The Housing Bubble

A report from the Bakersfield Californian. “Home shoppers will likely find a few bargains this summer. Prices have dropped and the selection of available homes has grown, local realty pros said. Those searching in the northeast, where a four-bedroom home (on) Loch Fern Court is selling for $275,000, will find ‘gobs of choices’ in the same price range, said agent Mike Saba.”

“‘Between $225,000 and $300,000 right now, you’d have about 65 choices of a four-bedroom,’ Saba said after doing a search on Bakersfield’s MLD. The Loch Fern Court house might be a tad overpriced, he said.”

“Buyers can also get more house for their money than they could in the past two years, said agent Jeanne Radsick. The homes Radsick has listed at $500,000 or higher start at about 2,700 square feet. And sellers may strike a deal. ‘People who up to this point might not have entertained offers, are now entertaining offers,’ Radsick said.”

“Luxury homes have been discounted as well, said agent Gail Malouf of Coldwell Banker America West. ‘You’re getting a better deal on all houses than you were a year ago,” Malouf said.”

The Ventura County Star. “After months of waiting for someone to purchase her Spanish Hills home, Cheryl Conroy decided she couldn’t hold out any longer. She and her husband have put a deposit down on a lakefront property in Missouri. But they might lose the money if their Camarillo home doesn’t sell soon.”

“Conroy enlisted the help of Dennis Gottlieb, director of a Las firm that provides relocation services for corporate executives. He purchased a share of the home and will reap some of the profit when it sells.”

“Given the time constraint, Gottlieb decided the fastest way to raise interest in the house is to let buyers set the price. Gottlieb placed an advertisement in The Star to announce the home must be sold by Sunday night for the ‘best reasonable offer’ over $594,837.”

“The house hasn’t sold because it was priced too high, said Bob Doughtery, who was Conroy’s Realtor until July, when Gottlieb stepped in. ‘If she had gotten the price below the $800,000 mark, we would have probably been able to sell,’ he said.”

The Orange County Register. “Maria Cordova was thinking about tapping into her home equity to add a fourth bedroom and second bathroom to her Santa Ana home. But that plan evaporated when Cordova watched local home sales slow to a crawl.”

“Brian Glabman owns Glabman Furniture, a 108-year-old, four-store chain based in Costa Mesa that sells high-end pieces. He will soon close his 42,000-square-foot Costa Mesa store, the only Orange County location.”

“He believes that because the slowdown in the high-end housing market (the segment Glabman sells to) happened quickly, his customers turned wary of spending on their homes. ‘The buying habits of consumers are changing,’ Glabman said. ‘What we’re doing here in Orange County no longer makes sense.’”

“Cordova is skittish as she watches home sales and prices fall. ‘We’re spending less,’ she said. ‘We’re buying just want we need.’”

The Recordnet. “Affordable housing, considered an oxymoron during San Joaquin County’s unprecedented real estate boom in recent years, is making a comeback. The playing field is leveling because of the unprecedented number of area defaults, foreclosures and price reductions in the past year, observers say.”

“But just as nonprofit developers begin placing ‘for sale’ signs on newly affordable properties, a new trend is emerging: Many people who can now afford homes are afraid to buy.”

“‘They see their friends and family losing their houses,’ said Larry Johnson of one of the area’s affordable housing builders. ‘They’re scared to death right now.’”

The Union. “Financial woes for the DarkHorse luxury housing project in southern Nevada County deepened Friday, with a lender planning to foreclose on 72 lots and the nationally recognized 18-hole golf course, according to the lender’s agent and a legal notice.”

“Owens Mortgage Investment Fund, based in Walnut Creek, said Friday it would sell the land to the highest bidder on Aug. 17 at the front entrance to the Nevada County courthouse if the owners fail to come current with payments on the loan.”

“In June, DarkHorse sales director Terry Williams said the luxury development on Combie Road had experienced a slowdown in sales that reflected the slump in real estate around the county.”

“Statewide, sales have slowed to the lowest point in more than a decade, DataQuick has reported. ‘It’s a slow market, but it hasn’t stopped,’ Williams said previously.”

The Advance Register. “Michelle and Dennis Kogler moved to Visalia in September 2005 from Colorado. It was the height of the real estate boom and the Koglers bought a new home for $376,000.”

