February 4, 2008

Collectively, We Went A Little Nuts Out Here In California

Bloomberg reports on California. “In the sprawling new subdivisions of Southern California’s Riverside County, newspapers litter empty driveways and coffee-colored lawns are reminders of neighbors who had to abandon their dream homes. California leads the nation in home foreclosures, and economic worries are driving the voters who have the biggest say in tomorrow’s Super Tuesday contests.”

“‘The economy has trumped everything else,’ said John Husing, VP of a Redlands consulting firm.”

“In Riverside County, 160,000 homes were constructed since 2000, said Larry Ward, county assessor and property recorder. Today, one of every 43 homes in the so-called Inland Empire that stretches east of Los Angeles County to the Arizona border is in foreclosure, according to RealtyTrac.”

“Average home values in the county dropped from $450,000 last year to $350,000 this year, Ward said.”

“A few years ago, no money down and interest-only loans bought Clinton supporter Felipe Molina, who makes $43,200 a year, a $590,000 Riverside home that he intended to use as a small boarding-care facility for the elderly. Now, Molina and his wife can’t afford the $4,500 in monthly mortgage payments.”

“Veronica Blankenship, a 49-year-old African-American probation officer who Riverside Fair Housing Council officials say was the victim of a predatory lender, owes $3,400 in monthly payments, more than she earns, for her modest home.”

“Clinton’s proposal for an interest-rate freeze ‘is not going to help me,’ she said. She also dismissed the fund proposed by Obama, as another government program for which she wouldn’t qualify.”

“‘Politicians say anything to get a vote,’ she said.”

From Reuters. “Stockton, California, may be the foreclosure capital of the United States, but that is not influencing how residents like Michelle Encinias who are losing their homes will vote on ‘Super Tuesday.’”

“Encinias recently cast a mail ballot for Sen. Hillary Clinton, but has little faith that the New York Democrat or other presidential candidates can do much about foreclosures if they make it to the White House.”

“‘They’re just going to say what we want to hear,’ Encinias, who has two children, said during an interview in her four-bedroom home in a middle-class neighborhood in Stockton.”

“Encinias’ skepticism is shared by Tino Gonzalez, another Stockton Democrat leaning toward Clinton for Tuesday’s primary election.”

“‘I don’t think either party is going to do anything about it,’ Gonzalez said of the local foreclosure surge. ‘They’re promising a lot of stuff to get elected but once they get elected they’ll forget.’”

“Gonzalez’s mortgage is rock solid. He chose a fixed-rate loan because, he said, he felt adjustable rate loans were a trap waiting to be sprung on unknowing borrowers. His caution paid off, for foreclosures are soaring among borrowers with adjustable-rate mortgages, such as Encinias.”

“‘I go to the gym and hear a lot of horror stories,’ Gonzalez said. ‘A lot of people bought houses a year, year-and-a-half ago and paid top dollar and now can’t make the payments.’”

“Encinias conceded she could have avoided defaulting on her mortgage by selling her house when local home prices were peaking, but said better loan disclosure rules could have prevented her current predicament.”

“But many who bought during Stockton’s housing boom simply ignored loan terms, said Bill Herrin, an economist with the University of the Pacific: ‘Everybody wanted to do it now, today. Collectively, we went a little nuts out here.’”

The Recordnet. “The lunch rush used to fill Campesino Café. That hasn’t been the case for the past several months. A handful of south side businesses, such as Campesino Café, that cater mostly to Latino immigrant workers are not only seeing the effects of a sluggish economy, but they also say reverse migration has left their business nearly empty of customers, who are fleeing lackluster employment conditions.”

“The cafe has laid off two of its five staff members. Sales have diminished from $500 per day to $200 per day since the summer. ‘If there are no customers, we don’t have money to pay,’ said Margarita Jimenez, the cafe manager and daughter of the owner.”

“‘This is one of those annual times when families go back to their homelands. At times, they don’t feel there is enough work to come back, and you’re going to feel that pinch in the businesses that provide services to the Latino community,’ said Mark Martinez, CEO of San Joaquin Hispanic Chamber of Commerce.”

“‘Right now, there’s no sign that it’s going to get better. There are no jobs,’ said music retailer Marcos Flores, who is considering closing the shop.”

“The soft housing market has played a huge role in the economic slowdown in San Joaquin County. The housing market slowed job growth in the county from 1.3 percent in the fourth quarter of 2006 to 0.4 percent in the fourth quarter of 2007, according to University of the Pacific’s Business Forecasting Center.”

The Orange County Register. “It’s hard to feel sorry for well-heeled shoppers whose idea of tough economic times is passing on $1,000 Burberry raincoats or that $300 limo ride while the working poor skimp on vegetables and take the bus.”

“But economists say that recent signs of cutting back by the affluent could hurt the economy.”

