September 30, 2007

The Market Isn’t What It Was In California

The San Francisco Chronicle reports from California. “A year and a half ago, Saverio Bellomo and his wife, Amy Robinson Bellomo, thought about selling their house. A real estate agent urged them to list it at $930,000. They decided to hold off for a while. Big mistake. Today, their two-story stucco house in American Canyon is on the market for $868,000.”

“‘Obviously, we’d love to sell high but we have to be realistic,’ said Robinson Bellomo, who has lived in the house since it was built five years ago. ‘The market isn’t what it was a year and a half ago.’”

“When the Bellomos bought their house in 2002…they paid $424,000. The Bellomos…upgraded cabinets and added granite in the kitchen, placed an inlay in the foyer’s hardwood floor and added marble and granite slabs in the bathrooms.”

“Saverio Bellomo got his dream library-study with built-in cabinets and the couple added expensive Venetian plaster to many of the walls in the house. The same high-end cabinets and granite countertops used in the kitchen were installed in the laundry room. Every closet got a built-in closet organizer. New built-up baseboard and crown moulding was installed throughout the house.”

“The Bellomos declined to say how much they paid to make the renovations but admitted that even if the house fetches full price they won’t break even. ‘Upgrades are very difficult to value,’ said Napa Valley Realtor David Barker. ‘So much of what people do to their homes they won’t get a return on.’”

The Sacramento Bee. “In the Sacramento region last year, about one of every six homeowners spent more than half his or her gross income on housing, according to a Bee analysis of new census data. That’s 30 percent higher than the 2005 rate, and almost double the 2000 rate.”

“Due largely to an adjustable-rate mortgage, the Cavanesses’ house payments had grown $200 a month, to $2,300 including taxes and homeowner’s insurance — about 60 percent of their $3,800 monthly gross income. Ultimately they defaulted on their loan and last week their home went up for public auction.”

“‘I feel like someone said, ‘Here’s a shovel. Dig yourself a hole,’ Christina Cavaness said.”

“Shortly after they bought their Orangevale home, in 2001, increasing housing prices presented that opportunity to use equity in their home to supplement their income. It worked well for several years. The family refinanced their house at least twice, David Cavaness said, as its value increased. Their cycle became build equity, cash out, repeat.”

“‘We paid off two cars,’ Christina Cavaness said. ‘We paid off some credit cards. We were just trying to survive.’”

“The Baileys made the mistake of refinancing at the height of the housing boom. Now, their mortgage payment is set to increase in October from about $2,700 to $3,400. During a slow month, that’s about half their income.”

“Mary Bailey now knows the monthly payments will increase even more — every six months, according to her reading of the loan. And the property values in the couple’s North Natomas neighborhood are falling, so they figure selling won’t even cover their debt.”

“‘I think everybody is to blame,’ Mary Bailey said. ‘Us for signing the documents. Shame on us, we shouldn’t have. But (the lenders) have also helped to create the problem.’”

The Ventura County Star. “Ventura County’s foreclosure sales spiked 784 percent to 548 from January to June, compared with 62 for the same period a year ago — according to the Real Estate Research Council at California State Polytechnic University, Pomona.”

“Kay Wilson-Bolton, broker in Santa Paula, has dealt with 38 foreclosed properties from February through mid-September, ranging from a $230,000 condominium in Port Hueneme to a $1.15 million house in Simi Valley.”

“‘There’s a flood on the way,’ she said.”

“For Alvarado, it was a combination of many factors that cost him. The maintenance technician bought the home in December 2002. He scraped together the $2,700 monthly payment by pooling resources with several other adults living in the house.”

“But he later took out a $100,000 home equity loan to pay for various expenses, including property taxes. ‘The money went fast,’ he said.”

“‘I feel bad, but I don’t have a choice,’ said Alvarado, who has to move by Oct. 18. ‘I want to keep my home, but it’s too late.’”

“‘Sylvia,’ a Ventura County resident who asked for anonymity…and her husband purchased their house nine years ago for about $200,000. They borrowed against it a couple of times for upgrades and to start a business. When the business failed about two years ago, Sylvia became a Realtor. In early 2006, they refinanced again in a subprime loan.”

“When the interest rate adjusted, their payments ballooned from $2,000 to $4,150 a month. The family could not keep up. As the market softened, members became ‘upside down’ on their home, owing more than what they could sell it for.”

“Sylvia and her husband decided foreclosure was the most viable solution. Her family moved out of their home July 1. Their monthly rent of $1,800 is much more manageable.”

“‘I’d rather rent a home that’s nice and be comfortable, than own a home that’s a burden and struggle,’ Sylvia said.”

“In most markets, a spike in foreclosures provides a better opportunity to score a deal on a house, but it is not necessarily the case in Ventura County.”

“Erik J. Beckstrom, an auctioneer who handles trustee sales, has seen a growing crowd congregate at public auctions held weekdays outside the Ventura County Government Center. There’s been a 50 percent increase in trustee sales during the past three months, he said.”

“But bargains are difficult to find as banks try to recover the total amount owed on homes, leaving a small margin of potential profit for people interested in capitalizing on an investment.”

“Dan Bruce was hoping to bid on a home for his daughter in his housing development. At most, he was planning to bid $1.25 million on a home that he estimated had a market value of $1.75 million to $2 million. Bruce thought the asking price of $1.3 million was too steep, considering it was a blind purchase.”

“He learned the house had been trashed by its former owners, and he had no idea how much he would have to pay in back property taxes. ‘Wait until 2009, it’ll be $800,000,’ another person half-jokingly told him.”

“Dave Kingston, a real estate investor from Oxnard who has been flipping homes since 1971, regularly attends the auction sales in hopes of scooping up deals.”

“But with four unsold homes in his inventory, Kingston is hesitant to buy more. He says he’s discounted most of the properties to a point where he might lose money when they sell. He also expects home prices to drop 10 to 15 percent in the next six to eight months.”

“‘This market is unbelievable,’ he said. ‘There are so many houses for sale.’”

The Union Tribune. “Leti Moreno recalled getting caught up in the excitement yesterday as she bid on a three-bedroom Encanto townhome during an auction of new dwellings built by D.R. Horton.”

“Moreno, who rents in the College Area, said she offered $230,000 for a three-bedroom unit. On the advice of her real estate agent, she stopped bidding when the price climbed higher. The unit finally sold for $250,000, she said.”

“‘It was a little overwhelming,’ Moreno said outside the auction. ‘You know how fast those auctioneers talk.’”

“Real estate agent Steven Moran said fast-paced bidding can be confusing. Some bidders weren’t aware that properties have unpublished minimum reserve prices that may be higher than the starting bid, Moran said.”

“Moreno said she could afford to wait for a better deal because, with the housing boom over, home prices have begun falling in San Diego County. ‘We are in a different market,’ she said.”

Some Stymied House Sellers Have Stopped Holding Out

Inside Tucson Business reports from Arizona. “University of Arizona economist Marshall Vest looked around the room at the Arizona Inn before delivering an economic update last week. ‘Does anyone know a good joke? We need to lighten things up a bit.’ No one offered, so Vest continued.”

“‘The economy is losing momentum,’ he said. ‘Business confidence is plunging, housing is still in a recession – and could be for a while still – and the labor market is deteriorating.’”

“Vest released the latest Business Leaders Confidence Index, showing it fell 8 points. The index, released at the start of each quarter, measures business leaders’ expectations for the next three months. Taken by components, business leaders, both in Tucson and statewide are not optimistic in any one of six categories.”

“‘Anyone have a joke?’ Vest asked a second time.”

“He believes a housing recession has been prolonged and no foreseeable end at this time. ‘We had just an inventory problem with housing before,’ Vest said. ‘Now with the credit crunch we have an even bigger problem in housing that will take longer to turn around. The asset bubble has burst.’”

“The biggest problem of a lingering housing recession, he said is that it was the housing boom that really fueled growth for several years in Arizona.”

“‘Housing accounted for 25 percent of all new jobs in Arizona,’ Vest said. ‘Tucson is selling 13,000 homes annually and there is an eight month supply of housing on the market.’ All those factors in housing are leading to price declines.”

The Arizona Republic. “In a new sign of Phoenix’s slowing housing market, the city’s Development Services Department plans to cut about 10 percent of its staff in coming months for lack of work.”

“‘We experienced a very significant downturn in July and August,’ said David Cavazos, a deputy city manager. ‘There’s a large inventory of existing homes, and whenever that happens, there’s a likelihood that there will be a slowdown in new home construction.’”

“Development Services Director Lionel Lyons said Phoenix officials expected that staff cutbacks would be necessary at some point given the cyclical nature of the housing industry. ‘There’s no conceivable way that the 2004-05 levels could continue without having a downturn,’ he said.”

“During the first six months this year, the number of net new housing units declined in Pinal County, according to data from the Central Arizona Association of Governments.”

