The Housing Bubble

The Sacramento Bee reports from California. “Tracy Trammell sold the boat, the extra vehicles and tried everything to ‘find a way to refinance, or do what I could not to lose the house for my children.’ She is in a bind all too common in Sacramento: a home losing value and an adjustable-rate mortgage with payments that jumped $1,000 a month in June.”

“Neither Trammel nor Countrywide has yet been able to work out a deal to spare her small house in Citrus Heights from foreclosure. ‘I asked, ‘What’s your solution? Give me some ways I can keep this from happening,’ says Trammell of her dealings with the nation’s leading lender. ‘They said, ‘Get a roommate.’ That’s what she told me. I said, ‘OK. Well, I guess we’re done talking.’”

“Lenders tout a willingness to work out troubled loans with a variety of options to keep people in houses. Yet some observers say the numbers speak louder than words.”

“‘The statistics don’t bear it out,’ said Martha Lucey, president of a statewide nonprofit loan counseling service. ‘The foreclosures are rising. The workout options just aren’t there.’”

“Lenders, for their part, say it’s a two-way street. Staffers often find people unwilling to give up cell phone service or satellite TV to finance strategies to save their houses, Ed Delgado, a senior Wells Fargo executive, told the California Senate Committee on Banking, Finance and Insurance last month.”

“In Citrus Heights, Tracy Trammell said she knew she might have trouble with refinancing the loan her husband took out in 2005. But a Countrywide representative told her early this year not to worry, her loan would only go up a little.”

“As June approached, she called again. This time a different representative said she faced a major reset on her two-year adjustable loan, the payment would rise $1,000 a month.”

“‘I called the original girl and said, ‘I need to know what’s going on,’ Trammell said. ‘She said, ‘Fax me the stuff, and I’ll get back to you.’ Then her first words were, ‘Oops, I missed that part.’ I said, ‘What do you mean, oops? This is my home.’”

The Recordnet. “Rosalee and Ernie Schimpf have enjoyed the country life east of Stockton for nearly three decades. But now they want to get on with the next phase of their lives - retirement and relocation to Colorado.”

“This isn’t the real-estate market for such dreams, so they are discovering as they try to sell in a brutally slow home-sales market that has left them feeling as if they have hit a brick wall.”

“There have been lots of lookers, they said. They can’t get any serious offers, though, for their 1,700-square-foot home, plus finished basement and a 600-square-foot workshop on two acres.” “They got the property appraised and initially set the price at $589,000 in May, later lowered to $549,000, a price below anything similar in the area, they said.”

“Still, the only offer they have gotten came in at almost one-third below asking price. ‘Guess he figured that if you’re desperate, you’d take it,’ said Ernie Schimpf.”

“Other lookers either turned out to be unqualified for a loan, or hinted they would be interested only at a far lower price or else needed to sell their home first in a sales market that feels frozen.”

“‘We look at each other and ask, ‘Could we have chosen a worse time to sell?’ It’s scary, said Rosalee Schimpf. ‘I’m just not sure - do you wait or drop the price enough to sell?’”

“Low-ball offers and feelers also are routine these days, said Jerry Abbott, president of Coldwell Banker Grupe. ‘Buyers right now are saying the market is going to come down even more, so if we’re going to buy now it’s going to be for a lot less than they’re asking,’ Abbott said.”

The Fresno Bee. “A real estate mystery lingers in southeast Fresno: Why would a developer build two dozen houses, sell only two and then disappear?”

“Few cars visit this ghost tract south of Butler Avenue, known as Ashwood Park. Weeds choke many lots. The model home complex is closed. There are no real estate signs in the yards, and no phone numbers posted anywhere. Just placards in the windows that read ‘available.’”

“‘It’s very quiet and peaceful,’ said Pao Ly, one of two home buyers who moved in before the developer, Lafferty Homes of San Ramon, vanished in March. He suspects the surrounding houses eventually will sell for less than the $450,000 he paid for his 2,900-square-foot home, and would like to renegotiate the deal — if he can figure out who to call.”

