The Housing Bubble

The Union Tribune reports from California. “The first half of this year ended with a continued downward slide in San Diego County’s real estate market as sales declined steeply in June compared to a year earlier, while prices remained more stable, posting only a moderate decrease, according to DataQuick. Last month’s sales volume, which was down nearly 23 percent, totaled 3,510, which was the slowest June since 1997 and the 36th consecutive month of year-over-year declines.”

“The median price of a home, including condos, was down 1.9 percent from the previous June. Put in perspective, the median price of a home last month was 4.3 percent off the $517,000 peak price, recorded in November of 2005, reported DataQuick.”

“Tired of being pressured to raise appraised home values to help real estate loans win approval, longtime La Mesa-based appraiser Sara Schwarzentraub is steering her business away from work with mortgage brokers.”

“‘There is always pressure, but when the market is soft like it is now, the pressure becomes almost unbearable,’ she explained. ‘People are trying to refinance and there may not be equity there. That doesn’t stop people from trying to put the screws to you: ‘We need this value or we can’t afford to do the (appraisal) work.’”

“Ted Faravelli Jr., executive director of the California Association of Real Estate Appraisers, said it’s common for appraisers to feel like their arms are being twisted. ‘I think there is a pressure, particularly when there are fewer dollars chasing fewer deals,’ he said.”

“Like Schwarzentraub, Doranne Godwin, a San Diego appraiser since 1984, is moving away from ‘lender-type appraising.’ Most of the pressure, she said, comes from mortgage brokers.”

“‘I am choosing my lender clients more carefully. I am keeping the clients who do not do put pressure on me,’ she said.”

The Record.net. “The latest quarterly new-home sales figures confirm the Valley housing market is continuing to slow under the shadow of tighter lending standards and buyer concerns that prices will continue to drop.”

“Still, even with sales dropping to the lowest point in recent years - second-quarter sales of 474 in San Joaquin County fell by nearly half from the previous quarter, there are more building projects than ever in the county, according to the latest report on the new-home market by the Gregory Group.”

“There were 90 building projects last quarter, up from 70 in the first quarter of 2005, the peak of the long-running boom market.”

“There also are more unsold homes than ever in the county, the report said. In the second quarter, there were more than 1,000 new homes waiting for buyers, the highest number in the past several years. That compares with only eight homes unsold in the first quarter of 2005.”

“Joe Anfuso, president of Stockton-based Florsheim Home, charged that some national homebuilders are flooding the market with unsold houses, increasing competition so much for the limited demand that builders are forced to slash prices every few months.”

“‘It’s strictly related to standing inventory from many of the big builders who continue to build in the down market,’ Anfuso said.”

“Paquin said that in the market boom of 2004 and 2005, many builders bought land for future development. When the market slowed, they had to decide whether to sit on the land and pay interest or try to build and sell to keep cash flowing, even if they might not make any money, he said.”

“‘At the end of the day, builders build homes,’ he said. ‘That’s what they do.’”

“‘In home building, it’s a pretty big ship to steer,’ said Chris Apostolopoulos, president of the KB Home Central Valley division. ‘It takes a while to slow down.’”

“Builders say there are buyers and potential buyers out there, though they seem to be exceedingly patient and either look for the best possible deal or just watch market prices.”

The Press Telegram. “Don’t try to tell Dick Gaylord it’s a down housing market, or that there’s a housing slump, and don’t dare mention the word ‘bubble.’”

“The congenial Long Beach man, who will assume the role as the nation’s head Realtor next year, will argue vehemently that the market ‘isn’t down but just returning to normal.’”

“‘I don’t know that there’s ever been a bad time to buy,’ Gaylord said. ‘If people will hold on, there’s no bad time to buy in real estate.’”

The Bakersfield Californian. “‘You have to know the market’s going down,’ said broker Scott Tobias.”

“Houses still sell if they are priced right, said Tobias, a 30-year veteran of the real estate business. He tells his agents to be wary of taking overpriced home listings.”