“There were 5,152 new houses added in the year’s first two quarters, compared to more than 7,700 in the first two quarters of 2006.”

“‘The declines in completions for the first two quarters in 2007 weren’t as deep as I’d thought they might have been,’ said Jack Tomasik, planning director for the governments association.”

“Though the Valley’s housing market has cooled, it remains one of the nation’s top five markets, said R.L. Brown, publisher of the Phoenix Housing Market Letter. Homebuilders are not likely to stop working.”

“‘Builders are going to bring on new subdivisions,’ he said. ‘It’s going to be a continuing thing.’”

The East Valley Tribune from Arizona. “The Queen Creek region of Pinal County is continuing to burgeon with another new home development under way, even as many area homeowners struggle to sell their properties in a down market.”

“National builder Shea Homes recently opened Cabrillo Canyon, a 107-home development. Canada-based builder Mattamy Homes has started work on 250 homes in two subdivisions in the area. Property owner Magellan Partners Queen Creek LLC is planning a subdivision of 61 custom homes. And Shea is working on a more than one-square mile development that will have nearly 2,400 homes.”

“Homes in Shea’s Cabrillo Canyon will range in size from 1,501 to 2,470 square feet with prices starting from the $130,000’s. The houses are one- and two-story with three to four bedrooms and two to three bathrooms.”

“With the housing market still deteriorating, some stymied house sellers have stopped holding out for a sale and are veering down a different path — becoming a landlord.”

“Would-be landlords may get more than they bargained for. ‘You can’t just sit back and collect rent,’ said author Janet Portman. ‘You’re in for a steep learning curve, and you could easily get into huge trouble.’”

“Renting out a home also has financial implications. Homeowners often won’t be able to command a high enough rent to cover the entire monthly mortgage payment, Norton said. A recent client of Norton’s had a roughly $2,400 mortgage payment but could only get $1,450 in rent.”

In Business Las Vegas from Nevada. “Last week Gov. Jim Gibbons…called for an Oct. 4 economic summit on housing, and Buckley convened a special subcommittee on mortgage lending. In his speech, Gibbons talked about how foreclosure filings have more than tripled since last year and pointed out that during the first six months of 2007, Las Vegas had one foreclosure filing per 31 households.”

“‘Foreclosures are putting downward pressure on home prices,’ Gibbons said. ‘In Southern Nevada, home inventory is at historic levels and 46 percent of those homes are empty. That is negatively impacting home values. For every one percent decline in housing prices, that costs single-family residential property owners $800 million.’”

“There are mixed feelings about how far government should go in helping those who take out loans they can no longer afford.”

“‘Michael Krein, president of the National REO Brokers Association, handles foreclosures in Las Vegas. Krein said he believes in letting the market readjust on its own without a bailout. Most of the foreclosures he handles involves speculators and the homeowners who got hurt are adults who should have known better.”

“‘If you bail out the market with cheap financing, prices stay artificially high,’ Krein said. ‘Just let the market readjust and people will be able to afford a home again.’”

“Who would have thought it? The price of land is so high that some developers in Southern Nevada said they are finding better opportunities right now in California. That was one of the surprising revelations in a recent forum on mixed-use development.”

“‘There is a lot of land out there, but it is way too expensive,’ said Michael Newman, senior VP with the Trammell Crow Co. in Las Vegas. ‘Unless, we see some adjustment here, I have grave concerns.’”

“Newman said there are many landowners who have speculated and questions how long they can hold out given their carrying costs. He said he’s seen land off the Las Vegas Beltway that is priced at $1.3 million an acre and there is no use that would support that.”

“‘It is going to be an interesting dynamic to watch,’ Newman said.”

“Some panelists suggested that some of those land owners and smaller developers are going to lose their properties over the next two years.”

“Douglas Crook, managing director of Christopher Commercial, which is developing lofts, said there are going to be challenges in closing sales given what’s happening with the housing credit crunch. Lenders are tightening up on jumbo loans of more than $417,000.”

The Review Journal from Nevada. “The end is near for so-called stated-income mortgage loans in Nevada because of a consumer protection law enacted earlier this year, some mortgage lenders say. Assembly Bill 440, sponsored by Assemblyman Marcus Conklin, contains a provision that makes stated-income loans a crime, according to some legal interpretations.”

“‘You have an obligation Mr. Bank or Banker, to verify that the story you’re being told (about the buyer’s income) is true,’ Conklin said.”

“Nevada Mortgage Lending Commission Joseph Waltuch has already issued written guidance that his office will not take action against mortgage brokers who collect evidence about a borrower’s ability to repay when documents aren’t available to verify the all the borrower’s income.’

“But critics say that hasn’t persuaded lenders on Wall Street and big banks, who still believe that buying stated-income loans may become a felony in Nevada.”

“Given the possibility of jail time, ‘nobody is going to do that,’ said Brock Davis, president of the Southern Nevada Chapter of the Mortgage Bankers Association. ‘The risk is too big.’”

“Many people who took out adjustable rate loans during the housing boom are already facing the possibility of not being able to make their monthly payments when the interest rates are reset higher, Brock said.”

“The new law could make it even more difficult for many of those homeowners to refinance their mortgages, because they won’t be able to offer proof of income, Davis said. To sell, these homeowners often must write a check for the difference between the amount owed and the amount the house is sold for.”

“For many of the homeowners that get caught by higher mortgage bills, foreclosure will be the only other option, he said. ‘That’s the big wave of foreclosures that’s about to happen,’ Davis said.”

“Bill Ochs, owner of Nevada Mortgage, and other mortgage lenders note that Wall Street has stopped buying so-called ‘liar loans’ and curtailed other lax lending practices.”

“Conklin said increasingly conservative lenders and mortgage loan investors — but not the bill he sponsored — are making it harder to get mortgage loans in Nevada. ‘Some of these loans aren’t going to be made anymore. They’re just bad investments,’ Conklin said.”

Betting On An Uncertain Boom

The Press Register reports from Alabama. “Two years of slow sales have killed many new condo development plans and put others on hold. The inventory glut — almost 3,000 units for sale on Alabama’s Gulf Coast, has kept bankers away and Realtors hunting for buyers. ‘I think it’s going to be an investor market for the next 12 months, and we’re going to see some pretty serious bottom feeding,’ predicted broker Arthur Hood in Birmingham.”

“It could be two years before the market changes, and that’s barring any major hurricane, according to Hood. ‘The market couldn’t continue going like it was,’ he added. ‘We saw stuff literally triple in price’ as few as two years ago.”

The News Journal from Florida. “Like many home builders, Dallas-based Centex Homes is trying to remain profitable, particularly in the Volusia-Flagler market, in the face of a disastrous housing market.”

“Its Jacksonville-based North Florida division is pressing on with three condominium communities in Flagler County, company officials said earlier this month.”

“‘We’ve taken early actions to improve our competitive position in every local market,’ said Carl Holman, operational marketing manager in Jacksonville. ‘This includes evaluating every project in every market and making prudent long-term decisions.’”

“‘We tried to put some deals there that didn’t work out,’ said Brett Lundequam, president of Centex’s Orlando division. ‘For every 10 projects we put our name on, maybe only two will stick.’”

“Other home builders besides Centex are backing out of land deals, said Costa and commercial Realtor Roger Baumgartner. ‘A lot of builders are just walking away, absolutely,’ Baumgartner said. ‘That’s not a good thing.’”

The News Press from Florida. “With its new advertising campaign and attention-grabbing slogan — ‘The End is Near,’ Engle Homes is spreading the word that the days of declining prices for its existing housing stock are reaching an end.”

“The print and electronic media ads are intended to make clear that rock-bottom has been hit and the existing inventory is shrinking, said Bruce J. Hershey II, VP of sales and marketing. ‘Once it’s gone, it’s gone,’ he said. ‘It’s a buyers market. The market is going to come back and once it does and there’s no more inventory, you’re not going to be able to come into a sales center and negotiate. Prices will never be lower. Incentives will never be higher. The end is near. Now’s the time to buy.’”

“Q: Why did Engle Homes initiate the campaign?”

“A: ‘There are a lot of people out there asking, ‘Should I buy now, should I wait, are prices going to continue to drop?’ The answer is no, it’s over, prices are not going to go down any further. Incentives are not going to get any better. Now’s the time to buy. That’s what we want to make sure that we educate the customers about — that it’s not going lower. It can’t. I can’t do it anymore. We’ve reduced the prices of the homes as low as we can. … Forget about the bad press, because there are a lot of good things.’”

“Construction superintendent Dan Bickes was glad to leave the Michigan rust belt five years ago for a six-figure job running condominium projects in Florida.”

“But after working at three different condo sites in Volusia and Flagler counties, he can’t find a construction job that will pay him $100,000 or more, so Bickes and his wife, Dixie, are packing their bags for an Atlanta suburb.”

