December 23, 2007

Going Through The Floor In California

The Daily Democrat reports from California. “The median price of homes in Yolo County has fallen by 12.35 percent in November compared to the same period in 2006, according to California Association of Realtors report. Yolo County homes are at a median price of $355,000, while in 2006, it was at $405,000.”

“In November and December, there has been a ‘pickup in buyer activity,’ with more homes being sold during that period than in any other months in 2007, said RE/MAX Woodland owner Don Sharp, who has been a realtor in Woodland for 29 years.”

“He said one possible reason for the spike in sales is that an increase of homes on the market has brought prices down. The supply-and-demand effect likely brought prices down to a point where they are once-again affordable.”

“There were 125 homes on the resale market in Woodland in mid-2005 and 425 in October 2007. Sharp said 350 homes were sold in Woodland this year, less than half of the 750 sold in 2005.”

“‘What it boils down to is there were a lot more homes for sale and the prices started going down,’ Sharp said. ‘Overall, in Woodland over a two-year time frame, we’ve seen the prices come down about 25 to 30 percent.’”

“In the Woodland market, for example, Sharp began seeing an increase in prices in 1997 that continued to rise until 2005.”

“‘It got to a point where people were having a hard time affording a home,’ Sharp said. ‘And pay rate in Yolo County and across the state just hadn’t increased that much, so it just got to a point where people couldn’t afford to buy anymore.’”

The Press Telegram. “It’s not hard to imagine a real estate agent somewhere in Long Beach saying: ‘If it can happen at Robert Weil Associates, it can happen anywhere.’”

“One of the city’s premiere real estate firms is closing its doors after 37 years, leaving behind a veteran staff and a long-standing reputation as a career destination for agents.”

“‘It’s very disappointing,’ said Pam Spoo, who has been with the firm for 23 years. ‘We were a boutique, stand-alone company. I would really call it the premiere real estate company in Long Beach.’”

“The downturn that’s now gripping the industry itself has one primary cause. Robert Weil, which often planted its flag on listings in communities like El Dorado Park Estates, Naples and the Virginia Country Club, recorded only about 20 sales for the past year, according to Spoo.”

“‘This is an extreme downturn,’ she said. ‘Buyers are very, very cautious about buying.’”

“‘What goes up must come down,’ said Long Beach real estate veteran Rose Voss, who described the market upturn at the start of the millennium as the best real estate conditions in her 30 years in the business. ‘Everyone knows real estate is cyclical. We saw this in the early 1990s.’”

“In 2006, there were 3,660 properties reported sold in Long Beach. This year, 2,557 sales have been reported to date, according to data from the MLS. And in December, a slow time in the housing market, there were 291 reported sales in Long Beach in 2006, while so far this month only 95 sales have been reported. The 277 sales reported in November 2006 were more than double the 129 this past November.”

“‘I certainly have been hearing anecdotally that either offices have been cutting back on agents, or in a smaller number of instances, I’ve been hearing about offices that have closed,’ said Robert Kleinhenz, deputy chief economist for the California Association of Realtors. ‘We’re seeing a number of Realtors who are either having to find another place to work or who are leaving the industry.’”

“CAR data show home sales fell more than 36 percent in November in California from the same period a year ago, and the median price of an existing home fell 11.9 percent. And that drop comes on the heels of a 9.9 percent record price decline in Octobe.”

“‘An 11.9 percent year-to-year decline in median price is the biggest year-to-year drop on record,’ Kleinhenz said.”

“‘How is it that all off a sudden, seemingly out of nowhere, we’ve seen this market turn on a dime?’ Kleinhenz said. ‘This market has behaved so differently from past cycles. In the ’80s and ’90s, the price declines never got as bad as they have over the last two months. Even at its worst in the 1990s, the median price only fell by 7.2 percent year-over-year - at its worst.’”

“Over the past three months, sales have fallen to a pace of below 300,000 units on an adjusted annualized basis, according to CAR.”

“‘Quite frankly, we think that the floor for housing market activity in the state of California is somewhere in the low 300,000 range,’ he said.”

“The number of Californians taking the test to become licensed to sell real estate has fallen considerably, according to the California Department of Real Estate.”

“There were 3,785 tests taken in October compared with 9,656 a year ago at the same period, and there were months last year in which the number of tests given numbered far more, according to the DRE.”