“Experts say the developer likely turned the tract over to lenders because it couldn’t sell houses fast enough to cover debt payments — much as some troubled home buyers walk away from a house they cannot afford and cannot sell.”

“‘The odds are that there was a large loan on the land and the builder could not afford to carry the land,’ said Alan Nevin, economist for the California Building Industry Association.”

“Lafferty Homes may have priced the houses too high for the area, some real estate observers said.”

“‘The houses were too tricked out for the area,’ said Walter Diamond, executive VP of the Fresno division of Beazer Homes, which has a tract in the area.”

The Orange County Register. “Real estate agents and mortgage brokers are being squeezed out. Appraisers have seen their six-figure incomes cut in half. Movers are selling trucks suddenly standing idle.”

“But the hemorrhaging doesn’t stop there. This Labor Day weekend finds consequences of the housing slump trickling down through all sorts of professions – from termite inspectors to escrow officers and even newspapers that have seen a decrease in real estate advertising.”

“Because so many depended on a pie that’s half as big as it was in 2005, professionals of all stripes are eating out less and cutting back on personal spending. Some have taken jobs elsewhere to keep food on the table. Others are diversifying, moving into commercial real estate or other related fields to supplement their incomes.”

“Certainly they made a lot of money in the boom, and many set aside a cushion for slow times like this. But it’s painful nonetheless, industry insiders said.”

“‘I think every person in the real estate industry has been impacted , from the appraiser to the real estate agent and mortgage companies,’ said Huntington Beach appraiser Cindy O’Dell.”

“‘We’re already seeing the first steps of people leaving the business, and it’s going to increase,’ said Mike Cocos, general manager of ERA North Orange County. ‘Our agents are not making as many transactions, so they’re not making the income they’re comfortable making.’”

“Appraisers regularly face tremendous pressure to overvalue a property so a lender will fund a transaction, Chirpich added. A handful of appraisers now are giving in to such pressure to get more work.”

“‘If an appraiser refused to bend to pressure, they would no longer get assignments and many times would not be paid for completed assignments,’ said Carol Chirpich, president of the Southern California chapter of the Appraisal Institute. ‘To keep work, (some appraisers) will bend to the coercion of the broker.’”

“Experienced professionals, aware that the housing market is cyclical, prepare for such times by saving up a cushion to offset lean years like this.’

“‘Some brokers are doing very well. Some are wondering when the day comes they’ll have to put the sign out, ‘Will work for food,’ said Jack Williams of the state mortgage brokers association. ‘It depends how well established they are and how well protected they are (by) putting money aside for days like this.’”

The Gazette reports from Colorado. “Colorado Springs’ tepid housing market needs a nationwide mortgage mess like a homeowner with a leaky roof needs a rainstorm. ‘There’s going to be more inventory coming on the market,’ predicted Joe Clement, owner of Re/Max Properties in Colorado Springs. ‘It will affect appraisals. It’s going to affect prices.’”

“An owner who’s been in a house for a couple of years and has little or no equity could lose money, he said. That’s a good reason some homeowners should think twice before putting up a for-sale sign. If you don’t need to sell, keep your house off the market, some experts say.”

“‘I think we’re going to see a little bit of price reduction,’ said Sharon Roshek of The Roshek Group in Woodland Park. ‘Those people who don’t really have to sell, they should take their house off the market because they won’t like the downward pressure.’”

The Santa Fe New Mexican. “Pilar West has been getting a couple of calls per day from people who have one thing on their mind. ‘Will you help me rent my house?’ is their plea.”

“The inventory of homes on the market through June 2007 was up 29 percent compared to June 2006, according to Sotheby’s International Realty State of the Market report. ‘Using the number of homes for sale and how many have sold in a certain period of time, we can calculate an absorption rate of 393 days,’ the report said.”

“At The Management Group, ‘we’ve had a huge increase in the last three months from people who own a house here and want to rent it,’ said James Dominick, the agency’s qualifying broker. ‘A big part of them are on the sales market and are not moving.’”

