The Housing Bubble

The Mercury News reports from California. “It wasn’t until a bank rejected his application for a credit card that Kulwinder Singh checked his credit report and found out he owed $579,000 on a San Jose condominium that he’d never seen. Worse, the condo was facing foreclosure and his credit was in ruins.”

“Singh, who admits he agreed to sign as the condo’s buyer in exchange for $2,500, is one of several people who have told the Mercury News that they wound up with mortgages and property in foreclosure after allowing their credit to be used to help someone else buy a home.”

“In a written complaint to the San Jose Police Department, Singh reported that he agreed with two agents to accept $2,500 for ’signing a house under my name’ last May while working at Century 21 Su Casa’s Fremont branch office. He told police he was promised that his name would be removed from the property a month or two later, that the home would be transferred to the real estate company and that they would be ‘responsible for everything.’”

“Public records show that Singh bought a condo in San Jose in May 2006, borrowing the full purchase amount of $579,000 from a subprime lender. His initial payments were to be $4,780 a month. He paid $30,000 over the asking price, according to the listing agent’s Web site and real estate records.”

“Singh’s loan application, prepared by Mariposa Mortgage, claims he is 20 years older than he is, earns $12,500 a month as ‘co-owner/manager’ in Newark, a job he supposedly held for 2 1/2 years, has $24,000 in a savings account, $8,500 worth of jewelry and $19,000 in other assets and drives a Toyota Tundra truck worth $37,000.”

“Singh said that after asking Fremont Investment & Loan for the documents, he was surprised to see those claims on the loan application, though he signed it at the time.”

“‘I’m like, God, I don’t have any of this. And $24,000 in my account? That’s completely insane,’ Singh said in an interview.”

“When Singh learned in December that he still owned the property, he investigated. He sneaked in, went upstairs and knocked on the door of the unit his credit report said he owned. There was no answer. ‘There was mail under the door, addressed to me, from Fremont Investment bank saying you haven’t paid your money,’ Singh said. ‘I was like, ‘Whoa.’”

“Foreclosed on in March, Singh’s condo is for sale again for $509,500, nearly $70,000 less than he paid.”

The Record Searchlight. “Mirroring the rest of California, Shasta County home sales dipped deeply in March compared with the same period a year ago, DataQuick reported.”

“In Shasta County, the shift that started last year from a sellers’ to buyers’ market has taken root, Redding real estate agent Brad Garbutt said. ‘It takes time for things to show up in the stats,’ Garbutt said. ‘There’s a slowdown in sales activity due to the subprime market implosion.’”

The LA Times. “It’s hard to imagine a metropolis here. Not far from 13 pristine model homes, some with bathrooms the size of studio apartments, cows munch hay near a potholed two-lane road. There’s a stench of manure in the air.”

“When the model homes open to the public for the first time today, Adrian Foley, the president of Brookfield Homes Corp.’s Southland operations will have his expectations in check. ‘I’m a realist,’ Foley said. ‘I acknowledge that the pool of buyers today doesn’t appear to be as big as it was a couple of years ago.’”

“In March, sales of existing homes in the city were down 59% from the same month last year, according to DataQuick. The median sale price fell to $408,000 from $425,000.”

“On the other side of Riverside Drive from the New Model Colony, ‘For Sale’ signs sprout from a lot of lawns. The value of undeveloped land, much of it still home to cows, has fallen by as much as $100,000 an acre in this part of San Bernardino County in the last six months, land brokers estimate, settling way below the peak of $550,000 in 2005.”

“‘Before, if a dairyman even hinted he wanted to sell his land, he would be inundated with offers,’ said David Beno, a partner with Ontario brokerage firm Beno, Van Dyk & Owens. ‘Now it’s pretty hard to find someone who would close a deal.’”

“The unemployment rate last year was 4.6%, the lowesteconomist John Husing has seen since he began studying the area 42 years ago.”

“But many of the new jobs won’t pay the sorts of wages necessary to buy a house in the New Model Colony. ‘Prices have been pushed way too high for incomes in that area,’ said economist Christopher Thornberg. In 2005, the last year for which he has statistics, only about 25% of the households in the Inland Empire had incomes that could support a $500,000 home.”