“‘A year ago we were giving 15,000 to 20,000 tests a month just for sales people,’ said Tom Pool, a spokesman for the DRE, the industry’s regulatory body. ‘Now the number of exams taken are going through the floor.’”

“People have been increasingly leveling charges against agents over mortgage issues, which come to the attention of the DRE only when an agent has had a hand in a fraud, such as over- or under-reporting the price of a home.”

“‘The nature of the investigations is clearly changing,’ Pool said. ‘Now we’re seeing more and more cases involving mortgage fraud.’”

The Desert Sun. “The Desert Sun Economic Index for the first time in 12 years shows that the Coachella Valley economy is slumping and job creation has virtually stopped.”

“The Index sank to 98.6 on a scale where anything above 100 shows the economy is growing and jobs are being created.”

“‘In all likelihood, job creation has stalled or actually turned negative and the direction is going down,’ said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University, who devised the index with the editors of The Desert Sun.”

“‘We haven’t seen the worst yet,’ said Bill Powers, CEO of Pacific Western Bank. ‘Many in the real estate market have to come to terms with reality.’”

“Powers predicted ‘we are still going to be in a funk for a while more,’ he said. ‘The problem is there are still a lot of people in denial who think everything will turn around after the first of the year and that’s just not going to happen.’”

“John Soulliere, CEO of the Coachella Valley Economic Partnership, said he was not surprised by the drop in job growth. ‘Our largest payroll gains for the last seven years have been in construction and now that is completely off the map,’ he said. ‘We have no idea when that will change.’”

The Ventura County Star. “At a time when homebuilders are playing it safe and in some cases halting construction, the developer of an ambitious Simi Valley housing project is moving ahead, banking on the improvement of slumping market conditions.”

“Casden Properties is outpacing most builders to get approval of a 266-unit development with affordable housing, senior housing and single-family homes. ‘Upon approval, we plan to proceed,’ said Darren Embry, spokesman for Casden. ‘We’re confident the market will adjust during our construction periods.’”

“But Casden is an anomaly when it comes to construction in Southern California, said a representative of the Building Industry Association.”

“‘For the majority of our members, they are in a holding pattern or have stopped mid-stream,’ said Terra Donlon, VP of government and public affairs for the Los Angeles and Ventura County chapter of BIA. Donlon said most developers are just trying to sell their current inventory before starting new projects.”

“Last month, Encino-based developer Larwin Co. announced that its high-profile 66-unit condominium development in Simi Valley will be put on hold. The Savannah project, now in its grading phase, is…by what is known as Happy Face Hill. It has been interrupted until at least March while the developer waits for an upswing in the housing market.”

“Larwin has another Simi Valley development that was approved, but construction has been put on hold.”

“Councilwoman Barbra Williamson expressed concern the Casden development might end up like the two Larwin projects. ‘With all that’s going on, the economy the way it is right now, why are they moving ahead when all others are backpedaling?’ she asked.”

The Bakersfield Californian. “The trail of troubled properties linked to the former Crisp & Cole Real Estate agency appears to extend beyond Kern County. At least one high-priced property in Fresno County’s mountainous Shaver Lake region was shuffled between a Crisp & Cole company and two former staffers, according to the Fresno County Recorder’s office.”

“The $1.3 million property was foreclosed on last month, according to records reviewed by Fresno County Assistant Recorder Gilbert Carter.”

“One-time Crisp & Cole salesman Jeriel Salinas bought the property…from Julie and Charles Farmer, and Aiden, Logan & Associates Inc., a company created by former Crisp & Cole principals David Crisp, and Carl Cole.”

“‘Find a life,’ Salinas said when asked about the foreclosure Friday. ‘Find something else to report about. Call everybody else who’s in foreclosure in Bakersfield.’”

The North County Times. “After losing their home to the Witch Creek fire two months ago, Jack and Mary Phillips have a new home before Christmas. The couple were able to trade their scorched lot and insurance payouts for free-and-clear ownership of their new Escondido home, using a program offered by Michael Crews Development.”

“Crews is one of several local builders who are adapting their business models to help fire victims transition into new homes. And for some smaller builders, the fires offer much-needed business as they struggle to survive during the housing downturn.”

