a self-fulfilling prophecy.’”

The Herald Tribune reports from Florida. “When Matt Kihnke paid $15.5 million for a Bradenton apartment complex in March 2005, the Chicago investor looked primed to become the architect of another condo conversion success story. That was before the real estate market went soft and became saturated with converted apartments. Kihnke’s property is still about a third unsold.”

“As a result, Sanctuary of Bradenton may be one of the most affordable options for first-time home buyers between Tampa and Fort Myers. Studios at Sanctuary of Bradenton sell for $89,900. The most expensive units, 1,055-square-foot lake-view 2-and-2’s, sell for $139,900. Some of the units were listed for at $160,000 or more 18 months ago.”

“‘We used to have a lot of investors who would sit on our product for six to eight months,’ Kihnke said. ‘We’re starting to see those investors again. Buyers understand there is a deal to be had right now.’”

“In the opinion of one analyst, Bradenton’s Coast Bank of Florida is the weakest bank in the state. Coast received the lowest rating among the 376 banks doing business in Florida last year as measured by BauerFinancial Inc.”

“Coast wasn’t the only bank in Southwest Florida that failed to make money last year. Others posted losses from their own loan woes, from costly expansion or because they are young and still struggling to turn a profit.”

“Most of Coast’s problem loans were to borrowers, many of them speculators, who were building homes with Construction Compliance Inc., a defunct St. Petersburg builder.”

“Coast’s capital level. the financial cushion to absorb problem loans and other losses. is at 4.33 percent. That’s barely above the 4.0 percent minimum required by federal regulators to be considered adequately capitalized.”

“In Manatee County, First Priority Bank lost $546,000 and Freedom Bank dropped $1 million in 2006. Both reported sharp increases in their allowances for loan losses. So did Peninsula Bank of Englewood, which posted a $737,000 loss for the year. Both of Sarasota’s newest banks, which opened in October, were in the red with growing pains.”

“Analyst Richard Bove says banks are tightening their loan standards. ‘Some of this is due to pressure from regulators. Much is due to the fear of defaults,’ he said.”

“Troubled mortgage loans, those 90 days or more past due, jumped by $3.1 billion, or 15.6 percent, during the fourth quarter nationwide. Charge-offs of mortgage loans hit a three-year high of $888 million in the quarter.”

The Times News from North Carolina. “In 1998, 196 notices of foreclosure were filed in Alamance County. In 2006, 737 notices were filed. That’s a 276-percent increase. In nine years.”

“The trend is continuing in 2007. Foreclosure filings are up more than 20 percent through the end of March of this year compared with the same period last year, says county Register of Deeds David Barber. ‘It is a national trend.’”

“Laziness or a desire to shirk financial responsibilities isn’t the problem; homeowners who find new or second jobs still can’t surmount their debt, said Graham bankruptcy attorney David Huffman. That’s because the jobs they find tend to pay lower wages and come without benefits.”

“‘Foreclosures, in and of themselves, are just a symptom of what’s wrong with the economy,’ Huffman says.”

“A soft local housing market that encourages inflated appraisal values fuels the problem locally, Huffman says. ‘You got appraisers that are not putting realistic appraisals on property,’ he said. ‘The (real estate agent) comes in and tells them what they want.”

“‘At some point in time, the lending institutions have to become more responsible. It’s not an issue of just sales. You’re really doing nobody any favors by putting them into a house where they can’t afford it,’ he said.”

“Nothing is wrong with foreclosure procedures, Huffman says. The real problem, he thinks, is in the American economy’s reliance on debt. Congress doesn’t weigh in on the problem because tighter lending requirements would ’send our economy into a tailspin,’ he says.”

The News Daily from Georgia. “Last week, a sign high over Interstate 75 reported for the first time there were more than 100,000 homes for sale in metro Atlanta. Sunday, it read 100,233.”

“‘I’ve been selling real estate in Henry County 20 years and this is the largest inventory I’ve ever seen,’ said associate broker Dottie Wise. ‘You’ve got a lot of new homes being constructed, and it’s a mobile society we live in — people are moving in and out,’ she said.”

