The Housing Bubble

The Record.net reports from California. “After a year and a half of painful ‘adjustment’ in the housing market, slowing sales and sliding sales prices after four boom years, there’s still more to come, the chief economist of the state Realtors group told Central Valley agents and brokers Friday.”

“State sales of existing houses the first five months of this year are down 18.7 percent from the same period last year, said Leslie Appleton-Young, chief economist for the California Association of Realtors.”

“‘And it’s getting worse,’ she added. ‘So this market, unfortunately, has not bottomed out yet. We’re moving toward it, but it’s not there yet.’”

“This year’s attendance of about 100 Valley agents and brokers looked to be about half the usual attendance at the annual event.”

“Appleton-Young said the Central Valley market peaked in the boom years of 2002-05 in August 2005. Since that August 2005 peak in the Valley, she said, the median sales price has slid by 8.8 percent to $331,580. It’s down 6.7 percent just the first five months of this year, compared with a year ago, she said.”

“‘It’s not a falling off a cliff, but it’s certainly a squeeze down,’ she said.”

“Foreclosures from buyers who got in over their heads continue to affect the market, pushing up the number of homes for sale, she sad. That run of foreclosures still has a year and a half to two years to go, Appleton-Young said.”

“At the current sales pace, it would take nearly 11 months to sell all the Valley homes on the market right now, she said.”

“Turlock real-estate agent Richard Salinas, said he sees a housing market comeback perhaps by next spring, even with many would-be buyers sitting back and waiting to see whether prices drop more.”

“‘The fish definitely are not jumping into the boat any more,’ he said.”

The Orange County Register. “Orange County home prices are on track to tie the peak levels set last June, although sales continue to be down by almost 30%, new data that include the first three weeks of the month show.”

“It bears noting, however, that the median price is based the recorded sales price for closed escrows, but doesn’t reflect seller concessions that are now commonplace in home sales.”

“One thing that’s not known is whether the degree of seller concessions is greater today than it was a year ago, a time when concessions already had become commonplace amid slow sales and rising inventories.”

“James Joseph is a 26-year veteran in the business. We asked him recently to tell us how he sees the housing market and its future.”

“Us: Is the market flat, or down. And if it’s down, how far down is it? Jim: There really are two markets. First the price market and secondly the sales market.”

“The price market as reported is flat with the median property selling at about the same price as last year. If a buyer looks around however he/she will notice that there are a lot of homes listed at prices lower than what has sold. I would bet that a buyer today can get a better price on the same home today than he/she could have last year. Prices already are lower and more reasonable than last year.’”

The Gilroy Dispatch. “South County homeowners, many of them first-time buyers, are losing millions of dollars in equity. Mid-range markets in parts of the county, especially San Jose, continue to soften.”

“As a result, nearly 18,000 property owners, three times more than last year, are paying lower property taxes and getting a tax break because the value of their land decreased, dropping by a combined $4.9 billion.”

“This year, in Gilroy, 698 properties lost a combined $42.9 million in value, according to the assessor’s office. In Morgan Hill, 161 properties lost more than $9.1 million in value. Last year, 146 Gilroy properties lost $28.5 million in value and 38 Morgan Hill properties lost $3.6 million.”

“Lending practices that allowed thousands of Silicon Valley residents to buy homes with little or no money down drove prices up after the dot-com crash in 2001. Now the housing market is slumping and many of those buyers have no equity as their payments go up.”

The Press Democrat. “Santa Rosa officials Friday killed a widely touted deal with a private developer to build the city’s first downtown high-rise.”

“The project was to include a 545-space, city-owned parking garage, 183 condominiums, 208 parking spaces for the condo residents and 15,000 square feet of ground-floor retail space.”

“The high-rise was seen as a cornerstone of city efforts to turn around its struggling downtown by creating a residential market of consumers who could bolster the business of retailers and generate a night life after work hours.”

“Santa Rosa Mayor Bob Blanchard said Friday he was disappointed by the failure to move forward but said, ‘I do not see it as a blow.’”

“‘If we hadn’t gotten hit with a housing slowdown and the increases in steel and concrete prices, that project would be halfway up by now,’ he said.”

