July 21, 2007

It’s Going To Be A Bumpy Ride In California

The Orange County Register reports from California. “Homes in Capistrano Beach and Irvine’s Northwood areas may have been hit hardest this year by speculators buying properties, only to bail out when the housing slump hit. Median prices there fell about 15 percent, DataQuick reported. Overall, median home prices fell in almost 70 percent of Orange County’s ZIP codes during the first half of the year, DataQuick reported.”

“And while median prices increased in 23 ZIP codes, they accounted for about 28 percent of Orange County’s 83 postal zones. But some agents questioned whether other neighborhoods with the highest price gains really saw home values go up. Irvine sales agent Mac Mackenzie, who sells homes throughout Orange County, said many are areas where more expensive houses are selling for less, pulling medians artificially up.”

“‘Those 23 ZIP codes where prices are up doesn’t take into account price reductions (made to get) a sale,’ Mackenzie said. ‘Higher cost houses are selling for less. I think that’s skewing the numbers.’”

“The biggest price drops occurred in areas with high numbers of new-home sales, such as Newport Coast and an area near The Block in Orange (92868), said Hahn. In addition, areas such as Capistrano Beach (Dana Point’s 92624) and Northwood (Irvine’s 92620) are pricy neighborhoods where a lot of speculators invested, then bailed out when the slump hit, putting homes back on the market for whatever they could get.”

“‘Capo Beach is really hit hard,’ Mackenzie said. ‘There were so many speculators who tried to flip houses (there).’”

“Bob Chapman, who oversees a Prudential California chain in south Orange County, said that more higher-priced homes are selling now, making the median price look better than it is. ‘I don’t think it indicates an increase in value in very many places at all,’ Chapman said.”

The Sacramento Bee. “The housing sector weighed down the job market with increasing force in Sacramento and California last month, leaving payroll growth nearly at a standstill. ‘The housing slowdown is taking a bigger bite than previous months,’ said Dennis Meyers, an economist with the state Department of Finance.”

“‘It seems like housing is at the root of it all,’ he said, adding that the housing sector is hurting other segments of the economy.”

“Consumers ‘are living on fumes — there’s going to be a slowdown,’ said economist Chris Thornberg. ‘We have a real mess on our hands.’”

The San Mateo County Times. “Lately, the real estate propellant for the East Bay has fizzled. During the last year, four key industries that are tied directly to housing construction, sales, or financing, have lost 5,000 jobs in the East Bay alone.”

“‘The East Bay will not completely avoid the fallout from the housing market problems,’ said Scott Anderson, senior economist with Wells Fargo Bank.”

“Anderson has just returned from San Diego, which went through a job boom in recent years because of robust home-building activity. The reverse is now the case in San Diego, he said.”

“‘The housing market in San Diego has single-handedly brought that area’s economy to its knees,’ Anderson said. ‘All of it is related to the housing fallout. They are also seeing effects in retail employment, which is due to a slowdown in consumer spending.’”

The Union Tribune. “San Diego County reported the slowest year-over-year job growth since January 1994, when the county was crawling out of a recession.”

“‘Things are looking pretty bad,’ said Alan Gin, an economist at the University of San Diego. ‘It’s conceivable in the next couple months that we might see negative job growth – a fall in jobs.’”

“Economists pinned the blame for slow job growth on the local housing market. ‘It really is the real estate market that’s causing this,’ said Kelly Cunningham, an economist at the San Diego Institute for Policy Research. ‘Even though job growth in the visitors industry and the professional business sector is still positive, we’re losing as many jobs as we are adding.’”

“For the past year, Cunningham and Gin have been predicting that San Diego would be able to survive the real estate slowdown without falling into a recession. Now they say they are not sure.”

“‘If this trend keeps going on for the next couple months, it would suggest that we might have a recession before the end of the year,’ Cunningham said. ‘Not a big recession, but a slight one.’”

From KGO TV. “Homeowners in some Bay Area communities are defaulting on mortgages at a record pace. In the first three months of this year, defaults in Contra Costa County are up two hundred twenty-five percent.”

“Statewide, there are nearly 500,000 homeowners currently facing foreclosure. Eleven percent of all subprime adjustable rate mortgages are past due, and analysts keeping track of it all say it will get worse.”

“For Richmond homeowner Robert Harrell, it all happened at once. The security guard supervisor lost his job, at the same time his mortgage company hiked his mortgage rate. ‘Which just about doubled my house payments, which put me behind so,’ said Harrell.”