“Ike Bootsma, whose dairy farm fetched more than $525,000 an acre when it went on the market in 2004, wants to sell 20 acres that his family has owned since 1938. Bootsma sealed a deal with a developer in 2005 for $515,000 an acre.”

“When land values began to tank, the developer, who had already made a few payments, triggered a clause in the deal that allowed for a price adjustment, and asked that it move down to $375,000 an acre.”

“Bootsma decided not to sell and now rents out the land. He figures it will be more than seven years before prices will climb to where he wants them. ‘If the right offer comes in,’ Bootsma said, ‘we’ll sell it anytime.’”

The Orange County Register. “Expect the housing slump to continue at least through 2008, building industry officials said Friday. The year 2008 ‘won’t be so great,’ said Les Thomas, president of Shea Homes Southern California. ‘We hope things will be fine in ‘09.’”

“About 40 high-rise condo projects in the Irvine Business District have ‘ground to a halt,’ said Mac O’Donnell, CEO of the Irvine brokerage O’Donnell/Atkins.”

“Condo tower builder Opus West Corp. will only develop one residential high-rise a year in the next three to five years, said Matt Montgomery, Opus West’s director of real estate development. ‘I don’t see a whole heck of a lot of (construction) in the next five years,’ Montgomery said.”

“‘There still are deals out there,’ said William Shopoff, founder of an Irvine investment firm. But, he added, deals are earning 25 percent to 40 percent less than what they generated 18 months ago.”

The North County Times. “A member of Riverside County’s governing panel wants the county to set up a resource center for homeowners facing foreclosures, which have increased dramatically in the last year.”

“Foreclosure-related filings rose by 94 percent to 6,879 in Riverside County, according to RealtyTrac.”

“‘There is a crisis out here,’ said Rose Mayes, executive director of a nonprofit group. ‘There are people losing their homes at an alarming rate. Some of these people will never again be able to purchase a home.’”

The Press Enterprise. “In yet another sign of a continuing Inland housing market slowdown, the percentage of homes sitting vacant and waiting to be sold rose to 3.9 percent in the first quarter, well above 0.8 percent a year ago, according to newly released government data.”

“Earlier this week, a report by the Multi-Regional MLS, showed there are more than 34,700 Inland homes listed for sale. That’s the highest level in eight years.”

“The length of time those houses stay on the market has almost doubled in the past 12 months, the report showed. It would take 13.2 months to sell the supply of resale homes, up from 6.9 months a year ago.”

The Desert Sun. “Sales volume for all types of homes in the Coachella Valley declined 37 percent in March from a year ago, with new-home sales experiencing a particularly soft month with nearly a 53 percent decline from March 2006, DataQuick reported.”

“In areas of the valley where homeowners compete with new-home builders, eager sellers are increasingly willing to negotiate, real estate agents said.”

“The valley’s sluggish new-home sales market has prompted some new tactics, including auctions. Home-builder Lennar recently turned to (a) Web site to auction off homes and condos in Indio, La Quinta and Rancho Mirage. On Friday, for instance, RealtyBid fielded bids for homes in the Marquesa at Terra Lago community in Indio. Lennar homes there originally priced at $459,990 were getting $296,000 to $318,000 bids in an auction scheduled through May 8.”

“The valley’s home inventory has steadily climbed to nearly 9,200 homes by mid-April, up from 7,467 in April 2006, CDAR reported.”

“A general scarcity of buyers means they’re increasingly in a strong bargaining position and can take their time to sift through the choices. So it took an average of 103 days for a home to sell in the valley between Jan. 1 and March 20, compared to 77 days a year ago, CDAR reported.”

“The increasing number of delinquent mortgage payments and possibility of eventual foreclosures that could result in bank-owned properties becoming a bargain has some prospective buyers holding off, said Realtor Carlo Lombardelli, who has been working with clients for nearly 18 years in the valley and has ridden out many local real estate market cycles.”

“‘I don’t think we’ve seen the foreclosures and short sales fully manifest themselves as of yet,’ Lombardelli said. ‘I think we’re going to see the impact over the next six to 12 months.’”

In Business Las Vegas reports from Nevada. “In his latest take on the Las Vegas housing market in light of new home sales remaining weak, new home prices dropping and inventory of existing homes increasing, local housing analyst Dennis Smith said he appears to have underestimated what was happening when he predicted at the end of 2006 that the market was bottoming out.”

