The Housing Bubble

The Union Tribune reports from California. “Homeowners desperately trying to save their dwellings from foreclosure in the subprime lending crisis say they are being led to a series of wrong turns, dead ends and blind alleys as they seek relief from lenders. ‘Sometimes it takes 45 minutes to an hour just to get to the right person’ on the phone, said Adeline Enriquez of the nonprofit Community HousingWorks. ‘They put on the music. They disconnect the phone call. I mean it is a mess.’”

“‘The governor and the president are putting out information, but that definitely hasn’t trickled down to ground zero,’ said Ed Smith Jr., VP of governmental affairs and industry relations for the California Association of Mortgage Brokers. ‘The feedback we get is (borrowers) go through the voice-mail rigmarole. The first person they talk to generally isn’t someone who is in a position to make a decision. The customers get put into voice-mail hell.’”

“In Chula Vista, Alex Rodriguez needs to modify the terms of his adjustable-rate mortgage before he loses the condominium he shares with his wife and two children. His payments recently jumped from $2,000 to $2,672, well beyond what the family can afford.”

“‘How do I try to save this property if they won’t work with me?’ Rodriguez said. ‘No one can refinance me because there is hardly any equity. All the doors are closed.’”

“To make ends meet, Rodriguez holds two jobs. After eight hours in the shipping department of a pharmaceutical company, he works six to seven hours on a loading dock. ‘It doesn’t seem like the effort is paying off,’ he said.”

From CBS News. “Ernesto Ramos is a real estate agent, but he couldn’t have picked a worse time to hang a for sale sign on his own home. ‘I decide to put the house on the market, but unfortunately we haven’t been able to sell the property, you know, here we are still,’ he says.”

“Ramos lives in Paramount, Calif., a working class community about 15 miles south of Los Angeles. Home sales there have all but stopped.”

“In the third quarter of this year, only 30 homes changed hands, down from 134 homes the previous year. That’s a 78 percent drop, the largest in the country.”

“Gary Endo has a real estate office in Paramount, but he will not accept new clients here because homes just aren’t moving. ‘A lot of the things on the market right now is fear. A lot of the buyers are sitting on the sidelines waiting to see what happens,’ he explains.”

“The problem for places like Paramount has been building for years. Home prices rocketed far beyond what a middle-class family could afford. For example, in early 2003 a home in Paramount cost around $200,000. Last year, a typical house sold for almost a half a million dollars.”

“But as prices dropped, many buyers were left holding a loan that far exceeds the home’s value. They are left in a bind.”

“‘It’s not easy to lower the price of your home, because if you only have 10 percent equity in the home and you lower it 10 percent, that may be all your equity,’ explains Delores Conway from the USC Lusk Center For Real Estate.”

The Record Searchlight. “Blame the slumping housing market for the delay in getting Big Wheels rolling. That’s the story from Michael Dastrup, who bought the iconic Shingletown restaurant, in 2004, about six months before a May 2005 fire torched his investment.”

“‘I am very real estate rich and cash poor,’ Dastrup said.”

“Dastrup has been trying to sell his two homes in Shingletown for nearly two years. The homes are listed for $450,000 and $285,000. Dastrup, who says he owns the houses outright, needs the sales profits to put 50 percent down on a construction loan.”

“But Dastrup doesn’t know how much longer he can wait. ‘I just hate to give up on anything I do,’ he said.”

The Bakersfield Californian. “David Crisp and Carl Cole, the image-makers of Bakersfield’s bygone real estate boom, ended the year deep in a quagmire of home loan defaults, allegations of deceptive borrowing practices, civil lawsuits and an ongoing FBI investigation.”

“Although Cole left the now-defunct Crisp & Cole Real Estate agency in 2006, the pair were still talking up ambitious deals at the year’s start.”

“By July, CSUB had nixed its condo tower negotiations with Cole and Crisp.”

“Later that month, tenants in homes in the North Country Meadows subdivision said they were in a lease-to-buy program run by Crisp & Cole Real Estate. Some had no idea the homes they hoped to own were in default until contacted by reporters.”

“As of the first week in December, at least 105 defaulted and foreclosed properties are linked to associates of the former Crisp & Cole companies, according to an ongoing Californian tally.”

“More than $64.6 million was borrowed against the homes, according to The Californian’s analysis of county filings.”

“The Crisp & Cole office is gone today, replaced by a real estate office specializing in bank-owned properties.”

