June 3, 2007

A Huge Turnaround In California

The Modesto Bee reports from California. “A bleak picture was painted of the region’s housing market at a recent conference for real estate appraisers. ‘This year, we’re going to see prices drop in every market across the country for the first time since the Great Depression,’ said Steven Smith, a property appraiser and consultant from San Bernardino.”

“Smith predicted that home values throughout the country will fall 25 percent to 50 percent below what they were at their peak, which was in 2005 or 2006, depending on the region.”

“New home prices already have declined dramatically in the Northern San Joaquin Valley. This March, the median-priced new home in Merced County was $310,990, which was nearly 22 percent below March 2006, according to Hanley Wood Market Intelligence.”

“In San Joaquin County, they sold with a median of $462,950, a 12.3 percent drop.”

“Used homes also are selling for far less this year compared with last. In Modesto during the past six months, the median home sales price was about $322,000, compared with about $340,000 during the same period a year ago, according to the Central Valley Association of Realtors. Resale home prices are down about $55,000 in Turlock, about $46,000 in Oakdale and Riverbank, $49,000 in Salida, and $113,000 in Ripon.”

“‘We have not hit the bottom yet in prices. There’s just too much inventory,’ said Glenn Race, sales manager for Prudential California Realty. ‘It will take time for the next recovery, perhaps four to five years.’”

“During the first four months of 2007, there were 1,733 homes for sale in the Northern San Joaquin Valley that were in process of foreclosure or already had been taken back by the lender, Race said.”

“Race said there were more than 3,300 members of the association in February 2006. But that declined to about 2,500 in February 2007, a drop of 800, or 24 percent. ‘Simply put,’ Race said, ‘there are not enough sales to sustain the large population of agents walking around with licenses.’”

The Record.net. “Greg Paquin, president of a real-estate information and consulting service in Folsom, said the shakeout in the sub-prime lending market and tightening credit standards have for now backed off many would-be homebuyers.”

“Sales and prices looked to be stabilizing at the end of last year and the first couple of months this year until news hit about subprime lending woes and tighter credit markers, he said.”

“It’s not a bad market, he said. Although there are those having trouble qualifying for mortgage loans these days, there are buyers out there. ‘They just want the right price.’”

The Bakersfield Californian. “A year ago, it was all about image: a Gulfstream jet, bodyguards, a half million-dollar car, Armani suits. Now, David Crisp is floating in default notices. So are family members and employees, current and former.”

“In April, 770 of the county’s homeowners entered some stage of the foreclosure process, according to RealtyTrac. That’s more than five times the number of Kern residents who defaulted in April a year ago.”

“County records, meanwhile, show notices continue to roll in. On Wednesday alone, for example, the recorder’s office entered 28 new default notices.”

The Orange County Register. “Fresh local housing statistics confirm what’s been suspected: Prices are off their peaks and the top occurred sometime in the second half of last year.”

“The market has surprised many watchers with just how fast it turned to what in most cases is the weakest pricing climate in a decade or more.”

“One trend stands out to Cal Poly Pomona real estate professor Michael Carney, whose group’s index shows O.C. prices down for the first time in 11 years: ‘widespreadness…The fact that everywhere I look, prices were down.’”

“This professor who thought regional prices would fall by maybe 5 percent in 2007. He thinks we’ve already seen losses of that scope this year. ‘There has, no doubt, been a huge turnaround. Early last year, there was an unexpected decline in the demand for housing,’ he says.”

“Why? ‘I don’t have good explanation,’ admits Carney, who doesn’t think oft-mentioned affordability challenges for shoppers totally explain the flop in sentiment, nor does any other rationale. ‘People somehow changed their expectations.’”

The Union Tribune. “John Karevoll, analyst for DataQuick Information Systems, estimates that there are between 700,000 and 750,000 outstanding loans on existing houses and condominiums within San Diego County. That figure excludes duplexes, triplexes and apartments, he said.”

“At the end of the first quarter, about 10 percent of outstanding home loans countywide were in the subprime market, said LoanPerformance spokesman Bob Visini. His figure includes loans on attached housing of less than five units.”

“Nearly 13 percent of those loans were at least 60 days behind in payments, he added.”

“One thing researchers agree on, however, is that the pace of foreclosures has increased dramatically. During the first four months of the year, DataQuick reported 1,707 foreclosures within San Diego County, compared to 238 during the same period last year, an increase of more than 600 percent.”