“The problem is, Dominick said, ‘we can only handle so many in a week. We’re at a point where agents are looking at two or three a day, which is all they can handle.’”

“John Barker of Barker Management said his agency has just started getting more-than-normal calls from homeowners whose homes are up for sale but not selling.’There are a lot more places for rent now. There’s a lot of competition out there, and the consumer is much more price sensitive,’ he said.”

“Barker has also been receiving calls from people in Florida and other states where the real-estate market has dropped sharply and who own Santa Fe property. ‘In Florida, it seems that nothing has sold for months,’ Barker said. ‘They’re really scared’ that the same thing could happen in Santa Fe. ‘When they ask if they should sell, I tell them not to. I think Santa Fe is solid.’”

“Marg Veneklasen of Veneklasen Property Management said the sales of higher price ranges of homes have slowed, in part because ‘nobody has to sell and nobody has to buy.’ That is, rather than bringing down the sales price of a second or third home in Santa Fe, owners prefer to rent it, thinking prices will be better next year, she explained. ”

The East Valley Tribune from Arizona. “A couple of weeks ago, Chandler homeowners Gary and Debbie Meltzer decided to slash the asking price for their house by nearly $100,000. The four-bedroom home had been for sale since March, they had received little interest and the housing market was still deteriorating.”

“The couple knew they would have to gradually drop the price anyway, just like the rest of the sellers in their area. So, with the even slower holiday season fast approaching, they decided to beat their competition to it.”

“‘I feel like by spring break, our house may even be worth less,’ Debbie Meltzer said.”

“It’s better to slash prices now rather than later, said Mike Balzotti, VP at The Equitable Real Estate Co. in Scottsdale. ‘You don’t want to be chasing the market down,’ he said.”

“After the dramatic price cut, their asking price is now $388,000, compared with two nearby homes that are listed at $419,000 and $498,000. Still, they continue to wait for calls. The Meltzer’s realize that the market has been bad for many people, but it’s still been disheartening, Gary Meltzer said. ‘We didn’t expect it to be as difficult as it is,’ he said.”

The Arizona Daily Star. “‘Now is the ideal time to buy because we are seeing prices lower than they have been in a long time,’ said John Strobeck, owner of the Tucson based Bright Future Business Consultants. ‘They won’t stay as low as they are now. … I would say that within a year we will see prices inch back upward.’”

“Noy Kelly, a real estate agent in the Tucson area, agrees that this is an opportune time to buy a home. ‘We are in an area where economically it makes more sense to have homes become lower in value pricewise so people can still afford them,’ Kelly said.”

“Strobeck said the decrease in prices makes perfect sense. ‘We see prices being pushed downward because demand is low,’ he said. ‘It is low because everyone bought homes in 2005 and at that time, investors came into the market and pushed prices way up. What we are doing now is adjusting back to where we should be.’”

The Las Vegas Business Press from Nevada. “Las Vegas’ vertical high-life suffered vertigo in the second quarter as consumer confidence dropped from its high-point two years ago, reports Applied Analysis.”

“‘Current market conditions, a lack of newly announced projects and the cancellation of those proposals with unrealistic development plans will ultimately help the luxury condominium market in the long run,’ said principal Brian Gordon. ‘The market remains in the midst of a rebalancing from an overheated demand profile to a skeptical consumer perception.’”

“Nearly 56.4 percent of the luxury condo market — about 58,461 units worth — remain in the planning or proposed stage, while another 3,877 units have been suspended. Meanwhile, 5,253 units or 14.7 percent of all projects have been canceled.”

“Many more developments appear dormant, neither active nor outright canceled.”

“Nevertheless, there were 14,149 units under construction in the second quarter, most of which have been presold. Downtown, meanwhile, has 854 units being built. ‘We believe that end users will ultimately dictate demand within the luxury condo sector,’ Gordon said.”

