The Housing Bubble

The Union Tribune reports from California. “Economist Edward Leamer, director of the UCLA Anderson Forecast, said the creation of a company that helps borrowers go into foreclosure reflects ‘a collective erosion in borrowers’ commitment to service their loans.’ Households didn’t default on mortgages unless they experienced life-changing events, such as illness, divorce or a death in the family, he said.”

“‘That old model is behind us,’ Leamer said. ‘People are walking away just because it was a bad investment.’”

“Martin McGuinn, a San Diego attorney who represents lenders and loan servicers in foreclosures, called the trend disturbing. ‘From a lender’s standpoint, the worst thing in the world that could happen is for people to simply walk away from their property,’ McGuinn said.”

“In Spring Valley, an area hit hard by defaults, Eddie Zepeda, 30, has grown weary of trying to pay his adjustable mortgage while the value of his house is slipping.”

“‘I am getting tired of the whole two-job thing,’ Zepeda said. ‘I work at night. My wife works in the morning. I have to pay a baby-sitter. I can’t afford it any more.’”

The LA Times. “Here’s more evidence that California is losing its struggle against recession: The state shed 20,300 jobs in January, more than the other 49 states combined for the month, a government report showed Friday.”

“The slump is taking its toll on people like Gabriele Larmon of Port Hueneme, who was laid off from her administrative university job more than two years ago.”

“‘I’d just like to get my foot in the door for anything,’ said Larmon, who estimates she’s applied for 600 to 700 positions online in the last year.”

“Larmon said she had to move in with her daughter because she could no longer make her mortgage payments and the bank refused to renegotiate the terms. ‘Everything has just fallen apart,’ she said.”

The Press Enterprise. “The crippled housing market sent the Inland region last year into the biggest jobs freefall on record, state figures released Friday show. Riverside and San Bernardino counties lost 7,300 jobs in the past year, the vast majority of losses in home construction-related fields.”

“Redlands-based economist John Husing now expects 2008 will be worse than last year and said the region won’t regain its momentum until 2010. ‘It basically means we have 20 months of real difficulty in front of us.’”

“The Inland area has never lost jobs for a full year since economists started keeping records more than 30 years ago, including when the area was crippled by the closing of Norton and March air bases in the early 1990s.”

The County Sun. “Fontana muffler shop businessman Ralph Maldonado’s already laid off one full-time employee and poured $8,000 into his business to keep it afloat. He’s watched two other muffler shops go belly up in the past few months.”

“‘When the housing crunch came, it took a hell of a hit on us,’ Maldonado said. ‘People just don’t want to spend money.’”

“‘It’s a tough environment for everyone right now,’ said Bob Bartlett, manager of member services for San Diego-based Western Electrical Contractors Association, which has members in San Bernardino and Riverside counties.”

“‘For residential (electrical) contractors, if they’ve only had to reduce their work force by 50percent, you could say they’re in good shape. Some of them have gone down 75 and 80 percent,’ he said.”

“In Corona, Vineyard National Bancorp has struggled to deal with a rising tide of bad construction loans, and reported a loss of $41.3million.”

“‘It’s a true observation that companies with a real-estate orientation, like an escrow company or anything related to real estate, has got to be feeling the slowdown,’ said James G. LeSieur III, chairman of Vineyard.”

“Wally Alkhouri, who owns a smoke shop in a small retail mall in Claremont, says business has dropped off sharply since September. ‘It is bad,’ he said. ‘Everybody’s cutting back on spending, on cigarettes and everything else.’”

“Alkhouri’s cutting back on his spending, and that means fewer restaurant meals. ‘If you have no money, you’re not going to go out,’ he said.”

“At Ralph’s Muffler, Maldonado sees the strain in the faces of people looking for work. ‘I’ve got a lot of guys coming here looking for jobs that got laid off,’ he said. ‘I probably get two or three a day.’”

The Recordnet. “Stockton-based All-Star Maytag, a five-store appliance sales and service dealer, will shut down this weekend, another victim of a slowing economy dragged down by the region’s severe housing woes.”

“‘I just couldn’t hold through the bad economy. There’s been a big slowdown the last two years, and it just amounted to too much,’ said Hicks, who first took note of business slacking off in the spring of 2006.

“‘The winds had changed direction. It was very slight, but we traced the numbers back to February ‘06. By the fall of ‘06, it was very noticeable. It just kept dropping and dropping and dropping,” Hicks said.”

“‘Through the grapevine, you hear various dealers having trouble. Not too many people are excited about the business right now. Even employees from the big-box stores have been coming by looking for work,’ he said.”