“Six months later, as they noticed that similar homes in the neighborhood were selling for $125,000 less, plus incentives, Dennis Kogler decided to accept another job in northern California.”

“That’s when the Koglers got into trouble. They tried for 18 months to sell the home while Michelle Kogler remained in Visalia. They had two sets of living expenses.”

“‘We bought the home at an inflated price and it dropped to the point where we were immediately losing money,’ Michelle Kogler said. ‘It was a disaster.’”

“The Koglers aren’t alone. As the real estate market in Tulare County keeps tumbling, the number of default notices has skyrocketed, from 623 in 2005 to 1,165 in 2006 and 864 in the first half of this year.” ”

“‘We just came off the biggest market we’ve ever experienced in real estate,’ said Visalia real estate broker Brad Maaske. ‘What’s stupid is we had the lowest interest rates in 40 years and people took a variable rate loan because they thought it would get lower.’”

“If all else fails, the lender ultimately repossesses the property and resells it to recoup the loan. That’s what happened to the Koglers. ‘We couldn’t get rid of that home to save our lives,’ Michelle Kogler said.”

“Finally, she said, she got homesick, left Visalia and rejoined her husband. ‘It financially ruined us,’ Kogler said. ‘It will take us years to recover.’”

“At the steps of Tulare City Hall Monday, the Koglers’ home was put up at public auction. It didn’t sell, and the lender took it, adding to a portfolio that will eventually have to be placed on an already depressed housing market, where, according to DataQuick, home prices have fallen at the rate of 1 percent a month.”

“Carlos Lopez of Visalia had his sights set for months on a defaulted home on West Dorothea Avenue. It had last sold for $130,000 in 2002. He and his mother drove to the neighborhood a few times to see if the home had investment potential. ‘We just thought it was a good time to look for property,’ Lopez said.”

“He and his mother bought the house Monday at the auction, after a bid war with another potential buyer, for $25,000.”

The Press Enterprise. “Mortgage default notices in the Inland region have almost tripled since last year. Home foreclosures have increased almost eightfold. And home sales last month were the worst in a decade.”

“Real-estate experts and economists say today’s housing woes might be just the beginning of trouble.”

“In the past six months, almost 22,000 Inland homeowners received notices of default, the first step a lender takes to foreclose on a property. During those same months, 6,367 homes were taken through foreclosure.”

“Christopher L. Cagan, director of research and analytics for Santa Ana-based First American Corelogic, said he expects at least another 60,000 foreclosures in the Inland region in the next four to six years. He identified about 221,700 adjustable-rate mortgages sold in Riverside and San Bernardino counties from 2004 through the first half of 2006.”

“‘It’s sort of like watching the snake swallow the mouse,’ said John Karevoll, an analyst for DataQuick. ‘We have this huge amount of loans sort of moving through the pipeline.’”

“The median home sales price in Riverside County was $400,000 last month, down from $432,000 in December. In San Bernardino County, the median price dropped to $365,000 from $372,000 in the same time period.”

“The falling home prices largely have been caused by more houses being put on the market, either by builders or homeowners listing a house they can’t afford.”

“‘First they try to refinance, and then they’ll list their property, putting more downward pressure on the prices,’ said Esmael Adibi, an economist at Chapman University in Orange. ‘This is really what is adding to the resale inventory in the marketplace, but demand has dried up. That’s why you are seeing notices of defaults going up.’”

“‘Some of these people were just caught up in the incredible appreciation going on,’ said Steve Johnson, of MetroStudy. ‘They thought it was sort of a fail-safe scenario.’”

“Many bought when prices were their highest, and when prices fell were left trying to sell a house at a loss. ‘People who were investors were very comfortable in the economy, and leveraged the value of their own home to buy other houses and flip them,’ Johnson said. ‘So we have another wave of these coming through, some of them subprime.’”

“Anthony Banks, a construction contractor in Riverside, said he received three calls late last week to renovate foreclosed homes. Banks has in the past bought homes himself and rehabilitated them for sale, but now says that business is poor. ‘You can buy them, but you can’t sell them,’ he said.”

