The Housing Bubble

The Columbian reports from Washington. “A total of 225 Clark County homes were lost to foreclosure through July, up from 138 foreclosures in the same period in 2006, according to data compiled by the Bank of Clark County. Mike Worthy, CEO of the bank said some may need to act quickly or risk foreclosure. ‘If the value of your home is staying even, you have a chance to make a hard decision, to sell the home and move to something less expensive,’ Worthy said.”

“He and other analysts acknowledge selling will be more difficult for buyers who bought homes during a three-year housing boom that lasted through 2006. Easy financing, or subprime lending, extended during the period allowed buyers to take on greater risk, too much, in some cases, said Dave Dahlstrom, CEO of Riverview Community Bank.”

“Subprime mortgages were offered ‘not just to people with low credit scores, but to people who didn’t have the traditional 15 to 20 percent down,’ Dahlstrom said.”

“The lax credit terms allowed buyers to ‘move up’ into homes priced just beyond their means, Dahlstrom said. Many of those buyers are now trying to sell, a situation that is adding to a glut of higher-priced, $400,000 to $450,000 homes on the Clark County market.”

“‘There are just too many of them,’ Dahlstrom said.”

“The inventory won’t sell off as quickly now because the pool of potential buyers can no longer secure subprime mortgages. Once considered high-yield by group investors, subprime and related ‘Alt-A’ loans are no longer a hot commodity. ‘The subprime market has dried up like a desert and the huge mortgage companies across the country are folding like tents,’ Worthy said.”

“Homeowners facing default ‘need to sit down with a real mortgage professional and evaluate their mortgage contract,’ Worthy said. ‘I’m sorry to say some people will find selling the house is the best option.’”

“Home construction inside Vancouver fell by 56.4 percent in August, when the city issued 24 permits for single-family homes, compared with 55 permits issued during the same month last year.”

“The year-over-year decrease in Vancouver mirrored home construction trends throughout unincorporated Clark County.”

The Register Guard from Oregon. “The University of Oregon’s monthly Index of Economic Indicators suggests that economy watchers should expect more of the same in coming months: slowing but continued growth in the state, with the potential for a shakeup if national figures head south this winter.”

“‘Our growth is slowing or has slowed,’ economist and index author Tim Duy said Wednesday. ‘We’re at a much more mature point in the business cycle (than in recent years).’”

“While residential building permits rose by more than 27 percent to 1,890 in July, Duy said the gain was ‘a balance-off’ of a decline from May to June of nearly 25 percent - to a six-year low of 1,483.”

“Duy said…new building permits in the Bend area have more closely followed the national trend of a deflating real estate bubble.”

“‘Looking into next year, I can see how those (declining) conditions are going to ease back - a fall nationally, and then a move sideways,’ Duy said. ‘It’s a bubble phenomenon, and bubbles don’t re-create themselves easily.’”

“The bottom line appears to be that Oregon’s economy appears capable of continuing to grow, but at a slower pace than the past few years. ‘With the caveat that nobody knows for sure how this current round of credit tightening will play itself out,’ Duy said.”

The Bend Bulletin from Oregon. “Just when the Prineville Railway had finally begun to become profitable, it learned that it will lose one of its top customers from Eastern Oregon.”

“The City of Prineville Railway will lose about 60 percent of the business currently in operation at its freight depot facility and about 20 percent of its total business when the Louisiana Pacific Engineered Wood Products plant in Hines, next to Burns, shuts down Oct. 18, said Dan Lovelady, manager of the Prineville Railway.”

“‘It’s unfortunate for us. We were building some base customers and getting to the point where the railway would again be profitable,’ Lovelady said. ‘It’s unfortunate that we’ve lost some of the gains that we had made, but it’s even more unfortunate for Burns. The loss of jobs is going to be very difficult.’”

“The Louisiana Pacific mill shutdown will result in the loss of 92 jobs at the facility, located near Burns, said Jim Campbell, plant manager for Louisiana Pacific, which announced that it would cease operations last month.”

“A slowing national housing market and a need to consolidate operations into other Louisiana Pacific Corp.-owned plants has been the main cause of the closure, he said.”

The Mail Tribune from Oregon. “August home sales haven’t been this slow in Jackson County since 1998, just before the market began a record run-up for several years.”

“Just 160 single-family residences exchanged hands last month as the stagnant real estate market produced the fewest sales this year since February — a month of winter sales doldrums rarely mentioned in the same breath as August in real estate figures.”