“Steve Doyle, San Diego area president for Brookfield Homes, stressed that the local housing market remains sound, despite the rise in foreclosures. Prices have softened, but there have been no steep declines. Even so, fear that failing subprime loans will depress home prices has caused some buyers to unnecessarily delay purchases, he said.”

“‘Right now we have a lot of difficulty finding people who think it is a good time to buy,’ Doyle said. ‘That fear factor is keeping them on the sidelines.’”

The North County Times. “San Diego County’s sluggish housing market is churning out single-family home sales at a pace barely above the low point of the recessionary 1990s, according to an analysis of regional statistics.”

“At the height of the recent housing boom, about 4 percent of county homes were being sold every year. Today, a little more than half that are changing hands.”

“The recent developments are to be expected, as they reflect long-term trends, said Ed Leamer, director of the UCLA Anderson Forecast. Leamer said housing markets tend to go up and down, but cycles are different for price than for sales volume. Typically, sales fall first and fast following booms, while prices decline later and drift down slowly.”

“‘The volume cycle has already made a major adjustment,’ he said. ‘We may not be on the bottom, but we aren’t far off the bottom.’”

“On the other hand, Leamer said, ‘The price decline is just starting. And we expect that to last for a considerable time.’”

“‘It’s definitely a buyers’ market,’ Leamer said. ‘By that I mean, if sellers want to move their product they are going to have to do what the builders are doing, which is aggressively price and promote.’”

“There aren’t many bargains being offered in the resale single-family market, Leamer said. ‘If you want a bargain, you have to buy a new home or one that has been foreclosed,’ he said.”

“Leslie Appleton-Young, chief economist for the California Association of Realtors, said there is no question prices also are going to pull back from the ‘unrealistic appreciation in prices’ that occurred during the boom of the 2000s.”

“Robert Campbell, an independent San Diego economist, said a strong economy and low interest rates can’t eclipse the market’s need to return to price levels that more closely reflect the region’s income levels. Campbell said he believes the county is in store for a severe price decline, in the neighborhood of 35 percent.”

“‘This boom took prices twice as high as normal cycles,’ he said. ‘People talk about high gas prices. But what is really stalling the economy and could actually bring the economy down is overpriced housing. Affordability, of course, hit the wall. The market is just exhausted.’”

“Borrowing a baseball analogy, Campbell said, ‘We’ve got innings four through nine to go…and that’s assuming we don’t have extra innings.’”




A Lull That Will Shake Down The Market

The Mail Tribune reports from Oregon. “A well-intentioned attempt to cash in on a red-hot real estate market has turned sour as the unsold home’s mortgage now gobbles up a big chunk of the regional Boy Scout council’s budget. Rather than selling quickly for a profit, the house has sat vacant for about a year. If it doesn’t sell soon, Boy Scout officials fear the project may end up costing them money, said Scout Executive Rick Burr.”

“‘I don’t think there’s going to be anything left over after we pay the Realtors,’ Burr said. ‘It could potentially put us into debt.’”

“The Crater Lake Council already has made about $30,000 in interest payments to South Valley Bank & Trust, Burr said. The council co-signed a $426,000 loan with local contractor Brian Monroe, an Eagle Scout and former Scout master. Monroe said he is not going to see any profit because he agreed to donate labor and solicited about $125,000 in materials, all to benefit the Scouts.”

“The Scouts approached Monroe about three years ago with the idea modeled on three previous Scout houses that all sold prior to completion. In each of those efforts, the builders took on all financial liability and returned profits to the Scouts, Monroe said. But he said he insisted the Crater Lake Council assume some responsibility for the loan.”

“‘There was too many houses on the market,’ he said.”

“After paying $140,000 for the lot, Monroe started building the house in summer 2005 and finished it a year ago. Listed before completion, the two-story home is priced at $499,900, a figure that’s been reduced several times. ‘Every month, it’s going down,’ Monroe said.”

“While an unusual method of raising funds locally, the Scout house project was approved by a healthy organization with an experienced board, said Dee Anne Everson, executive director of United Way of Jackson County, which helps fund Boy Scouts.”

“‘There’s no question you have to spend money to raise money,’ Everson said. ‘They didn’t see the bottom falling out of the housing market.’”

The Bend Bulletin from Oregon. “Multiple housing projects are being planned on at least 1,200 of the 2,299 acres on the city’s western and northwestern edge that could add up to 7,000 new home sites for Redmond by the time they are built, sold and occupied, said Nick Lelack, city planning manager.”

“‘All the (major) property owners are seeking plan approval and annexation in 2008,’ Lelack said.”