Inside Bay Area. “The East Bay is being hammered with a jobs recession that erased 5,100 jobs in January, marking the worst one-month employment setback since Sept. 11, a report released Friday showed.”

“In another ominous disclosure, the job market in the East Bay turned out to be far weaker in 2007 than first thought. An annual revision by the state Employment Development Department showed that by December 2007 the East Bay had 9,200 fewer jobs than their initial estimates.”

“‘The East Bay is probably in a recession or clearly headed in that direction,’ said Jon Haveman, economist with Beacon Economics. ‘California as a whole is in a recession. That does not apply to every region of the state, but it appears to apply to the East Bay.’”

“‘The numbers show the effects from the bursting of the housing bubble,’ Haveman said. ‘We also see the consumer cutting back.’”

“Alameda resident Brad Chamberlain is seeking work in construction management or carpentry. Despite 27 years of experience in project management, Chamberlain has gotten few nibbles since he lost his job last August.”

“‘Two years ago when I was out of work, there were a lot more ads and much more of a response,’ Chamberlain said. ‘Now, there are hardly any ads for people with my experience.’”

The San Francisco Chronicle. “In the last six weeks, the San Francisco office of a staffing firm that specializes in administrative, technical and financial jobs, has seen assignments drop from about 40 a week to about 25. The slowdown is concentrated among administrative and clerical positions, branch manager Stephanie Zeppegno said.”

“Workers ‘are not worried about losing their jobs, but they’re leery about leaving their jobs,’ Zeppegno added.”

“Meanwhile, there’s plenty of competition for job openings. ‘I volunteer time with job seekers in the Bay Area, and nearly every job opening attracts tens of job seekers, often more,’ said former Employment Development Department Director Michael Bernick.”

The Sacramento Bee. “‘It’s been a very cold winter,’ said Jason de Lemos of IM Construction, a building contractor in south Placer County. The firm has cut about 280 jobs since 2006.”

“‘We thought it was meager to begin with,’ said Howard Roth, chief economist at the state Department of Finance. With the revision, ‘it’s certainly more meager than we thought. We’ve slowed down more than we thought, more than we knew.’”

“A year ago, the local head honcho for Beazer Homes figured the housing market had hit bottom and was ready to take off again. He was wrong. Sales ‘went off a cliff’ in March, says Alan Newman.”

“During the Feb. 7-13 sale, prices were marked down as much as 10 percent. For example, houses normally priced at $199,000 were offered for $179,000. Every home sold at a loss, Newman says.”

“But, the company was able to reduce its inventory. And, Newman says, the sales blitz proved that buyers – especially the first-time homeowners that Beazer targets – are willing to get back into the market.”

“‘They’re ready to buy,’ he says of prospective customers, ‘ … at the right price.’”

The Contra Costa. “A Southern California developer has pulled the plug on a planned multiuse project on San Pablo Avenue near the Del Norte BART station in El Cerrito.”

“The Mayfair Block project, brought forth by the Olson Co. in 2005, originally was planned to include about 10,000 square feet of retail space on the ground floor, and 58 condominiums above.”

“‘Everything looked fine, and then the housing slowdown began,’ said Mitch Oshinsky, El Cerrito’s community development director. ‘Olson, like other developers, started slowing down and stepping back from projects. They had stepped back from a number of other projects but kept (the Mayfair Block) project active. Eventually, they came back and had to let that project go as well.’”

The Bakersfield Californian. “Bruce Norris, a Riverside-based real estate investor, doesn’t think the housing market will perk up until 2011. That’s ‘when you’re going to have your first positive price year,’ he said.”

“If you ‘look at sale price of a home, start subtracting everything that costs (developers) money — marketing, holding costs, borrowing money to finance the project, grading — at the very end, there’s a profit, a number that’s left that they can pay for the land itself,’ Norris said. ‘Right now, that number is so negative, it wouldn’t make sense to put a lot anywhere (in) Southern California.’”

“‘I don’t have many applications going in. It’s not like it was,’ said Roger McIntosh, principal (of) a consulting firm that does planning and surveying among other services.”

“Most of McIntosh’s residential clients have put their projects on hold. ‘In a slow market, (there’s) no reason to expend millions of dollars on a subdivision if you can’t sell the houses,’ McIntosh said.”

The Orange County Business Journal. “Mortgage brokers are buzzing over the latest bad news for the local housing market: Wells Fargo has designated all of OC and L.A. as ’severely distressed,’ putting the two counties in the same bottom category with San Diego and the Inland Empire.”

“Wells becomes the first major lender in OC to completely eliminate stated income, stated asset (’liar’) loans, even for highly qualified borrowers.” ‘Jason Grange of Premier Mortgage Lending says other lenders are sure to follow: ‘There are officially no more lenders offering 100% financing in OC … Most borrowers can expect to put down 10% or even 15%.’”