The Modesto Bee. “The housing market is bad throughout California, but apparently it’s worst in Stanislaus County. Stanislaus’ median home sales price plunged 23 percent this November compared with last November, according to DataQuick.”

“Homes in Stanislaus sold for a median $285,000 last month, which was about what they were going for in August 2004. Median prices peaked at $396,000 in December 2005, but they’ve been declining since.”

“Only 392 homes sold throughout Stanislaus last month, 40 percent fewer than during November 2006. There also were more properties lost to foreclosure — 419 — than were sold by traditional means last month.”

“San Joaquin median sales prices dropped to $329,500 in November from a year ago, a 21.7 percent decline. Sales volume was down 34 percent.”

“Merced’s median sales price was $274,000 in November, which was down 16.8 percent compared with the previous year. Prices were even lower in October this year, however, when they hit $260,000. Sales volume was down 31.9 percent this November compared to last.”

The Daily News. “Let’s dub 2008 the ‘Year of the Home Buying Opportunity.’ That’s my glass-half-full take on what’s going to happen with the residential real estate market.”

“But the extent of the opportunity will materialize over time.”

“DataQuick noted that the median price across the Southern California region stretching from Ventura to San Diego fell a record 10.3 percent from a year earlier, to $435,000. (DataQuick’s stats include new and previously owned houses and condominiums.)”

“The price drop was bigger - 12 percent across California and in Los Angeles County - in the state association’s report, which focused just on previously owned single-family houses. Both reports noted that prices have dropped to early 2005 levels.”

“Robert Kleinhenz, the association’s deputy chief economist, recalled that during the market slump of the 1990s, the biggest price decline statewide was 7.2 percent in May 1993. Los Angeles County’s biggest drop was 11.6 percent in March 1993.”

“‘This is truly unique because it happened so fast and the (price) adjustment has been so steep,’ Kleinhenz said.”

“The ‘Home Buying Opportunity,’ or HBO, has certainly improved since April, when California’s median house price increased an annual 6.2 percent to a record $597,640. By last month, it had fallen $109,000, a drop of 18 percent.”

“So far there is little inclination among the nation’s legislators to help California. And the mortgage brokers also joined the ranks of prognosticators who don’t think that the market will improve until 2009.”

“‘There is going to be a lot of wreckage, but hopefully there will be some opportunity for people, and I think that will be a benefit,’ said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. ‘This is a very fascinating situation to watch.’”

A report from the Arizona Republic. “A major Valley real estate broker shut its doors just days before Christmas, leaving 350 agents without a home, and about 20 salaried employees without a job. RE/MAX 2000, based in Gilbert, is closing its 13 offices around the Valley. An attorney for owner Robert Kline told 12 News Sunday the company was not generating enough sales to meet its expenses because of the Valley’s depressed housing market.”

“As for the timing of the closing, attorney Dax Watson said, ‘We felt it wouldn’t be fair to our clients to wait.’”

“Bruce Fraser, an agent with RE/MAX 2000 in Gilbert, said Sunday the company held its Christmas party about two weeks ago, and there were no signs the broker was in trouble. ‘I did not see this coming,’ he said.”

“But Fraser said he had already received about a dozen calls Sunday from other brokers looking to hire him.”

“A year ago, Phoenix housing counselor Joann Hauger spent her days helping people buy their first home. Now, the executive director of non-profit Community Housing Resources of Arizona is swamped with calls from homeowners about to lose their homes.”

“‘So many people were in denial too long,’ said Hauger, referring to homeowners who took out loans they didn’t understand or couldn’t afford. ‘I am afraid the problem is much worse than many people think.’”

“‘There are some very sad stories, and there are some people who made bad decisions,’ she said.”

“Sales slowed and listings climbed across the Valley, but prices hadn’t yet slipped much from the speculator-spurred run-up of 2004-05. Many sellers were still holding out for those inflated prices and the hope that the market would rebound in early 2007.”

“‘People would come to us wanting help purchasing a new home somewhere in one of the Valley’s outer suburbs, but they didn’t have the income to do it,’ said Hauger. ‘Many didn’t like what they heard and went to a mortgage broker who would make the loan.’”

“‘We were appalled when we saw what kind of loans people were getting to buy homes last year and the year before,’ she said. ‘People would call looking for down-payment help to buy a $300,000 house. We would look at their monthly income and see they should only qualify for a $120,000 loan.’”

“By February, Community Housing began receiving calls for foreclosure help. But those first calls were people ‘just fishing,’ looking for money to catch up on their mortgage instead of help fixing their loan or counseling, Hauger said.”