“Nathan Warren, a limo driver, knows this first hand: He has seen his monthly wages drop by 40 percent to about $1,800 since late last year. His work week at Newport Beach-based Classy Ride Limousine Service was reduced to three days from five amid slow business.”

“‘I have to struggle to get by. I am pinching pennies,’ said Warren, a Costa Mesa resident. ‘I am eating more cereal and am not buying clothing.’”

“He used to go eat at restaurants a couple times a week. No longer. He also would like to visit friends in San Diego and Los Angeles. But less work and expensive gas are making him put off those trips.”

“Just look at the cutbacks by Dali Wiederhoft, a 52-year-old marketing executive from Reno, Nev., made skittish by a volatile stock market, a 20 percent decline in her home value and recession fears.”

“Over the past three months Wiederhoft pared her spending on clothes to $500 per month from about $3,000; that means no more Jimmy Choo shoes and David Yurman jewelry. Her cutbacks also included canceling the services of a cleaning woman and a lawn care company. She also plans to trade in her BMW for a Ford when her lease expires in about a month.”

“‘This is a time to have cash, not to spend. So, I’m cutting wherever I can,’ she said.”

“Soaring home values had made upper-middle class shoppers feel wealthy in recent years, causing them to trade up to $500 Coach handbags and $1,000 espresso makers, but a housing slump has wiped away their paper wealth. The woes are creeping into even the high-end luxury sector, as affluent shoppers are rattled by the turbulence in the financial markets.”

“Classy Ride Limousine Service, which caters to clients with an average household income of $200,000, has suffered a 10 percent sales dip this January vs. the same month last year, according to general manager Jason Lattier.”

“The 13-year-old business started seeing a slowdown last November when sales dropped 15 percent vs. the same month the year before. That 15 percent decrease was the worst monthly drop in about four years, he said.”

“‘We’ve been really slow,’ said Lattier, noting that 12 out of his 20 drivers are now working three days per week. With the average driver earnings $150 a day in tips and wages, that means a weekly shortfall of $300.”

“‘People are holding onto their money or maybe they don’t have the funds like they used to,’ Lattier said. ‘I’m not sure.’”

The Record Searchlight. “The chatter inside Cypress Square Barber Shop in Redding usually involves NASCAR, football or bowling. On the economy, conversation that quickly turned to the sagging housing market. Home sales in Shasta County are down from last year, according to DataQuick. At the same time, home foreclosures are up in the county.”

“‘How many people work in Redding at $40,000 a year can afford a house?’ said Tom Gerald, of Weaverville.”

“Eddie Grant, 78, of Redding, who paid cash for his home 22 years ago, said he’s worried about people losing their homes to foreclosure. ‘Somebody wanted to stimulate the economy 20 years ago and it’s out of control,’ Grant said. ‘It was buy and buy and now nobody can pay for it.’”

The Daily Pilot. “It’s been a tough few months for Orange County homeowners, and no area is feeling the brunt worse than the Westside of Costa Mesa.”

“The 92626 zip code, which comprises the western end of the city, had the biggest increase in foreclosures last quarter of any zip code in the county, according to DataQuick.”

“The area posted only a single foreclosure in the fourth quarter of 2006, but that number rose to a whopping 29 in the fourth quarter of 2007 — leading Orange County with a 2,800% increase.”

“Nearly every part of the county had an increase in foreclosure. Costa Mesa Realtors surmised the Westside’s high amount was the result of a large number of first-time buyers who, in some cases, may not have completely understood the loans they took out.”

“Elia Ceniceros of Weichman Associates Realtors recommended prospective home buyers check with the California Department of Real Estate or local realty boards to check an agent’s credentials. Part of the problem, she and Fajardo said, was many first-time home buyers were recent immigrants, and small-time lenders sometimes coaxed them into taking out loans they were unable to pay off.”

“‘There’s a lot of unscrupulous and unethical agents out there that may have done that to clients, but the problem is that when the client turns around and needs the agent to help them, the agent is no longer in the business,’ Ceniceros said.”

“Valerie Torelli, who owns Torelli Realty in Costa Mesa, said she had a number of homeowners come to her asking for help with short sales. The problem, she said, was not restricted to low-income buyers; many more affluent ones had pushed their luck in recent years because they expected the market to keep improving.”

“‘Even people who have really good income got sucked into this, too,’ Torelli said. ‘They kept buying houses they couldn’t afford.’”

The Press Enterprise. “Love may fade, but bills must be paid. That’s why some couples who are divorced or separated are continuing to live together, experts in the Inland area and throughout Southern California say.”

“Divorce lawyers, real estate agents and psychologists who work with ex-couples say they are seeing men and women staying together after the breakup because they just can’t afford to live separately, given the slumping housing market.”