“Agent Jon Busby, of Bakersfield Premier Realty, was equally adamant about the importance of accurate pricing. Busby said most sellers are realistic, but others are ‘trying to latch on to an equity amount that’s no longer there.’”

“McKinzie Nielsen Real Estate lost some of its agents as the market softened. Many in town who snapped up real estate licenses during the boom were unprepared, said partner Karen McKinzie.”

“‘They didn’t have a true conceptual idea of how difficult this business is, and some of them went away,’ she said.”

“The new work includes a lot of expectations management, McKinzie said. Sellers have to understand that a house might take a bit longer to sell and that it won’t garner as much as it might have just two months earlier.”

“Experience handling foreclosures for banks has helped broker Darrell Sparks make up for diminished standard sales. He estimates that foreclosures make up about 50 percent or 60 percent of his business now.”

The Monitor reports from Texas. “The nationwide housing slump is finally catching up to the Rio Grande Valley. Local building permits this year hit the lowest level since 2001. An overbuilt market during the past five years, combined with an increasingly more conservative mortgage market, has sent Valley builders scrambling for customers, builders and industry insiders say.”

“‘There is a real dearth of housing starts and I think that is really associated with the more stringent requirements on lenders,’ said Brownsville developer Bill Hudson.”

“The number of home permits in the Valley dropped 33 percent during the first five months of 2007 compared to the same period last year, according to statistics released recently by the U.S. Census Bureau.”

“The decrease is across the Valley and few areas are immune to tighter conditions, builders say. Some builders have had to make drastic changes to their local business model. National builder DR Horton has stopped raising new developments in the area.”

“During the last several years, the Valley has been on a home building spree, said Mike Blum, a real estate broker in McAllen. Suddenly, families who couldn’t previously afford homes on the area’s low wages could afford new homes under creative loan practices.”

“Wall Street and government regulators are now forcing lenders to tighten the loan process after several subprime firms failed during the first quarter of this year and the number of foreclosures nationwide skyrocketed. ‘The subprime shakeup has had an effect on the market,’ said Jack Pollock, president of the Rio Grande Valley division for Casa Linda Homes.”

“One report in May said the McAllen area leads the nation in the number of subprime loans at nearly 27 percent, according to First American LoanPerformance.”

“The decrease in home building has hit all segments of the construction market, from landowners to lot developers. There is currently about a 40-month supply of developed lots in the area, much higher than a normal supply of less than 24 months.”

“Even cities are seeing the decrease and that could cost thousands for each municipality in fees for building permits. ‘It’s slower during the last few months,’ said Luis Vasquez, chief building official for the city of McAllen. ‘We have had a little breather after things have been so fast.’”

“Vasquez said the department added staff during the housing boom of the last five years to keep up with demand.”

“The drop in building permits combined with strong real estate numbers could be good news for the market and may help the area avoid a prolonged slump, said Jim Gaines, a real estate analyst with the Real Estate Center at Texas A&M. ‘The builders are looking around and saying we can’t build,’ Gaines said.”

The El Paso Times. “El Paso’s residential real estate market has slowed from last year. Sales of existing homes were down 9.5 percent in the first six months of the year, compared with sales at the same time last year, Greater El Paso Association of Realtors’ data show.”

“Last week, just over 3,600 El Paso homes were listed for sale on the El Paso MLS, about 1,500 more listings than in July 2006, Realtors association data show. The numbers include most existing homes on the El Paso market, and some new homes. Many new homes are not listed on the MLS because they are sold by builders and not Realtors.”

“It’s a buyer’s market definitely. There’s so many houses out there and not enough buyers,” said Realtor Sylvia Olague-Lopez. ‘People are having a harder time qualifying for loans,’ he said, and fewer out-of-town investors are in the market this year.”