“Some looking for help were investors who had more than one property in foreclosure but still believed if the market came back in a few months they could sell for a profit. ‘When people found out we didn’t have the cash to catch them up on their mortgage payments, they didn’t call back or come in,’ Hauger said.”

“By March, complaints about bad loans flooded into regulators. ‘Some people felt entitled that they should be able to buy even if they didn’t have the income,’ Hauger said. ‘We saw people getting ‘no doc’ (no documentation) loans showing they had income that wasn’t there. That’s fraud, and those loans are bad and can’t be fixed.’”

“Hauger’s agency worked with a man from California who was being transferred to Phoenix and wanted to buy a home. He couldn’t afford it with his Arizona income, Hauger said. But a mortgage firm used his California income to work the deal.”

“‘That’s when we began to see what the housing market was in for,’ she said.”

The East Valley Tribune from Arizona. “The Valley’s most expensive rental community is getting pricier. In March, Tempe’s Grigio apartment development will open up six luxury suites with monthly rents ranging from $5,500 to $6,500.”

“Grigio, which opened in early 2007, meshes together the concepts of rentals, condominiums, time shares and resorts, said Mike Clow, senior VP of project builder Gray Development Group.”

“The big question is whether there is enough demand for rental units that have such a high monthly rent, local apartment market analyst Bob Kammrath said. ‘At that price, you could buy yourself a pretty high-end condo and still have a pretty good view,’ he said.”

“Grigio and other Valley apartment complexes will face competition from frustrated home sellers who are renting out their places until the market recovers, he said. Local experts have estimated that there could be thousands of single-family homes for rent across the Valley.”

“The short-lived fad of converting apartments to condos has also created more competition, as failed projects revert to rentals.”

“‘That’s been a real drag on the apartment market on all levels,’ Kammrath said. A person can rent a home with the same square footage and a pool in a gated community for far less, he added.”

The Whittier Daily News on Arizona. “The widow of a former mayor claims she was taken for more than $600,000 by a development company co-owned by a former police chief. In a Dec. 12 letter to the Orange County district attorney, Joanne Lopez alleges The Hoover Companies ‘criminally mismanaged and stole’ retirement savings she invested in Arizona housing developments in 2005.”

“Lopez said she asked for the return of her funds after the first investment note was due this past June. She said Brad Hoover told her the company was having problems.”

“Lopez said she gave the Hoovers a total of $660,000 to put into two proposed residential and one commercial development around the Arizona desert community of Fort Mohave. ‘He told me they were having trouble getting loans and I said, ‘Brad, you are starting to scare me,’ Joanne Lopez said. ‘Someone has to look into whether there has been fraud, or just bad luck.’”

“Hoover investors include prominent names in Whittier and law enforcement, including Steve Simonian, former chief of the Los Angeles County District Attorney’s Bureau of Investigation; David Carlisle, former Whittier police lieutenant who now heads USC’s department of public safety; and former Assemblyman Frank Hill.”

“Kirk Linklater, another Hoover investor, said he put a total of $80,000 into the Mariposa development and El Rio, a country club and residential project the Hoovers were building nearby.”

“‘My three-year note was due in June, and I haven’t sent in a letter requesting my investment plus my 4 percent return,’ said Linklater, a Whittier resident and former contractor who now works as a building inspector for the city of Los Angeles. ‘I have heard from other investors that have received letters back (from the Hoovers) saying that at this point they don’t have the money.’”

“While he acknowledged the real estate market has taken a turn for the worst, Linklater questioned management of the El Rio development.”

“‘It took them forever to build the clubhouse, engineering has been an issue and there is a lot more that should have been completed,’ said Linklater, adding that years after he invested in the project there are only a few model homes on the site.”

“‘They have a ton of money sitting in that raw land that is still empty,’ Linklater said.”

The Las Vegas Sun from Nevada. “About this time two years ago, real estate agent Ben Correa was laying out his finest semiformal attire for his office’s lavish holiday party, held in one of the grand ballrooms at the Wynn Las Vegas.”

“This year, his boss threw an office potluck.”

“If mortgage and real estate professionals needed one more reminder of their dismal 2007, they’ve found it in the chips and dip-filled holiday parties that have replaced the posh blowouts of past years.”

“‘It’s drastically different from other times in the market,’ Correa said.”

“‘This time last year I had no friends who were unemployed, and this year I don’t have enough fingers and toes now to count all of my colleagues who are unemployed,’ said Stephanie Prather, president of the local chapter of the National Association of Professional Mortgage Women.”