“Former partners are not parting ‘because the equity in the house, which is their biggest asset, is rapidly going down,’ said Martin Bender, a Temecula lawyer specializing in family law. ‘A lot of parties are (afraid of) losing their major asset. They are trying to hold on in hopes that it will go up.’”

“The trend of cohabitating exes differs also from the so-called ‘nondivorce’ — in which couples do not legally separate but lead separate lives while still living together — for legal reasons. Unless spouses legally break their union, each party can continue to claim a share of their joint assets, including the home.”

“Riverside Realtor Collette Lee said she closed escrow last month on a home whose occupants had divorced six months earlier and were sleeping in separate bedrooms and leading separate lives.”

“‘It was an amicable divorce — well, as amicable as a divorce can be,’ Lee said. ‘It was just very strange.’”

“Lee said she has seen a few cases lately of cohabitating ex-couples, something she had not previously witnessed in 20 years selling real estate.”

“Michael Young, who practices family law in Redlands, said…he has several clients in that situation. ‘What I do see is them not wanting to sell the residence at this point. They’re doing everything they can not to sell in this terrible market,’ Young said.”

“Sometimes, if couples can afford it, one party will rent another place while the other remains to sell the house so they can split the proceeds, Young said. Couples who cannot afford that basically avoid each other.”

“‘I always think, ‘How awkward is that?’ Young said.”




It Will Soon Be Raining Shoes

Some housing bubble news from Wall Street and Washington. Reuters, “Corporate America is pouring money into the U.S. presidential campaign at an unprecedented rate, with a torrent of donations coming from the businesses behind the subprime mortgage crisis. Facing a government crackdown over predatory lending and a troubled housing finance system, Wall Street and the real estate industry were among the top political givers in 2007, a campaign finance watchdog group said on Sunday.”

“Leading all corporate donors in campaign donations as of the end of last year was investment banking giant Goldman Sachs, based on an analysis of Federal Election Commission records, the Center for Responsive Politics said.”

“The next four largest corporate donors were Citigroup, Morgan Stanley, Lehman Brothers and Merrill Lynch, according to the center’s fourth-quarter preliminary analysis, which is subject to revision.”

“Senators Clinton and Obama have each taken in more than $5 million from securities and investment firms; Republican Mitt Romney, over $4 million, and rival John McCain, $2 million.”

“Real estate has not been far behind, donating $4.8 million to New York’s Clinton and $3.7 million to Romney, the former governor of Massachusetts.”

“Illinois’ Obama has raked in $2.7 million, and Arizona Sen. McCain $1.9 million from real estate interests including mortgage brokers, homebuilders and property developers.”

The San Francisco Chronicle. “Congress is set to rush through an increase in the mortgage loan limits for Fannie Mae and Freddie Mac (and Federal Housing Administration insurance, too) - from $417,000 to $729,750.”

“Those same lawmakers won’t mention the fact that they get paid far more by real estate lobbyists than they do from our Treasury.”

“I’ve spoken with borrowers who stopped making mortgage payments seven or more months ago. None has received a default notice. Defaults may be much higher than banks are letting on. The data lags are growing suspiciously long. Nobody knows what’s going on. Seven months without making a single payment!”

“Will Fannie guarantee those loans because they aren’t in formal default yet? Nobody wants to know, because if they know, they might be called to testify next year. That’s why lawmakers want to raise the limits now and ask questions later.”

“In support of the economic stimulus bill, Bush will have to face ‘working American families’ and explain that some of their tax money is going to be spent guaranteeing $730,000 mortgages on $1 million homes. It’s like some sort of upside-down communism where the poor pay the rich welfare.”

“Why should taxes from families earning $48,000 a year be used to support expensive mortgages in New York, Los Angeles and San Francisco? Welfare for the hungry and homeless is evil, but welfare for million-dollar homeowners facing a tough refi … well, that’s called ‘helping the economy.’”

“I can imagine the president’s radio address playing in the heartland: ‘We have some families with million-dollar homes on the coasts who are really hurting and so we need you, the working families of America, to stand together with them and help them avoid the kind of home price depreciation that might leave them without a new Lexus for years.’”

The Ventura County Star. “For the past few months, America’s subprime mortgage drama has dominated the news, but its threat to the overall economy puzzles some people.”

“If mortgage providers unwisely extended credit to unqualified borrowers, they must refinance or repossess the properties, as they have in the past. Why on earth would this situation threaten the world economy?”

“Banks package their loans into financial products like Collateralized Debt Obligationss, selling as investments the cash flow and interest profits from the mortgages. Theoretically, this dilutes default risk through diversification; many different types of loans are mixed together.”

“How does such an instrument end up achieving the exact opposite of its intended outcome?”

“Our knee-jerk response is to quote Berkshire Hathaway Vice Chairman Charlie Munger: ‘When you mix raisins with turds, you’ve still got turds.’ But bad loans are just bad loans, even if banks make more bad loans than usual.”