“According to figures compiled by Medford real estate appraiser Roy Wright, the county’s average single-family residence sale price in 1998 was $139,725, less than 40 percent of this year’s average of $348,623.”

“Single-family home sales haven’t topped the 200 mark since August 2006, when 216 deals were reported. Meanwhile, the inventory of houses on the market grows with nearly 2,300 homes on the market, up 16 percent from a year ago.”

“‘If the sellers are in a situation where they have to sell, the price is coming down and those are the ones the buyers are locking on to,’ said agent Ron Galbreath. ‘The buyers are sifting through the inventory looking for the bargains and they’re determining the values. For the four or five years before this, the sellers determined the price. Now the buyers have the hammer and they’re popping it over the sellers’ heads.’”

“Sandy Lighthall of Eastside Realty said real estate agents have forgotten some of the tools in their box in recent years. ‘For the last three or four years, all you had to be was an order taker,’ he said. ‘The way things are you need to be listing 5 percent below market value. If your house is worth $300,000, you need to list it at $285,000 to sell.’”

“Lighthall said sellers are running out of time to grab buyers’ attention before they hunker down for the school year. ‘People have to be very competitive to move their houses right now,’ he said. ‘After Sept. 10, people are pretty much situated for school.’”

“With the exception of east Medford, prices dropped in all of the county’s urban areas, Wright said.”

Readers suggested a topic on local housing bubble fallout. “I’d like to hear from HBBers on the changes (good or bad) that have taken place in their communities as a result of the housing bubble. Sprawling new developments are obvious, but what about some of the other, more subtle (or not so subtle) changes like demographic shifts, closing or opening schools, traffic patterns, loss of a favorite small business, etc?”

“Just the other day, I was driving down the eastern shore of Tampa Bay and saw that Cox Lumber is shut down and boarded up, a casualty of the housing bubble. We’ve had boat ramps and bait & tackle businesses get swallowed up, traffic medians put in to re-route familiar patterns (thanks a pantload, Lennar). This past spring, the familiar scent of orange blossoms was gone from the air, due to the fact that a number of groves in the area were sold off to developers.”

One wrote, “One thing I’ve noticed in So Ca, and being a member of The International Council Of Shooping Centers ,is the amount of designer malls that were built during this latest bubble. (Doesn’t the world have enough shopping centers already!)”

“Now we are looking at leasing in more of a survival mode. Even the yuppies have decided that if its all made in China, why not just buy it at Target.”

Another saw, “Here is the change I’m seeing locally: Multiple families living in one home. Not that common (yet), but some homes have far too many cars. I even see this in Palos Verdes. Kids never leave the nest as its too expensive to buy anywhere in the south bay. I’m talking kids about to hit 40!?!”

One from New York, “In NYC the good news; the most new housing production since the 1960s, middle class people willing to live in more city neighborhoods, a temporary boost to public finances due to real estate transfer taxes.”

“Unlike elsewhere, new housing quality may have actually increased here, as developers who formerly only built in established affluent neighborhoods (and made people take crap to get that location) attempted to attract people to less desirable locations with the quality and amenities in their buildings.”

“The bad news; people who grew up in the city but didn’t attend college priced out by college graduates from elsewhere, loss of economic competitiveness due to higher real estate prices than elsewhere. I believe people and businesses may stop coming here if the prices do not fall. While NYC banked the extra tax revenue, the State of New York blew it, and will be coming after us for tax increases and service cuts.”

From California. “The housing bubble has made land so valuable around W. LA that they’re tearing down surfshops, malls, old houses, anything they can get their hands on (they=developers) to build CONDOS. I shudder every time I see a new condo dev’t going up, because I know it’s going to mean more traffic, less retail/pedestrian space, and more single/DINK yuppies moving in.”

One from Illinois, “In Chicago, which is very neighborhood-centric, development happens at different speeds. Some neighborhoods have been completely transformed since I moved here a decade ago, some have remained largely the same.”

“In the now quite-gentrified Wicker Park neighborhood to the south of me, for example, little was done for years to protect older residential buildings. Lots of frame houses, classic Chicago bungalows, and two / three flats were razed to make room for ugly-ass new construction — the kind we all know will not age well.”

“Lots of arts spaces, small restaurants and the like were driven out of the area by ever-increasing rents and taxes. Many of the small businesses that remain in that neighborhood either have built-in hipster appeal … or have owned the property for years. Lots of old-timers cashed out and more elsewhere, too.”