“‘There are no more high-rise projects coming on line this year, and it doesn’t look like there will be any more for years and years, so we’re getting out,’ Bickes said. ‘It’s very disheartening.’”

“The Bickeses are not alone. More than 13,000 people left Volusia and Flagler counties for other states last year, twice the flow of earlier years, according to the Internal Revenue Service.”

“‘My feeling is there’s a big potential problem in the soft real estate market,’ said Chris McCarty, who supervises a statewide consumer confidence survey at the University of Florida. ‘A key part of our economy is based on people being able to move. If people can’t move, then the economy suffers.’”

The Wall Street Journal. “For almost a century, Florida has been a magnet for mobile Americans. The state’s plentiful sunshine and open space has attracted “snowbirds” fleeing winter, retirees living out the last chapter of their lives and down-on-their-luck workers in search of jobs.”

“Florida has become a less-appealing destination. Moving company Atlas Van Lines brought 6,700 families into Florida last year and took 8,000 out, the first time it has moved more out than in. The number of people from other states who switch to a Florida driver’s license is down more than 8% from last year.”

“‘Growth is what Florida is known for,’ says Carl Hiaasen, the Miami Herald columnist. “Florida is in the business of cramming people into real estate for absurd prices.’”

“A few months ago, Randy Quinones, a retired plumber in New Hampshire, was gearing up to leave the chilly Northeast and live out his days in Florida. He got ready to put his home on the market…but Florida housing prices caused him to look elsewhere.”

“‘It didn’t fit our budget, so we didn’t do it,’ he says: Instead of Gainesville or Ocala where prices were $250,000 to $300,000, Mr. Quinones moved in May into a home outside Knoxville, Tenn., that cost $207,000.”

The Herald Tribune from Florida. “The conventional wisdom is that booming growth for Florida is as sure as orange blossoms in spring and hurricanes in summer.”

“But some economists — armed with fresh anecdotal evidence — think that, at least in the short term, high insurance rates, high property taxes and heady competition from other retirement states is taking some of the wind out of the Sunshine State’s sails.”

“The old axiom says that Florida picks up 1,000 residents each day, but evidence is mounting that this long-lived assumption is no longer valid.”

“Earlier this year, Allied Van Lines reported that outbound residents outnumbered inbound for both Florida and California.’We have Realtors taking Floridians by the busload to buy in North Carolina,’ said consultant Jack McCabe.”

“Chuck and Linda Edwards are trying to snip their Southwest Florida ties while setting up shop in a rural South Carolina town that they expect to boom. They really fit into two categories because they are disenchanted Southwest Florida real estate investors as well as half-backs.”

“They moved to Bradenton from Maryland in 1993 and have spent the last 13 years investing in houses, rehabilitating them and renting them. They have done 40 in Southwest Florida, and so far, have made money on every one.”

“The only problem is that they have 11 in Sarasota and Manatee counties left to sell.”

“Late last year, the Edwardses pulled up stakes and moved to Georgetown, S.C. They will soon list a newly tuned-up, 3,500-square-foot house for $249,900. Then they will take on a bigger project: a house half-wrecked by a large pecan tree’s limbs.”

“‘Prices are pretty cheap here,’ said Chuck Edwards.”

“Sarasota Realtor Diane Christner is charged with selling the Edwardses’ leftover local listings. The couple’s previous residence, completely renovated with 140 feet on the Braden River, is listed for just under $400,000.”

“‘It has been on the market since spring,’ Christner said. ‘Obviously, we started up higher, around $500,000.’”

The Florida Trend. “Whether chased north by the heat, the hurricanes or property-tax and insurance costs, more Floridians are buying second homes in western North Carolina — or packing permanently for the mountains.”

“And Florida home builders are following their customers north. Seeking to diversify operations as they ride out Florida’s housing downturn, the builders are buying up mountaintops and developing them by the thousands of acres.”

“But they are betting on an uncertain boom. For in these cloud-laced mountains, Florida history is repeating itself in a dozen different ways. In some areas, speculators have lost money on development deals that proved too good to be true.”

“‘You see many of the same people operating under different business names in both markets, and the same speculators speculating in both markets,’ Western Carolina University history professor Richard D. Starnes says. In the 1930s, he says, ‘When the Florida market crashed, the Asheville market followed.’”

“Having experienced a seedy side to the housing boom, western North Carolina is beginning to see there can be a downside, too. Asheville-area counties that had bucked the national housing downturn began to see a slowdown this summer that in some cases is tied directly to Florida’s.”

“Every real estate broker seems to have stories of buyers who couldn’t close on the purchase of a mountain home because they couldn’t sell a home in Florida.”

“In Asheville, broker Joe Grady advises sellers not to make deals that are contingent upon a home sale in Florida. He’s even advising his brokers not to bother with Florida customers who have to sell their homes in Florida: ‘Do not get them in your car; do not play chauffeur; do not give them the tour,’ he says. ‘In our experience, it is taking them a long, long time to sell.’”

“Just ask Daniel Longen, and fiancée Susan Brady. Last year, with their Naples home on the market, the couple bought a home in the western Asheville suburbs, looking forward to four seasons.”

“When their Naples home languished on the market, ‘I woke up in the middle of the night one night and said we’re not in too bad shape today, but this could get to be a really bad situation,’ Longen says. The couple decided to put the Asheville home up for sale, too, and to live in whichever one didn’t sell. Two weeks later, they headed back to Naples.”

“‘I’m disappointed, but not terribly because Naples isn’t that bad, and people really seem to be working on the things we were critical of, like homeowners insurance and taxes,’ Longen says. ‘But those mountain vistas sure were nice.’”

Local Market Observations!

What do you see in your local housing market this weekend? Industry layoffs? “Charlotte-based online mortgage broker service LendingTree announced late Friday it will lay off 255 people, or 17 percent of its workers in its mortgage origination business. Most of LendingTree’s cuts will be in Irvine, Calif., and Jacksonville, Fla.”

“The cuts reflect ‘the current realities of the market,’ spokeswoman Rebecca Anderson said.”

Lending difficulties? “Jack Haynes, executive VP with Countrywide Home Loans, said lenders are having a hard time interesting investors in purchasing the mortgages they make. ‘Things are stacking up on everybody’s shelf,’ Mr. Haynes told builders meeting in Grapevine for the Sunbelt Builders Show. ‘At a certain point that will strangle the mortgage industry if it doesn’t get some relief.’”

Or REO discounts? “In 10 of Akron, Ohio’s hard-hit neighborhoods, a report given to the city council this week said 79% of all homes sold from February to August this year were unloaded by lenders for a fraction of their value. In Akron, as elsewhere in the USA, the dumping of foreclosed homes on the market has squeezed both builders and sellers who must compete against additional properties.”

Or foreclosures? “The flood of foreclosed homes has stretched the staffing limits of the Marion County, Indiana’s sheriff’s civil division and drenched the resale market with so many properties that it has nearly dried up profits for investors who deal in homes.”

“Despite facing more foreclosures than any other county in the state, Marion County remains the only one that hasn’t capped the number of properties per month it puts into its sheriff’s sale. That’s done out of fear the county would never catch up.”

“‘If we were to cap these, it would just be chaos,’ said Shirley Challis, commander of the civil division. ‘We do not see daylight now. We are working on three sales all the time’ — the last and current ones, plus the next one.”

Or speculation? “Housing prices in the Edmonton area continue to drop. But that’s not stopping homeowners from putting up ‘for sale’ signs in record numbers.”

“‘I haven’t had a call yet and my place has been listed for three weeks,’ said Jason, who’s selling a new home for $455,000 after building it for just $270,000. ‘The market has loosened up but the boom isn’t going anywhere.’”

“Shashi is selling her home for $475,000 after buying it last year for $329,000. She only had three calls since listing the house two months ago. ‘I’m not in a rush to sell, but I can tell people aren’t in such a rush to buy either,’ she said.”

Bits Bucket And Craigslist Finds For September 30, 2007

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

September 29, 2007

There’s Nothing Moving In California

The Union Tribune reports from California. “Home builder D.R. Horton has clamped down on public attendance and media coverage of a planned auction today of condominium units at two San Diego developments amid a growing national interest in its marketing strategy. ‘We are going to be closing the auction to the press tomorrow,’ said Michael Schack, senior VP of REDC. ‘We are only allowing registered bidders in. We are not allowing cameras, photography, press, media. It is not our choice.’”

“Earlier, Schack had said anyone could attend but bidding would be limited to registered participants. Schack declined to give a reason for the new restrictions but said they were the decision of D.R. Horton.”

“Builder Michael D. Pattinson, who heads Carlsbad-based Barratt American, contends that such auctions could cause consumers to wait on the sidelines for deeper price cuts.”