“Knowing that subprime mortgages were pigs, bankers applied enough lipstick and rouge to make the loans attractive to investors. But the banks made these packages so attractive that they bought them from each other. CDOs were invented so banks could transfer risk and earn fees in the process, but when banks started issuing multiple CDOs based on the same securities and buying them from each other, things got out of hand.”

“Those watching the subprime debacle and waiting for ‘the other shoe to drop’ are in for an unpleasant surprise: it will soon be raining shoes.”

From Business Week. “We’ve been reading a lot lately about how subprime mortgages have submarined the economy. But, while there’s no denying the subprime problem, on closer look it’s clear that even prime borrowers were taking on more debt than they could afford.”

“How bad is it? In Arizona, between the third quarters of 2006 and 2007, there was a 902% rise in foreclosures started against homeowners who had prime adjustable-rate mortgages, known as ARMs, according to the Mortgage Bankers Assn.”

“ARMs, whether prime or subprime, are the real culprit in the housing crisis because they’ve allowed too many people to buy homes with almost no money down, with the hope that they could flip the properties or have rates drop before the loans reset.”

“The rise in prime ARM foreclosure starts isn’t isolated to a few states. Nationally, foreclosure starts related to prime ARMs jumped 253% in the third quarter of 2007 when compared to a year earlier.”

“‘The fact is the pain of the changing real estate markets is affecting more than just subprime borrowers,’ says Keith Gumbinger, VP of a financial information publisher. ‘It’s more important to think of it as perhaps an ARM problem and a rate reset problem, not just a subprime problem.’”

“Arizona, Florida, Nevada, and California, which all had the greatest rise in prime ARM foreclosure starts in the third quarter of 2007, also have a heavy concentration of investor-owned properties.”

“Maryland prime ARM foreclosure starts increased 229% during the 12 months ending in the third quarter, 2007. Virginia, which like Maryland includes high-priced Washington, D.C., suburbs, had a 369% year-over-year increase.”

“Oregon, Massachusetts, and New Jersey also saw huge jumps in such foreclosure starts, in part because buyers with good credit in those states used ARMs to pay for homes that might otherwise have been out of their reach.”

“Of course, nobody would be complaining about ARMs if home prices were still rising.”

“‘There was so much competition for mortgages over the last couple years that the definition of prime became less and less stringent,’ says Addison Wiggin, publisher of Agora Financial, which publishes investment advice for individuals. ‘Even in the prime market, you had people taking on larger loans than they historically were able to handle.’”

“One type of mortgage that was popular with prime borrowers during the boom was the so-called option ARM. As a result, with unpaid interest accumulating and house prices falling, some homeowners have seen the equity in their homes disappear and even head into negative territory.”

“Jay Brinkmann, the Mortgage Bankers Assn.’s VP for research, says the slumping home prices simply uncovered problems that borrowers could sidestep in the days of home buyer bidding wars and double-digit annual price increases.”

“‘Before, if somebody had a divorce or the main wage earner was injured and couldn’t work, or some other issue, you would not have seen it because they would have sold their house and satisfied their mortgage, ‘Brinkmann says. ‘Now if there’s still the same level of job loss, more of those people end up in foreclosure because they can’t sell.’”

“‘The magnitude of the [prime ARM foreclosure start rate] increase is somewhat large because we had a lot of activity in the last few years,’ says Robert Kleinhenz, deputy chief economist with the California Association of Realtors. ‘We thought the prime side of the market would be a steadying influence and what we had to focus on is the subprime market. That’s not exactly true as the events are unfolding.’”

“Mortgage bankers, industry experts and nonprofit officials say that the impact of the Option ARM, involving hundreds of billions of dollars of loans, has yet to be felt. And, they say, it will hit prime borrowers and subprime borrowers alike.”

“People like Bruce Rose who never should have got a loan. Rose bought his home in Boston in 1986. After stress and depression forced him to retire as a state employee in April 2006 he ‘maxed out’ his credit cards on his annual income of around $16,000.”

“On medication, he refinanced his debts through the largest U.S. mortgage lender, Countrywide Financial Corp. The new loan totaled $439,000. Rose said he did not know his mortgage broker and Countrywide used a stated income loan, also called a ,liar loan, because no proof of income is required, and that they claimed his monthly income was $12,166.”

“‘If I had known what I was signing I would never have agreed to the loan,’ he said. ‘Now I may lose my home.’” “Rose’s minimum payment rose from $1,200 a month to $2,800 and his loan now totals more than $500,000. He is fighting foreclosure.”

“‘No reasonable lender would have given him a loan like that,’ said Virginia Pratt, a foreclosure prevention counselor at a Boston nonprofit group, who is seeking legal counsel for Rose.”

“Rose’s is an extreme case, but industry insiders say Option ARMs, also called Payment Option ARMs, will be the next chapter in the U.S. housing crisis and could push hundreds of thousands more subprime and prime borrowers into foreclosure.”