“Roxann Martinez and her husband have been trying to sell their three-bedroom home on Rex Baxter on the East Side for about four months so they can buy a new house. ‘We didn’t think we would have this much problem. Our first home sold (four years ago) in a week,’ Martinez said. They have a buyer’s contract on their home, which is selling for $130,000, but the buyer is having trouble qualifying for a loan.”

“Martinez said her home is priced below its appraised value, so she doesn’t want to lower the price.”

“Jan McNutt and several other Realtors said many sellers are cutting their original asking prices to help sell their homes. McNutt said out-of-town investors helped push prices up the past two years, and now that fewer investors are in the market, prices are going down.”

“Sonja Van Nortwick, president of the Greater El Paso Association of Realtors said, ‘I’m not sure if we’ll see another market like last year,’ which she called one of El Paso’s best ever.”

“‘People still want to price (their home) at a higher price and then realize they won’t get quite what they thought they could get’ because of the slower market, Van Nortwick said.”

The Denver Post from Colorado. “Despite predictions that foreclosures would level off this year, new filings rose 26 percent in the metro area through the first half of 2007 compared with the same period in 2006. For every two existing homes sold in the metro area during the first half of the year, another went into foreclosure.”

“The 12,085 filings represent nearly half the 25,513 existing homes sold during that period. With the peak home buying season only six weeks from wrapping up, another dismal record in foreclosures seems unavoidable.”

“‘There is nothing to keep this year’s total foreclosure numbers from well surpassing last year’s,’ said Ryan McMaken, a spokesman for the Colorado Division of Housing.”

“Even in Douglas County, once viewed as immune, new foreclosures filings raced ahead 38 percent in the first six months of this year. ‘There are a lot of houses that were bought as investment properties. Those are going under,’ said Dianne Bailey, the county’s public trustee.”

“Bailey said she is seeing larger homes and wealthier borrowers going into default, in contrast to other areas where novice homebuyers in lower-priced homes have been the ones getting into trouble. Investors, faced with rising payments…and flat or declining home values, appear willing to walk away in greater numbers, she said.”

“‘These are upper-middle-class people. The houses that are being lost are averaging $250,000 and $300,000. We are seeing many $500,000 and $1 million homes going under,’ she said.”

“Denver Post research last year into loans in foreclosure found that while many were adjustable rate products, most had gone into default even before payments reset higher. ARM borrowers may have expected their paychecks and home values would rise enough to offset higher payments, McMaken said.”

“In another troubling trend, public trustees report that a larger percentage of homes going into foreclosure this year are sliding all the way through.”

“Adams County public trustee Carol Snyder said her office sold 1,180 homes at auction in the second quarter of the year. In only 23 cases were mortgages reported as cured, meaning the borrower had caught up. In only 21 cases did borrowers ‘redeem’ or buy back mortgages after the public trustee sold them. In 416 cases, the foreclosure was withdrawn, usually because a lender reworked a loan or agreed to accept a sale by the borrower for less than what was owed on the note.”

“In Douglas County, Bailey estimates only that about 35 percent of borrowers are able to escape foreclosure once they enter in, compared to half last year.”

“More than 11,500 Coloradans, a third of them in the Denver metropolitan area, who did business with national lender Ameriquest Mortgage Co. are eligible for $8.4 million in restitution the firm has agreed to pay in a national, year-old predatory-lending investigation, state Attorney General John Suthers said Thursday.”

“Consumers claimed the company misrepresented the amount of interest they had to pay, inflated home appraisals that left borrowers with unaffordable loans and failed to clearly disclose fees and penalties associated with paying off loans early.”

“Thousands said in multiple lawsuits that they were financially ruined because they lost their homes, were forced into bankruptcy or had their credit destroyed.”

“More than 4,840 borrowers in the Denver metro area are eligible to divide $3.66 million, the highest average statewide. Restitution checks range from $123 to $3,462, Suthers said.”

“The settlement was penned in January 2006, but the amount residents in each state would collect was just determined, Suthers said.”