“Indeed, a construction boom has been partly to blame for the inventory, experts say. According to statistics compiled by the University of Georgia, after several years of uptick in housing starts, building permit issues show signs of slowing.”

“In 2002, for example, Henry County reportedly issued more than 4,000 permits for single family housing. In 2005, however, it issued 3,697.”

“‘Supply kind of got ahead of demand,’ said Jeff Humphreys, director of economic forecasting at UGA. ‘Builders are pulling back,’ he said. ‘I think, actually, this is quite an opportunity, the last chance to pick up quite a bit of value.’”

“‘I would be a little more cautious in buying a condo,’ he said. ‘The value proposition there may not be quite as strong.’”

“The building boom has meant ‘older homes are really have trouble moving,’ said Nikki Finlay, an associate professor of economics at Clayton State University in Morrow.”

“The cooling has led some builders to offer considerable buying incentives, particularly in high-priced homes in areas where inventories are at a peak. One Henry builder, for example, is offering a $20,000 incentive on a $390,000 home.”

“In Clayton and Henry, inventories of moderately-priced homes, those in the $200,000 range, are well above the metro average, according to Tisha Gay, director of public relations for Metro Brokers/GMAC.”

“In Henry, there’s nearly a 10-month supply of homes in the $201,000-225,000 range. In Clayton, it’s nearly 18 months.”

“‘What it means for the buyer is that there are a lot more choices out there,’ Gay said.”

The Portsmouth Herald reports from New Hampshire. “As mortgage foreclosures increase nationally, the Northeast has not been as hard hit as other parts of the country. But the region is far from immune. ‘We’re seeing a significant increase in families that are unable to keep up with payments on their subprime mortgages,’ said Kerry York, executive director of CCCS NH-VT.”

“‘Recently, we met with a family trying to deal with a rate increase on their ARM. The rate change increased their monthly mortgage payment from $1,300 to $1,750,’ York said. ‘Most people don’t have that kind of wiggle room in their family budget.’”

“‘Some subprime loans have fairly exotic terms and conditions,’ said David Deziel, at CCCS NH-VT. ‘Anyone who has ever closed on a mortgage knows how tough it is to review a 10-inch-high stack of documents. During the process, there’s a lot of trust in the mortgage loan officer; sometimes too much.’”

“According to Deziel, ‘People need to recognize that there can be a big difference between the amount the lender says you are approved for and the amount that you really can afford. Only you really know what you can handle in your budget.’”

“York also has a new concern. ‘We’re now seeing a scaling back of mortgage products and a tightening of loan approval standards,’ she said. ‘Many people who may have been told that they could refinance if rates went up now might not have that option available to them.’”

“Many subprime mortgages were made in late 2005 and 2006. ‘We’ll be seeing the fallout from this through 2008 and perhaps into 2009,’ York said. ‘This is a problem that’s not going to go away quickly.’”

The Journal News from New York. “The pain of losing a home is hitting hundreds of people in the Lower Hudson Valley, as lenders seek to recover what they can from customers who fell behind on payments.”

“In Westchester, lenders began foreclosure proceedings on 527 homes during the first three months of the year. That’s a 39 percent increase over the first quarter of last year.”

“In Putnam County, the number rose 91 percent from 68 last year to 130 this year. In Rockland County, the clerk’s office reports 200 foreclosure initiations through the first two months of the year, a 33 percent rise over the 150 filed in January and February of 2006.”

“An elderly couple in Rockland County is preparing to give up the spacious home where they raised their two children…they were unable to keep up with the payments on $778,000 worth of loans they took out on their house in October 2005. The husband said he now realizes he and his partner should have shut the business sooner than they did.”

“‘We’re sitting in a house we’ve owned for (decades) and we’re going to lose it,’ he said.”

“‘A lot of people bought homes they had no business buying,’ said Kenneth Polin, president of Banner Mortgage Group Inc. of Scarsdale. ‘Many of those homeowners were introduced to what you would call ‘gimmick’ mortgage products. They had low introductory rates and basically were timebombs waiting to go off.’”