From NBC San Diego. “This weekend, there’s another auction, but this one has a twist. Fifty-three condominiums in North Park will be on the block. The units are not foreclosures; they are brand-new units…built by developer D.R. Horton.”

“The homes have previously been valued at $309,990 will have starting bids of $149,000. Bidding for units previously valued at $546,900 will start at $249,000.”

“Bob Green already lives in the La Boheme units in North Park. He said he has mixed feelings about the auction.”

“‘The gut reaction of course is I don’t want my unit to be devalued because of it. That’s my gut reaction. But I also understand that there’s nothing moving in this market place,’ Green said.”

The Sierra Star. “Scott Runtzel is a local broker who is also a licensed appraiser and has worked on the lending side of the industry. Runtzel gave several examples of how the mass of foreclosures are affecting local Real estate prices.”

“‘There is a beautiful three-bedroom, two-bath house listed in the Yosemite Lakes Park area for $325,000,’ he said. ‘But just around the corner is a three-bedroom, two-bath foreclosure house, listed at $233,000. Which would you choose?’”

“Runtzel said he also has a four-bedroom, two-bath home, with a two-car garage, horse arena and five fenced pastures in Raymond. ‘It has been on the market for $760,000,’ Runtzel said. ‘It went into foreclosure, and I now have it listed at $544,900 with no offers yet.’”

“Runtzel said some houses will go for a ‘fire sale’ compared with what they would have cost two years ago.”

“‘It looks bad now, but it is going to get a lot worse,’ he said. ‘I’m not sure what some of these people were thinking, but the two-, three-, five- and seven-year ‘teaser’ mortgages all have escalating payments. We have seen the foreclosures for the two- and three-year escalations but the five- and seven-year ‘teasers’ have yet to hit. This is just the tip of the iceberg.’”

“Nevertheless, Runtzel said all of these foreclosures do not mean the real estate market is unhealthy.”

“‘When you get a flood of foreclosures on the market it does have a slight tendency to bring the overall market down,’ Runtzel said. ‘However, this is still a healthy market. The market in 2001 to 2003 was abnormally high. The market today looks bad, only if you are only comparing it to that abnormal high.’”

“Linda Cavalla, trustee sales officer for Chicago Title, said she has seen a huge upswing in the local foreclosure numbers. ‘We used to open an average 25 foreclosure proceedings a month for our company,’ Cavalla said. ‘Since last October that has been increasing, and we now open at least 35 to 70 each month. We have been quite busy.’”

The Sun Post. “Housing speculators share the blame for a growing portion of the foreclosures in Manteca. In August, 41 percent of the Manteca homes sold at courthouse foreclosure auctions were owned by people who never lived in them, according to an online foreclosure tracking service.”

“According to the service, the foreclosures on investor-owned properties have skyrocketed since four months ago, when just 5 percent of the houses sold at auction were owned by people who did not apply for a tax break available only to those who live in their houses.”

“Deborah Romero, a loan officer in Ripon, said she looked at auctioned homes in Manteca during the first two weeks of September and found only 16 percent where the billing address for the mortgage did not match the address of the home. However, Romero said she wouldn’t be surprised if another 10 percent had lied about their residence.”

“The national Mortgage Bankers Association’s chief economist, Doug Duncan, blamed investors for fueling excessive home building and then walking away from their bet.”

“‘Rapid price appreciation attracted both speculators and home builders, a volatile combination that led to an over-supply of homes,’ Duncan said. ‘When this over-supply became apparent and prices began to fall, many of these investors simply walked away from their mortgages.’”

“Besides the real estate agents and mortgage companies that have been stung by the rising foreclosures and falling home sales, sellers of big-ticket items — such as furniture stores and car dealerships — are also seeing a downturn.”

“The problem, according to local retailers, is that buyers relied on rising home prices and easy access to borrow cash from home equity lines of credit to make big purchases. Forced to operate on a smaller budget, those people are sticking to the necessities.”

“Sam Guedoir, owner of Century Furniture in downtown Manteca, who has run the furniture store since 1995 out of a building he owns, says his sales have been down significantly during 2007. He’s been forced to sell furniture at lower prices to ride out the slump.”

“‘I usually work on clearances — try to make stuff more affordable for people,’ Guedoir said. ‘We’ve started selling more small-sized furniture because people are moving back into apartments.’”

“‘We have left most of our eggs in one basket,’ Guedoir said. ‘Manteca is in many ways a bedroom community. If the bedroom is affected, the whole community is affected.’”

“Car dealers face similar problems, even though their business is not directly related to having a place to live. Mike Naranjo, who runs a used-car dealership, said his business has performed ‘just like the housing market.’”

“His sales are down 30 percent, he said, the worst sales clip he has seen during his seven years operating the dealership. ‘I’m just trying to squeeze,’ Naranjo said. ‘What would you do? Get a car for $2,000 or make your house payment?’”

From KCBS. “Residents in East Contra Costa County, which is considered the center of growth in the East Bay, are worried about what the next two years might bring for homeowners.”

“Foreclosures and delinquency notices have been making life miserable for many homeowners in east Contra Costa who thought they were riding the coat-tails of a booming housing market.”

“‘It’s true that Contra Costa is probably the worst region in the Bay Area,’ said economist Christopher Thornberg. ‘In a large part it’s because of those new housing developments that have been forming here over the last few years.’”

The Daily Bulletin. “A softening housing market cost the county $70 million in anticipated property tax last fiscal year, and county officials are concerned that it could cost millions more this year. Property taxes represent about 60 percent of the county’s discretionary revenues, and brought in $2.39 billion for 2006-07, according to the county CEO’s office.”

“But that was $70 million less than expected, Supervisor Gloria Molina said this week. And the county is bracing for another hit, said Molina spokeswoman Roxane Marquez.”

“‘The big question is, what will be the magnitude of the hit?’ Marquez said. ‘Will it mean that we just don’t enhance services? Or does it mean we have to cut services?’”

“As home values in the county continue to decline, a wave of homeowner-requested property reassessments could result in a similar shortfall for fiscal year 2007-08, which began in July, officials said.”

“A wave of reassessments is already on, as property owners are ‘lining up’ at the Assessor’s Office, county CEO William Fujioka told the supervisors Tuesday. Many are seeking to have their home values reappraised to bring them in line with the declining market, he said.”

“Property-tax bills are also based on the previous January, Assessor Rick Auerbach noted, meaning that people’s property-tax bills will not go down, and their home values will not be reassessed down, unless the homes were cheaper in January 2007 than their October 2007 property-tax bills show.”

“‘The housing values in L.A. County didn’t start changing much until after January,’ Auerbach said.”

About The Buyer Psychology

Readers suggested a topic on who is buying. “I propose the following weekend topic: With all the bad news from the housing market, you’d have to be an idiot to buy now, right? Yet people are still buying. Are they deluded homeowners, or knife-catching ‘vulture investors’ who are going to be creamed when prices crater? If you know of a friend or rellie who made the mistake of purchasing recently, ask them ‘what were they thinking?’ and post the results back here. I’d be interested in reading about the buyer psychology.”

One replied, “My new (Maine) landlord closed on this house just a month ago. He is a retiring Federal employee, maybe he got a lump-sum distribution. He thinks he got a good deal here, because the price he paid is 30% below the original 2005 asking price of $650K. Shorefront, 2000+ s.f.”

“When he told me he had done very well with the purchase, I ‘yessed’ him - why ask for trouble? I am paying him $1,000 a month to rent his $450,000 alligator, and during the winter, when I am not here, the young couple of housemates with local parents will pay me $420/mo, most of which will go on heat.”

“You might say that it is I who am spending foolishly, and there is some truth in that; my point really is that the landlord is fortunate to collect even $1000/mo from a creditworthy customer. He thinks he will sell his inland NH house within a year. Stay tuned.”

Another said, “I’m considering buying soon. In central Aarkansas, we tend to lag national trends. The bubble lagged and the burst seems to be lagging.”

“I want to get out of the neighborhood scene, get some more room in the house, get a piece of land (5 acres? 25 acres?). So, is now a good time to buy? Probably not the best.”

“I expect to buy some time next year. I figure something in the neighborhood of 170k, I should be able to get a decent house with a couple acres for that. I am also not in a hurry at all, so I expect to make a purchase that is a ‘good deal’ at the time of the purchase. Of course, a ‘good deal’ now is just ‘fair market’ in six months. If I lived in a huge bubble area, I wouldn’t consider it.”

One looked back, “They are thinking in exactly the same way investors in the tech bubble thought. That is, ‘It can’t drop much more can it?’”

“Only if you have been through (and experienced the financial pain) of a bubble bursting, do you NOT reach out and catch a falling knife. Almost all who were invested in the tech bubble had very little experience with the stock market (myself being one of them) and thought the prices would bounce back. I myself was invested very heavily in the QQQQ’s (then the QQQ’s).”