“Brossie Cerniglia, who owns and operates The Pool Doctor in Corona, said he sees a lot of possibilities for his business in a foreclosure market. His company whitens plaster and cleans pool tiles. Cerniglia estimates that on about 70 percent of the homes he works on, the owners are preparing for sale. In just the past week, traffic to his Web site has doubled. He also has been trying to contract with banks that hold foreclosed homes. ‘Then I’d be working for a long time out here,’ he said.”

“Home sales last month were the worst in a decade in Riverside County and the worst on record in San Bernardino County, which is sort of a downer because I was going to sell my house, pocket the cash and sleep in an elaborate tree fort.”

“My house lost an estimated $70,000 in equity this year, slightly less than it might have, had it been haunted by poltergeists. I’ve never lost $70,000 before, but I always imagined it would feel more … well … fun.”

“I may live in the Inland Empire but I really don’t see how this real estate slump could possibly be my fault. The real blame here falls on the rest of you.”

“Step it up, Inland Empire, and start beautifying your residences! Get a garden gnome or politically correct lawn jockey. And when you take out the trash, for gosh sakes, put a shirt on.”

“A few decorative patterns in the front yard, say a seahorse or snow leopard, or a seahorse mauling a snow leopard, could really increase your home’s resale value. Even triple it.”

“We’re a team, Inland Empire. And we have to start acting like a team. (Corona, you bring the sliced oranges). And together, we’ll systematically re-inflate the real estate bubble so that this time, we’ll be smart enough to sell our homes, take the profit and buy mansions in Oregon, Colorado or Texas.”

The Chicago Tribune reports from Illinois. “Need to sell your home in a hurry? Unfortunately, for most homeowners today it’s no longer as simple as putting a ‘for sale’ sign in the yard. Existing-home sales have fallen, and home prices have declined, too, as the number of houses for sale has reached new highs. In other words, it’s not an easy time to be a seller. There is too much supply for the demand.”

“If you overshoot the asking price, it could take longer to sell your home, and you may have to concede significant price reductions later. ‘The buyer thinks the longer a home is on the market, the less he should pay for it,’ said Andrea Geller, a member of the board of directors for the Chicago Association of Realtors.”

“‘There seems to be a disconnect now,’ said Terry Semmens, Chicago district director for ZipRealty Inc. ‘We’re showing lots of homes and our agents are busy, but it hasn’t correlated [with transactions] as it has in the past.’”

“Semmens said the supply of homes for sale in the Chicago region rose 3.6 percent in June, reaching a level 30.6 percent higher than the year before. He also said 37 percent of homes for sale had reduced their price at least once, up from 35.4 percent at the end of May.”

“Andrea Fraley has cut the price on her 3-year-old home in Aurora from $240,000 to about $220,000, below the appraised value, since it went on the market in May, and says she is feeling pressure because her family is moving out of state in August. Recently she began ‘make us an offer’ ads.”

“‘It’s in perfect condition, we’re keeping it really clean, and it’s freshly painted,’ she said. ‘We can’t get rid of it.’”

The Kane County Chronicle from Illinois. “Suzanne Ehardt, planning and development director for McHenry County, said single-family, detached-home building permits were down by about 50 percent in unincorporated McHenry County compared with the same period last year.”

“Greg Wallis, a partner at Cary-based builder Verseman Development, said local sales mirror the national trend. ‘Things are definitely slow,’ Wallis said. ‘We’re following the national average.’”

“‘Everybody was talking about the bubble and how the bubble was going to burst, and it obviously has,’ he said.”"

The Courier News from Illinois. “Earleda and Kevin Parrish were looking for a home for seven or eight months before they found the one they wanted in Carpentersville. By March 2007, not quite two years after they bought their dream home, the family’s belongings were being moved out to the front yard and the Parrishes were being evicted.”

“‘We literally lost everything,’ Earleda Parrish said. It was not just the house, but many of the things inside that they couldn’t fit into the storage container they’d rented. ‘It’s kind of hard to watch people from the neighborhood walking away with your stuff,’ she said.”

“Foreclosures in Elgin and South Elgin for the first half of 2007 are up about 32 percent over the same time period in 2006, according to Record Information Services Inc. In other areas of the county, foreclosure numbers through mid-July 2007 nearly are surpassing what they were in all of 2006.”

