The Housing Bubble

The Mercury News reports from California. “For what one expert thought was the first time, the number of monthly foreclosures exceeded the number of monthly home sales in California in January, according to data compiled by two research companies. A Discovery Bay real estate research firm said 19,821 California homes went into foreclosure in January, representing about $8 billion in home loans. Meanwhile, DataQuick reported 19,145 home and condo sales in January.”

“‘There’s no way a market that slow can clear these kinds of foreclosures,’ said Christopher Thornberg of Beacon Economics,. ‘What that number says to me is you have more homes getting dumped on the market in terms of foreclosures than there is demand for homes.’”

The Times Herald. “More people should be able to afford a Vallejo-area home now that prices have dropped, though stricter mortgage loan requirements make it difficult, local real estate experts said.”

“Solano County’s affordability rating in February, 2005, was 13 percent, and one would have needed $100,000 annual income to qualify, according to reports at the time.”

“The California Association of Realtors latest affordability index reported that 33 percent of households could afford to buy an entry-level home statewide in the fourth quarter of 2007. That compares to 25 percent for the same period a year ago.”

“‘Prices are significantly lower than they were last year, so they’re more affordable to more people,’ said Solano Association of Realtors president Lori Collins. ‘But credit is still a huge issue. You must have much better credit and a larger down payment to qualify for a loan now.’”

The Morgan Hill Times. “It seems counterintuitive that when housing prices in the free market are falling dramatically that prices for below market rate (BMR) houses are set to increase, but that’s the situation in which Morgan Hill finds itself.”

“Because home builders are having a difficult time selling - even at reduced prices - the free market homes that subsidize the BMR homes, builders say they need a price increase for the BMR homes to make ends meet.”

“As a result, a City Council subcommittee consisting of Council members Greg Sellers and Marby Lee is recommending a price increase.”

The Press Banner. “In a year when the housing market took a considerably hit across the nation, the markets in Bonny Doon and Scotts Valley have remained relatively stable, while the San Lorenzo Valley has seen some downs and more recently some ups, local realtors say.”

“‘The lending bubble collapsed and we had a very quiet fall (season),’ realtor Ronnie Trubek said of the San Lorenzo Valley. ‘The press scared (qualified) buyers, and then the prices did fall.’”

“In mid-January, there were 143 active listings in the San Lorenzo Valley and 16 pending sales. Countywide, however, 63 single-family homes were sold in January, down from 76 in December, which was the lowest number in the past 11 years, according to Real Options Realty.”

“The market has remained fairly stable in Bonny Doon in 2007, despite the first foreclosure realtor Frank Murphy has seen in his 10-year career. ‘Most people prefer to take a financial loss by selling for less than they paid (rather than face foreclosure),’ he said. ”

The Union. “Realtors in Tahoe-Truckee say the word foreclosure has not been spoken in the area since the early 1990s - until now. ‘It is the majority of my listings,’ said Kelly Smith, a North Shore real estate broker.”

“Tahoe City broker Michael Willette said that two to three years ago people began to take advantage of an ‘option R’ mortgage. The initially low monthly mortgage payments ballooned beyond what some homeowners could afford.”

“‘These loans have been resetting with a vengeance,’ Willette said.”

The Lincoln News Messenger. “The effects of a deepening national housing slump are hitting close to home. Even Gladding, McBean, one of Placer County’s oldest businesses and a Lincoln institution since 1875, is feeling the market’s pinch.”

“‘I’ve been here since 1991, and this is the most significant downturn in our market I’ve seen in that time,’ said Bill Padavona, general manager.”

“Padavona said the clay company has seen a 60 percent to 70 percent decline in products tied to home construction, such as sewer pipes and roof tiles. Though Gladding, McBean provides products throughout the West Coast, the market is especially bad in Northern California, where ‘the market has slowed to a near standstill,’ Padavona said.”

“Construction of single-family units in the state was down 37 percent from a year ago, to 67,993, the lowest number since the 51,160 reported in 1982, the state association said.”

“That’s bad news as well for another Lincoln company, lumber supplier Sierra Pacific Industries. ‘It’s had a dramatic downward impact on lumber prices,’ said Mark Pawlicki, a spokesman for the Redding-based business. ‘Prices today go back to about 1992, the last time we had a housing recession.’”