“As it happens, I was away in europe and I got out of the market before I left because I couldn’t watch it on a daily basis. As in the property bubble, the buying and selling was fast and furious at the height. Bubbles are ALWAYS the same. I was following an ‘expert’ who advised his news letter subscribers to buy the QQQQ’s (long) at $84.00. They had already dropped from $120.00 at that point and the newsletter said they were a bargain. (Gee, where have I heard that before?).”

“However, and here’s the lesson and the irony, when I got back from europe, the QQQQ’s had dropped to $65.00! I read the newsletter and he had made no mention to his readers that they should sell. ‘Wow!,’ I thought, ‘How can I go wrong!?’ I plowed big bucks into the QQQQ’s at $63.00, thinking, ‘If an expert like him thought the QQQQ’s were a bargain at $85.00, what must they be at $64.00!’”

“Well folks, what is going to happen with property is what happened with the QQQ’s. I and others (the mirror images of todays FB’s and speculators ) hung in. It had to bounce back. Right? Wrong. Thousands of ‘hot companies’ tanked and many went bust. Just like some of the builders, banks and realtors and brokers are going to go bust.”

“Where I was concerned, the QQQQ’s dropped to $55.00. (That’s okay they will bounce back soon). Then $45.00. (That’s okay they will bounce back soon). Then $35.00. (That’s okay they will bounce back soon). Then $25.00. (Jeez, I wish I’d sold at $60.00 but it’s okay they will bounce back soon).”

“Of course there were the odd mini-rallies as the ‘falling knife catchers’ jumped in and bought but the bubble continued to deflate. As it always does until capitulation day arrives. The QQQ’s finally hit a $20.00 low after falling from $120.00.”

“THAT is exactly what is going to happen to property values. Other forces could come into play which might affect, one way or the other, the eventual outcome. However, it will make no difference. This problem is worldwide. I fully expect prices to drop at least 50% from the highs. Possibly much more. A property worth $700,000 at the height will drop to $350,000. THAT is the path ALL bubbles have taken. I’ve now read volumes on the outcome of bubbles and it’s amazing how the pattern repeats time and time again for hundreds of years.”

“THUS: Now is NOT a good time to buy. Now is a good time to sell if you own property.”

A response, “The amazing part (IMO) is how predictable this is, yet how unbelievable it seems while it plays out.”

The Economist. “The S&P/Case-Shiller national index, the best gauge of American house prices, peaked last year after rising by 134% in the previous decade. France, Sweden and Denmark have all had booms of similar size.”

“In Britain, Australia, Spain and Ireland, the ten-year increase in house prices has been even larger. If America is staring at a nasty housing crash, what does this say about the fate of frothy markets elsewhere?”

“What sets America apart is the time-bomb laid by subprime mortgage lending in the late stages of the housing boom…In short, dangerously loose lending standards fuelled America’s housing boom and now the fallout from increasing defaults is exacerbating the bust.”

“The Federal Deposit Insurance Corp reckons over 1.5m households will eventually be unable to meet their mortgage payments. Prices are falling and more forced sales will add to the already swollen stocks of unsold homes.”

“What might this presage for Europe’s overpriced markets? Robert Shiller, a seasoned bubble-hunter at Yale University, has stressed the role of news reporting in influencing price expectations. If America’s slump deepens, it might trigger a reassessment in Europe’s property hotspots, particularly as tighter credit markets start to price out the more speculative investor.”

“No one knows for sure how markets in Europe might respond to events in America. But one thing is certain: when it comes to asset bubbles, bigger is not better.”

The Message Is Finally Getting Across

The Saugus Advertiser reports from Massachusetts. “Homebuyers are paying less these days to jump in to the Saugus market, following the nationwide trend. Prices have fallen to an average of $380,100 for a single-family home in Saugus, according to MLS statistics. At the same time, it’s taking longer to sell a home. The Saugus market peaked in 2005 with an average sales price of $404,000 for the 285 single-family homes that were sold that year.”

“Meanwhile, there have been 47 foreclosures in the town of Saugus in the past 180 days, according to ‘The aggressive predatory mortgage industry put a lot of people in a bad situation,’ said Arthur Coombe of Century-21 Coombe Real State.”

“He further explained that homebuyers with variable mortgage rates and no money down are in the biggest trouble. The market had been rising steadily for nine straight years, added Combe, who said that it was inevitable that an adjustment period would eventually take place.”

“‘I see a change with sellers and buyers coming to grips with the market,’ added Rick Parziale of Red Coach Realty, who gave the example of a seller from Indian Rock Hills whose home might have sold for $725,000 during the recent market peak, but would now probably get closer to $625,000 for the home.”

The Boston Globe from Massachusetts. “More than 9 percent of all homeowners in Massachusetts with adjustable-rate home loans, about 10,000 borrowers, are facing larger housing payments when their mortgages reset to higher interest rates over the next three months. The total value of all those loans, according to First American LoanPerformance, is $2.45 billion.”

“‘This is an unprecedented wave of resets,’ said Wellesley College economics professor Karl Case. ‘It’s going to lead to a credit crunch for people who will find it hard to find loans,’ he said.”

“‘I don’t know how I’m going to survive,’ said Sana Masoud, a single mother facing a $600 a month increase in one of two mortgages she obtained to buy a two-family house in Brighton for $712,000 in 2004.”

“That mortgage will reset on Dec. 1 to 7 percent, from 6.125 percent, pushing up Masoud’s total monthly housing costs to $4,350. She rents the second unit for $2,400 and earns $63,000 a year. But her income will not be enough to cover the mortgage and other expenses, such as property taxes, college tuition for her eldest daughter, and ongoing medical bills for her youngest daughter.”

“‘I don’t want a foreclosure,’ said Masoud, who is asking her lender to renegotiate her mortgage.”

The Staten Island Advance from New York. “Ada Diaz’s belongings are packed in boxes, ready to be moved sometime in the next 10 days. The bank recently sent her a notice to get out of the Mariners Harbor home she owned for 17 years before losing it in July to foreclosure, the result of a series of increasingly calamitous subprime mortgages.”

“Ms. Diaz refinanced four times over the last four years, public records show. WMC Mortgage Corp., where Ms. Diaz got her last and what she says was her worst mortgage in 2005, was recently shut. A Long Island-based mortgage broker solicited Ms. Diaz and originated the last loan, allegedly falsifying her income in the process.”

“‘We wish Ms. Diaz’s case was unique but it’s not. It’s happening all over America,’ U.S. Sen. Chuck Schumer said during a visit yesterday with Ms. Diaz at her Grandview Avenue townhouse. ‘It’s just criminal,’ he added.”

“She said she was seeking some extra cash to finish work on her house. Loan documents show her income was listed by the broker as $8,000 a month. The broker also said she worked at a cleaning service, even though she was retired and not working at the time.”

“What was supposed to be one mortgage payment turned into two payments of $1,769 and $550, respectively, for a combined total of $2,319. The first mortgage was slated to reset next year to $2,314, and the total monthly payment represented more than 90 percent of Ms. Diaz’s income.”

“The broker, meanwhile, made $10,000 to originate the loan, noted Margaret Becker, director of the Foreclosure Prevention Project for Legal Services NYC/Staten Island.”

The New York Times. “With home foreclosures on the rise, buying a property in default may seem a sure route to profit or, at least, a cheap way to get a home. It can be. But it is not an endeavor for the shallow of checkbook or faint of heart.”

“‘Before, even if you didn’t know what you were doing, you were safe because the general market was on the upside,’ said Joseph Tammaro of Brooklyn, a real estate agent and investor. ‘Now, when you buy foreclosures in today’s market with property values in decline in certain areas, you have to be careful because you might be catching a falling knife.’”

“Brad Rozansky, a real estate agent in Bethesda, Md., cautioned against thinking that buying and selling foreclosures is an easy way to make a living. ‘I have plenty of customers who have lost $20,000, $30,000 or $40,000 on a house,’ he said.”

The New Haven Register from Connecticut. “Connecticut’s home building market continued to pull back in August, with the number of permits issued falling 13 percent from July levels. For the year to date, the number of permits issued statewide was down 12 percent at the end of August.”

“Mark J. Nuzzolo, owner of Brookside Development LLC in Woodbridge, said…a logjam has been created as many potential buyers put off making a move in anticipation of further price drops. ‘Clearly sales are down, and as builders we’re a lot more cautious today than we were in the last recession. We’re not anxious to run out and start building new houses,’ he said.”

“Nuzzolo said people are attending open houses and expressing an interest in buying new homes, but many cannot find buyers for their current homes.”

“‘There are so many homes on the market now that buyers are becoming paralyzed by the choices they have,’ he said. ‘Everything is bogged down, and people are very nervous.’”

The Washington Post. “If there’s anything real estate experts agree on these days, it’s that you should not buy property unless you are willing to keep it for years.”