“The alarming growth rate begs the question whether prospective home buyers are spreading their finances a bit thin. ‘What we ran into now is what I’d call a perfect storm,’ said Mike Hawley, senior VP at First Community Bank of Elgin.”

“North Aurora-based real estate and tax attorney John Duggan, said these new loans have made it so that equity is no longer a requirement for buying a property, which also can contribute to the increased number of foreclosures. With no equity, there’s nothing to lose by foreclosing, he said.”

“‘They ride the foreclosure into bankruptcy,’ Duggan explained. ‘You just keep your house until they take it away from you.’”

The Press Citizen from Iowa. “Jim Kessler, Coralville building and zoning official, said builders are being more careful about the kinds of homes they build. He said the biggest drop he has seen is in the number of speculation homes, or homes that are built without a specific buyer already choosing the lot.”

“‘There’s a pretty darn good amount of pre-existing spec housing that is unsold,’ Kessler said.”

“Sally Cline, president of the Iowa City Area Association of Realtors, said this is true from her perspective.”

“‘There was this mentality a few years ago that was, ‘If you build it, they will come,’ she said. ‘There’s a big inventory out there. So, I think builders are saying ‘Gosh, I think I’ll wait until this sells.’”

“Bill Frantz, president of Frantz Construction Company in Iowa City, said last year and the year before that there was a boom in speculation housing, a lot of which is in North Liberty.”

“‘We’re just kind of waiting out this slump, if that’s what you want to call it,’ he said. ‘I’ve talked to some other builders, and it appears to us that there is a surplus of inventory out there.’”

The Star Observer from Wisconsin. “Additions have been made in the entryway of the St. Croix County Government Center to accommodate a growing number of sheriff’s foreclosure sale notices.”

“Once, only one bulletin board was needed to handle the announcements, but now three are jammed with foreclosure notices and a fourth may be needed soon.”

“St. Croix County Clerk Cindy Campbell said the additions were made recently. Three bulletin boards on the main entrance wall at the St. Croix County Government Center are literally jammed with foreclosure sale notices with more waiting for space. ‘There are three bulletin boards packed and more (foreclosure sale notices) waiting to go,’ Campbell said.”

“She pointed to a stack of 13 waiting for room on the board and said in two days her office received 23 foreclosure notices to post. ‘We added a third board two weeks ago,’ said Sheriff Dennis Hillstead, who conducts the foreclosure sales. ‘We may need a fourth — there is no slow-down in sight.’”

“According to records provided by the sheriff, 40 foreclosure sales were conducted in 2003. The number took a sharp rise by 110 percent to 84 in 2004, then rose 52 percent to 128 in 2005. Last year’s foreclosure sales totaled 188. The 2006 sales were surpassed by a substantial number, with 251 recorded thus far in 2007 with over five months left until the end of the year.”

“‘When I first started as sheriff in 1999, we had one or two sales a week,’ Hillstead said. ‘Last Tuesday there were 12 sales scheduled. Two were postponed or cancelled and 10 went.’”

“Hillstead recalled a time when the subject of a sheriff’s sale was most often a failed farm. ‘Most are single-family homes now,’ he said. ‘Lately a lot of them have been in the $300,000 to $400,000 range.’”

“The problem down the line, informed observers said, is that when there is an over abundance of foreclosed properties held by mortgage companies, they will be forced to lower prices to make sales, which in turn would lower property values throughout the county.”

The Pioneer Press from Minnesota. “At least 40 houses across the Twin Cities will be up for bid soon in St. Paul at a rare mass property auction complete with paddles, auctioneer and ‘Do I hear $150,000.’”

“The event - a ’short sale’ auction of homes in the early stages of foreclosure - is being organized by National Realty Guild, a small St. Paul company rolling the dice in a housing downturn.”

“It’s the latest sign of distress in the local housing market, and a new tactic in the “move that house” game under way as Twin Cities agents struggle with rising foreclosures, dipping home values and a record crop of for-sale signs.”

“Short sales are on the rise around the Twin Cities, said Keenan Raverty, immediate past president of the Mortgage Association of Minnesota. ‘I think it’s going to get worse before it gets better,’ Raverty said.”