“‘Doing the right thing for the people we serve has always been one of our core values. We regret those occasions when our associates have not met this ideal to our customers’ expectations,’ Aseem Mital, CEO of ACC Capital Holdings Corp., parent of Ameriquest, said at the time of the settlement.”

The Patriot News reports from Pennsylvania. “In 2004, James Dailey and his wife were renting and not looking for a house to buy. At parties, he said, people would look at them ‘like we were weird.’ ‘That’s how I knew we had made the right decision,’ said Dailey. Now, Dailey and his wife…hope to find a house by spring between Hershey and Carlisle. He sees no reason to hurry. He’s convinced prices on homes $400,000 and up will fall.”

“A sharp increase in the number of homes listed for sale shows the midstate isn’t immune from the supply glut that is slowing the housing market nationwide. In particular, local observers say the midstate market has a surplus of homes priced at more than $400,000.”

“‘There aren’t as many buyers right now …,’ said Viola Thompson, president of Prudential Thompson Wood Real Estate in Hampden Twp. ‘We have some gorgeous homes out there, and they are sitting.’”

“‘Builders tell me they have reduced their homes by tens of thousands of dollars because they can’t sell,’ said Dawn Shughart, owner of Dawn and Associates Realty in Carlisle.”

“She and other agents say home sellers in the higher-end range have been slower to adjust to the reality that they might need to lower their asking prices.”

“Of 106 midstate homes newly listed one day last week, the asking prices for 95 of them had already been reduced before going on the market, Shughart said. That number usually is about 10 to 15.”

“The pendulum has shifted to an over-supply in parts of the market, and buyers are cautious. ‘What’s wrong with a buyer’s market? Half the clients we represent are buyers,’ said Greg Rothman, CEO RSR Realtors.”

From Chicago Business in Illinois. “On a late June afternoon, Laurence Kallen stepped to the podium in the Randolph Street office that serves as his cramped auction house. Mr. Kallen had 11 foreclosed Chicago properties to sell and 10 bidders in attendance. The auction lasted 10 minutes. He didn’t get a single bid.”

“‘Two to three years ago I’d get up to 50 people,’ Mr. Kallen says, gazing at a room of mostly unoccupied folding chairs. ‘For a while it was like that every day. People were buying properties like mad.’”

“Not anymore. Despite a meteoric rise in foreclosures — 17,096 Chicago-area homes were foreclosed on in the first half of this year, up 46% from 2006 — the market for investors in foreclosed homes has been in steep decline.”

“‘It’s counterintuitive,’” says T. J. McKinney, a Chicago-based investor. ‘To be honest with you, there’s less deals than there used to be.’”

“Foreclosed properties that don’t sell at auction revert back to the banks, which pass them off to a real estate agent to sell, exacerbating Chicago’s glut of unsold homes and threatening to push down home values.”

“‘If there’s enough foreclosed property, it will definitely affect the real estate values in a neighborhood,’ says Marvin Stockert, executive director of the Illinois Assn. of Mortgage Brokers.”

“Because banks don’t want to be landlords, or to pay the maintenance and property taxes on homes they’ve repossessed, they typically hand those properties over to real estate agents to sell at the market price.”

“Many of those properties are concentrated in neighborhoods where prices are already under pressure. ‘A lot of the foreclosed properties are south of the Eisenhower,’ Mr. Stockert says. ‘If you’ve got a real concentration, that really does hurt values in those areas.’”

The Chicago Tribune from Illinois. “More than a hundred people gathered Saturday in the Austin neighborhood as housing experts sought to raise awareness about an epidemic that has left in its wake a growing number of boarded-up houses across Chicago.”

“The forum came as the number of new foreclosure cases in Chicago increased 36 percent over the last year, from 7,558 to 10,294, the biggest single-year increase since 1993, according to the National Training and Information Center.” “More than half of foreclosures were on loans less than two years old.”