“Wall Street played a role, too, Polin said. Firms gobbled up mortgages, buying them in bulk from lenders. The lenders, knowing there was a lucrative market for their portfolios, pushed hard to make as many loans as possible, often giving money to people without checking their income or without requiring any money down, Polin said.”

“‘Those rates are adjusting and people cannot tolerate the adjustments,’ Polin said.” “John Sauro, the president of North Atlantic Mortgage Corp., which is in Stamford, Conn., said he believes that the foreclosure issue is getting too much attention. The press, political leaders, regulators and consumer advocate groups have all weighed in on the topic.”

“He said it’s important to note that the increase in foreclosures follows a boom in housing sales. It’s logical to expect that more housing sales is going to mean more foreclosures, he said.”

The Courier Life from New York. “The next two years could leave thousands of Brooklynites homeless, as the aftermath spawned by a ‘rogue’ industry comes to light, a federal lawmaker recently warned. A rash of foreclosures fueled by subprime mortgages is the cause, according to Senator Charles Schumer.”

“Schumer, who recently released an analysis of the crisis, said that by the end of 2008, 6,100 families in Brooklyn could be at risk of losing their homes.”

“Oda Friedheim, a staff attorney with the Legal Aid Society said the issue is nothing new. ‘Too bad it took Wall Street’s pain to put the problem on the spotlight,’ she said. ‘They have a bellyache because they swallowed too many bad loans,’ she said.”

“‘Our clients have been suffering for years under these abusive mortgages,’ she added.” Meghan Faux, an attorney with the South Brooklyn Legal Services Foreclosure Prevention Project said she sees firsthand how the dream of homeownership can turn into a nightmare. ‘Some people have had their homes for 30 years or more and are now at risk of losing them,’ she said.”

“In some instances, there have been multiple foreclosures on the same block, she noted.”

Newsday reports from New York. ” As the slide in housing from boom to bust continues, congressional attention is focusing on the skyrocketing numbers of home foreclosures caused by the collapse of the ’subprime,’ or high-credit risk, mortgage market.”

“A study released by the office of Sen. Charles Schumer shows that by the end of 2008, as many as 8,378 families in Nassau and 10,476 in Suffolk could be at risk of losing homes obtained with subprime mortgages. In the state, nearly 100,000 homeowners face possible foreclosure.”

“But not all borrowers were unwitting dupes. An uncertain number used risky loans as speculative gambles, hoping to sell the property quickly to make a huge profit before their mortgages’ higher interest rates kicked in. They deserve no relief.”

The Christian Science Monitor from Massachusetts. “Victor Castro bought his home four years ago, expecting the move would bring stability. The Massachusetts janitor thought he would no longer move from rental to rental.”

“‘I thought it was a step forward,’ says Castro, referring to the day he bought his home four years ago. At the time, land prices were surging in the Boston area, even in Lawrence.”

“Now it looks as if Castro will likely have to take a big financial step back. The home is up for sale. So are two other homes on his block, homes that are now vacant and on their way toward foreclosure.”

“Castro hopes he can get about $300,000 for his house and then give the lenders what’s left after the sales commission, probably about 75 percent of what they are owed.”

“As with many borrowers at risk, several changes combined to bring Castro to this point. Between his paycheck, his sister-in-law’s, and rent from the tenants, he was covering mortgage payments on the loan that had financed 80 percent of his original purchase, as well as on the loan that had financed the other 20 percent of the home’s cost.”

“But in recent months the rental income grew less reliable. One of Castro’s loans adjusted upward, which pushed his total payments to above $2,600 a month. Then came the biggest blow of all: His job was phased out.”

“All this comes at a time when the housing market in Lawrence is reeling. The number of foreclosures in progress doubled in 2006, with 425 as of December.”

“That’s weighing on home values in a city where only about twice that many homes sell in a good year, says Mayte Rivera, who is researching Lawrence’s foreclosure problem.”

“Lawrence is in some ways typical of the excesses of the nation’s subprime boom. The expansion of higher-risk credit was fueled by a confluence of factors: rising home values, rising buyer aspirations, and an influx of eager lenders.”

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