“Michael Crews Development sold the new home for $699,900, and the company hopes to at least break even on the trade, said Mark Connal, sales director for Michael Crews Development. He said $250,000 of the sale was compensation for the burned lot. Whether Michael Crews can profit on the trade depends on the future market for a home on the lot.”

“‘It’s unfortunate that, as they say, the misery of some is the fortune of others,’ said Mario Landini, president of San Diego-based Innovative Development and Construction. ‘Business is way too slow versus the year before. If it wasn’t for the fire, I wouldn’t be meeting with anyone. It’s unfortunate, but it’s driving the business.’”

“Landini said he will rebuild homes at a 10 percent discount over his normal price.”

“On its face, rebuilding allows companies to offer reduced prices in comparison to new homes, said Nick Pappas, president of K. Hovnanian’s California Coastal region.”

“Because the builder does not need to worry about changing the land’s entitlements or building infrastructure, rebuilding a burned-down home can cost as much as 40 percent less, he said.”

“Single-home building represents a change in K. Hovnanian’s subdivision-focused business model, one that Pappas said will remain after fire victims are in their new homes.”

“And the housing downturn makes it easier to find construction workers. ‘Subcontractors want the work, desperately,’ he said. ‘When there was work going everywhere, (they) weren’t interested in doing one house, they were doing subdivision work.’”

What Kind Of Frenzied Buying Activity Are We Seeing?

Time for the annual Christmas shopping thread. “How about what to get your favorite used house salesperson, or FB for Christmas?”

Several replies: “A pre-paid bus ticket, if it’s a metro area. Recommend a particular row.”

“A gift basket with a squeegee, a spray bottle, and a piece of cardboard.”

“Bullet-proof evening gown.”

“Orange jumpsuit.”

“For the used house salespeople I suggest a copy of M. Scott Peck’s ‘People of the Lie.’” “Who would give a realtor a gift?”

“Donald Trump cologne?”

A reply, “How’d you get the goat to piss in the bottle?”

“A conscience?”

“Joshua Tree’s are the perfect gifts for realtors. In fact you should give them a few extra and ask them to share with their recent clients. Don’t need to tell them why. If I ever buy a house I plan to give out a few if I think they are needed.”

Others want to know what you see locally, “This is the last weekend before Christmas. The retail ‘analysts’ have been constantly telling us that the shoppers are waiting until the last minute this year, as an explanation for why retail numbers are so low.”

“This is an assumption that there are actually buyers out there with a pent-up demand, the same desperate assumption made repeatedly by NARies.”

“What kind of frenzied buying activity are we seeing this weekend after all?”

One posted, “Our Malls have been packed to the max since last weekend, of course I have no idea if they are all buying like mad. The American consumer is well trained though, so I would expect they are doing their job. We’ll see.”

One had a prediction, “Well if things don’t go as planned, they’ll blame the weather — copious snow in the Northeast, ice in the Midwest…”

One reported, “Actually I did see a last minute shopping frenzy. Kohl’s had been empty the 2-3 times I had been in it since Thanksgiving. Last weekend as I picked up my popcorn popper w/my earned Kohl’s bucks, the store had 2 lines at least 30 deep at one point feeding customers into the cashier lines. The shopping center’s parking lot was packed to overflowing. I think people were waiting for last minute bargains but in the end didn’t want to look like Scrooge.”

“That being said, I did post earlier that the local media was interviewing shoppers in the mall and for several the cuts in the Christmas budgets from last year was deep. (ie, 50%, $600 down from $1600).”

One from California. “Here in San Diego, the malls are even busier this year than 2006 and 2005. Maybe people are depressed about the economic malaise and are doing some ‘therapy’ shopping?”

These Trends Seem To Wander Up Into The Northwest

The Missoulian reports from Montana. “Missoula builder Joe Stanford doesn’t need fancy statistics or color-coded foreclosure maps to tell him America’s subprime mortgage crisis has arrived here. Like other builders and real estate agents, his deals have been scotched or delayed by buyers who first must sell their homes in stagnant markets. He’s stuck when out-of-state buyers who want to relocate to his Lolo and Missoula residences can’t sell their houses in Denver, Chicago and Los Angeles.”