“Upon expected buildout within 10 years, the mix of new homes could bring between 14,000 and 17,500 people, he said. But developers are cautious about the number of years it will take to sell the lots and build what they are calling a diverse mix of housing types and prices.”

“‘It’s hard to say whether there will be enough people based on the number (of houses) projected,’ said Andy Crosby, managing member of Redmond Community Ventures LLC, which is planning between 1,200 and 1,400 housing units on 150 acres west of the current city limits.”

“‘There’s going to be a lull that will shake down the market and put an emphasis on quality,’ Crosby said. Some projects will fall by the wayside, Crosby said.”

“The city’s recent housing slide includes a 38 percent drop in sales of single-family homes for the month of April compared with the same month in 2006, according to the Central Oregon Multiple Listing Service. On June 1, there were 739 single-family homes on the market.”

“Median home prices in Redmond, meanwhile, have slipped to $255,500.”

“‘Right now, there’s a bit of a pullback, but if you look at the long-term dynamics, Central Oregon is very bullish,’ said Bruce Kemp, Redmond’s real estate agent of record. ‘The (slowdown) allows for prices to pull back a bit and as prices adjust down, sales will pick up.’”

“Eventually, more affordable housing prices will attract more companies, said Bud Prince, manager of Redmond Economic Development. The number of speculators and investors who sought to buy a piece of property, then resell it for a profit, have slowed to a trickle at his office, he said.”

“‘That’s a good thing, really,’ Prince said. ‘Because they drove the prices up for the end user.’”

“But the city’s resources make the city attractive for companies to relocate or expand their businesses, Prince said. ‘The attraction is there for people to move here from outside the region, but there’s a concern whether they can afford the houses,’ Prince said.”

The Bellingham Herald from Washington. “Condominium living has become a popular trend locally, and industry experts have watched with interest to see what happens when a red-hot home market starts to cool.”

“Spring and summer is the real-estate shopping season in Whatcom County, and this year buyers have plenty of units to choose from, with more coming available as projects finish. For sellers, it’s probably a time for patience, as the average time on the market is around 270 days. Heading into June, Bellingham condo sales are down 22 percent compared with the same period last year.”

“‘The next few months will be a crucial period to find out what will happen not only with condominiums, but single-family homes as well,’ said Julie Hansen, an economics professor at Western Washington University. ‘I’m concerned that the condominium inventory is around 10 months. With that much supply, there is a risk of price declines. If it does decline, I don’t believe it will be steep, but right now it’s too early to tell.’”

“She noted that home sales in Whatcom County dropped 23 percent in 2006.”

“While the condo market for first-time homeowners has been growing, more high-end condominiums are expected to hit the market in the coming months, including the refurbished Waldron building and the new Young building in Fairhaven.”

“The current supply for highend condos is around two years, and the new projects will be adding to it.”

“The apparent glut is not slowing some developers. Jim Laing of Vancouver, B.C., has two projects in the works; a mixed-use project on on Lincoln Street that will have 55 condo units for around $200,000 each and a work-live project East Bellis Fair Parkway that will have around 60 condo units.”

“‘There is about a year’s worth of existing inventory available, but the reality is there are quite a few opportunities in the Bellingham area,’ Laing said. ‘Once my projects are completed, this area will have worked through the current inventory and the demand will be back.’”




The Hangover Following The Homebuilding Boom

The St Petersburg Times reports from Florida. “Last year, New Tampa real estate agent Sabrina Westenbarger sensed that home buyers were disappearing. She branched into managing rental properties. Real estate investor Rob Duncan sensed the same trend. And in Pasco County, Betsy Morgan has seen accounts double in the past two years in her office in Trinity.”

“All are profiting in the hangover following the homebuilding boom. All are signing up clients who need to rent their houses, townhouses and condos because they cannot sell them in an overbuilt housing market.”

“‘Now there are more than just intentional investors,’ says Morgan, who has worked in residential property management for 23 years. ‘They’re what I call the accidental landlords. They’re not always the happiest or most knowledgeable of landlords.’”

“Yet, they collectively own a flood of homes for rent.”

“Over the past three years as the number of owner-occupied dwellings around Tampa Bay increased 5 percent, the dwellings with tenants, or needing them, rose 32 percent. In Hillsborough County, that included an increase of nearly 30, 000 properties whose owners live elsewhere.”

“‘You can get a $260,000 house for $1,200 a month,’ said Westenbarger.”