“‘Most companies last year were telling people to invite every past customer and client, and bring all their family members, bring anybody,’ Prather said. ‘They would buy everyone gift cards and all kinds of goodies. This year is definitely toned down. They can’t turn off the power, so these extravaganzas are the easiest things to cut.’”

“At Countrywide, the largest mortgage lender in Nevada and in the country, the holiday season has been particularly tough, its workers say. One office replaced a party at Del Frisco’s Double Eagle Steak House with an office potluck, and workers at other offices say they’re not sure they’re having parties at all.”

“‘It’s definitely not like what it used to be,’ said one Countrywide worker who did not wish to be identified. ‘People understand that the budget is tight. And some people could care less about a Christmas party; they’re just happy that the office is going to close early.’”

“D.J. Kopple, an assistant general manager of Hamada of Japan, said she’s seeing fewer groups, but the ones that are coming are spending more money than before and are more likely to allow an open bar.”

“‘Perhaps they want to keep the morale up,’ Kopple said. ‘It’s a lot easier and cheaper to do a Christmas party than give out Christmas bonuses, and this way people still get something, at least.’”

The Daily News reports from Florida. “The slumping real estate market of 2007 took a dramatic toll on sellers, buyers and everyone in between. ‘There are a lot of people who are just walking away,’ Realtor Ray DiTirro observed in April. ‘They do their cash-flow analysis and they say, ‘It’ll cost me less to walk away than to carry this condo.’”

“Veteran Realtor Debbie Gericke…does not expect to see significant improvement in 2008. ‘There’s a lot of unrealistic stuff on the market,’ said Gericke. ‘Until we chew through that, we’ll continue to mutter along.’”

“The year started with more than 4,500 condos, town homes and houses on the market — an all-time high for the Emerald Coast. Current records from the Emerald Coast Association of Realtors show 5,977 single family homes and 4,090 condos on the market.”

“‘If you do not have to sell your home, now is not the time to put your house on the market,’ Gericke said. ‘It’s just diluting it.’”

The Palm Beach Post. “It’s not just schoolteachers, bartenders and other real estate amateurs who got burned by the condo crash. Some big, seemingly sophisticated investors are taking hits, too.”

“Condo converter Tarragon Corp. of New York just unloaded the 311-unit Floresta Apartments in Jupiter for a hefty 28 percent loss.”

“Tarragon bought the complex for $83.95 million in February 2006, just after the condo boom ended. It sold the apartments this month for $60.25 million, according to property records.”

“Tarragon has been in the midst of a nationwide fire sale. It said last month that it expected to write off $350 million as a result of the falling values of its properties.”

“More evidence of a slowing commercial real estate market: An $80 million deal for Vista Business Park west of West Palm Beach has fallen through. When owner Steve McCraney contacted institutional investors this summer about selling, the offering was expected to be a home run that would net $100 million, thanks to a white-hot industrial market. What a difference a few months make.”

“‘We’re back to a real market,’ McCraney said last week.”

“The winning bidder’s financing recently fell through, and McCraney said he’s talking to other bidders. With residential real estate faltering, brokers say potential bidders are taking a harder look at McCraney’s tenants and realizing that many of their fortunes are tied to the housing market.”

“The housing slump ‘is affecting everybody,’ said Randall Greene of Palm Beach Gardens-based Catalfumo Construction and Development. ‘There’s even a spillover into the Class A office market.’”

The St Petersburg Times. “The days of dueling with land speculators and getting squeezed by orange growers, are mostly past. John Ryan is at a place he can call home. The housing market is sputtering into a tailspin. And John Ryan’s sitting in the cockpit with the bailout plan.”

“He wants to buy your lots - tens of thousands of them.”

“‘You planned to be a land baron but ended up with just barren land,’ reads the Web home page of Ryan’s Metro Development Group. ‘We won’t leave you with barren pockets.’”

“Lennar, the Miami builder limping along with the rest of the industry, sold Metro 8,300 lots in central Florida three weeks ago. The Lennar deal brought Metro’s lot total to 30,000, a huge number for a 4-year-old company. But Ryan’s hunger is unabated. Expect him to go bargain shopping and close on other lot purchases with cash-depleted builders by the end of the year.”

“Ryan’s calculation is that home builders will churn out new homes again in 2010. He’s got the charts and graphs to buttress his position.”

“Private equity funds financing most of his lot purchases trust him with their cash. ‘That money is looking for an operator,’ he says. ‘And I’ve got the experience.’”