“‘So far the public is largely unaware Option ARMs are going to cause problems,’ said Scott Stern, CEO of Lenders One Mortgage Cooperative, whose 100 members originate $40 billion in mortgages annually. ‘But mortgage servicers know what’s looming in the pipeline.’”

“Option ARMs have existed since the 1980s, but according to a U.S. Federal Deposit Insurance Corporation report, as recently as 2002 they were still quite rare.”

“Industry insiders say a skewed system…paid mortgage brokers more to sell Option ARMs than traditional loans. ‘If you’re a broker and you can get $4,000 commission for a traditional loan and $12,000 commission for an Option ARM, which one are you going to pick?’ said Michael Lefevre, CEO of trade group the National Association of Mortgage Professionals.”

“‘This product is suitable for people with a lot of money who are financially astute,’ said David Zugheri, president of First Houston Mortgage, which offers loans in 18 U.S. states. ‘But very few people fit that category and that’s why we didn’t make many of these loans.’”

The Star Telegram. “In the past few months, as elected officials and regulators examine the meltdown in housing, more are focusing on appraisals. These independent assessments of a home’s value are required for every mortgage, and they set the parameters on a loan.”

“Lawsuits have been filed recently against major lenders, alleging that they pressured appraisers to trump up home values so borrowers could get bigger loans.”

“And appraisers are accusing lenders, home builders, mortgage brokers and real estate agents, the major parties who rake in most of the fee income, of threatening to blacklist them if they don’t play ball.”

“‘No place has been immune to inflating the numbers, and bad appraisals lead to bad loans,’ said John Brenan, director of research and technical issues for The Appraisal Foundation, an organization authorized by Congress to set standards and qualifications for the industry.”

“Appraisers have always felt some pressure to deliver the magic number, the appraised value that enables a loan to be made and a home to be sold. But long ago, appraisers worked on staff for a bank or lender, and Brenan says their primary job was to make sure that the bank wasn’t saddled with a bad loan.”

“Today, most of the work is done by independent appraisers, who are usually paid $275 to $400 for each appraisal. And they’re often hired by mortgage brokers, the independent middlemen who bring together homebuyers and lenders.”

“Brokers don’t just gravitate to appraisers who happen to provide higher numbers; they often seek them out.”

“Techniques used to be fairly subtle: a broker would say that an appraisal had to hit a set value and if that wasn’t going to happen, the appraiser shouldn’t do the work. More recently, some brokers have sent out mass e-mails, asking which appraisers would OK the price.”

“‘I have an e-mail that went to 200 appraisers,’ said Pamela Crowley, who has been in real estate since 1970 and has been an appraiser since 1995.”

“She even tells stories of appraisals being altered, with higher values inserted, after the appraiser has turned in the report. Such allegations help explain why investors remain so skittish about the housing problem — it’s hard to tell just how far the market may fall.”

“In an industry survey last year by October Research, a stunning 90 percent of appraisers said they were being pressured to inflate values, up from 55 percent in 2003. Three in four respondents also said they faced negative ramifications if they didn’t deliver.”

“More than 10,000 appraisers have signed an online petition, urging the federal government to step in and stop the abuses that they say are corrupting the system.”

“‘A lot of people have money riding on this, and if a deal falls through, there’s hell to pay,’ said Harry Davis, who’s in Austin and has been an appraiser for more than 30 years.”

“He says that real estate agents are the root of the problem. Brenan points to mortgage brokers, because their numbers grew rapidly and they became a primary source of business. Others say that lenders hold the most responsibility.”

“Big finance companies are key players, too, because loans are bundled into investments sold around the world, with the blessing of credit-rating agencies.”

“The bottom line is that all these parties get paid, and paid well, only if the loan closes. If it goes bad a few years later, well, that’s someone else’s problem.”

“Now that the house of cards is crumbling, the excesses are coming to light. ‘Appraisers are supposed to provide the checks and balances in the system,’ said Brenan of The Appraisal Foundation in Washington. ‘But the housing market was going crazy. It was party time.’”

The New York Times. “Is it finally time to believe in the housing bubble? And how much should the average American care?”

“Barbara Corcoran, real estate maven: ‘There’s a hell of a lot of noise out there right now that would scare anyone away from buying real estate. Not me. I’m yahoo-ing, low-bidding, and snatching up deals wherever I can find them.’”

“So until everyone else decides (always at the exact same moment in time) that the worst is over and it’s safe to invest, I’m grabbing as many over-priced, over-stuffed, and over-rated homes as I can get my greedy little hands on.’”

“Lawrence Yun, chief economist of the National Association of Realtors: ‘All real estate is local, and there are many local variations. As to the bubble, quite a number of local markets have not seen any price decline. The ‘correction’ has been in home sales, mortgage lending, and new home construction, all of which are all down significantly.”