“When Harrell started missing some of his payments, the mortgage company began foreclosure procedures. ‘They just wanted their money,’ said Harrell.”

From CBS 5. “It’s a sign of the record number of foreclosures: 80 Bay Area homes will go on the auction block Saturday at the Concord Hilton. More than 5,000 foreclosure notices went out in June. That’s three times more than last year.”

“Local newspapers are filled with hundreds of default notices. Many homes were purchased by people with bad credit who took adjustable rate subprime loans. Congressman George Miller said the government may do more to force lenders to educate buyers of the risks.”

“Miller…believes the worst is yet to come. ‘We are just entering the unwinding of the subprime loan scandal,’ he predicted.”

The Signal. “With subprime lending worries continuing to send shockwaves through financial markets, the foreclosure market in the Santa Clarita Valley may have only just begun to grow.”

“‘The foreclosure crisis is going to continue for a couple more years,’ said Rodney Fernandez, executive director of the Cabrillo Economic Development Corporation.”

“It is a trend that many in the real estate market are aware of in the Santa Clarita Valley. ‘There is going to be a foreclosure market,’ Pam Ingram, a local real estate agent said. ‘We just don’t know to what extent it’s going to be.’”

“For those who are looking to buy a foreclosed home, however, the time is ripe, and a person can receive a home for below market value. Ingram said it was important to have someone knowledgeable there to help with picking the market.”

“‘You need to be very careful when you’re shopping,’ she said.”

From Eyewitness News 29. “More trouble for the once, high-profile Bakersfield realtor, David Crisp. Eyewitness News has learned, for the first time, a home belonging to either Crisp or his wife Jennifer, is poised to go on the auction block.”

“Documents show an outstanding loan for $400,000. The Crisps can’t sell the home themselves because of an outstanding I.R.S. lien amounting to over $111,000. There are eight properties showing ‘notice of default’ owned by the couple.”

The ChicoER. “While the worst is over, the north valley isn’t out of the woods yet when it comes to the housing market. ‘It’s going to be a bumpy ride over the next 18 to 20 months,’ said Greg Paquin, president of The Gregory Group.”

“Blackening the view, both past and future, are the number of shaky mortgage loans that have been made to individuals ‘who shouldn’t be buying a home,’ Paquin said.”

“Not only has that put some mortgage lenders in trouble, it’s hurt builders who have had to foreclose. ‘We heard stories about people living in Sacramento and buying properties in places they’ve never seen’ for speculated return in California hot housing markets.”

“Paquin also blamed lenders for backing away from their strict guidelines in lending and allowing that to happen. However, he said traditional standards were falling back into place.”

“‘Other than people in housing, people are feeling pretty good,’ Paquin said about the north valley economy.”

The Modesto Bee. “It’s a good time to be a renter in Modesto. Apartment rents remain flat in Modesto, according to statistics released today by RealFacts.”

“Many people appear to be leasing apartments instead of trying to buy homes with housing sales sagging badly in most parts of the West, according to RealFacts.”

“Sales have been bogging down during the past two years as home prices have declined, causing more prospective buyers to stay on the sidelines in hopes of getting a better deal.”

“The slowdown also reflects greater difficulty in getting mortgages as interest rates rise and lenders tighten their qualifying standards.”

“When the Northern San Joaquin Valley housing market was booming, investors jumped in to buy homes they planned to resell, or flip, at higher prices or to use as rentals. As the market cooled, it became inundated with rental units, and that has helped hold down rents.”




A Look At The Arguments For ‘Bubble-Proof’ Areas

Readers suggested a topic on areas immune from the housing bubble. “Let’s discuss and prove/debunk ‘bubble-proof’ areas. My hometown of Rochester, NY, for example, never historically appreciated more than 4% since the 80’s. The local news media has been saying Rochester is undervalued, prices will go up, and the bubble isn’t happening in there. It is different in Rochester!!”

“My dad bought a 4/2.5/2 in the burbs in 1982 for $180k and sold it in 2004 for $220k. His appreciation was easily absorbed by maintenance and inflation. My friend bought a 3/1.5 off Park Ave. in 2004 for $150k. The previous owner paid $89 in 1999. A house a few doors down just sold for $125k. No bubble, eh?”

“I hate to say it, because I am a firm bubble-believer: I think parts of NYC are more or less bubble-proof (or I should say crash-resistant). I’m saying let’s look at the arguments for ‘bubble-proof’ areas (NYC, SF) and areas where the bubble ‘never happened’ (Buffalo, Lawrence, KS and so on). I think that would give us all a historical perspective to help us understand - and make better choices - about buying in the future.”