“Michelle Rodriguez-Taylor, a housing organizer at the information center, said the problem has spread in Chicago neighborhoods such as Austin, where boarded-up houses highlight a 65 percent jump in new foreclosure cases since 1993.”

“U.S. Rep. Danny Davis, whose district includes Austin, attributed the rise of foreclosures to homeowners signing mortgages without fully understanding the conditions of their loans. ‘They’ve invested everything they have into a place they can call their own,’ Davis said. ‘And then they have that taken away and they don’t understand why.’”

“Rodriguez-Taylor said many lending companies are skirting an Illinois law designed to protect borrowers from high interest loans by offering mortgages with adjustable rates that start as low as 4 percent but rise as high as 12 percent within a year.”

“‘We’re seeing people paying over 50 percent of their income on their loans,’ she said.”

The Journal Sentinel from Wisconsin. “News about the housing market is keeping Tony Barnes from house hunting - not news from the media, but news from his brother in Minnesota.”

“‘My brother and his wife bought a house a year ago, and now they want another one, and they can’t sell it,’ says Barnes, who just…landed a job in Menomonee Falls. ‘I don’t want to get into something I can’t get out of.’”

“Mortgage rates are reasonable, there’s a huge selection of houses to choose from, and local house prices are flat or edging down. But buyers are holding back, say those in the real estate industry.”

“Residential sales in Milwaukee are even slower than the national average. The Metro MLS reported last week that sales in the first half of the year dropped 11% compared with the first half of 2006. Sales were slowest in Washington County, down 26.3%, but lagged only 3.5% in Ozaukee County.”

“‘The lack of buyer confidence is holding back the market right now,’ says Lawrence Yun, senior economist for the National Association of Realtors.”

“‘The fact that household formation has drastically slowed in an expanding market is very unusual,’ says Yun. ‘This implies to me that people want to wait it out and see how long this housing slump will last before making that commitment. We haven’t encountered this buyer psychology in the past.’”

“The psychology that homeowner Lynn Bednarz sees is endless house hunting and procrastination.”

“She has been trying to sell her Wauwatosa 1920s-era brick house since last fall. She has dropped the price to $345,000…and now is throwing in a brand new car, all in an attempt to convert just one foot-dragger to a contract-signer.”

“‘A lot of people I know want to sell,’ says her broker, Pam Jerzak in Waukesha. ‘But they say, ‘Because the market is in the tank, I don’t want to buy, because I can’t afford two mortgages.’ They might let their dream house go by.’”

“The number of mortgage applications is up, too, but that could be a mirage, says Yun, because higher lending standards are forcing some applicants to apply several times before being approved.”

“First-time buyers are hardest hit by more stringent lending standards, says Christopher J. Callen, senior VP of lending for Brown Deer-based Bank Mutual, which has 22 offices in the Milwaukee area.”

“‘A couple years ago, on an adjustable(-rate mortgage), we would write the loan at the then-current interest rate. But today we look at the monthly payment, fully indexed, and for interest-only loans you’re looking at the interest rate fully indexed plus amortization, and from that point of view, can the borrower afford this mortgage?’ he says.”

“Refinancing volume is down, too, he says, because homeowners with low rates aren’t likely to give them up to move to a new house. ‘If I own a house, there’s a sense of hesitancy. I can have a great selection of houses to buy and a good price, but can I sell my house?’”

“Bednarz vows that when her longtime home finally sells, she will be buying in a warmer climate, answering the prayers of some stressed seller.”

“Or maybe not. ‘There’s a lot out there to look at,’ she says. ‘I might wait. I guess that makes me one of the people I’m complaining about.’”

The Staten Island Advance reports from New York. “Selling themselves was not something home builders had to do during the real estate boom just a few years ago, when new homes sold rapidly. But with housing inventory up and prices down, builders are beefing up the incentives. They’re cutting prices and offering upgrades, and even gift baskets.”