“Smith said any suggestions that the market was going to improve by the end of 2007 appears to have been just wishful thinking. Smiths said he wouldn’t be surprised if some neighborhoods saw home prices drop as much as 20 to 30 percent because of a glut in those areas.”

“The fallout from the subprime market has been felt by the housing market because of tighter credit standards, Smith said. In some cases, it’s taking a credit score of 720 to qualify for a 30-year fixed loan. ‘I have heard this from builders and lenders, and it is not helping sales,’ Smith said.”

“The growing inventory of existing homes also makes it harder for those who want to sell their home and buy a new one. Smith reported that the cancellation rate in March ranged from 24 percent in the northwest to 42 percent in the south valley.”

“Michael Krein, who handles foreclosure cases, said what’s happening in the foreclosure market is nothing in comparison to what’s coming. He said he was handling about 500 repossessed properties and would like to add staff to handle another 500.”

“Many adjustable rate mortgages will kick in by November and a second wave of cases entering foreclosure will occur, he said. ‘The worst is yet to come,’ Krein said.”

“John Restrepo, principal of Restrepo Consulting Group, spoke at a commercial real estate seminar when he joked about the three reasons why people should believe economists: 1. We have a firm grasp of the obvious. 2. We generally don’t know what we are talking about, but we make you feel it’s your fault.”

“3. We have forecasted nine out of the last five recessions.”

The Associated Press. “In the rampant real estate speculation of the Las Vegas valley three years ago, people lined up outside Pulte Homes sales offices overnight.”

“Having seen his house in an upscale part of suburban Henderson jump $200,000 in value in 18 months, Sam Schwartz felt he couldn’t miss any part of the boom. He spent the night in the parking lot with about a hundred other people.”

“Most people waiting were flippers just like him, he said. ‘We had seen real evidence of what was possible in this crazy, inflated market, and we just wanted to get a piece of that investment equity,’ Schwartz said.”

“But when home prices unexpectedly took a backward step, many investors seeking to cash in quickly were left ‘upside-down,’ or owing more on their mortgages than what their homes were worth.”

“The result was a glut of homes in the marketplace, communities spotted with empty houses and for sale signs, and a foreclosure rate in Nevada that leads the nation as owners unable to sell became saddled with unbearable debt payments.”

“Realty Trac statistics show dozens of homebuyers in the Las Vegas area have more than one home in the foreclosure process, a telltale sign of investments gone wrong. One person has as many as 15 mortgaged properties in arrears.”

“The bulk of the state’s foreclosures, or 91 percent in March, were in Clark County. One of every 30 homes in Clark County began the process toward foreclosure last year.”

“The day Schwartz reserved his home, the sales staff was raising prices $20,000 after every fifth buyer came inside. The $500,000 house he and his wife were eyeing had shot up to $540,000 by the time they sat down. Somehow, it still seemed like a good deal.”

“‘Everybody was thinking, ‘Hey it’s not the end of the world, because the homes across town are selling for $720,000. We have almost $200,000 in equity in the house and it isn’t even built yet,’ Schwartz said.”

“The Schwartzes were able to cancel before closing on a property that suddenly was worth only $490,000, and recoup their deposit on a legal technicality. Schwartz, a 44-year-old life coach, said he ‘narrowly escaped financial disaster.’ But…he expects to see among the clients he coaches to succeed in their lives and careers.”

“‘There’s going to be a lot of depression, a lot of anger. A lot drinking, gambling, and desperate stuff going on,’ he said.”

“New home builders are slowing down the pace of new projects in Las Vegas and are giving agents commissions of up to 12 percent and up to $100,000 in upgrades such as pools, granite countertops and appliances. ‘The speculators completely dried up,’ said Paul Murad, a real estate observer and author of ‘Manhattanizing Las Vegas.’”

“In March, the number of resale listings for single family homes, condos and townhouses in the Las Vegas valley grew 30 percent from a year ago to 27,282, according to the Greater Las Vegas Association of Realtors. Sales and the value of homes sold were both down 38 percent from a year ago.”

“State lawmakers are considering a range of bills that clamp down on the easy mortgage lending that helped heat up the market. ‘The biggest loan I ever saw, a person bought a $1 million property and only had to come up with $1,000 in cash,’ said Scott Bice, the state’s commissioner of mortgage lending.”