“‘We’ve put deals together here, but everything is contingent on them selling their homes. They got into subprime loans and bought houses they couldn’t afford unless they financed it with those. When the market dropped, they lost their chance to sell,’ he said. ‘I have multiple builder friends who’ve called me with the same concerns. I think the trickle-down will affect the economy.’”

“In Montana, about 22 percent of the loans were considered subprime, or 7,342 out of the 34,152 loans that originated in 2006, according to the Home Mortgage Disclosure Act.”

“Mary Marry, president of the Missoula Organization of Realtors, has several clients who are stuck, though. They must sell homes in Las Vegas and Arizona before they’re able to purchase one here.”

“Broker Sherril McCabe said there have been some jittery buyers. ‘Everybody was looking at the national news. They sit at home and say, ‘It’ll be us next.’ But we’re never next,’ McCabe said. ‘They don’t realize we’re Missoula, Montana. We’re different and always have been. It isn’t doom and destruction in Montana; it isn’t like other states.’”

“Agent Julie Lynch said sellers’ homes are staying on the market longer, but the market is active. ‘There was an overall price drop,’ she said. ‘It was difficult to explain in our market because people were used to seeing the prices increase more than they could believe.’”

“Last year at this time, Stanford had six homes presold in a Lolo subdivision and built a dozen during the year. He has gross sales of $2.4 million in 2007 - about double his 2006 sales - for his three-year-old firm, Homes In General.”

“But with about 60 percent of his business derived from out-of-state clients who are in stale markets, he’s uncertain how 2008 will unfold. ‘I own 14 building lots in the subdivision and I’m concerned about what the winter holds for us,’ Stanford said.”

“Rebecca Babin, board secretary for the Missoula Building Industry Association, said builders report there are plenty of homes for sale in Missoula, especially in the $250,000 price range. Coupled with low interest rates, she said this is a good time to buy.”

“‘There is so much negative press that the public is losing sight that they can still buy a house,’ said Babin, a real estate loan officer at Community Bank Missoula.”

“Tighter credit is likely to alter the behavior of some homebuyers who have been living off the rising equity in their homes for years.”

“‘Maybe people shouldn’t use their homes as an ATM. People have taken the equity out to pay off other debt,’ Marry said. ‘They got used to their homes appreciating enough and that is a dangerous thing to rely on.’”

The Idaho Statesman. “Idaho’s housing foreclosure numbers have already more than doubled the total for all of last year, with December’s figures yet to be tallied, according to a report.”

“November’s 667 filings were 11 percent above the previous month. Ada and Canyon counties accounted for 393 filings or 59 percent.”

“Shaun Tracy, an associate broker with Re/Max Capital City., said that the spike in foreclosures might be just the medicine needed to cure the state’s ailing single-family residential housing market.”

“Tracy believes that as desperate homeowners slash their asking price housing affordability will return to the Treasure Valley, where the housing boom of 2005 and 2006 priced many area residents out of the market.”

“According to the Intermountain MLS, the median price of an Ada County home has risen 43 percent since 2004, or from $169,900 to $232,900 at the end of 2006. Canyon County’s median prices went from $107,0000 to $161,900, or an increase of 51 percent for the same two-year period.”

“‘It (the rise in foreclosures) might help re-establish where the market needs to be in order to stimulate sales,’ Tracy said.”

“Marc Lebowitz, CEO of the Ada County Association of Realtors, wasn’t convinced that higher foreclosure numbers would translate into higher housing sales. ‘Usually, when a person sells a house they buy another one,’ he said. ‘But some of these people are going to be forced into the rental market, at least for a while.’”

The Mail Tribune from Oregon. “During the housing boom earlier this decade, Larry Kellems’ company built and sold 102 houses in 2004 and 96 in 2005. When the real estate market bellied up last year, Kellems didn’t have to read about it. Overnight, the market dried up.”

“He sold 17 units in 2006. Although 2007 has been marginally better — he sold 21 houses through November — Kellems was forced to make tough choices. And he’s not alone.”

“A review of the more than 750 default notices compiled by LandAmerica Lawyers Title suggests about 10 percent of mortgage defaults belong to builders or developers.”

“Many builder-related defaults were to private lenders, who fronted money at higher than market rates. ‘The smaller builders are the ones we’ve seen having issues,’ says John L. Scott Real Estate agent Ron Galbreath, who has been involved in sales of property that went into default. ‘You find some of the younger builders overextended themselves.’”