“Average industrywide framing lumber prices were $249 per thousand board foot in January – down from $404 in January 2004, reported Random Lengths.”

From KCRA 3. “Across the country, fire investigators are looking at some homeowners in foreclosure as potential arsonists. In Modesto, Battalion Chief Hugo Patino looked over a charred and nearly destroyed home, a home that was empty and is now set for auction.”

“‘A fire in an empty house is always cause for suspicion,’ Patino said.”

“Sacramento fire investigator Steve Johnson said spite, revenge and pyromania are a few reasons for arson. But firefighters are adding desperation to that list. ‘Nationally, we’ve been told foreclosed homes have been set on fire,’ Johnson said. ‘People are thinking this is the easy way out.’”

“‘That sign in the front yard is always going to be in the back of our head going, ‘I need to really concentrate on why is this an accidental fire? To make it look like an accidental fire? And in retrospect, they are trying to burn their house down to pay it off?’ Johnson said.”

“‘If we have someone set a structure fire that’s an arson and one of our firefighters get hurt, they will be chased harder than anything that’s been chased in their whole life,’ Johnson said.”

The North County Times. “Interest rates on mortgages have increased dramatically over the last few weeks, preventing homeowners from refinancing and making it more expensive to buy a home.”

“Mortgage brokers said the jump in interest rates has caused many refinancing deals to fall through. Dave Hopkins, a broker with Rancho Financial in Rancho Bernardo, said Wednesday he had 12 customers back out of deals over the last week because of the increased interest rates.”

“The housing market this year will see more foreclosures, lower property values and — with higher interest rates — fewer sales, said Kelly Cunningham, an economist with the San Diego Institute for Policy Research.”

‘”With all these things, there doesn’t seem to be any turnaround or recovery anytime soon,’ he said. ‘(Higher interest rates) kind of prolong our housing slump.’”

“When average interest rates hit a low of 5.49 percent a month ago, it was the lowest since mid-2005, according to the bankers association. And then the Federal Reserve, the nation’s central bank, slashed its overnight lending rate by 1.25 percentage points.”

“But the Federal Reserve rate only determines the cost for banks to borrow money and does not directly change mortgage rates.”

“‘When the Fed said it was cutting rates, people had the misconception that it’s going to drop interest rates,’ said Justin Sheftell, director of sales for a mortgage brokerage in San Diego. ‘So they missed the boat and now they can’t refinance.’”

The San Gabriel Valley Tribune. “An economic stimulus package signed into law on Feb. 13 by President Bush should bring some relief to homebuyers and sellers. A portion of the package has boosted the limits for loans purchased by Fannie Mae and Freddie Mac from $417,000 to as high as $729,750 in the Los Angeles area through December 31.”

“Norman Cox, regional VP for Coldwell Banker Town & Country, said that probably won’t bring quick relief to distressed homeowners, however. ‘It’s only legislation that enables Fannie Mae and Freddie Mac to implement (higher loan limits),’ he said. ‘The indications are they aren’t really happy about doing it.’”

“Moreover, loans purchased under the new cap will likely be subject to a different set of rules and regulations, Cox said. And even if the new rules were put into place immediately those loans wouldn’t fund before July, he said, which wouldn’t help the people who need immediate assistance.”

“Robert Kleinhenz, CAR’s deputy chief economist, said today’s housing market is markedly different from recent years.”

“‘I’ve been hearing anecdotally that 25 percent of the home listings in some markets are distressed listings that are either a foreclosure or a short sale,’ he said. ‘In some markets they’re saying it’s 50 percent.’”

The New York Times. “Elizabeth and Ben Kilgore, who live in Tiburon, Calif., are back in the real estate market. All it took was a little-publicized section of the economic stimulus package President Bush signed into law last week that lowered the borrowing cost of buying a more expensive home.”

“‘This will push us into a price range that’s now financially possible,’ said Ms. Kilgore, a real estate agent in Marin County.”

“Prices have dropped 20.4 percent over the past year in Contra Costa County, east of San Francisco, and 13.1 percent in neighboring Alameda County, according to DataQuick.”