The Mercury News. “The house in Silver Creek that real estate agent Nancy Vanegas will soon put up for sale has five bedrooms, views of the foothills, and is part of a growing category in the housing market: homes that fail to sell at foreclosure auctions and are repossessed by lenders.”

“Known in the banking industry as REOs, for ‘real estate owned,’ once rare in Silicon Valley, may soon contribute to lower home prices in some neighborhoods.”

“In May, $2.8 billion worth of California real estate went up for sale in foreclosure auctions, according to a company that sells foreclosure information. Of that amount, about $2.6 billion worth failed to find buyers, and so became bank-owned. The figures represent the total value of the outstanding loans that went up for auction.”

“In January, $1.49 billion worth of property was auctioned statewide, and $1.32 billion went back to banks. January is typically a busy month because trustees usually refrain from foreclosing during the December holidays.”

“Vanegas, who specializes in REO transactions, had three such listings last year. Currently she has 27, ranging from condos to the Silver Creek home, where a neighboring home sold for $1.3 million last fall.”

“An estimated 8 percent of homes for sale, or about 450 houses and condos, in Santa Clara County as of June 30 were ‘distressed’ in some way’ either being sold in a ’short sale,’ or in foreclosure or as REOs, according to a new report from Movoto, a brokerage based in Redwood City. Movoto gathered the data by scouring the agent remarks that accompany homes on the MLS.”

“There probably are not enough bank-owned homes on the market in Santa Clara County now to drive down prices single-handedly, especially as the trustees that own them are not deeply discounting. But that could change as the market does, said Laura Pephens, a director of the California Mortgage Bankers Association.”

“‘All mortgage servicers are buried in this issue right now,’ she said. Trustees, the entities that have assumed ownership of the properties, be they the original lender or a mortgage servicing company, are still trying to get a handle on the increased number of REO properties they are managing, and on how much leeway they have to discount home prices without encountering resistance from investors in the mortgage-backed securities.”

“‘In this market right now, I hope trustees are being more flexible in terms of the purchase price offers,’ she said.”

The Star Banner reports from Florida. “Local Realtors are in survival mode. ‘I’ve seen the highs and the lows and the unreal in 2004-2005 and the complete crash right now,’ said 17-year Realtor Vic Rotz. ‘It’s really taking a turn for the worst the past three months.’”

“The Ocala metropolitan area is down 50 percent in home sales compared to May 2006. Just behind Ocala was the Tampa Bay region and Miami, with 42 percent and 44 percent declines respectively. In the greater Orlando area, sales are down 40 percent.”

“‘I’m all about ‘we live in Florida.’ Everyone wants to live here,’ said Rotz, ‘But facts are facts. We’re over-inventoried and overpriced and until we fix that this is going to get worse.’”

“Reasons for the readjustment in the housing market are obvious: homes in many areas of the country became too pricey, affordability suffered and the home buying public lost confidence.”

“‘Households and investors moved to the sidelines with many waiting to get back into the real estate market when property prices retreat to more suitable levels,’ wrote Paul C. Bishop, Ph.D. and Harika Bickicioglu, both housing analysts.”

The Palm Beach Post. “Mortgage foreclosures in Palm Beach County tripled in June compared with the same month a year ago, and they quadrupled in St. Lucie County, painful signs that the housing market slump continues to spread throughout the region.”

“In St. Lucie County, where speculators madly gobbled up properties during the five-year boom, lenders foreclosed on 355 homeowners in June, compared with 79 in June 2006, according to the St. Lucie County clerk’s office.”

“‘Many people can tell you they can’t refinance now because their property is worth less than their mortgage is, especially those who bought at the pinnacle of artificial appreciation in 2005,’ said analyst Jack McCabe. ‘Others do not meet the more stringent requirements needed to get a loan now.’”

The News Press. “Lee County foreclosures kept rising last month, with Cape Coral leading the way. June’s foreclosures totaled 968, up from May’s 867, according to the Lee County Clerk of Court.”

“It was a continuation of a long runup in foreclosures as the real estate market has cooled, the rate in April 2006, before the numbers took off, was only 131.”

“Many of the properties going into foreclosures were single-family homes owned by investors, Fort Myers-based mortgage broker Jeff Tumbarello said. ‘Everywhere there was heavy speculator ownership.’”