“When houses were moving rapidly, developers gobbled up property virtually any time and — all too often — at any price.”

“‘When things were going well, two, three, four years ago, we bought property for the future,’ Kellems says. ‘A lot of us got caught when the market changed. Some of us have been stuck with developments that we have been unable to sell very well and can’t maintain the overhead to keep for future development.’”

“Kellems says he has a dozen projects in various stages of development. He also has a pair of development properties, totaling nearly four acres in Medford, that are going back to his lender, a local family trust.”

“‘It takes deep pockets so you can ride through these times when there is no cash flow,’ Kellems says. ‘It takes a certain amount of money every month to keep (payments) current. You’ve got to pick and choose which ones you want to keep.’”

“He sold the two lots now in default to other builders at the height of the market and then took the property back in July. ‘It was their first time in development and I had to take it back,’ Kellems says. ‘They couldn’t make the payments and then I couldn’t make the payments and was stuck in the middle. It caused a ripple effect.’”

“Mark Knouff, one of the Falcon Meadows developers, believes timing was perhaps the biggest factor for investors who came late to the party and are now caught between falling values and payments reflective of peak prices.”

“‘We weren’t building starter homes before (the White City project), but it was the right fit and a good value,’ Knouff says. ‘There was such a feeding-frenzy.’”

“‘Everybody was buying there as quick as it was offered for sale. There was a trend — people thought they had missed out and saw this as another opportunity,’ he says. ‘A lot of people made money in a short period of time fixing up places and selling them … and then there were a lot of people got in over their heads.’”

The Oregonian. “Portland’s standing as a bright spot in the U.S. housing market eroded a bit in November, according to data released Tuesday. Homes also continue to take longer to sell and the inventory of unsold homes remains stubbornly high.”

“And the worst may still be on its way. ‘I’m not really sure we’ve found bottom,’ said Jerry Johnson, a Portland housing economist.”

“Nancy Wheeler can see the effects of the slowdown in a foursquare home on Northeast 21st Avenue. The freshly renovated house, which sits in Portland’s popular Irvington neighborhood, has granite countertops and cherry wood cabinets. Wheeler, a broker for John L. Scott Real Estate, listed the home for sale in July for $800,000.”

“She got no offers, so she lowered the price by $20,000 in September. That didn’t bring any offers. She lowered the price by another $20,000 in October.”

“Today, the home is still for sale at $759,900. High-priced homes, Wheeler says, are tough to sell in the slowing market because fewer buyers can afford a $4,000 monthly mortgage payment. ‘There’s lots and lots of homes for sale,’ Wheeler said. ‘It’s just taking longer to sell.’”

“Wheeler’s home also competes with more houses for sale than at any point in the past four years. The Regional MLS — which lists 14,000 homes in Clackamas, Columbia, Multnomah, Washington and Yamhill counties — said closed sales fell by almost 20 percent in November. There were 2,249 closed sales in November 2006 and 1,623 in November 2007.”

“Across the Columbia River, Clark County continued to struggle. Inventory is 11 months, and the median home value was up 2.5 percent to $260,000.”

“Johnson predicts the region’s home values will be flat in 2008. In other words, your house won’t be worth any more in December 2008 than it is worth today. ‘We’ve got to work out the inventory,’ Johnson said, ‘and it’s going to take 2008 to do it.’”

The Olympian from Washington. “This was a healthy year for South Sound real estate sales though sales through November were down about 12 percent compared with 2006, according to Northwest MLS data for Thurston County. The market of 2005 and 2006 was active and resulted in record sales in 2006.”

“‘You just have to remember those years we were so over the top,’ said Jeff Pust, general manager of Van Dorm Realty. ‘We needed a correction year.’”

“Active listings of homes and condo have increased 86 percent from 2005, from 1,120 units late in 2005 to 2,087 units this November.”

“Though the inventory of homes for sale has grown significantly the past two years, Pust is optimistic that buyers will absorb it. He said that’s partly because of low county unemployment and steady job creation. New Cabela’s and Kohl’s stores that opened in Lacey this year, and a Great Wolf Lodge resort expected to open in Grand Mound early next year will create about 1,000 retail jobs, Pust said.”