“‘I think a person who’s buying, they’re not going to do quick flips,’ said Sara Rubida, an agent in Arlington. She said she advises her clients to be prepared to own their home for at least three years to break even or make a profit on their investment. ‘But I’d feel more comfortable if they lived there at least five years.’”

“‘The investors who got into the market recently are really paying the price’ for not treating real estate as a long-term investment, said Gregory H. Leisch, CEO of a research firm in Alexandria.”

“‘Try to save some money so you can come up with a 20 percent down payment,’ advised Tom Bryan, a senior VP of Coldwell Banker Residential Brokerage.”

“With Washington area prices as high as they are, that’s no easy feat. As of May, the median condominium resale price for the metro area was $303,968, and the median single-family house resale price was $465,726, said Leisch.”

“So you’d better have about $61,000 or $93,000 sitting around if you want to get a decent mortgage.”

“Condo resale prices in the past 12 months fell in the District and Northern Virginia. New condo prices, meanwhile, declined 0.5 percent across the metro region, according to the Delta report.”

“‘We’re not going to see too much of a rise in the market until all these foreclosures are cleared up, and that’s going to take two to three years,’ said Randy Morrow, an agent in Arlington.”

“In 2005, the pipeline of apartment units planned for construction over 36 months was 18,000. As of June, it had ballooned to 31,030 units, according to Delta.”

“For the first time in a long while, the tide may be turning in favor of renters. ‘It looks as though, through anecdotal evidence so far, rents are pretty flat from last year this time,’ Leisch said. ‘We were predicting that rents would turn flat for the next year or so because of all the condos turned into rentals. The more supply, the less pressure there is on rent.’”

The Virginia Pilot. “South Hampton Roads is not experiencing the condo collapse that has plagued some big cities, but in the past year, prices have fallen more than 20 percent, units are staying on the market about a month longer, and condo building permits have fallen off.”

“‘This is a very tough time to be building these high-rise condominium projects,’ Norfolk Mayor Paul Fraim said, adding that the shortage of credit is killing projects nationwide, especially condominium developments.”

“James V. Koch, an economist and former president of Old Dominion University who oversees the school’s State of the Region report, said the climate in Hampton Roads does not appear to differ greatly from the national situation.”

“‘Verbal reports I have received indicate that some condo buyers are walking away from their condo prior to purchase,’ he said. ‘They forfeit their deposits rather than purchase units that in some cases have fallen in value since the deposit was made.’”

“The median sales price of a condo in South Hampton Roads, for example, has dropped about $60,000 in the past 12 months, from $289,272 to $229,900, according to the most recent data.”

“Not many people are willing to put money down on a condo they can’t see, said developer Bart Frye, of East Beach. ‘When the market was white-hot, people were buying without doing as much due diligence as they do now,’ he said.”

From WVEC in Virginia. “The housing market in Hampton Roads is making some condo developers reevaluate their projects. Crews are hard at work on the East Beach Villas in Norfolk. When they’re done, there will be 20 new high-end condos and it’s owner Bart Frye’s job to sell them in a tough housing market.”

“‘Unless you were living on an island someplace by yourself, you’d be concerned about the market,’ said Frye.”

“Several local condo developments are now on-hold, like the Point Chesapeake project. Economist Dr. Vinod Agarwal says he’s not surprised by builders’ reactions. There are more condos on the market this year than last year, and they take longer to sell, so developers are cancelling projects and lowering prices for new condos.”

The Daily Press from Virginia. “The first home price drop in more than five years means that everyone involved in real estate in Hampton Roads is about to stare down the biggest boogeyman of the business: buyers’ expectations.”

“Hampton Roads home sellers came to grips with their own expectations and finally recognized in August that they no longer had the upper hand on price in an oversupplied market. August marked the first month since February 2002 when the median price of a home in the region was lower than that from a year earlier.”

“‘The message is finally getting across to sellers,’ said said Perry Pilgrim, broker in Hampton.”

“Now that seller psychology is changing, will the consumer get stubborn and wait? Pilgrim said anyone who needed to move would find no problems finding a good deal and mortgage. The buyers who hold out are the marginal ones just looking for a deal that blows them away, he said: ‘Some percentage of buyers are always going to wait for the best deal.’”

Bits Bucket And Craigslist Finds For September 29, 2007

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

September 28, 2007

Taking Great Comfort In The Triumph Of Rationality

It’s Friday desk clearing time for this blogger. “The mulish housing market will bedevil us for another year or so, a pair of economists predicted. ‘Sellers are having trouble getting over the fact that they can’t get 10 percent appreciation anymore, and buyers are looking for deals at $50,000 or $100,000 off asking price,’ said Dennis Winters, chief of the Office of Economic Advisors for the Wisconsin Department of Workforce Development. ‘In my neighborhood, they’re lopping $30,000 off asking price. That’s 10 percent.’”

“For the first time in more than a decade, Palm Beach County’s taxable value is expected to drop next year by 5.4 percent, according to preliminary estimates. But Mayor Lois Frankel said she saw a silver lining.”

“‘I think that it’s better to have more realistic prices,’ she said. ‘The cost of housing has been too high. Maybe we’ll get some reality here.’”

“No doubt about it, the pace of new home building in Central Oregon, as in the nation, has sagged badly this year. People who sell cars, furniture, and other expensive items that would be expected to feel pain in a weakening housing economy say business has been fine this year, if not as easy as it was when houses were selling like iced drinks on a hot day.”

“For Bill Moseley, president of a software company, weakening in real estate prices is good news.”

“‘The builders, I understand their frustration, and their importance to the economy. But to someone who is in manufacturing and production, like we are, high housing values are not in our interest,’ Moseley said. ‘It puts too much pressure on wages. Our customers don’t care what it costs to buy houses in Bend. We have to keep that in mind.’”

“Prices for high end homes in China’s capital have been bouncing to record new levels all year, even with dramatically fewer transactions, rental prices flat and many new units empty. Some showrooms have fallen dead quiet.”

“And the euphoria is running particularly high as the Beijing Olympics approach, analysts said. ‘Market growth is the rule here,’ noted Anna Kalifa, the head of research for Jones Lang LaSalle in Beijing. ‘It’s just a question of more or less.’”

“For the first time the Reserve Bank named pockets of Australia, particularly in western Sydney, where it believed households were under financial stress. A Reserve Bank analysis points to regions in NSW, Victoria and Queensland where mortgage payments are consuming more than 30 per cent of household income.”

“‘A disproportionately large number of borrowers in this part of Sydney took out investment housing loans around the peak of the house price cycle,’ the Reserve Bank says.”

“A substantial erosion in housing affordability over the past few years combined with a surge in new listings has started to bring the Calgary housing market back down to earth, says a TD Bank Financial Group report.”

“‘Notably, in Vancouver and Calgary, a substantial erosion in housing affordability over the past few years has started to weigh on demand. This development, combined with a surge in new listings, has started to bring those markets back down to earth,’ says the TD report authored by economist Pascal Gauthier.”

“The report says the ‘main corrective force’ currently at work in Canada’s hottest markets - Calgary, Edmonton and Vancouver - is affordability.”

“Sales of new homes in the United States sank to their lowest level in nearly a decade last month. There is now an eight-month supply of newly built homes, twice the backlog there was when the market was booming. The median sales price was $225,700 last month, down 7.5 per cent from a year ago.”

“The full impact of the credit crunch hadn’t even hit the mortgage market in August, suggesting further declines in the months ahead, said economist Ian Shepherdson. ‘People don’t like borrowing to buy depreciating assets, and lenders don’t like to lend on them either,’ he said. ‘Housing is nowhere near bottom.’”

“Eyewitness News has uncovered an amazing case that involves a victimized grandmother in San Diego, a failing Los Angeles loan company and a Las Vegas man who doesn’t care who he hurts.”

“‘I’m struggling right now,’ said Paul Mangione. He is about to lose his house to foreclosure. ‘I was ready to flip out. That’s why my walls look like this,’ Mangione says he went nuts and took a crowbar to the walls.”

“The former head of the US Federal Reserve has denied that regulators failed to foresee the problems which caused the global credit crunch. Alan Greenspan said they had not acted on concerns about complex and risky financial deals because only very wealthy people invested in them.”

“‘Hedge funds, who are presumably the largest culprit of all of this, are organisations in the US in which wealthy investors invest, Greenspan said. ‘I must admit that I do not have considerable concern about their net worth going from 40 million to five million, which in many cases is what’s happened.’”

“Back in the 17th Century in the Netherlands, there was a mass rage for, of all things, tulip bulbs. Prices got bid way up, and speculators jumped in to bid them up higher still. But eventually the market fizzled and prices plunged.”

“If I had been one of the people who invested in flowers during the frenzy, I would have felt bad to lose my money. But I like to imagine I would also have taken great comfort in seeing the triumph of rationality.”