“I’m hoping that the bursting bubble will save my neighborhood from the same fate — it’s a neighborhood on the verge, and it would be a crying shame if it lost its character.”

And from Virginia. “Here in the D.C. area, formerly dicey areas in Va. close in to downtown have become much more expensive, since the rise of the far-flung exurbs has made traffic much worse, really just in the last 10 years or so.”

“And those exurbs that suddenly sprouted up in the last five years. Lawdy! They’ve managed to pave over pretty much everything in Va. within 50 miles of D.C.”

From Georgia. “In the Atlanta area the main impact I have seen due to the bubble has been the deterioration of once stable lower middle class to middle class neighborhoods. People trying to raise children in a true middle class environment have had to gamble on exotic loans in order to live in safe family areas. Those who didn’t want to take the risk with a mortgage have had no choice but to live with low life crack heads & drunks as neighbors and hope that their children survive.”

“Another adverse impact is the continued deterioration of traffic congestion. Traffic in the NW metro area was nightmarish because of this for 6 hours. So it has become prudent to avoid the interstates if you want to get anywhere alive & on time.”

One from the road, “Had to go into (shudder,) Bakersplat today and saw three dedicated billboards along Hwy 58 touting reduced prices in new housing developments. These were not ads with ‘price reduced’ slapped across them, but boards specifically advertising $50,000 off, etc.”

“Still a lot of new industrial starts and commercial building going on. Saw a new (empty,) office complex on Truxton Extension with its windows shattered. In-town traffic seems to be easing, though, so maybe folks are leaving town for (dare I say it,) Oklahoma?”

And Minnesota, “In the Minneapolis-St. Paul area, the recent housing bubble has created an unsustainable retail construction blitz. When the music stops in this musical chairs game, there will not only be some very po’d J6P, but also a lot of commercial developers/landlords/out of business tennents.”

“We’ve also seen many local small businesses dissapear completely. Many local hardware stores and coffee shops… gone in 60 seconds after the big box stores and chains moved in. Customer traffic at most of these big box stores appears to be down significantly compared with 6-12 months ago (not a scientific statistical analysis, just a personal anecdotal observation).”

“Also spoke with family from the St. Cloud MN area… one told me about an ATV/Snowmobile/Farm Implement dealer (one of the largest in the Midwest, if not the entire U.S. in terms of gross sales) manager who told him that if it weren’t for the John Deere farm implement division, that they would be in the red due to virtually non-existent sales of ATVs and Snowmobiles. Seems sales are down significantly from 05-06.”

“Again, seems to follow a very similar pattern whereby home-mortgage slaves used their HATM (house ATM) to withdraw funds.”

And on the media, “I live in the Bay Area and am amazed how quiet the media is about the housing market here. I never read about the slow market in San Francisco or environs. I still hear how the Bay Area is so different; there are so many brilliant, well-paid people living here that the prices will never go down. Why do I see so many houses on the market for months and months, then?”

“Just for fun, I looked did a search for houses for sale in Burlingame, which is an expensive suburb of San Francisco. The cheapest ones are in the $1.1 range. I looked up a bunch of them on zillow.com, and found that most of them were purchased within the last 11 months to 4 years. I wonder if these are people who went in over their heads and now need to sell. I think most people would say that this was impossible in a rich place like Burlingame.”

The Daily News reports from Florida. “Foreclosures are at a record high across the county, and you’re looking to snag a deal. The first step? Proceed slowly and carefully, said Okaloosa County Clerk of Courts Don Howard. ‘Anytime you’re buying foreclosed property, there is some risk involved,’ Howard said. ‘The availability of foreclosures is much more simply because the filings are up. Considering the falling prices, it might not be a bad time to look.’”

“Some real estate agents say it makes more sense to concentrate on the current market, which has started to correct itself. ‘I’d much rather be buying today than two or three years ago,’ said Jim Gilliland, a veteran Realtor on the Emerald Coast. ‘Prices are much lower.’”

The Palm Beach Post. “Foreclosure filings in the Treasure Coast more than tripled in August as the worst housing slump in 16 years continued to send shock waves through local households amid more evidence that severe economic problems could be on the horizon.”

“In Palm Beach County, lenders foreclosed on 1,210 homeowners last month, compared with 435 in August 2006, according to the county clerk’s office.”

“‘Owners of condos who speculated pre-construction are trying to dump them at their sales price,’ said real estate lawyer John Pankauski in West Palm Beach. ‘Investors will have to realize that to get rid of their condos — and to stop paying real estate taxes and maintenance fees - they will have to take a hit.’”