“‘I don’t think anything will ever prevent speculation,’ he said, but added that new regulations and tighter credit requirements by lenders will eventually return the market to the good old days: ‘When it takes good credit and money in a transaction to close it.’”

The St Petersburg Times reports from Florida. “Ballooning tax bills fueled a storm of citizen unrest that now has state leaders searching for a fix. But the root cause of the tax revolt was a record surge in property values over the past few years.”

“On both sides of the bay, however, there are signs of a market decline not seen in years, and if the trends continue, owners may see some relief on their tax bills in 2008.”

“Joni L. Herndon, a Seminole Heights appraiser, works in both Pinellas and Hillsborough. Herndon said that from December 2005 to March 2006, condos at one Carrollwood location were going for $254, 000. Now, she said, they’re at $218, 000.”

“In Pinellas during the first three months of last year, the median sale price of a home was $212, 000. In the first three months of this year, the figure dipped to $198, 000.”

“‘This year you’ll see declining values,’ Herndon said. ‘But the tax relief will probably come later, not this year.’”

“For Pinellas County Property Appraiser Jim Smith, the downturn that has taken hold is the market’s returning from orbit to solid ground. ‘Now things are starting to get a little bit more real,’ Smith said. ‘I think prices are coming down to normalcy.’”

The Associated Press. “In Miami, the rush of condo building and speculative buying has slowed to a crawl, said real estate agent Penni Hurley. Florida’s foreclosure filings rose 54 percent from a year ago to 14,303 in March, or one filing for every 511 households.”

“‘The market was on steroids, and now it’s going through a much-needed correction,’ Hurley said.”

The Miami Herald. “Soaring property tax bills are making it increasingly burdensome to buy or keep a second home in Florida, raising questions about the future of a real-estate niche that’s long been a mainstay of the state’s economy.”

“‘A few years ago, people wouldn’t ask about taxes,’ said Carlos Justo, principal of Sol Sotheby’s International Realty in Miami. ‘Now the tax issue is the single-biggest factor why a lot of transactions don’t happen.’”

“Justo said one Venezuelan client who has owned a Miami Beach home for nearly a decade has listed it for sale after growing weary of the escalating property taxes.”

“Coldwell Banker, the largest real-estate brokerage firm in Miami-Dade, has tracked a 20 percent drop in second-home purchases in 2006, following a 10 percent decline in 2005.”

“‘I just lost a sale because of taxes,’ says Jennifer Macia, a Realtor who specializes in waterfront properties.”

“Spanish clients who plan to spend part of the year in Miami were close to buying a waterfront home on Key Biscayne, she said, but they balked when they saw the $260,000 property tax bill. ‘It was a $14 million property, and had it not been for the taxes, I would have had a deal,’ Macia said.”

“Roughly one-third of the homes in Miami-Dade and about 40 percent of those in Broward aren’t covered by the homestead exemption and cap on assessment increases, available only to permanent residents.”

“‘It’s a huge market,’ said developer Edgardo Defortuna in Miami. ‘Second-home buyers definitely need to be included in any changes in Tallahassee, because they are the ones paying the most. They have been impacted the most by high taxes the last four or five years.’”

“Homer Thompson. a retiree who lives in one Miami home and rents out another in Kendall, says taxes on the nonhome-steaded property, some $8,458 last year, are eating up his investment.”

“‘I’m trying to hold on to a second home that I lived in before my marriage in 1975, hoping to pass it on to my children,’ he said. ‘I paid $38,200 for the house, and since 2000, I’ve paid more in taxes than I paid for the original price of the house.’”

The Star Banner. “While existing-home sales in the Ocala area last month continued to rebound, the number of homes sold was down 33 percent from the same month a year ago when the local real estate market was still red hot.”

“Bert Meadows, of Meadows Realty, said the real estate boom of the last couple of years was an anomaly, and said most Realtors would be happy to see sales figures similar to those witnessed in 2003 or 2004.”

“‘I think it was an unusual time in the market,’ he said of the frenzied sales period.”

“There’s still lots of inventory on the market. Realtor Judy Disney-DiFranco said she’s seeing more homes are being listed than are being sold and prices are falling. Buyers have the advantage, she said.”

“‘It’s still a buyer’s market,’ Disney-DiFranco said. ‘It’s a good time to make a really good deal.’”

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