“‘It’s a Buyer’s Market — The Choice is Yours’ was last week’s ad, which ran only in the Sunday Advance and was endorsed by the National Association of Home Builders and the local Building Industry Association of New York City.”

“‘You always want to buy low and sell high,’ added Larry Brinker, executive officer of the Building Industry Association. But for people who must also sell their home in order to buy another house, selling high is often the hard part.”

“Buyers say they found the homes they wanted for what they considered reasonable prices, but they then had to sell existing homes, often for lower than they expected.”

“‘Having two mortgages for three months — that was not fun,’ recalled Jennifer Rinella, who bought a new home in Prince’s Bay before she sold her high ranch just a few blocks away.”

“She expects to close this week on her old home, which she sold after dropping the price to just below $600,000.”

“‘We’ve all been forced to raise the bar a little bit and the guys who are doing it are moving product,’ said builder Robert Kelly., who is also a Realtor. ‘The guys who aren’t are not moving product.’”

“Annette Cartigiano got a welcome basket with a champagne bottle and gift certificates from local restaurants from her builder after she moved into a new home at the Tides of Charleston.”

“Mrs. Cartigiano loves her new home but she said it took six months and several price cuts to sell her former house. She said a friend who also planned to buy in the Tides was nervous about her ability to sell her home and backed out.”

“‘It all depends what situation you are in,’ she said. ‘It’s scary when you have your money on the line and you can’t sell your house.’”

The Long Island Business News from New York. “The Long Island Association’s chief economist panned a National Association of Realtors’ prediction that home sales will recover in 2008, calling the outlook ‘overly optimistic.’”

“Pearl Kamer of the LIA said Long Island’s housing fortunes would continue to sag into 2009, as part of a drawn-out market correction. ‘We still have to liquidate a excess inventory of homes,’ Kamer said. ‘And as of Sept. 1, lending practices will tighten, so fewer buyers will qualify for mortgages.’”

“Through May, there were 18,749 homes for sale in Suffolk, up 26 percent from a year ago. In Nassau, 12,711 homes were up for sale, a 21-percent increase from the same period in 2006.”

“It wasn’t all doom and gloom from the LIA’s economic fortress. Kamer said the slow market correction has actually helped the Long Island market. ‘The worry has been that the bubble would burst,’ Kamer said. ‘Thankfully that didn’t happen, because a steep decline would have hurt consumer spending, which makes up two-thirds of the Long Island economy.’”

The New York Daily News. “Carol David was sure her dream of home ownership was about to come true when she answered an ad offer to move into a house 30 days after making a $10,000 down payment. ‘But it was the beginning of a nightmare,’ David said.”

“‘The paperwork wasn’t explained. It was just ’sign here, sign there,’ she said. ‘When I went home and went through it, I realized I had been tricked.’”

“David was expecting her mortgage would be $1,776 a month. In reviewing the paperwork, she discovered two interest rates, and when her first house note came due, she discovered she was to pay $6,069 a month.”

“State Sen. Jeffrey Klein estimates that more than 50,000 New Yorkers stand to lose their homes to foreclosures from loans they took out in 2005 and 2006.”

“Sara Ludwig, executive director of the Neighborhood Economic Development Advocacy Project, said there also has been a concentration of foreclosures in Flatbush, East New York, Canarsie, Bushwick and Ocean Hill in Brooklyn. In Queens, the concentration is in Rochdale, Jamaica and St. Albans, Ludwig said.”

The Boston Globe from Massachusetts. “Foreclosure actions against Massachusetts homeowners continued at a quick pace in May. The number of homeowners facing foreclosure auctions more than doubled in May compared to a year ago, according to the Warren Group. And the number of foreclosure actions initiated jumped 39 percent from a year earlier.”

“Foreclosure petitions, the first step in the foreclosure process, rose to 2,164, compared to 1,553 a year ago, and were also slightly above April levels. It was the eighth consecutive month that foreclosure notices topped 2,000.”