The Signal. “Home and condominium sales in the Santa Clarita Valley hit a record low in January, according to a report from the Southland Regional Association of Realtors released Wednesday. The realtors organization reported that only 99 homes sold in January, which is down 42.4 percent from a year ago.”

“Additionally, the median price of a single-family home sold in January fell below the $500,000 for the first time in three-and-a-half years.”

“Condos are also at a record low as a total of 31 condos closed escrow in the first month of 2008, which is a 57.7 percent decrease from January 2007, making it the lowest total on record for the realtors organization.”

“This was the first time in three-and-a-half years that a condo’s median price went below the $300,000 mark. The record high of $397,000 came two years ago in January 2006.”

“The median price of $460,000 for a single-family home was down 21.8 percent when compared to a year ago, according to the association’s report.”

“‘Buyers are expecting whopping discounts, and sellers are not being realistic with their asking prices,’ Doreen Chastain-Shine, president of the association’s Santa Clarita Valley Division said in a statement. ‘The market is deadlocked, at an impasse, and will remain that way until buyers realize that prices are not plummeting and sellers accept that they no longer have the upper hand.’”

“Chastain-Shine then added, ‘The market is moving toward a new balance, and there is a slight upswing in activity, some of which is due to seasonal factors. But a stable, balanced market will not emerge until both parties get real.’”

“The organization reports that a total of 2,163 active listings were reported at the end of January, up 22.9 percent from a year ago. At the current pace of sales, the number represents a 16.6-month inventory, continuing a buyer’s market.”

The News Press reports from Florida. “A year ago, at $89,000 it was the cheapest house listed for sale in Lee County. Now, three real estate agents and several price cuts later, the 578-square-foot cottage in Fort Myers is for sale at $29,900 — reduced again Friday from $38,900 and still among the least expensive. But one of the partners who owns the house — built in 1944 and assessed by the Lee County Property Appraiser’s Office at $47,870 — said she’s not worried.”

“‘It depends on what type of offer we get,’ Joyce Dean said. ‘We’re not going to just give it away. It’s holding its own so it’s not like we have to sell it.’”

“If an acceptable offer doesn’t materialize, that doesn’t bother her. The property, bought in 1990 as an investment for $5,000, is occupied by a tenant and isn’t a financial burden. Taxes for 2007 were $1,141.64.”

“Lisa Wiskowski of Florida Resale Properties, who represents the owners, said to sell quickly the house would have to be knocked down in price even more.”

“‘It should probably be around $19,900 for this market. It just might not be a price the owner wants to sell it for,’ she said. ‘If the owners can afford to hold them, the sun’s not going to stop shining.’”

“Real estate broker Denny Grimes noted: ‘If they’d listed it for $40,000 a year ago, it’d have been sold in a day.’”

The Herald Tribune. “Area gas prices crept up to yet another all-time record for Southwest Florida. ‘It’s affecting everything,’ said Jules Van Landuyt, owner of Victory Lane Sunoco in Sarasota. ‘People are bringing in change to pay, and I mean pennies. I’ve had more denied credit cards in the last six months than in the last 27 years.’”

“Business in Van Landuyt’s commercial accounts is down 22 percent as the cars and trucks used by electricians, plumbers and roofers sit idle because of the housing slowdown. It was not long ago when they were lined up when Van Landuyt opened his station at Fruitville Road and Lime Avenue at 5:30 a.m. Now he is lucky to have his first customer by 7 a.m.”

“‘People are just broke,’ he said.”

The Bradenton Herald. “The lobby of attorney Margaret Lambrecht’s office has been full of frightened homeowners fearing the worst. With more than 2,600 foreclosures recorded in Manatee County in 2007, Lambrecht said a growing number of residents this year are discovering their options have run out.”

“‘We’ve got some clients coming in that have between five to seven properties that would have never normally come to see us because we are more of the little-guy consumer office for people who don’t have a lot of money,’ said Lambrecht. ‘These are people who, even now, have very good incomes, but they cannot keep up with the properties and they can’t even get any decent rent out of them.’”

“The pace of this year’s foreclosure filings is staggering, according Very Reyna, an assistant supervisor for the Manatee County Clerk of Circuit Court’s office. For 2008, Manatee County has already recorded 756 foreclosures. During the same time last year, the clerk’s office had recorded a total of 276 foreclosures.”

“‘I hate to say it, but it looks like it is getting worse,’ Lambrecht said. ‘It used to be that we could put people in Chapter 13 in a worst-case scenario and they could catch up on their arrears. Then, after a year or so, they could refinance. But now people can’t qualify for loans.’”