“Back in 2005, you could hardly hear a word about real estate without wondering who repealed the law of gravity. At the peak last year, home prices in this country were up 134 percent over the previous decade. They are not rising anymore.”

“In truth, the great majority of us will be better off in the long run if the housing bubble has finally burst. Most homeowners, after all, don’t face foreclosure even if their houses are suddenly worth less than before. Not until they sell will they take a hit. But even then, the pain should usually be mostly theoretical.”

“Of course, speculators who sunk money into second homes and investment properties figuring they could flip them in a year or two for a handsome profit will also get the short end of the stick. But that’s why it’s called speculation, not certainty. No one said they couldn’t buy Treasury bills.”

“Like many events in a dynamic capitalist economy, the overdue cooling of an absurdly overheated housing market will inflict some pain. But that doesn’t make it a bad thing.”

Correcting The Price Imbalance In California

The Tracy Press reports from California. “The number of houses on the market in Tracy, 946, is closing in on the total number of houses built in town at the peak of the housing boom in 2004, the last year the city added more than 1,000 houses. At the same time, RealtyTrac reported this month that 1,138 Tracy homeowners had received notices of default. As a result, homeowners have slashed their asking prices to 2004 levels.”

“‘Actually, I’d have to say it’s a little lower than that,’ said local broker Dave Konesky, a director with the California Association of Realtors.”

“Konesky said one of his clients bought a Tracy house in 2004 for $430,000 and now is asking $419,000, ‘with no bites, and it’s a beautiful home,’ Konesky said.” “He said that’s about as low as the homeowners want to go. ‘They said they’ll sell it for less than they paid for it,’ he said, ‘but they won’t give it away.’”

“This summer, the median asking price for existing homes in Tracy, Banta and Mountain House dropped below the median sales price. As of this week, that price was $475,000, $35,000 less than in mid-July. Local real estate agent Donna Baker said that of the 946 homes for sale in Tracy right now, about a third either are bank-owned, meaning they’ve been through foreclosure, or are ’short sales.’”

The Recordnet. “Homeowners in the upscale Paseo West development in Manteca are getting organized to see whether they can convince Lodi-based Anderson Homes to change plans to auction off 34 homes next month.”

“Owners of 26 homes there think the home builder is treated them unfairly and in bad faith by planning to auction off vacant or under-construction homes at prices that could be more than $200,000 less than what current residents paid for their homes within the past year, said Dave Cantrell, one of the first to buy a home in the subdivision.

” “‘We’re looking at a loss of potentially up to a quarter million dollars (per home),’ he said.”

“Earlier in the week, Craig Barton, Anderson Homes chief financial officer had said the slow housing market had pressured the company to turn to auctions as a way to sell homes in the partially finished subdivision. Otherwise, the homes would remain vacant for the foreseeable future, he said, and that wouldn’t be good for the neighborhood.”

“Cantrell said he doesn’t like the empty houses around his house, ‘but at what cost do we fill these?’”

“Stockton resident Zelda Falkner said Thursday that she and her husband will be checking out homes in Anderson Homes’ Teal Landing development in Los Banos. Twenty-five homes in that development will be auctioned off Oct. 14 in San Jose with minimum bids starting at $215,000.”

“The Falkners want to live closer to friends there, and they’re hoping to get a great deal on a new home and would pay cash. She wouldn’t feel a twinge of guilt if they snagged a great deal, Falkner said, ‘because I’d be getting a bargain.’”

From News 10. “In some cases, the starting bids are about half of what some current homeowners paid for nearly identical homes just over a year ago.”

“‘They didn’t treat us very good as far as I’m concerned at all,’ said Amy Sturdevant who in August 2006 paid $585,000 for her family’s four-bedroom, two-bathroom home. Now, a nearly identical home with the same floor plan right across the street from Sturdevant is set to be auctioned at a starting bid of $295,000.”

“Barton said this is their neighborhood, too. He said that they will keep building there. ‘This is the right decision for us,’ Barton said. ‘In this type of market, the auction will tell us what the current fair value of the homes is.’”

“Barton said it’s not because they’re in financial distress but instead to spur a sluggish market.”

“‘I was talking to my wife just an hour or so ago and I told her, you know, I think we made a very serious mistake by buying this home,’ Cantrell said.”

The Press Enterprise. “Home construction is falling more dramatically in Riverside and San Bernardino counties than anywhere else in the state, as builders put on the brakes until they sell a glut of completed houses and wait for the market to rebound.”

“Steve Johnson, a director of Metro-Study, said even homes for which builders have obtained permits from counties and cities may not get built. He said there are about 15,000 permits for single family homes that recently were close to expiring.”

“There are also 27,000 lots prepared for new homes on which construction has not begun, he said. Johnson said a majority of the empty lots are in emerging housing markets such as Banning, Beaumont and south Riverside County.”

“Alan Nevin, chief economist of the state builder’s association, said (buiolders) are trying to ignite buyer interest with price cuts and a host of other incentives.”

“‘Now is the time to buy,’ said Frank Williams, CEO of the Baldy View chapter of the California Building Industry Association. ‘If buyers go to the builders they can pretty much cut their own deals.’”

“To sell homes, he said some builders are willing to just break even while others are taking losses. He said all are laying off personnel and he believes there is ‘a good chance’ that some Southern California home builders will go out of business.”

The County Sun. “From the 15 Freeway, Rosena Ranch is advertised with great fanfare. Flags are waving. Signs and banners lead drivers into a newly paved and planted community of homes. But then the excitement stops.”

“Construction is coming to an end - at least temporarily - at the project just north of Fontana off Glen Helen Parkway where the developers, Lennar Corp. and SunCal Cos., once envisioned a school and 2,100 homes.”

“Now there are fewer than 100 houses and no indication of when new foundations will be poured.”

“In Rosena Ranch, 54 homes are occupied or ready for occupancy, and when “a handful” more are finished, it’s not clear when construction will continue, Rynerson Rock said.”

“‘My staff says they have been frighteningly quiet, and that’s not typical for them,’ Rynerson Rock said of the developers working on the project.”

“But the developers are continuing to plan and seek county approval for their homes, Rynerson Rock said.”

“Chino’s director of community development, Chuck Coe, said building has slowed at The Preserve but that no one is talking about making changes to the project. ‘There’s no panic or going back and rethinking,’ he said.”

“Rynerson Rock said the developers are being prudent. ‘We don’t want them going out of business, going broke and never being able to come back again.’”

The Appeal Democrat. “If misery loves company, area residents trying to sell a home should be feeling plenty of love. The Yuba-Sutter market’s 35 percent drop in housing sales between August 2006 and August 2007 puts local homesellers in the same lousy neighborhood as nearly everyone else, according to numbers compiled by the Sutter Yuba Association of Realtors.”

“Comparing August to August sales, Yuba-Sutter weighed in with a relatively steep median sale price drop of 8.1 percent – $290,000 to $260,000, according to the SYAR numbers. Yuba City Realtor Lloyd Leighton noted that in December 2005, when the area’s house prices peaked, the median sale price was $315,000 – 17.5 percent higher than in August 2007. ‘That’s been a pretty dramatic decrease over less than two years,’ Leighton said.”

“Among the reasons for downward pressure on prices, he said, is the continuous growth of new housing developments. ‘The new homes compete with all the other homes,’ he said.”

“Companies like Lennar, which cater largely to first-home buyers, are under increasing pressure, ‘to sell their product, even if it means lowering price and sacrificing profit,’ Leighton said. ‘They’re offering huge incentives.’”

The Orange County Register. “Mid-September sales data from DataQuick show further evidence of how that midsummer credit crunch has iced an already chilled O.C. real estate market. Sales for the 22 days ended Sept. 14 are off 35% from a year ago. The mid-September median for all residences of $605,000 is the lowest since January; 4% below a year ago; and 6.2% off June’s peak.”

“Sales of new autos plunged 17 percent in Orange County in August, one of the steepest drops in memory, the Orange County Automobile Dealers Association reported Thursday.”

“‘Blame it on housing,’ said Art Spinella, auto market analyst for CNW Market Research. ‘Buying a car with a home equity loan is a California pastime and when home equity drops, it’s tough to get a home equity loan.’”

The Union Tribune. “San Diego County’s leading economic indicators took a sharp plunge in August, according to a report released yesterday by the Burnham-Moores Center for Real Estate at the University of San Diego. All six components used in the index were negative last month.”

“The index fell 1.4 percent in August. That is the steepest decline since 1979, although USD economist Alan Gin, who compiles the index, cautioned that there may be some upward revision. The index has fallen 16 of the past 17 months.”

“‘Things are pretty bad,’ Gin said. ‘Not only are all the components down, but they’re down by hefty amounts.’”

“At the center of the economic problems is the continuing decline of the local housing market. ‘There’s a connection to the weakness of the housing market in every one of the components,’ Gin said.”