”Some bad lenders have gone bankrupt, and aggressive hedge funds are hurting as a result — and I, for one, do not care. What I do monitor carefully is a factor that matters to consumers and homeowners: home prices.’”

“‘The national median price was 1.1% lower in the second quarter of 2007 than its comparable period the year before. That drop comes after a more than 50% rise in home values during the boom. If people want to call the 1% price decline a bubble collapse, well, everyone has an opinion.’”

“David Lereah, the N.A.R.’s former chief economist: ‘Bubble is the wrong imagery for today’s housing markets. Bubbles inevitably ‘pop.’ A more useful image for the housing markets is a balloon. Balloons expand and deflate.”

“‘It is clear that air has come out of a number of local balloons across the nation, particularly in California, Nevada, Arizona, Florida and some selected metropolitan areas in the Midwest and Northeast regions.’”

“‘From a home sales perspective, the magnitude of today’s real estate downturn is not meaningfully different from our two most recent real estate downturns — 1990/91 and 1980/81…However, unlike real estate recessions in the past, today’s downturn offers two unfortunate residuals — a drop in home prices for the nation as a whole, and a serious run-up in foreclosures.’”

“‘If a national bubble had burst, the nation would have experienced a meaningful double-digit drop in home prices. To date, we are experiencing maybe a 3 to 4% drop, at most. But for some post-boom metros like Las Vegas, Miami, and Phoenix, double digit price drops are not out of the question. So the answer is that there have been some local housing balloons that have popped, but no national balloons.’”




All Bubbles Burst And Prices Will Have To Fall Some More

A report from the Arizona Republic. “Home evictions have risen about 15 percent since January 2006 in parts of the East Valley, including Scottsdale and Tempe, constables said. They are substantially higher, up to 45 percent, in parts of Phoenix, Ahwatukee, Chandler, the north Valley and the West Valley, constables said. Among Arizona prime-loan defaults, 26 percent of the homes were not owner-occupied, according to the Mortgage Bankers Association. Among subprime-loan defaults, 18 percent were not owner-occupied.”

“‘We didn’t realize how much of an impact it was going to have on us when the market turned,’ said Constable Philip Hazlett, who works in the North Valley Precinct. ‘It used to be a standard tract home would be where you’d do your eviction. Nowadays, I do ones on houses that sell for $750,000 in Anthem.’”

“‘You’ll see people that have been there a year or two or three, and their luck changed,’ said Constable Dan Ryan. ‘On the other hand, you get someone that’s made a bad decision with a renter, and they got suckered. All of a sudden, somebody’s not paying.’”

“That’s what happened to homeowners Carmen Nuñez and her husband, Raymond Ordoñez. Almost four years ago, they bought a nice home in a nice neighborhood near 35th and Northern avenues in Phoenix. They kept the house as an investment property when they later moved to Laveen and in August rented it to a young, unmarried couple.”

“The tenants stopped paying the $1,200 rent in December, instead dodging Nuñez’s phone calls and giving lots of excuses.”

“On Wednesday, a team of constables descended on the home to evict the tenants, who weren’t home. The house was trashed: Half-eaten hamburgers and moldy bowls filled with cereal and milk sat on a table. Christmas decorations, dirty clothes and toys were scattered through the living room. The carpets were stained, the place smelled like rotten food and dirty diapers.”

“The tenants rolled up as the owners changed the locks, and the constables carried out the eviction paperwork. The tenant, Bobby Green, jumped out of a car, screamed, cursed and started to get physical with one constable. Within seconds, Green was Tasered, down on the driveway and in handcuffs.”

“‘I’m spending money I don’t have to pay the mortgage on that house, my house, to the courts for the eviction,’ said Nuñez, a real-estate agent. ‘It’s affected me really badly, and it’s just plain ridiculous.’”

“In metropolitan Phoenix…home builders are selling off land that they can’t sell homes on in the near future. Investors are buying home lots for bargain prices, which lets them hold onto the properties until the demand for homes picks back up.”

“In the last few weeks of 2007, as many as 8,000 vacant but finished home lots ready for construction sold in the Phoenix area, according to Scottsdale-based land brokerage and consulting firm Nathan & Associates.”

“‘Investors are offering about 30 cents on the dollar for finished lots now,’ Nathan said. ‘So if it cost a builder $700 a foot to finish the lot (get it ready for a new home), then buyers are offering $350 to $500 a foot.’”

“During the boom of 2005 and even as the market started to slow in 2006, publicly traded builders sparked bidding wars to buy huge tracts of land in the Valley. But now many builders who operated primarily as manufacturers and not long-term land developers in the past, need to get the dirt off their books.”