“‘Rents are trending down,’ said Lincoln Crone, president of St. Petersburg’s Alliance Property Management. ‘I think that’s more of a temporary situation. There’s a lot of competition for tenants now.’”

“As of last week, Westenbarger and her daughters were managing 15 homes with tenants, and were trying to find tenants for an additional 30 clients. Her clients fall into either of two groups: people who bought houses they can no longer afford, or investors who bought houses to sell, but can’t find buyers.”

“Many are like Kevin Schmook, of Land O’Lakes, who seized on a popular investment tactic: make a $10,000 down payment on a house, then sell it for a $30,000 to $50,000 profit a couple of years later.”

“Schmook and his wife both in the sales and marketing fields, profited hugely in 2004, when they sold their home and bought a larger one. So the next year, they invested $200,000 in a townhouse in Wesley Chapel. Early last year, they added a $320,000 house.”

“Now, the Schmooks are losing money on both and seeking a tenant for the townhouse.”

“‘A lot of owners, by the time they’ve waited six months and made the decision to rent, are already in financial distress,’ said Jeanne Gavish, former president of the Hernando County Association of Realtors, who tried renting and soon returned to sales.”

“‘You’re trying to rent it just to stop the bleeding,’ said Gary Schraut, owner of a real estate brokerage in Brooksville, who discouraged investors during the boom and avoids handling rentals now.”

“‘They want to cover their costs, but you have to tell them, ‘The market’s going to determine your rent,’ said New Tampa’s Duncan. ‘They’ll rent at a loss of $600 to $700 a month and try to figure out what to do.’”

“Meanwhile, their insurance costs and taxes are spurting up, unimpeded by any caps. The double-whammy of rising costs and sinking rents, said St. Petersburg’s Crone, ‘is starting to approach what I see as a crisis on the horizon.’”

The News Journal. “Local furniture store owner Bill Campbell’s business is tied directly to how well the real estate market is performing. And housing sales are in a prolonged slump.”

“For Campbell and many other business owners, large and small, it’s no secret Pensacola is slogging through a post-Hurricane Ivan economic slump.”

“The Escambia-Santa Rosa market is bedeviled by a record number of homes for sale, stubbornly high asking prices and property tax and insurance issues.”

“Homes are selling, especially homes priced at market, said Doug Gooch, president of the Pensacola Association of Realtors. ‘Houses priced at market are moving,’ Gooch said. ‘If the pricing is right, that’s the key.’”

“Gooch said the Pensacola area was in a housing boom before Ivan struck, and the storm damage actually accelerated the end of that boom.”

“In April 2005, when the housing market was at or near its peak, Gooch said 675 homes sold. 439 homes sold in the two-county area in March. But the current inventory of homes for sale, about 7,100, remains stubbornly high and actually has been climbing for the past several months.”

“Veteran Pensacola Realtor Alexis Bolin said the huge inventory ‘is responsible for the declining prices as we have an over supply and less demand. The only way this market is going to change is for the inventory to be depleted, which isn’t happening any time soon.’”

“Bolin said that the Pensacola area prices appear to be falling about 1 percent per month. ‘Unless the sellers get their homes priced right for this market, we are going to continue to have a depressed market,’ she said.”

“Danny Speranzo, president of Classic Home Builders, said he and his business partner are weathering the economic storm by being smart and selective about the properties they buy and develop.”

“‘We’ve been in business for 24 years, and it’s a roller coaster business with its ups and downs,’ Speranzo said, ‘but (the housing market) is as slow as I’ve ever seen it.’”

The News Press. “When the housing industry was hot, builders coaxed people with no money to borrow huge amounts to buy investment houses. Now prices are down and the people are trying to get out of their contracts while their lenders and builders are threatening to come after them legally.”

“The courts will sort out who’s legally right, but who has the moral high ground? ‘This is a classic business ethics situation,’ said Cape Coral-based ethics consultant Dawn Marie Driscoll.”

“A lot of people involved on both sides of the debate have strong opinions. ‘It’s your signature’ when an investor signs a construction loan to build a house, said Karen Quanstrom, a loan officer specializing in construction loans for SunTrust Bank’s Fort Myers branch. ‘These are things that people did to themselves because they didn’t think through the process.’”

“Besides, she said, some buyers are engaging in arguably unethical behavior themselves. For example, they instruct banks to hold off giving a builder his last payment in order to stall the completion of a house the buyer doesn’t really want to purchase.”

“As a result, Quanstrom said, ‘Now there are builders who are going to be either destroyed or financially harmed as a result of that.’”