The Mount Vernon News from Ohio. “Condominium sales in Knox County remain strong despite reports of a housing slump throughout most of the country.”

“‘The real estate economy is a local economy, and Knox County is nowhere close to the numbers experienced elsewhere in the Midwest,’ said Al Lindeman, the president of the Knox County Board of Realtors.”

“Mount Vernon resident Dee Reynolds and her husband recently passed on the chance to live in a condo. Dee said she and her husband had nothing against the condos they looked at, and that their decision was based more on the size of the condominiums.”

“‘We’re just used to a big home, and we didn’t want to be closed in,’ she said. The Reynolds, who are retired, did settle in a neighborhood where yard work is provided, like in condominium communities.”

“‘The condo market went crazy for a while,’ said Judy Cordle, Mount Vernon’s development services manager. ‘A whole slew of condos showed up at the same time.’”

“Beyond completing the Maple Wood and Colonial Woods projects, Cordle said there are no plans to build more condos in the near future. ‘There’s nothing new coming in right now,’ she said.”

The Beacon Journal fom Ohio. “With 2007 half over, said Tom Campensa, president of the Akron Area Board of Realtors, Summit County has seen better years for the home sale industry. There were 3,063 homes sold in the six-month period, down 11 percent from the first six months of last year, when 3,437 homes sold.”

“‘We had three record-breaking years — 2004, 2005 and 2006,’ Campensa said. ‘In 2004, there were 3,223 homes sold and 3,605 in 2005 for the same period. We are falling back in line with 2003.’”

“‘One of the challenges is to get home sellers more in tune of what buyers are willing to pay,’ said broker Deborah Loughborough. ‘Price and location are still key factors.’”

“‘It is still a buyer’s market; we just need more buyers,’ said Campensa.”

Readers suggested a topic about sweeping up after the housing bubble. “Weekend topic suggestion: How would ‘we’ (HBBers) clean up this mess? Now that the damage is done, we can play ‘policy wonk’ amongst ourselves. What would we do if we were in charge? If we were Bernanke, Paulson, members of Congress, etc.? How would we solve this situation to bring it to a resolution? And how could we prevent it from happening in the future? We’d have to examine how we got here in the first place, maybe there’s some fundamental problems that need to be handled, like requiring kids in school to become financially literate.”

“For example, on a local level, I would have liked to have given some of my county commission members a good pasting for the completely irresponsible way that builders and developers were given leeway to do whatever they wanted, to the detriment of the community.”

“The housing bubble and the bust speaks to my ongoing concern about how ‘business’ and corporate entities have been allowed to take precedence over ‘the people.’ Why cannot the two entities co-exist for the good of each other? (Gee, what a concept, and why does it have to seem laughable and naive?)”

“Anyway, what would we do about it if we were put in charge? For starters, if I were Bernanke, I’d do the Volcker.”

One said. “I would try to introduce the concept of fear into those who are fearless regarding the acquisition of debt. It’s crazy when multitudes will commit thirty years of future earnings to a bottom line of a contract that they don’t care to understand.”

A reply, “I agree with this. Perhaps financial history should be a subject taught at the high school level?”

Another, “Grade school. Scrap the Christopher Columbus propaganda, and replace it with Dirty Joe Kennedy and the rise and fall of the 1920’s bull market.”

One was frustrated, “I’ve tried so many times to warn people about whom I care concerning this mess. Either this mess is so unbelievable that people don’t want to believe it or I’m not convincing enough…any suggestions on how others on this board have been able to convince friends & family that there is a housing mess and what could occur as a result of it?”

One looked at incentives, “I would work to make sure risk remains connected to reward. When those who knowingly make junk loans are immediately and amply rewarded for these loans and at the same time are allowed to pawn the junk off to someone else then you end up with the mess we are in now.”

Another wants a decent return on savings. “How about if the Fed declared a cease fire in the War on Savers, and focused on getting that U.S. national savings rate back up from negative levels?”

One had a press release, “I would issue a public statement containing the following points:’

“No taxpayer bailout for mortgage holders. They are responsible for repaying their loans they contractually agreed to, or arranging otherwise through private markets.”