The Review Journal from Nevada. “In today’s skittish lending environment, worsened by the subprime mortgage crunch, consumers are left with diminishing options for loan packages. What’s available today may be gone tomorrow, said said Chris Biaggi, president of All Western Mortgage in Las Vegas.”

“Someone who qualified for a $500,000 home last week may only qualify for a $400,000 home this week as lenders tighten credit requirements. Sharp increases in foreclosures and nonperforming loans have caused the mortgage industry to become extremely conservative and eliminate the more aggressive loan programs, Biaggi said.”

“‘In my 20 years in the business, I have never seen the mortgage industry so scared and hyper-reactive,’ he said. ‘We seem to be looking for ways to decline loans rather than approve them. We seem to be losing products on a daily basis.’”

“‘Everybody hears the gloom and doom, but not this part of it, that loan packages they were qualified for in the past are no longer available,’ Biaggi said. ‘So to sit and wait as a consumer or potential home buyer may not be in your best interest any longer. That program that could put you in a home might not be here in a month.’”

“Carlos Moranchel used a 90 percent loan-to-value stated income loan to get into a larger home in July. He put 10 percent down on a $350,000 home in The Orchards subdivision near Sunrise Mountain and took out a five-year option adjustable-rate mortgage at about 7 percent.”

“‘That loan’s pretty much gone now,’ Robin Camacho of Direct Access Lending said. ‘You’ve got to have strong assets and reserves to get it. Carlos has reserves and he put 10 percent down.’”

“Moranchel, with his wife and four daughters went from three bedrooms to four and doubled the size to 2,300 square feet.”

“The property manager from Los Angeles took a second job as a parking valet to make ends meet.”

“‘I personally think it’s well worth the effort,’ Moranchel said. ‘Look at what I have now. A big house, a big yard. It’s a sacrifice. In all honesty, anybody who comes to Vegas can accomplish the same thing, but they have to put their heart into it.’”

The Hudson Reporter from New Jersey. “In the past year, three construction permits have been issued by the town for the construction of three additional housing sites which were all approved. These sites, in addition to the housing that was already being built on the Meadowlands Parkway, will lead to the addition of 2,280 new units in Secaucus.”

“With all of this new available housing, one concern is that there will not be as great a demand for the properties once they are built. Realtor Denise Michaels said that Secaucus is one of many towns where apartment and condo prices have dropped in the past year by six percent of what it was in 2006.”

“‘There is an interest, but buyers do not seem to be worried that the prices will rise anytime soon,’ said Michaels. ‘And it looks like they won’t.’”

“‘Buyers feel that they are more in control now. It used to be a question as to whether or not they would be able to meet the asking price for a residency or a home,’ said Michaels. ‘Now, they’re the ones [who are] making the prices.’”

The Record from New Jersey. “This year’s slow market is likely to become even slower as the leaves turn and the weather grows colder. That is more good news for buyers: A slow market is a buyer’s market.”

“If you are house-hunting, you have options and you have leverage that buyers didn’t have 18 to 24 months ago when houses were being bid up and snapped up within days of listing. ‘Buyers have power in this market,’ said Cathy Denis of Century 21 Mainstream in New Milford.”

“Bob Lindsay of Coldwell Banker in Wayne, said: ‘You want to be able to look at the most recent sales of comparable homes. If you look at property that sold and closed six months ago, that property would be worth less today. What you really want to see are very recent sales and very recent contracts, even if they have not yet closed.’”

“‘If you see someone who’s just listed a house, and you can see that the seller and the agent have got a clue about pricing, then I’d go ahead and consider the house,’ Lindsay said. ‘But, if the price is unrealistic, I don’t think I’d act on it.’”

“The contract can be written to say that your offer expires in 24 or 48 hours, forcing the sellers to respond promptly. ‘I have seen that done a lot more lately,’ said Leah Selig of Kern & Rogers in Wyckoff. ‘It puts a little fire under the sellers when you say, ‘In 24 hours, this offer is over, and we’re looking somewhere else.’”

The News Journal from Delaware. “Real estate investor Mike Lundregan, of Manhattan, N.Y., has been sitting on his 1910 Victorian in Lewes for 14 months, unable to sell the historic home.”