“Lenders and real estate agents should honestly inform buyers of the risks involved, she said. ‘A few people said to me, ‘What is the worst-case scenario?’ Quanstrom said. ‘I said to them, ‘You have to be prepared for six months’ payments and no income.’ I feel obligated morally to tell them that, and I did.’”

“Some investors decided to back out because of her advice, she said, but many forged ahead despite of it.”

“Real estate agent Brett Ellis in Fort Myers said there were deals he refused to put investors in during the boom and he stopped putting people into investment home purchases when the market became too overheated in 2005.”

“What’s legally allowable isn’t always what’s in a client’s best interests, he said. ‘I can sleep at night.’”




Post Local Market Observations Here!

What do you see in your housing market this weekend? Foreclosures? “More people are losing their homes to foreclosure in Lake County. According to one source, there were a total of 457 total foreclosures in April, 80 more than the previous month. The Illinois foreclosure rate has escalated 23 percent since last April, according to RealtyTrac.”

“‘Our foreclosure workload and files have increased this year from last year almost 100 percent,’ said Alex Attiah, broker in Grayslake. ‘We’re experiencing that in all of the counties in Chicagoland.’”

“He also said that due to the excess supply of properties especially at the entry level market, sellers need to be more aggressive and realistic about their sale prices.”

“‘Lenders are selling at a very discounted price,’ he said.”

Legal changes? “Massachusetts Attorney General Martha Coakley on Friday banned so-called ‘rescue’ schemes that entice homeowners facing foreclosure to sign over their property to a temporary purchaser, under the false hope it will help them keep the home over the long run.”

“Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said his organization welcomed Coakley’s move. ‘There is no reputable mortgage lender that would approve any kind of rescue scheme,’ Cuff said.”

See speculation? “Old records for the number of homes sold and the dollar value of sales were smashed last month, as Regina’s sizzling housing market remained red hot.”

“One house, just sold, was priced initially in the $400,000 range but was sold ultimately for $160,000 above the initial asking price, said Gord Archibald, the executive officer of the realtors’ association.”

“‘It’s probably a seller’s market,’ Archibald said. ‘It’s the Alberta effect.’”

“Construction of increased numbers of new homes would appear to be one potential way to meet the high demand for homes. But Archibald said that is easier said than done because home builders are already working at full capacity to construct as many homes as they can.”

High Inventory? “A record-shattering number of homes were listed for sale last month in the Pikes Peak region, while home construction continued its slump — fresh signs the struggling local housing market isn’t getting better. In May, 6,567 homes were listed for sale in the area, a one-fourth increase over the same month last year and breaking the record of 6,200 set in June 1988, according to numbers released Friday by the Pikes Peak Association of Realtors.”

“‘Wow,’ said Harry Salzman, broker in Colorado Springs. ‘The numbers, those are just crazy.’”

“Too many homes for sale raises fears that prices could plummet. Last month’s home sales, meanwhile, fell 18.4 percent compared with the same time last year. Some possible reasons for too much supply and reduced demand: Too many foreclosed homes on the market, while the buyer pool was drained by low mortgage rates that prematurely attracted buyers a few years ago.”

“‘Competition is fierce,’ Salzman said. ‘That’s why sellers better price their house right if they want a sale.’”

Economic comparisons? “What happens when the American housing industry enters a downturn? It can last a long time.”

“One measure is the Standard & Poor’s/Case-Shiller home price index, which measures house prices by comparing the price of a house with what it sold for before. Its composite of 10 major geographic areas shows that in March prices were, on average, down 1.9 percent from a year earlier, and 3 percent from the peak reached last June.”

“That index also hit a peak in October 1989, and went into a decline that lasted a long time. It was not until January 1998, 99 months later, that the index climbed above the 1989 peak.”

“Prices are falling more rapidly this time, just as they rose more rapidly coming into the 2006 peak than they had a generation earlier, in 1989. In the first couple of months after the peak, sales did not slip as much in 1989, but by the ninth month they were off about as much as they are now, with new-home sales particularly hard hit.”

“One thing that was very different at the 1989 peak from the one in 2006 was the trend in the number of homes being offered for sale. When prices peaked in 1989, the number of homes for sale was already declining, and it continued to fall for some months.”

“In 2006, however, the number of homes for sale rose as the peak neared, and the latest report shows that more than 4.1 million homes were for sale at the end of April, the largest number ever. That included almost 3.6 million existing homes, also a record high.”




Bits Bucket And Craigslist Finds For June 3, 2007

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