“‘The Bay State has not yet seen this problem peak,’ said Timothy Warren, chief executive of Warren Group. ‘”It becomes evident that homeowners are finding it difficult to refinance their mortgage or sell their homes before they reach auction.’”

“Foreclosure actions have soared this year. The 6,419 auction notices through May nearly matches 6,720 for all of 2006. Larissa Duzhansky, regional economist at Global Insight, a Waltham, Mass., forecasting firm, said the foreclosure problem will keep downward pressure on the housing market.”

From Fosters Online in New Hampshire. “Foreclosures in Rockingham County have more than doubled in the first half of this year and officials cite predatory lending and a slower real estate market as the cause.”

“Register of Deeds Cathy Stacey said through the end of May, the county has seen 163 foreclosures compared to 74 during the same period last year. In Strafford County from January to June, there were 85 foreclosures compared with 49 last year, according to Registrar of Deeds Leo Lessard.”

“‘You have some shady practices happening, where you’re lending money to borrowers who from the get-go couldn’t afford what they were getting into,’ Stacey said.”

“‘We haven’t seen this type of activity since the ’80s,’ she said, referring to the savings and loan crisis.”

“There have been more liens filed on properties in Rockingham County — 711 through May of this year compared with 450 during a similar time period last year.”

“‘You have the whole issue with the real estate market not moving and the subprime lending. On top of that, you have the emergency of people who are overextending themselves via credit cards and those companies are coming in and attaching properties. It’s kind of a double whammy,’ she said.”

The Pawtucket Times from Rhode Island. “Are you still having trouble finding somewhere you can afford to live? If so, you’re not alone. Despite the recent downturn, Rhode Island still has a healthy real estate market in one important respect: every seller is able to find a buyer, even if they may not be able to get the price they want.”

“But even after a few months’ slide, the reverse isn’t true: some buyers still can’t find anything they can afford.”

“According to national statistics from the Federal Reserve, around a quarter of total investment in real estate is speculative. These are purchases made not to provide a home to anyone, but in order to resell at a higher price.”

“For a local analysis, I obtained records of all the real estate sales in Providence between 2003 and 2006: 14,967 records. About a quarter of the sales records were for properties sold at least twice in the period, and 5.5 percent were property flips, where the buyer held the property for less than six months.”

“That doesn’t sound like a huge number, but in many neighborhoods, the number of short-term investors was much higher. In plat 43, which covers part of the West End, about 40 percent of sales between 2003 and 2006 were sold again before 2006. One hundred and ninety-seven properties there changed hands during that time, but 87 of them were involved in 220 sales.”

“The data also show that resale activity is clearly related to the level of prices. I ran some simple statistical tests on the property and saw that resold property went for 15-25 percent more money compared to its assessment than property that was only sold once in the study period.”

“What’s more, only one reseller in nine made any significant improvements to the property while they held it.”

“In dollar terms, approximately 21 percent of real estate investment in Providence was investment made for short-term gains alone. That is, 21 percent of the money spent on city real estate in 2003 was spent on property that was sold by 2006, and usually long before. This is a huge proportion, and still misses all the investors who waited just a few months more.”

“Real estate agents will tell you that the prices went up because there was so much demand, and in a way that’s true, but the extra demand was from the one buyer in five who was only shopping for a short-term investment, not for a home.”

“The short version of all this is that if you have trouble finding an affordable place to live, or if you are feeling the pinch of the downturn in housing prices, a large part of the blame rests with people who see buying and selling houses as a way to make money rather than as a way to find somewhere to live.”

“The real estate boom has busted and things are settling down now, but people whose memory only reaches back to the 1980s will remember that we had a nearly identical real estate frenzy then. Its aftermath was similar to what we’re seeing now: people stuck with unaffordable mortgages, foreclosures, rising rents and an increase in homelessness.”

“Unfortunately, this is what we have to look forward to in the coming months and years.”

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