“During the fourth quarter, housing giants D.R. Horton, Pulte Homes, Lennar, Centex and Toll Brothers lost a combined of $1.47 billion due to falling land values. RL Brown, publisher of the Phoenix Housing Market Letter, tallied 61,000 finished lots sitting empty across the Valley.”

“Longtime builder Greg Hancock, who sold his last housing firm to publicly traded Meritage Homes of Scottsdale, has invested in some lots in Pinal County.”

“Market watchers say he plans to sell homes for $90,000 there, well under half the Valley’s median home price.”

“Pinal County existing-home sales picked up during last quarter of 2007 as lower prices enticed more buyers into metropolitan Phoenix’s southeastern suburb. The median price of a Pinal County used home fell to $174,000 at the end of 2007. A year ago, it was $191,500.”

“Resales during the last three months of last year climbed to 1,145, compared to 625 during the third quarter, according to Arizona State University.”

“‘Although affordability has improved, higher gasoline prices, more congested highways and limited employment opportunities continue to strongly hamper any potential recovery of the housing market in Pinal County,’ said Jay Butler, director of Realty Studies.”

The New York Times on Arizona. “South of Tucson on Interstate 19, just over the Santa Cruz County line, two rugged mountain ranges vie for your attention: the soaring Santa Rita Mountains to the east, and the smaller, but no less compelling, Tumacacori Mountains to the west.”

“Lonnie Wagner, who lives in Colorado Springs, and his wife, Linda, bought a second home with another couple at the Tubac Golf Resort in 2001 for $185,000. Both couples later opted for their own digs, and in 2004 the Wagners bought a larger place just north of the resort area.”

“‘The more we came down here, the more we liked the idea of having more space around us,’ Mr. Wagner said. ‘Plus prices were starting to climb fast, and we didn’t want to miss our chance.’”

“They paid $250,000 for a 2,400-square-foot, three-bedroom stuccoed house on three-quarters of an acre.”

“‘We were walking hand in hand, on one of those gorgeous starry nights they have here, and we thought, ‘Wouldn’t it be wonderful to have a place here,’ said Christine Priester, of Denver, who traveled frequently to the area with her husband to visit family.”

“Soon after, in 2003, the couple learned that an adobe-brick house next door to an aunt and uncle was up for sale. They bought it for $260,000. ‘We play tennis and golf, but we also love to just walk around,’ she said.”

“Despite Tubac’s rising population of second-home owners — real estate agents estimate that 25 percent of homeowners have primary residences elsewhere — the village has kept its small-town charm. Residents like to point out that there’s no stoplight in town, and just one gas station.”

“Tubac has had considerable growth in the last five years. Barrio de Tubac, a 350-acre planned community just south of the historic village, has exploded in size in recent years. Its residential homes include town houses, patio homes and larger single-family dwellings. Prices range from $275,000 to $850,000.”

“Home sales were strong in Tubac starting in 2003, but have since begun to taper, said Gary Brasher, president of Brasher Real Estate. ‘We’re a niche market here,’ he said. ‘Even though things are not great guns like they were, things are still selling at a pretty good pace.’”

“There are two basic types of properties in Tubac, Mr. Brasher said — those in small subdivisions, like the ones found in and around the golf resort, and those found in Barrio de Tubac.”

“Overall, one- and two-bedroom town houses typically range between $268,000 and $425,000. Patio homes and villas, with more space, are priced between $350,000 and $550,000. Prices for single-family homes vary depending on location and lot size, with prices ranging from $400,000 to $800,000.”

“A third option is land, most of which is zoned as rural, meaning one home to roughly five acres. Those lots are typically priced between $250,000 and $325,000.”

“The most sought after second homes are those that are low maintenance, like the golf resort villas. ‘When one comes on the market they tend to get snapped up pretty quick,’ said Bill Mack of Coldwell Banker Residential Brokerage.”

The Yuma Sun from Arizona. “While national media continue to paint a bleak picture of the real estate market, Yuma is charting its own course, one that shows the worst may well be over.”

“Chris Hall, co-general partner in Cielo Verde Development, is banking on it.”

“A grand opening was held Saturday for the project south of 32nd Street along Avenue 8E. Cielo Verde brings a new concept to Yuma that combines homes and businesses in a planned community, all linked with a 25-acre linear park. The planned shopping center already is anchored by the Foothills Wal-Mart Supercenter.”

“‘Every home will be within walking distance of an ice cream cone or a haircut,’ Hall said.”

“But just when the project began to move from paper to dirt, the real estate market took a nosedive. ‘We held back opening,’ Hall said, ‘waiting for a sense of a turn in the market.’ Now seems like the time, Hall said.”

“Hall isn’t the only one who is bullish on Yuma’s housing market. ‘Activity has really picked up,’ said Jason Kehl, president of the Yuma Association of Realtors. While there are nearly 1,000 single-family homes currently listed for sale by YAR, he said, ‘houses priced under $200,000 are moving pretty quickly.’”