“Indeed, California is probably the state hardest hit by the housing slump. As inventories rose in most cities, the median price dropped 16.9 percent from May to December, according to DataQuick.”

“Prices are still high; A public policy advocacy group estimated that a family would need an annual income of $196,878 to afford the median-priced home in San Francisco.”

“In San Diego, real estate activity has dropped off noticeably in the past year. According to DataQuick, the number of homes sold in San Diego in January dropped 34 percent from a year ago.”

“‘The availability of jumbo loans was so easy,’ said said Jim Abbott, a real estate agent there. ‘Now they’re not, and it’s really exacerbated the problem. But I don’t think anyone is counting on it until it actually happens.’”

“Of course, prices for some houses in certain California enclaves and other luxury locations remain so stratospherically high that a change in the conforming loan limit, no matter how drastic, would have little effect.”

“‘It won’t make so much difference here,’ said Edna Sizlo, a real estate agent in Santa Barbara, Calif., where the adjacent suburb of Montecito has homes valued at a median $4.1 million, making them among the most expensive in the nation. ‘There’s nothing you can even live in for under $1 million.’”

The Daily Camera reports from Colorado. “The trucks and earthmovers have been out there so long that some Rock Creek residents joke that the construction zone along McCaslin Boulevard is beginning to resemble a training academy for heavy equipment operators rather than a building site. For 18 months, contractors for Calmante Rock Creek, a planned 75-unit luxury townhome development, have been grading the ground, building roads, and installing water lines and utilities.”

“But the first two buildings of the 15-building community, which the developer has been advertising for a spring and summer opening, haven’t even had their foundations poured yet.”

“‘I wonder if they are pushing dirt around for a couple of years while they’re seeing if the market is there,’ said Michelle Horton, who lives just south of the site.”

“She said it’s tough enough to unload a detached single-family home in today’s market, let alone townhomes ranging in price from $615,000 to $660,000.”

“Despite the cynicism he’s heard from some townspeople, David Chaknova, president of Calmante Residential Development, said he’s confident the townhomes will sell. The highly customizable units, which range in size from 3,200 square feet to 4,000 square feet, will have special appeal to young professionals and empty-nesters looking to live in a low-maintenance setting, Chaknova said.”

“‘Our marketing study shows us that there is a tremendous market for what we’re building out there,’ he said.”

“But Erik Fransen, an 11-year Rock Creek resident who passes by the Calmante Rock Creek site nearly every day, said he’ll believe it when he sees it.”

“‘If I were an investor, I would be a little worried about my investment if they are only going to put in homes that a Powerball winner can afford,’ he said.”

From 9 News in Colorado. “Adams County has the highest foreclosure rate in Colorado. According to the most recent analysis from the Colorado Division of Housing, one out of every 23 properties in Adams County filed for foreclosure in 2007. In 2001, there were 799 foreclosures in Adams County. Last year, there were more than 6,200.”

“The county’s public trustee, Carol Snyder, says foreclosure is hitting across the board and not striking any particular type of property. ‘We’re foreclosing on businesses, we’re foreclosing on apartments, complexes, shopping centers, we’re foreclosing on million dollar homes we’re foreclosing on 60-thousand dollar homes,’ said Snyder.”

“In the Reunion Community in Commerce City, Alan Barnes sees a very fluid pool of neighbors. Two neighbors recently went through foreclosure. ‘It’s almost like apartment living, everybody is here today, gone tomorrow. You never know who is going to be to your neighbor next year,’ said Barnes.”

“Snyder wanted to emphasis that there are ‘good things’ happening in Adams County. She cited a big boom in growth and construction. ‘Some of those good things have lead to some of the foreclosure issues,’ Snyder said.

“Snyder said developers over-built, buyers were unaware about ‘questionable’ lending practices and government officials did not have enough oversight of the entire situation. ‘It’s the perfect storm, and now we have to weather it,’ said Snyder.”

The New York Times on Colorado. “At first sight, Edwards, high in the mountains of central Colorado, comes across as a jigsaw puzzle whose pieces don’t quite fit. Its cluster of playing fields, uniformly spaced town houses and a downtown made up of a handful of commercial centers built in the last 15 years or so make Edwards feel more like a planned suburb than a thriving resort community.”