“An increasing number of homeowners also are finding their home equity line of credit is frozen by lenders without any notice, she said.”

“‘Bank of America recently froze and reassessed the value of property and gave no warning around the middle of the month,’ Lambrecht said. ‘They just sent notices that said, ‘Your home equity line of credit is frozen.’ And a lot of people had that in case of an emergency. So all of a sudden their little lifeline is frozen, even though there is nothing wrong with their credit.’”

“Dawn Bates-Buchanan, managing attorney for Gulfcoast Legal Services in Bradenton, said she has seen a huge increase in the number of seniors facing foreclosure walk through her door.”

“‘In 2006, I might have seen one senior every three months regarding foreclosures. Now, I’m seeing one a week,’ Bates-Buchanan said. ‘In most situations, by the time they come to see me, they are already facing a sale on the courthouse steps.”

“‘You ask somebody who is on a limited income to pay another $500 a month, it just doesn’t work. Then, they started using credit cards to make these mortgage payments and they ended up further and further in the hole. Now, there is no where left to go,’ Bates-Buchanan said.”

The Tampa Tribune. “There’s no doubt that many homeowners are finding it more difficult to pay their mortgages, and the latest national numbers show that Florida and the Tampa Bay area continue to be worse off than most other parts of the nation.”

“Some local real estate professionals say the numbers don’t even show the full extent of the problem. ‘So many people are working out short sale deals with lenders, and many of those aren’t counted as foreclosure filings,’ said David Carter, a local real estate lawyer.”

“Carter said so many homeowners are seeking short sales that the Florida Association of Realtors is providing forms to real estate agents to help them market a home as a short sale.”

“Of Hernando County’s fifth-place ranking, Carter said: ‘The frenzy for investing in properties was much worse here than in other counties.’”

From Reuters. “Miami condo builder Jorge Perez, who recently formed a $1 billion vulture fund to take advantage of weak U.S. real estate prices, expects south Florida’s overbuilt housing market to stabilize in two to three years.”

“Miami’s condo market has been considered one of the most overpriced and overbuilt in the United States. Although the median price for Miami condos rose last year, analysts say prices have tumbled 25 percent or more in some areas of the city.”

“‘We’re going to the banks and saying we’ll buy that mortgage that you have on this building at a discount,’ he said.”

“Perez said the fund will help stabilize Miami’s overbuilt market by taking unsold units out of inventory and converting them to rentals for a time. ‘The main aim of course is to make money. The second one is to be positioned in a way that when the recovery comes in we will have inventory immediately without having to build,’ he said.”

The Palm Beach Post. “There’s no sign that Palm Beach’s housing market is slowing. Despite the severe real estate downturn pushing Florida into a recession and shaking up world financial markets, home prices in this tony town remain on the rise.”

“‘All these terrible articles in the newspaper’ just don’t apply, Palm Beach real estate attorney Leslie Evans said. ‘Maybe in certain areas, but not in Palm Beach. This is a different animal here.’”

The Daily Business Review. “Well-dressed potential buyers were on hand for the long-anticipated foreclosure auction of the 52-room mansion of Veronica Hearst, widow of newspaper heir Randolph Apperson Hearst.”

“The show didn’t last long as lender New Stream Capital bid $22 million for the 3.5-acre oceanfront property. Hearst owed more than $40 million to New Stream Secured Capital, in one of the largest single-family residential foreclosure cases ever in South Florida.”

“Hearst’s husband paid $29.87 million for the estate a few months before he died in 2000. Geoffrey Thomas of the Corcoran Group, had the house listed at $27 million for about a year.”

The News Journal. “Half as many permits were issued for single-family houses in the Volusia-Flagler area in 2007 as 2006, according to Hanley Wood Market Intelligence. Multifamily permits were just as bad, down 43 percent, the report shows.”

“‘We’re doing pretty much what the state trend is, about 50 percent off,’ said Bob Fitzsimmons, CEO of Gallery Homes of DeLand. ‘There are areas of the state that are much worse, with parts of Florida off 70 to 80 percent.’”

“‘On a percentage basis, I’ve never seen it off this bad,’ Fitzsimmons said. ‘In 1989-90, there was a building slowdown, but it probably was off 30 to 40 percent.’”

“Mike Sawdai, VP of operations for Palm Coast-based SeaGate Homes, which also builds in Daytona Beach, Edgewater and St. Augustine, said the permit activity shows the market is returning to levels experienced before the housing boom started four or five years ago.”

“‘I don’t get over-alarmed to see large drops in the (year-to-year) permit market,’ Sawdai said. ‘(Recent years) weren’t typical building levels.’”

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