A reply, “Maybe with the sidebar topic about how NYC’s allegedly ‘bubble proof’ status is bolstered by RE industry hedging and hiding of data, and how, since RE advertising is geared to the very rich, the press tends to adopt that skewed view that everything is ok (while foreclosures pile up rapidly in many boro neighborhoods).”

“The ratio of income/house prices here is one of the worst in the nation. I wouldn’t buy here (yet) unless I was prepared to see my home’s value decline by 20-30 percent or more over the next few years.”

“The Real Estate industry here is extremely powerful, and will use every means to persuade buyers that the party can’t end here, even as credit is getting tighter and boro prices are falling. You have to listen closely, but if you do, you can hear the slow hissing noise in NYC.”

Another said, “I can wait for the Toll bros. High rise condoze in Union Square to fail miserably. Agreed its a pretty good location, but I understand it has no parking…..none not even for guests.”

One pointed out, “You probably can’t afford to buy in the Village. Therefore, NYC does need a correction along with every other square inch of this country. I will agree that some people (myself excluded) would pay more to live in NYC than anywhere else, but that still does not make it bubble-proof.”

Another reply to the original poster, “I’d consider rolling back to 2000 prices a crash. We’re basically on the same page, you just frame it more positively because you really like NYC - and that’s ok.”

Finally, “What’s different about NYC now vs. before the boom??? NOTHING fundamental that will justify the price increase. Therefore, if it wasn’t worth it before, it certainly won’t be worth it after.”

The Democrat & Chronicle from New York. “House sales in the Monroe County region fell by 9.5 percent in June compared with a year ago. There were 1,220 house sale closings last month, compared with 1,348 during June of last year. The median price edged up 3.6 percent to $121,250, compared with $117,000 during June 2006, according to the Greater Rochester Association of Realtors.”

“‘We’ve lost one part of the market, that’s the credit risk buyers,’ said Armand D’Alfonso, president of Nothnagle Realtors. With banks unwilling to take risks on that market, ‘prices are bound to go up,’ D’Alfonso said.”

“The subprime mortgage market now is virtually nonexistent, said Joseph Rinaudo, broker owner of ReMax Gold in Rochester. ‘To get 100 percent financing right now is impossible without good credit,’ Rinaudo said.”

“While certain portions of the market are faring well, the Rochester real estate market has shifted to favor buyers, said Michael Haymes, president of ReMax Realty Group in Pittsford. ‘Buyers have many more choice than they did a year ago,’ Haymes said.”

The Canarsie Digest from New York. “An extremely high rate of foreclosures in Canarsie mirrors a high rate of subprime mortgages in the neighborhood.”

“In Brooklyn, a total of 2,514 foreclosure actions were filed in 2004, rising to 2,557 in 2005 and then to 3,307 in 2006. The problem is not unique to New York.”

From Newsday. “Bankruptcy trustee Marc A. Pergament is seeking 32 subpoenas of investors, bankers and mortgage companies involved with Hicksville real estate agent Nayana Shah over property deals they made on Long Island.”

“In a story last month, Newsday detailed how five men reported making real estate deals with Shah that ultimately went bad, leaving them with ruined credit, extensive debt or homes in foreclosure. The men documented racking up $3.1 million in mortgage loans.”

“Pergament said the Shah case exemplifies the current problems in mortgage lending. ‘This is going to keep happening, and I don’t know how to stop it … ,’ he said. ‘But the more we can prosecute civilly, it has to have an impact eventually.’”

“Pergament’s subpoenas included more than 15 mortgage bankers and brokers. ‘We’re also looking at whether these people submitted false financial applications to get these loans, who persuaded them to do that and why the banks just accepted it,’ he said.”

“Rajnikant Sanghvi said he wants the investigations’ conclusions to stop the foreclosure on the Hicksville house he bought through Shah, taking out two mortgages worth $430,000. ‘I don’t know when they are going to finish the investigations, and in the meantime, I am still losing sleep,’ Sanghvi said.”




Speculators Misjudged The Market

A report from the Arizona Republic. “Mainstream home builders are under growing pressure to go green…which could be risky at a time when revenue is down and sales are stalled. ‘These guys are fighting for their lives at the moment,’ said RL Brown, a Valley housing analyst. ‘They’re trying to figure out how to make a sale, how to carry the burden of the inventory, how to get rid of the excess land, how to get the cancellations to go away. They’re into serious, hard marketing challenges right now. They’re not into that (green) kind of thing.’”