“But resort community is exactly what Edwards is. With its easy access to skiing, golfing and hiking, Edwards attracts active baby boomers who want recreation coupled with upscale comforts, at housing prices slightly less staggering than those in neighboring Beaver Creek and Vail.”

“Eddie and Melissa Branscomb of Clemmons, N.C., who love to ski, wanted a vacation home large enough to accommodate their six boys. Last fall they bought a four-year-old, 6,700-square-foot house in Edwards’s Singletree subdivision for just under $2.6 million.”

“‘If we put this house over in Beaver Creek, it’d be a little over double what it was in Singletree,’ Mr. Branscomb said. ‘Edwards is a good place for somebody who doesn’t have an unlimited budget.’”

The Arizona Republic. “Theresa and Tom Love are in a spot. They’ve been separated six months, as he relocated to Washington for a job while she and their two children remain in El Mirage to sell their three-bedroom home.”

“They are just a few of the everyday people caught up in an ongoing story of housing woes, as foreclosures rise and markets tumble. Most recently, the county assessor reported that for the first time in years, 94 percent of home valuations in Maricopa County dropped.”

“Three communities in the southwest Valley top the devaluation list: Buckeye valuations plummeted nearly 25 percent, Avondale dropped nearly 22 percent and Goodyear fell 20 percent.”

“The Loves bought the home for $110,000 in 2002. Their equity grew in the once-hot market, so they refinanced and upgraded. Their Redfield Road home went on the market six months ago for $199,000. Their asking price now is $179,000.”

“Tom Love said that would pay off the mortgage and leave $2,000 for his family to rent a U-Haul and head north. ‘The only thing keeping my family away from me is my house,’ he said.”

“The region’s success became its downfall. ‘At first, buyers were lured because of the affordability, but as the months went by, there was very little difference in price between homes in the outskirts and those in Phoenix,’ said Margie O’Campo de Castillo with Arizona Dream Realty.”

“Buckeye, on the outskirts of the West Valley, largely sprang from the desert during the housing market’s run-up. ‘There really wasn’t anything established in Buckeye prior to the boom, and they are still lacking in infrastructure,’ said Realtor Bridgette Gavagan. ‘It’s got to re-adjust.’”

“Buckeye resident and home builder Michael Marler knows that all too well. Not long ago, the small builder couldn’t knock out homes fast enough. He said he recently sold a home, after nine months on the market, on a one-acre lot between Goodyear and Buckeye, for $290,000.”

“The exact model in the same area sold for $385,000, or $95,000 more, a year ago.”

“‘It’s horrendous,’ he said. He added, ‘It was definitely a bubble.’”

“The high number of foreclosed homes, which usually sell below market value, are lowering home values further. In El Mirage, nearly 21 percent of home listings are foreclosures, Gavagan said. In Surprise, nearly 14 percent are foreclosures, she said.”

“Home builders in Arizona, whose lavish incentives haven’t attracted buyers in the slumping market, are turning to the auction block as a last resort to sell empty houses.”

“Scottsdale-based Cachet Homes is auctioning 28 of its luxury homes on Sunday in the West Valley, some once priced at more than $750,000. Bids start at about half of the homes’ original prices. Most properties will have no minimum reserve. The developer is following a national trend of builders’ letting home buyers set their own prices.”

“In March, 24 condominiums at Dobson Bay Club in Mesa will be sold in an auction. Promotional materials for the event say eight of them will be sold regardless of price.”

“In Arizona and nationally, home builders are faced with a glut of unsold homes and canceled contracts, as well as less traffic and fewer offers at their developments. Potential customers are fighting suddenly stiffer credit hurdles and often the challenge of selling their existing homes.”

“Cachet has faced similar problems with its homes at Verrado, a DMB master-planned community in Buckeye. ‘We’re tired of being landlords; we’d rather be builders,’ Byrne said.”

“Recent marketing strategies, such as promising two-year Lexus leases with home sales last fall, failed to unload enough inventory, she said. ‘We would like to see those homes filled up with families,’ Byrne said.”