“‘If people are thinking of buying, this is a good time,’ Kehl said. ‘Interest rates are at historic lows and sellers are willing to wheel and deal … and I expect prices to rise again.’”

“Joe Wehrle, Yuma County assessor, said his fourth-quarter 2007 real estate report indicates that while there was still a decrease for the three months in the number of homes sold, there was more activity in December and the quarter ended with a slight increase in the average sale price. Now $217,000, that’s 5.4 percent higher than for the previous quarter.”

“And while that average price is 3.9 percent less than for the fourth quarter of 2006, he said, it is 77.5 percent higher than the average sales price of $122,240 in early 2003.”

“‘We’re not exactly what the Phoenix metropolitan area is experiencing,’ Wehrle said. ‘That’s not to say we haven’t had a downturn, but not to the degree in Phoenix.’”

“There still are neighborhoods where homes in foreclosure sit on one side of the street while on the other side, new homes are under construction, he said. And, yes, some houses have been sitting on the market for months. ”

“Optimism is reflected in city of Yuma building activity. For the month of January, 22 building permits were issued for single-family dwellings, said Randy Crist, city of Yuma building official. But new housing activity has a ways to go to recover. Crist said in 2007, a total of 213 permits were issued for single-family dwellings.”

“In 2006, the number was 699.”

“‘I guess the good news is that we haven’t dropped below where we were in 2005,’ Wehrle said. ‘We raised the bar and it hasn’t fallen as it did in Phoenix. That just hasn’t happened here.’”

The Reno Gazette Journal from Nevada. “Home foreclosures in Washoe County rocketed 614 percent in 2007 from a year earlier, a report on Monday showed, as sales and prices of homes continued sagging in a trend observers expect to last through this year.”

“‘It’s going to get worse before it gets better,’ said analyst Brian Kaise of the Center for Regional Studies in Reno, who helped compile the report.”

“The report summary said foreclosures have risen in all geographic areas of the Truckee Meadows, totaling 750 in 2007 from 105 in 2006. Additionally, 14 percent of the area’s active homes for sale in December were bank-owned homes.”

“Add in homes already on the market, which are taking 20 percent longer to sell than in 2006, and ‘it’s really not a good scenario,’ Kaiser said.”

“He sees no turnaround of the 6 percent drop in price last year for all housing countywide. And the glut in foreclosures could worsen as more adjustable-rate mortgages come due for big increases.”

“Tom Cargill, economist at the University of Nevada, Reno, agreed. ‘All bubbles burst, and the pressure came down,’ he said. ‘A lot of unwise decisions were made. Add in the slowdown in other economic indicators, and it puts even more pressure on. Prices will have to fall some more.’”

“Broker Ken Wiseman said his roster of homes added two more foreclosures Monday. ‘It’s ridiculous. I’m up to 22 right now. A year ago, I had zero,’ Wiseman said. ‘I have potentially another 50 homes not foreclosed on yet but are on the brink. And that’s just me.’”

“Wayne Capurro, Reno-Sparks Association of Realtors president, acknowledged that 2007’s tough conditions have continued into January. Capurro cited an association study that showed an easing in the drop in the median price of an existing home from 15 percent in 2006 to 10 percent last year.”

“‘The word is out that most people were way too high-priced,’ he said. ‘The ones motivated to sell made the adjustments. The ones who’d been on the market for a long time were not reducing their prices. Now, they’re doing that.’”

“Capurro said the regional housing market’s nadir will be reached perhaps as soon as the second half of this year. ‘It was going up and down in fairly significant gyrations,’ he said. ‘I see that now. I know there’s lots of gloom and doom. You have to go back to early 2004 to see today’s prices. But affordability is swinging much in favor of buyers.’”

“Complaining their real estate was overvalued for tax purposes, the owners of a record 3,493 Washoe County properties are appealing their cases starting today.”

“Many came from the south Truckee Meadows. Land values there and in Washoe Valley and Incline Village rose an average of 80 percent. Since this area hadn’t been mass appraised for five years, the latest appraisal covered years marked by a huge run-up in housing prices, peaking in 2005. Since then, prices have declined.”

“Gary Bria, owner of a home on a half-acre at the Fieldcreek development south of Reno, said his value jumped from $101,000 to $235,000 in one year. ‘I’m going to fight it,’ he said.”

“Fourteen developers filed appeals for 1,200 vacant subdivision lots. One owner filed appeals for 478 condominiums.”

“Assessor Josh Wilson said he will recommend other subdivision lots that have been slashed in price since July be reduced in value, even if no appeals were filed. Under state law, he said, the assessor cannot not appraise properties for more than their cash or market value.”

“‘It’s unprecedented territory,’ Wilson said. ‘The overall value of real estate in the United States has not declined since the Great Depression.’”




Bits Bucket And Craigslist Finds For February 4, 2008

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