“Buyers have dried up, however, because of tougher credit practices and ‘the fact that the housing boom has run its course,’ he said.”

The Belleair Bee. “Mayor John A. Robertson has reiterated his claims that short term rentals in the town are ‘really a disaster.’ The town began prosecution of the owners of three beachfront homes last month, when he described neighbors complaining of debris littering the beach in front of those homes, noisy parties with cars parked indiscriminately and crowded beaches.”

“Robertson said, the property owners have continued to advertise their homes for rent. He said this appeared to be a snub of the town’s warnings. Rhonda Hogan of Hillsborough County, who owns two of the houses in question, allegedly has told Robertson that she must rent the houses until they are sold to avoid bank foreclosures.”

The News Journal. “Palm Coast resident Al Mascolo said he has spent 80 to 90 hours each week for the last few months finishing the construction of his new home. But it isn’t because he wanted to do the house himself. He says the builder left him no choice.”

“‘This is costing me a lot of money,’ Mascolo said.”

“Homebuyers like Anthony Rappa say Canterbury Estates Homes’s owners, Herbert Heron and Noel Richardson, didn’t pay the subcontractors who worked on their homes. But the company has left them scrambling to pay the people doing the work.”

“Ron Paulsen, owner of R&R Drywall (said he) didn’t get paid and placed liens against the homes. ‘Where’s all the money going if they’re not paying their bills with it?’ Natalie Krassner said last month when some of the affected customers gathered together to swap Canterbury experiences.”

“In an interview Thursday night, Richardson and Heron denied any intentional wrongdoing. They blame recent complaints against their company on the soft real estate market and sudden increases in material and overhead costs during the previous hot housing market.”

“They said their company has been hit with deficits in the tens of thousands on many of their contracted homes because they didn’t have the heart to reduce the quality of their work or pass the increased costs along to the customer. ‘Maybe that’s where we went wrong,’ Heron said.”

“Enrollment in Volusia public schools is down about 1,100 students from a year ago, meaning some teachers could lose their jobs and others will have to switch schools.”

“This is the first time Volusia school enrollment has declined in 25 years. Volusia officials don’t know why enrollment declined, but Superintendent Margaret Smith said they’ve heard some parents are moving away because of the slumping economy.”

“‘We’ve had some parents report to us they’re involved in mortgage foreclosures,’ she said, also pointing to some state reports indicating more people are moving out of Florida these days than coming in, especially if they work construction jobs.”

The St Petersburg Times. “This week was supposed to climax Trump Tower Tampa’s two-year pursuit of financing. Area developer SimDag LLC promised either to seal a deal to build the $300-million luxury high-rise or concede defeat and refund buyers’ deposits on condominiums costing up to $6-million.”

“But as the work week drew to a close Friday, the project found itself in familiar territory: limbo.”

“Buyers, who placed deposits of 20 percent on units costing from $700,000 to $6-million, had been told to expect a decisive turn of events by Wednesday. By Friday, it appeared they had been left hanging. ‘They’ve e-mailed us nothing new,’ George Galiourides, one of the condo buyers, said Friday.”

“Banks have steered clear of financing the project in the slumping housing market. According to Trump’s lawsuit in May, fewer than 70 percent of the 190 units had ‘bona-fide purchase contracts.’ Several buyers have sued to get their money back.”

The News Press. “A Charlotte County golf course that had become popular with Cape Coral golfers closed this week. A few golfers had parked Friday near the almost-deserted Tern Bay course, where Tom Cavanaugh of Sarasota-based Double Bogey Transport loaded up golf carts that were headed for Cart Guys in Punta Gorda. ‘This joint’s closed,’ Cavanaugh said.”

“The course at Tern Bay seems to be another victim of the current housing market in Southwest Florida. ‘The project is not dead,’ said Geri Waksler, who represents the developer on land-use issues. ‘The market is dead.’”

“Waksler said Tern Bay would remain dormant until the housing market rebounds. ‘As recently as a couple of weeks ago, they were still working on permitting for the project,’ Waksler said. ‘The only thing that is not happening is a function of the market — houses are not coming out of the ground.’”

“Fourteen homeowners live in Tern Bay, which was planned to have 1,800 homes. Twenty coach homes and 15 single-family homes are either waiting to be sold or are under construction, according to Lennar Corporation, the project’s builder. But a Lennar spokesman said the company has no plans to continue building.”

“Waksler said she represents other developments in the area experiencing the same problem, but she declined to name them.”

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