“‘Not only is it a cost drag every month to keep (inventory) on hand and fresh,’ said RL Brown, publisher of the Phoenix Housing Market Letter, ‘as long as a builder has inventory, his lenders are likely not going to allow him to build more houses.’”

“Current Cachet Homes property owners visiting the auction office Thursday said they had paid ‘royally’ a year ago to live in Verrado and were concerned about the auction’s low starting bids.”

“Cachet is offering 15 townhomes and 13 single-family homes at Verrado, as well as 16 condos at Flagstaff Ranch in Flagstaff. The prices just cover Cachet’s costs to build, Byrne said. The cheapest in the Verrado collection is a 1,975-square-foot townhome with three bedrooms and two baths starting at $190,000. Original price tag: $349,900.”

“The highest-priced house, at almost 5,000 square feet, features four bedrooms, a game room and 3.5 baths. It’s going for $375,000, a markdown of 55 percent.”

“Despite current residents’ worries about pricing, marketing agents said sales could reach original listing prices with enough competition among bidders. Brown said the strategy could create a ‘mini-market frenzy,’ driving up prices through bidding even better than other methods of sale.”

“‘If this auction has success,’ he said, ‘you’re going to see auctions galore.’”

The Arizona Daily Star. “Amid a worsening new-home sales slump, K. Hovnanian is taking a bet on success in a retiree-oriented development in Vail. The builder is scheduled to open the age-restricted Four Seasons Rancho del Lago to buyers today, according to a press release.”

“The community will include 522 homes starting in the upper $180,000s.”

The Review Journal from Nevada. “Sales of new homes hit a 15-year low in January with 881 closings, a 56 percent decline from the same month a year ago, as the Las Vegas housing market continues to work its way to the bottom.”

“The last time monthly new-home sales fell below 1,000 was May 1993, when there were 990 sales, housing analyst Dennis Smith of Home Builders Research said.”

“‘It’ll pick up,’ he said. ‘Want to bet? The numbers are bad. You can’t hide the numbers. But the good thing is the cycle is moving. We’re not dead in the water.’”

“The median price of a new home in January was $274,000, down nearly $61,000, or 18.2 percent, from a year ago, Home Builders Research reported.”

“Centex has been selling nine homes a month in the Mesa Verde community of North Las Vegas for $97 to $113 a square foot, a price that hasn’t existed for eight years, he said.”

“Smith counted 1,488 resales in January, down 38.6 percent from a year ago. The median price of an existing home dropped 14.4 percent to $239,900.”

“Larry Murphy of Las Vegas-based SalesTraq said it’s the first time he’s counted more foreclosures than resales. He showed 2,177 repossessed homes in January, compared with 1,061 existing home closings.”

“There are 34,026 homes in foreclosure in Las Vegas, the latest statistics from RealtyTrac show.”

“‘I said we were near the bottom, but I have an empty feeling about that,’ Murphy said. ‘I’m giving up. I’m just going to report the numbers. I’m not going to make any more predictions.’”

“Alex Edelstein, developer of Manhattan and ManhattanWest midrise luxury condos in Las Vegas, said the decline in resale inventory since September is a new phenomenon. He estimated 50 homes are being rented out or taken off the market every day.”

“‘There has been a tendency to focus on foreclosures and distressed sellers, but most sellers are smart enough to know that if they hold on, they’re going to get a much better price in a year or two,’ Edelstein said.”

In Business Las Vegas. “Seeing a business opportunity to attract buyers, Jennifer Weinberg and Andrew Newcomb of Prudential Americana launched a twice-a-week bus tour of foreclosed-upon Las Vegas homes. The bank-owned homes are substantially discounted to lure buyers, Weinberg says. She and her partner are targeting homes generally between $200,000 to $300,000 that in some cases were once worth nearly double.”

“‘The banks have so much inventory that they are trying to get it off the books,’ Weinberg said. ‘They figured out the way to move them is to price them between $120 and $130 a (square) foot.’ Homes had been valued at more than $200 a square foot, she says.”

“Weinberg says she believes the market has hit bottom because investors are searching for opportunities. Finding buyers for the foreclosures will be helpful in getting the housing market jumpstarted again, she says.”

“‘We’ve got to get the inventory down before we start to see homes appreciate again,’ she says.”

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