“‘This is very painful for homeowners, but for an economist it’s a good sign. It may begin to correct the housing price imbalance,’ said Stephen Levy, who heads the Center for Continuing Study of the California Economy in Palo Alto, referring to the gap between high home prices and relatively stagnant incomes.”

Buyers On Strike, Waiting Until After Prices Have Fallen

The Chicago Tribune reports from Illinois. “By any measure, including the two released Tuesday, little is coming up roses for the housing market, locally and nationally. Chip Wagner, a Naperville appraiser, said sellers’ asking prices appear to be on the way down, which might generate some momentum. ‘People have become more realistic on their pricing,’ Wagner said. ‘The average price of a house for sale today is $436,000; a year ago it was $467,000.’”

“Local real estate agents echoed this. ‘Sellers out there now really want to sell,’ said John Veneris, a broker in Downers Grove. ‘They’re getting less than they had wanted, but they’re happy to get them sold.’”

“Inventory continues to climb in the area.Wagner said the number of single-family homes listed for sale in the MLS of Northern Illinois as of Tuesday had surged to nearly an 11-month-supply, up from about seven months a year earlier.”

“‘I hate to throw salt into the wound to show how bad it has gotten, but we have almost doubled the number of active listings since September 2005,’ when the nation’s housing boom peaked, he said.”

“The deeeper America drops into the housing slump, the further out go predictions of when the market will recover.”

“David Mudd, CEO of Fannie Mae, told Bloomberg News it could be years before the slump is over. ‘I don’t think we hit a bottom until the end of ‘08, and then we have some period of time to work our way back up again,’ he said.”

“He joins the chorus of economists and industry experts looking into 2009 or beyond.”

“‘I’ve stopped making predictions,’ said Chicago builder Alan Lev. ‘You ask 10 different economists, you get 10 opinions. The real answer is, nobody knows.’”

“‘Mismatched expectations,’ explains Jay Ritter, a professor of finance at the University of Florida who says that consumer behavior is the wild card in the marketplace impasse.”

“Many home sellers, he says, are in love with the old days, when home prices seemingly rose by the hour. And sellers, he said, are stuck in neutral, waiting for a better deal.”

“‘When prices are going down and there are articles in the news about prices dropping, it leads more people to wait and see, and it becomes a self-fulfilling prophecy,’ Ritter said. ‘Rather than closing the deal now, they’re on strike, waiting until after prices have fallen.’”

“Stephen Baird, president of Baird & Warner Real Estate in Chicago, says the increasingly gloomy forecasts are an overreaction.”

“‘I think 2008 is a little long [to expect the market to bottom],’ he said. ‘One of the things you have to keep in mind is those guys now want to be overly negative. They don’t want to sound like Pollyanna because there’s been criticism that they were just too rosy about the housing picture. Now, if they’re going to err, they’re going to err on the negative side.’”

“‘You ask me when the market is going to bottom out, and my take is, I have no idea,’ Baird said.”

“The developer of the proposed Chicago Spire will host a preview and party for the global press, but the celebratory mood could be dampened by the worldwide credit crunch and a postponement of the tower’s preconstruction sales.”

“‘If I didn’t think I could deliver, I’d have a good excuse to pull out, but I’m not doing that,’ said Garrett Kelleher, who two weeks ago delayed the launch of sales from this week to Jan. 13, citing the complexity of the documents that must be filed with federal regulators.”

“The preview of the $1.5 billion, 150-story building, slated to be the tallest in the U.S. and the highest residential tower in the world, comes at a tough time for high-end residential developments in Chicago and around the country.”

“Real estate buyers and investors in Chicago, around the nation and in Europe, where Kelleher plans to sell more than half the Spire units, wonder what property is really worth and if it will appreciate.”

“Understandably, European investors are cautious, said Dominic Grace of London-based Savills PLC, who is directing the Spire sales effort. ‘The whole world is spooked,’ he said. ‘They’re aware of the malaise potentially hanging over the U.S. investment market, but Chicago is steadier than Miami and a huge market.’”

“In the U.S., capital for property development and purchases has become more difficult and more costly to secure.”

“‘The debt market is frozen for the inexperienced developer,’ said Robert Horowitz, a partner at Cooper-Horowitz Inc., which places about $15 billion in real estate debt a year. ‘To finance a supertall luxury condo project today, you need to have be an experienced developer with at least 30 percent cash equity, 50 percent presales and the ability to pay 9 to 10 percent interest.’”

“Kelleher, chief executive of Shelbourne Development LLC, said he won’t seek financing until he has the requisite amount of preconstruction sales. Before he would close on a loan for perhaps 70 percent of the cost, he’d have to spend about $500 million on construction. That is a lot of building that will take a lot of time.”

“Lenders not only worry about backing new development but also fret over buildings in construction that still have units to sell, said Richard Blum, chief financial officer for Chicago-based Fifield Realty Corp. ‘Some [banks] aren’t making new loans because they may face bad loans for projects already in construction that have unsold, unclosed units,’ he said.”

“To protect themselves, banks and private-equity lenders have raised the cost of capital, Blum said.”

“In Chicago, where 13,448 new downtown condos are due for delivery from now through 2010, sales fell 35 percent by midyear from a year ago, and in the past few weeks ‘luxury sales have been way down,’ said Gail Lissner, a VP at Appraisal Research Counselors.”

“Here, ‘everyone is skeptical of everything until it closes,’ said James Kinney, president of Rubloff Residential Real Estate.”

“The tall residential towers in development in Chicago all have vulnerabilities. The $650 million Mandarin Oriental Tower Chicago residential and hotel condominium project has not started construction. The $500 million Waterview Tower and Shangri La Hotel is in construction but hasn’t closed on its construction loan.”

“The half-built, $725 million Trump International Hotel & Tower had more than 200 units to sell as of May, the most recent figures available.”

“Spire developer Kelleher isn’t worried about selling enough units at $750,000 to $10 million to get financing when the time comes. ‘There’s pent-up demand all over the world,’ he said.”

The Columbia Missourian. “Real estate foreclosures in Boone County this year have already set a record, following a trend that has gripped the national housing market.”

“A total of 163 foreclosures were recorded through Sept. 14 in Boone County, 13 percent over last year’s total and topping the previous record of 150 set in 2003, according to information provided by the Boone County Recorder’s Office.”

“Dale Whitman, real estate finance expert and professor at the MU School of Law, thinks the ARMs weren’t responsible for the market crisis. Rather, it was the ‘irresponsible’ way they were handled, with ‘teaser rates’ placed below already-low mortgage rates to attract less-qualified borrowers.’”

“‘Lenders made many loans without much regard to whether borrowers would be able to repay them, assuming that increases in housing prices would inflate borrowers out of their financial troubles,’ Whitman said. ‘Borrowers were willing to accept (adjustable-rate) loans… even when they should have known they would probably be unable to make the higher payments.’”

The Union Eagle from Minnesota. “Princeton area realtor Jan Wokson likely wouldn’t have sold the home she did to a certain young man in his 20s a couple of years ago if she knew then what she knows now. What she knows now, she explained recently, is that the young man got in over his head in what he could afford.”

“Now it looks like he is headed towards foreclosure, Wokson said last week. (The man was asked to talk about his case for this story but declined.)”

“One of the negatives in the foreclosure mess, Wokson said, is that realtors are getting the brunt of the blame, when ‘most are not at fault.’”

“Local banker Ken Haskamp at the Princeton office of Peoples Bank of Commerce, expressed worry last week about the record number of foreclosures resulting across the United States from too many people having qualified for mortgages when they shouldn’t have.”

“Many borrowers, he explained, looked at the low beginning interest rate, translated that to a lower mortgage payment and bought a more expensive house than they otherwise might have.”

“Haskamp said those mortgage payments grew beyond the ability of many homeowners to maintain. Coupled with the rising interest rates, has been the declining value of homes in the midst of a housing glut. That has caused problems for people trying to get another loan or refinancing because their home is worth less than what they need to borrow to pay off their mortgage, noted Haskamp.”

“‘A $310,000 home two years ago may be worth only $270,000 today,’ he said. In the ideal world, Haskamp observed, a person wanting to borrow for a home valued at $270,000, would seek a loan for $216,000.”

“One reason Haskamp was so animated as he spoke about the foreclosure issue, was his explanation that banks don’t want to have to take homes back for non-payment. The reason, he explained, is because banks look at homes as ‘earning assets.’ That means, he said, as long as the payments are being made, they are earning interest for the bank.”

“There have been many unscrupulous lenders that verified a borrower qualified for a mortgage, when the borrower was not near that, Haskamp said. Along with the record number of foreclosures have been a large number of mortgage companies ‘going away,’ from the mortgage business, as Haskamp politely put it.”

“Haskamp also suggested that people steer clear of offers that only require paying the interest. That kind of loan is a ’stupid thing,’ he said.”