“Right now, they’re struggling to get their finances in shape as they try to clear an excess of inventory. At least 20,000 unsold new homes in the Valley wait for buyers, according to various analysts.”

“Doug Fulton of Tempe-based Fulton Homes said his company has started to sell houses below cost in some fringe markets, and he believes other builders are, too. ‘If it sold homes and made sense, I’d do it,’ Fulton said. ‘We’re just trying to keep our heads above water. It’s a little brutal out there.’”

The Explorer News from Arizona. “About a year ago Ricardo Small received a fax asking him to appraise a house in Marana, a daily event in the life of a real estate appraiser. When the appraisal was complete, Small sent it to the mortgage broker who had requested his service.”

“Small said the broker launched a campaign of furious phone calls demanding that the house be appraised for a greater value. ‘There’s an unacceptable level of dishonesty among appraisers,’ Small said.”

“After his conflicts with the mortgage broker, Small said the broker acquired the services of a second appraiser whose estimate actually exceeded the broker’s desired price.”

The Arizona Daily Star. “The cost of building and improving homes and businesses in Sahuarita is about to go up. The housing slowdown has reduced the town’s revenue collected from a construction sales tax, Town Manager Jim Stahle said last month.”

“Rents are rising modestly for large apartment buildings in Tucson and the occupancy rate is slipping down, according to a rental market research firm.”

“The dip could be related to the slowdown in the real estate market, and the abundance of unsold single-family homes, which are now being marketed to renters, said Terry Feinberg, president of the Arizona Multihousing Association. The same phenomenon is occurring on an even larger scale in Phoenix, he said.”

“But Tucson has an added twist in its market helping to prop up both rents and occupancy levels, no new supply of apartment buildings, Feinberg said. Rents have not been high enough to justify the cost of constructing new apartment buildings in Tucson over the past several years, he said.”

“‘Now since the real estate market has shut down a little bit, they’re not buying homes,’ said George Amos III, CEO of Tucson Realty & Trust Co. ‘They’re going back into apartments again.’”

In Business Las Vegas from Nevada. “Las Vegas homeowners are showing signs they are willing to cut their prices to make a sale. The median price of new homes listed on the MLS in June was $329,825. That’s the lowest median listing price since it was $324,900 in December 2004.”

“Las Vegas Realtor Steve Cross said he’s been surprised at what he’s seen recently on the MLS. It appears the number of daily price revisions on listings is increasing, Cross said.”

“Between July 1 and July 15, there have been more than 4,200 revisions of prices, and Cross said it’s unlikely many would be increasing. As recently as July 13, there were more than 700 revision a day, which he said is well above normal. Some of the revisions have ranged from $1,000 to $50,000, he said.”

“‘I think many people are realizing they have to be realistic on their prices,’ Cross said. ‘Some have doubled their money in the last five years and if they knock a few thousand off their price so it sells, is no great shakes.’”

“Others who bought late into the market are going to have to turn to short sales and sell the home for less than what they owe the bank, he said.”

“In June, Nevada had one foreclosure filing for every 175 households to lead the nation for the sixth-consecutive month, according to RealtyTrac. That’s a 280 percent increase over June 2006 and well ahead of second-place California, which had one filing for every 315 households.”

“Michael Krein, president of Nevada Real Estate Services, said he’s carrying 700 properties that have been foreclosed and expects that number to increase because many loans won’t have their payments adjusted until later this year or early 2008.”

“Homeowners who bought their homes with an adjustable rate mortgage have seen their payments increase 50 percent in some cases and others have seen their payments more than double, Krein said.”

“Foreclosures are occurring in every price range but the majority of the houses and condominiums fall between $350,000 and $600,000, Krein said.”

“About 75 percent of the homes Krein has dealt with were purchased by speculators who misjudged the market. ‘When you have cab drivers talking about real estate, it’s time to leave the market,’ Krein said.”

The Review Journal from Nevada. “The summer months are always slow for home sales in Las Vegas. When it’s 110 degrees outside, nobody likes to go house hunting. There were 1,872 new home sales in June, bringing the total to 10,395 for the first half of the year, a 45 percent decrease from a year ago, Home Builders Research reported.”

“Home prices have fallen, but not nearly as much as pundits predicted. California real estate consultant John Burns said housing Las Vegas prices must drop 30 percent to return to a normal market.”