“Anyone filing bankruptcy from multiple home loans, who committed fraud on mortgage applications (either by claiming primary residence or inflating income > 20%) is going to spend a minimum of 24 months in federal prison, unless they agree to pay back the full amount as stated on the loan.”

“Then I would let the free market sort out the mess. Zero down loans are fine for those with a stellar credit or repayment record, especially for a primary home.”

One made this point, “Fraud is already a felony. Like anything typically responded to by more legislation, if the present laws had been enforced in the first place, there wouldn’t have been a problem. We could really enemize the industry by focusing on the enforcement side.”

“Imagine undercover FBI agents working as loan officers, account execs, *borrowers*, HA! So much fraud, right out in the open… Start sending people away in jumpsuits and those guys will fall in line. Hell, they’re used to commission pay with little loyalty, all they need is a $$$ upside to start ratting each other out. The whole biz got way too fraudy.”

And another added, “The U.S. already has too many people in jail. Fraudsters should make restitution for their fraud. If there were no Fannie Mae, and no bail-outs, mortgage stooges would not be able to pump-n-dump fraudulent mortgages, as there would be nobody to buy them. The free market really does work, only we’ve never really tried it yet.”

One was for self-preservation, “Save yourself, then stand back and let everyone else learn their lesson. This country needs a national BK just to clean house and get it’s priorities straight. Only then will we prepared for whatever the future may hold.”

One poster hopes the message gets out, “What would you do, if you were in charge of something in government or business that would clean this mess up and prevent it from happening in the future? ‘They’ may not listen to us, but at least, if we blog it out here, our policies and ideas are out there, so that people can see the right moves and compare it with the future idiocy that is sure to come.”

What do you see in your housing market this weekend? Resetting loans? Builder incentives? “Pennsylvania home builder, Keystone Custom Homes, is offering potential buyers the chance to, ‘Live free for a year. Really.’”

“The advertisers for Keystone might have thought they needed the ‘Really’ to convince skeptical buyers, but nowadays, incentives like this are not surprising.”

“‘It’s definitely a challenging time to be building homes,’ says Keystone president Jeff Rutt. ‘Probably one of the biggest hurdles that I’ve seen here locally and just from what I’ve seen nationally, is buyer sentiment.’”

Slower construction? “The number of housing permits issued statewide during the first half of the year plummeted 18 percent compared with the first half of 2006, the state Department of Economic and Community Development said Friday.”

“‘It’s obviously slowed down a bit,’ said Jonathan Shweky, owner of Shweky Developers in Wallingford. ‘A lot of this talk of the bubble bursting has been going on since last year. A lot of builders pulled back, in the sense of not overbuilding.’”

“Home buyers are taking their time when deciding whether and when to purchase a house, scared by reports of a nationwide housing market downturn, he said. But Connecticut’s housing market has not been overbuilt like those in California, Nevada and other states, he said.”

Failed development? “In a one-two punch, an attorney representing Laughlin Ranch announced it has filed for bankruptcy. Out of 12,500 acres, approximately 1,200 acres of Laughlin Ranch have been developed. Most of Laughlin Ranch has been incorporated into the Bullhead City limits, increasing the area of the city by one-third.”

Slowing home sales? “Local realtors say although Alaska doesn’t always follow national trends, the market is not where it was one year ago, and inventory is the highest it’s been in seven years. Sales of existing homes dropped in June for the fourth month in a row, the slowest sales pace since November 2002.”

“Ingrid Thomas has had her home listed on the market for 14 months, waiting for a buyer that has not yet appeared. ‘It has been extremely frustrating because we left already, seven months ago, and the house is still on the market. We don’t know why it hasn’t sold,’ Thomas said.”

“And the Thomases are not alone in the waiting game.”

“‘They’re on the market longer because there are so many on the market and there’s only so many buyers to absorb that number of houses,’ said realtor Beth Simpson.”

“Anchorage Home Builders Association President Eric Schach said builders are reacting to the slowing market. ‘The levels of building were unsustainable from 2003 to 2006 and now Anchorage is just in a self-correction mode,’ Schach said.”

“Realtors say the most important thing sellers can do is to be prepared to get the price where the market is. Simpson says too many sellers think ‘”their house is worth more than the next door neighbor’s.’”

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