“He bought the 2-bedroom house for $389,000 in December 2005 and spent $80,000 in renovations. An appraiser told him last year that he should price it between $590,000 and $600,000.”

“‘Subsequently, the market did a bit of a nosedive,’ Lundregan said. ‘I’m the classic case of somebody who tried to capitalize on the red-hot market and then saw the bottom fall out.’”

“He dropped the price to $525,000 after the house sat for six months. Last month, he dropped the price again, to $489,000. Interest has improved, but he still hasn’t sold. ‘I think buyers are waiting to see how low prices are going to go,’ he said.”

“‘It’s really hard to argue that prices have not fallen,’ said Vince Grillo, a Realtor (in) Greenville. ‘Homes are just not moving. There’s a lot of homes that are still grossly overpriced.’”

“In other words, if all the homes languishing on the market were priced lower, they would sell — and statistics would show home prices going down, Grillo said. ‘There’s an expectation gap between what sellers perceive the market to be and what buyers believe the market to be,’ said Grillo. Two years ago, ‘homes were selling faster than you could get signs in the front yard. … the train was leaving the station and you had to get on it.’”

“‘Now we’ve done a 180 [degree turn] where it’s perceived that there’s no value in real estate. There’s no sense of urgency. It’s been a challenge to get people to even look at properties,’ Grillo said.”

The Washington Post. “During the real estate boom, many mortgage companies were willing to make loans to people with spotty credit, known as subprime borrowers, or with no money for down payments.”

“Two years ago, Jose Rodriguez and his wife bought a $550,000 three-bedroom townhouse in Alexandria with a pay-option adjustable-rate mortgage. They also got a second mortgage of $55,000. They refinanced that one with HSBC to obtain a fixed rate and now owe about $105,000 on it after tapping into their equity for renovations.”

“Rodriguez said he has always paid on time, but he suspects that will change in December, when the lender for the first loan, Countrywide, will begin requiring them to pay principal and interest.”

“‘We are responsible people, we are working people, we have never been late,’ he said. ‘We’re trying to resolve this before December. Once we get there, it’ll get nasty.’”

“They are selling the house and got an offer for $499,000, which would cover what they owe Countrywide but not the HSBC loan and closing costs. They are now waiting for the lenders to agree to a short sale. If that doesn’t work, Rodriguez said, they will consider foreclosure or bankruptcy.”

The Star Exponent from Virginia. “The Three Flags development in Culpeper County is in need of a new builder after Ryan Homes has pulled out of the project. Located off U.S. 29 South and Route 299, the subdivision contains about 72 homes but is zoned for 1,012 single family units and condominiums.”

“The Reston-based company provided a letter to all subdivision homeowners regarding its decision to drop the project. It states that Ryan Homes is ‘more disappointed than you know with the status of Three Flags.’”

“‘With the change in the marketplace, we were placed in a situation where the prices we were under contract to pay for future home sites made it impossible to operate in the black,’ the letter states. ‘We have tried unsuccessfully to come to an equitable agreement with the developer on home site prices in order to continue. We were forced to walk away from an enormous deposit rather than make poor business decision to operate at a loss.’”

“Broker Sally McDevitt said homes were once selling in the subdivision between $300,000s and $400,000s but the prices dropped because building has slowed.”

“‘It’s just because there is so much competition right now,’ McDevitt said. ‘There’s so much on the market and so many of the houses are being resold for much less than these people paid for; so the market to build one is not as good as it was at one time. Why have one built if you can buy one for a song?’”

“Joan and Bert Benning bought their ranch-style home in Three Flags for $304,000 in January. The Bennings hope that Ryan returns to the project because there are amenities they bought into that are not yet complete.”

“In the meantime, the Bennings said nearby empty lots are ‘messy and the weeds are blowing over.’”

“‘We’re hoping they can work something out because we feel they can make a winning community,’ Joan Benning said. ‘It’s already a winning community, but a finished winning community.’”

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