“‘Is it realistic for houses to back off by 30 percent?’ asked Larry Murphy of SalesTraq. ‘Why are we even talking about it? Come on. I think prices still have a ways to come down in Vegas, but not 30 percent. Eight to 10 percent, maybe.’”

“‘My interpretation of Vegas is not that it will have to plunge 33 percent, but rather that Vegas is being promoted into the small elite group of cities that have enough external factors that make people want to own property there that the prices simply are high relative to income,’ said Alex Edelstein, developer of the mid-rise Manhattan condos and Manhattan West in Las Vegas.”

“Peter Kaiser was hoping to find a home at a reasonable price. ‘What I have found is a market full of homes still hoping to extract the prices seen in late 2005. Simple three-bedroom, two-bath homes that are still $100,000 more than they’re worth are languishing on the market for well over a year,’ Kaiser said.”

“He said he’s seen at least a 10 percent slide in prices for homes in Henderson and Green Valley for the past six months and they’re still not moving at the reduced price.”

“‘Bottom line from my point of view is that the current price levels have been set by investors, not people who plan on actually living in any of these homes,’ Kaiser said.”

“‘I cannot and will not jeopardize my family’s financial well-being by jumping into a market that has such a high chance of going further south. We are currently renting a nice little home and doing what very few in our society are able to do any more — save money,’ he added.”

“He has a novel idea about what to do with all the vacant homes in the valley. An estimated 40 percent to 50 percent of the 23,000 homes on the MLS are sitting empty. According to the Las Vegas Outreach Center, there are 10,000 homeless people in the valley. ‘I think I just solved our homeless issue,’ Kaiser said.”

The Deseret News from Utah. “Housing prices continued to rise in Utah during the second quarter of 2007, but the number of homes sold dropped along the Wasatch Front. Most notable were Salt Lake and Utah counties, each of which saw a 19 percent decrease in the number of units sold in the second quarter compared to the same three-month period of 2006, according to the Salt Lake Board of Realtors.”

“Jillinda Bowers, the Salt Lake board’s president-elect, attributed the decreased sales to fewer investors participating in the market. ‘We don’t have the influx of investors that we had in the past. We’re not seeing that as strong in our area,’ she said.”

“Debra Sjoblom, former president of the Salt Lake board, chalks the declining sales up to the typical summer slowdown. ‘Who the heck knows (why)? Is it the heat? Is it summer vacation? Is it just a combination?’ said Sjoblom, anecdotally noting that while the market remained robust through May, it has ’slowed tremendously’ in the past 45 days.”

“Several individual ZIP codes posted a decrease in median home values. The 84103 ZIP code, which includes the Avenues in downtown Salt Lake City, saw an 11.9 percent decrease in median price over this time last year. Three Weber County cities, Eden, Huntsville and Marriott/Slaterville, also experienced varying levels of price drops, as did Alpine, American Fork and the 84604-area of Provo in Utah County.”

The Salt Lake Tribune from Utah. “Higher mortgage rates. Reduced affordability. A nagging fear prices are bound to nose-dive. Home buyers along the Wasatch Front pulled back this spring for a number of reasons, leading to falling sales of existing homes as reported Friday by the Salt Lake Board of Realtors.”

“Some buyers have been priced out of the market as a result of the double-whammy of rising home values and rising mortgage rates, both of which push monthly mortgage payments ever higher. Home values in a number of areas have grown by 50 percent to 100 percent over the past five years.”

“Add higher payments to tighter lending guidelines, and ‘there are more buyers who simply cannot qualify [for a home loan] right now,’ said economist Jeff Thredgold.”

“But Thredgold said an even greater factor driving down sales of existing homes is all the talk about the bursting of the nation’s housing ‘bubble,’ where selling prices are flat or falling in cities such as Phoenix and Las Vegas. ‘Buyers are concerned,’ he said.”

“In many areas, for-sale signs are piling up and take longer than they have in past years to come down. One concerned Utah home buyer is Jeff Rouse, who has recently moved to Salt Lake City from the San Francisco area. Rouse said he initially was going to buy right away. But as he began to drive around the Salt Lake Valley, he said he noticed quite a lot of for-sale signs. Some of the homes he looked at a few weeks ago now have lower asking prices.”

“‘I’m thinking of renting for a while and just seeing what happens,’ he said.”




Bits Bucket And Craigslist Finds For July 21, 2007

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