“Daren Blomquist, for RealtyTrac, said the county ‘has one of the higher foreclosure rates in the state,’ ranked at No. 6 in May, the last month available. The No. 1 county is Osceola; No. 2, Flagler; No. 3, Dade; No. 4, Pasco and No. 5, Manatee.’”

“Jeff Lazerson of Mortgage Grader said he’s hearing from a lot of Florida clients who are trying to get out of bad loans but aren’t always able to.”

“‘They were misled about the original loan, and they get the shock of their life’ when interest rates rise or a balloon payment comes due, he said. ‘Part of the problem is that subprime loans are almost non-existent because of the subprime meltdown’ with some big lenders in that category falling apart.”

From CNN Money. “A tidal wave of foreclosures may be heading toward Florida, if you judge by the number of homeowners looking to get rid of their homes as fast as they can.”

“‘Orlando has blown up. There’s been a 700 percent increase in traffic of people filling out our forms,’ said Duane LeGate, president of House Buyer Network.”

“Jonas Lee, whose company, Redbrick Partners, buys properties in distressed markets all around the country, sees similarities with Orlando. ‘There are tax issues that are depressing the market,’ said Lee, Property taxes jump when houses change hands. ‘And insurance rates spiked after the hurricane season of a couple of years ago,’ he said.”

“When LeGate sees big jumps in client contacts from a single county, he concludes that the area has hit a rough patch that may not come out in price stats for months.”

“‘We called Phoenix, two counties in California and West Palm Beach, Florida in June of 2005,’ he said, at a time when those areas were still perceived to be white-hot.”

“Now, according to figures from RealtyTrac, the Phoenix metro area has 10 of the top 11 zip codes for foreclosure filings in Arizona, and all 10 are among the 500 worst hit zip codes in the nation. The other areas are also suffering a deep slump.”

The Naples Daily News. “One of the nation’s largest homebuilders is abandoning plans to develop new communities in Southwest Florida, saying it expects the Naples/Fort Myers housing market to remain ’severely depressed in the foreseeable future.’”

“Meritage Homes Corp. said year-to-date home sales in the Naples-Fort Myers area have dropped 70 percent since the same time last year.”

“A Meritage official told the Daily News on Friday that the homebuilder has abandoned options to purchase an estimated 2,500 lots in the Naples/Fort Myers market over the past 18 months. The company had invested approximately $25 million in the abandoned lots, Meritage Investor Relations Director Brent Anderson said Friday.”

“The homebuilder, the nation’s 12th largest, announced it will write off $28 million in losses related to its investment in its Naples-Fort Myers operations as part of its second quarter 2007 financial results.”

“Ross McIntosh, an area land broker and industry analyst, said Meritage isn’t the first major builder to leave the market and it likely won’t be the last. WCI abandoned an estimated $10 million investment in its Sabal Bay project in Naples, but smaller developers also are walking away from millions in deposits, McIntosh said.”

“‘The scope, impact and pervasiveness of this downturn continues to manifest itself in ugly ways,’ McIntosh said.”

“Anderson said Meritage officials have lost hope that the Southwest Florida market will turn around any time soon. ‘The market is bloated with inventory and there’s no demand,’ Anderson said.”

The Miami Herald. “When Lily Azel and her husband forked over nearly $750,000 for a condo at Blue, a swanky new tower on 36th Street just east of Biscayne Boulevard, they weren’t just sold a luxury home with turquoise-tinted windows and a gleaming stainless steel kitchen.”

“They were sold a vision of a fabulous new midtown Miami. But that doesn’t quite gel with what they see when they leave their home.”

“‘We knew there was some of that element,’ Azel said, referring to the squads of vagrants and panhandlers who populate the area near the condo. She moved to Blue last year from Weston. ‘But we were led to believe the whole area would be revamped into this great midtown.’”

“Peter Megler, a Realtor and vice president of the Blue’s board of directors, said the condo’s developers extolled the transformation expected for Edgewater when pitching to buyers.”

“‘I moved here from New York because I could feel the energy in this town,’ said Megler, whose condo cost $396,489. ‘But many of us don’t feel like we’re getting our money’s worth.’”

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