“Neither Ryan nor Lennar would disclose the sale amount on the 8,300-lot deal, but Ryan said developers like himself like to pay between $9,000 and $13,000 per Florida lot.”

“Others say Metro got a steal of a deal, something closer to $6,000 per home site. In central Pasco, where Ryan scooped up 3,900 Lennar lots at the Epperson Ranch, undeveloped lots once fetched about $30,000.”

“Ryan’s investment deals rest on the assumption he can start construction in late 2009 and deliver lots to builders in 2010. ‘If the recovery goes to 2011 or 2012,’ says Ryan, ‘guess what? We made a bad bet.’”

The News Press. “Builders are snapping up thousands of lots in Lee County at fire sale prices — and experts say the party’s just getting started.”

“The big land sales are being driven by necessity, said Jack McCabe, a real estate consultant based in Deerfield Beach. ‘This is not a surprise because right now, for most of these home builders, it’s survival of the fittest,’ McCabe said. ‘They have to get lean and mean.’”

“As prices continue to deteriorate, he said, investors — not just other builders — will be looking to come in and scoop up bargains at the bottom of the market, McCabe said. ‘There are some hedge funds that are specifically planning on land acquisitions at highly distressed prices compared to the highly inflated prices’ that prevailed at the top of the boom in late 2005, he said.”

“Lots in Cape Coral and Lehigh Acres, for example, went ‘from 5 and 10 grand to 50 and 80 grand, and now they’ve gone back to where they were,’ he said. ‘Things just got too expensive and the demand was artificial. That means prices have to come down.’”

“It’s easy to believe there’s nothing but gloom and doom in the housing industry these days. In Lee County, the number of permits pulled has plummeted.”

“National builders and developers are paring the payroll to the bare minimum. Deep discounts and unheard-of incentives are being offered to tempt cautious customers.”

“But local builders and the Lee Building Industry Association are putting their best foot forward to convince consumers that there’s never been a better time to buy. The BIA has just launched a comprehensive ‘Buy Now!’ campaign to educate consumers about the pluses of purchasing in today’s market.”

“‘We’re emphasizing how incredibly economical building is right now based on building costs that we haven’t seen since the 1970s,’ said Heather Young, purchasing manager for Bloxham Homes in Fort Myers.”

“With experience in the construction industry going back to the 1980s, company founder and president Norm Bloxham has seen market peaks and valleys, although admittedly none as deep as this one.”

“Today, not only will it take less time to build a home, but materials also cost far less. For example, Bloxham noted that prices for plywood and lumber are the lowest they’ve been since the 1970s. Similar drastic reductions have been seen in concrete and masonry costs”

“And there’s no more scarcity of materials such as plagued the industry during the first half of this decade. Roof tile that took 16 to 18 weeks to obtain during the boom is now available for delivery in two to three weeks.”

“‘A few years ago,’ Bloxham noted, ‘it was difficult even to get subcontractors to bid because they were stretched thin. Now they’re motivated to bid as tightly as possible, lowering margins to get the work.”

“Claudine Wetzel, Stock Development’s vice president of sales and marketing., added that right now, Stock can promise to build a home in six months - an unheard of commitment just a few years ago.”

“Palm Beach County lost 1,400 construction jobs in the past year.The state’s job growth has cooled considerably, ‘We’ve seen a real slowdown in the past year as the housing market has come apart,’ said Mark Vitner, an economist at Wachovia Corp.”

“The weaker job market is good news for employers like Rex Kirby, head of Suffolk Construction in West Palm Beach. A year ago, contractors complained they couldn’t find enough quality workers for projects. ‘We’ve seen the caliber of people available going up dramatically,’ Kirby said. ‘That’s an upside.’”

“Traffic dropped on a half-dozen major Lee County roads last month compared with November 2006. ‘At first blush, I find that difficult to comprehend,’ said Robert Wagner, a Realtor with Evans & Wagner Commercial Group in Fort Myers. ‘Have some people left? Yeah, I guess some people have left the area to find work. But those are significant reductions.’”

“The biggest drop is on Daniels Parkway, at Metro Parkway. Last November, 54,510 cars traveled daily on this stretch of Daniels. This November, the count was down to 46,160, county counts show.”

“Lehigh resident Lou Gremani, 78, believes traffic has dropped, and not just since the start of the housing slump. ‘I’d say it went down after the last hurricane,’ Gremani said referring to Hurricane Wilma. ‘With the real estate market belly up, people are moving to other states and even Canada.’”

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