“A small percentage of home­owners are struggling to make mortgage payments, Thurston County Auditor’s records show. Through Thursday of last week, the department had issued 635 notices of auctions to homeowners who were behind on their mortgage payments, compared to 435 issued all of last year, nearly a 46 percent increase in sent notices.”

“‘I don’t think we do have enough affordable housing,’ said Ken Anderson, broker and owner of Coldwell Banker Evergreen Mortgage. ‘We’ve seen examples of where people have overreached.’”

“At the same time, Anderson said that overall, 2007 was a year when lenders tightened up on liberal credit, some of which led to foreclosures. ‘We’re glad to see a year like this,’ he said. ‘We can get rid of the speculation we’ve seen.’”

The Seattle PI from Washington. “King County had 767 foreclosure filings in November, up 127 percent from October and 93 percent from November 2006, according to RealtyTrac.”

“Seattle-area foreclosures have been on the rise since the spring, said Stephen Routh, CEO of the state’s largest handler of foreclosures, because softening prices have made it harder for people to sell their homes for as much as they owe.”

“‘These trends seem to wander up into the Northwest. The perfect storm is starting to descend on us here,’ he said.”

“‘I would view that (surge) as an anomaly right now,’ Routh said. ‘If it happens again next month, then I’d scratch my head maybe and try to rethink that.’”

“As Seattle-area foreclosures have risen, King County’s median house price declined by nearly 10 percent between July and November. The median price for houses and condos that sold in November was $405,000 in Seattle and $385,990 for all of King County, down from a year ago and from recent highs this summer, according to the Northwest MLS.”

Local Market Observations!

What do you see in your local housing market this weekend? Builder troubles? “Nearly 70 construction or related businesses in Northwest Arkansas filed for bankruptcy protection during the year, according to U. S. Bankruptcy Court filings. Springdale-based custom home builder Tim McMahon filed for Chapter 7 bankruptcy protection Friday, citing between $ 1 million and $ 10 million owed to 279 creditors.”

“‘More [builder bankruptcies ] are expected. More will come down the path,’ said Kathy Deck, director of the Center for Business and Economic Research at the Sam M. Walton College of Business. ‘The longer the market goes sideways… it remains difficult for some people to remain solvent.’”

“The company builds mainly in Fayetteville, Springdale, Rogers and the surrounding area. The cost of homes by McMahon Brothers Custom Homes is between $ 250, 000 and $ 1 million, the Web site said.”

A related slowdown? “In a housing market flooded with inventory, it is no fun to be a home seller. On the flip side, if you are looking to buy, build or renovate, the cards are in your favor. The housing slump has pushed down prices on many building supplies and labor.”

“‘There have been circumstances where I’ve been underbid by what I think are kind of ridiculous amounts by people who are not as experienced with remodeling aspects,’ said Dave Gridley, owner of a remodeling business based in Rockford.”

“The home improvement business is finally catching the housing virus. Remodeling and repair actually received a boost in the early phases of the housing slump as many owners opted to upgrade their current digs rather than sell and move in a softening market. Still others fixed up their second homes and investment properties to make them more attractive to prospective renters.”

“But the stimulus from both trends has now faded. Making matters worse, a typical source of cash for remodeling — home equity lines of credit — is drying up. Banks are getting pickier about making such loans.”

“David Seiders, chief economist with the National Association of Home Builders, says, ‘Remodeling is not countercyclical. We’re starting to see a setback.’”

“What the market really needs are homes that are appreciating in value. Kermit Baker, director of the Remodeling Futures Program of the Joint Center for Housing Studies at Harvard University, notes, ‘Nothing indicates that there will be a quick turnaround’ in that department.”

Or economic fallout? “As housing continues a meltdown, consumer goods cost more and unemployment rises, those who make a living cooking and serving others say they’re feeling the impact.”

“Observers noted that real estate’s downturn as well as higher food and fuel prices have negative effects on everyone’s bottom line. In downtown Modesto, Harvest Moon owner Mark Smallwood said his restaurant still is seeing sales growth, but not as much as in other years.”

“‘We’re not seeing the mortgage brokers and the real estate representatives,’ Smallwood said.’

Bits Bucket And Craigslist Finds For December 23, 2007

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