The Housing Bubble

The San Francisco Chronicle reports from California. “In eastern Antioch, 4.1 percent of all homes and condos went through foreclosure in 2007, according to DataQuick. That’s as bad as the hardest-hit neighborhood of Stockton - often cited as the foreclosure capital of California and even the nation. In eastern Contra Costa, more than 2 percent of all homes in eight ZIP codes were foreclosed on in 2007, a rate that rivals most Stockton neighborhoods.”

“‘We have one every 15 minutes including drive time,’ said Deputy Sheriff Alex Custodio, who has been doing evictions for four years. On Tuesday, the Brentwood eviction was the duo’s fifth call of the day; they had an additional dozen scheduled afterward.”

“Until recently, the vast majority were of tenants who fell behind on their rent. Only 10 percent were foreclosures. Now one-third are foreclosures. That comes to about 720 foreclosure evictions a year, or just under one-fifth of the 4,000 Contra Costa homes that went into foreclosure in 2007.”

“Doug Odom, a deputy sheriff with Contra Costa County, rapped loudly on the front door of a one-story prefabricated home in Brentwood. Odom had already been to the Brentwood house a week earlier and served former owner Ellen Anderson with a warning notice of the eviction date.”

“Looking distraught, Anderson apologized for the mess. She said she and her husband are getting a divorce and couldn’t make the monthly payment, which had risen to $4,500. The couple bought the house about 10 years ago. She said her soon-to-be-ex husband had already moved out to another house in Concord the couple had bought together.”

“She gestured at the kitchen ceiling. ‘This … all leaks,’ she said. ‘You can’t get refinanced because it’s a manufactured home. It’s 20 years old. They don’t last.’”

“In places such as Antioch, Pittsburg and Discovery Bay, homes that went for $650,000 a couple of years ago are now selling for $450,000 or so. ‘Look at this block,’ Custodio said, gesturing at a subdivision of cookie-cutter houses in Pittsburg. ‘You can see all those for-sale signs. More than likely, we’ll be out here posting them’ for a notice of eviction.”

“Custodio has seen the role real estate speculation played in fueling the foreclosures. ‘In talking to some people (being evicted) they tried to buy other property; they tried to add to their wealth by owning,’ he said. ‘People tried to capitalize on the boom when values were skyrocketing.’”

“Still, he doesn’t fault them. ‘Most folks are decent people,’ he said. ‘They just wanted a little more, but it didn’t work out for them.’”

From ABC 7 News. “The high number of home foreclosures in Vallejo is one of the reasons why the city is facing budget problems. Today, on Mare Island, homeowners in danger of losing their property are getting help from real estate experts.”

“Tonie McGee and Matthew Criswell are trying to hold onto their 1,200 square foot condo. Their adjustable mortgage just went up two points and will rise again.”

“They bought the condo eight years ago for $160,000. Over the years, they borrowed on equity and now owe $294,000. Similar condos next door won’t even sell for that much.”

“‘It’s either we’re going to afford it, we’re going to lose it, or we’ll be getting second jobs,’ says Criswell.”

The Recordnet. “When Linda and David Barnes put their north Stockton home up for sale in August 2006, the real-estate market was already slowing down. They knew that. Still, they had bought and sold two homes during their 34 years in Stockton, and things had always gone smoothly. They figured they would sell this time in a few months.”

“They listed their five-bedroom, two-and-a-half-bathroom home for $419,000. David Barnes took a company transfer to a job in Southern California…and Linda Barnes waited in Stockton for a sale. And waited. And waited - for 13 months. A sale never happened.”

“The Barneses’ house sat on the market for 13 months and received only two offers. One was so low it was insulting, at least at the time. The other looked so suspicious that their real-estate broker advised against accepting the offer, which seemed to contain an illegal kickback to the buyer. There was one tire kicker who made no offer.”

“The rest of the lookers would go through the house and then tell the Barnes’ agent, no thanks, they were actually interested in buying a less expensive foreclosure property.”

“‘It was just horrible,’ Linda Barnes said. ‘I think I spent the whole last year in a state of depression.’”

“Last September, the Barneses decided enough was enough and took the home off the market. David Barnes transferred back to Stockton. ‘No matter what, in two years we’ll definitely put it on the market again,’ Linda Barnes said. ‘We’re not expecting to get it over $400,000 again but just whatever we can get. It will be higher than we could get now. And we can get on with our lives. Now it’s just terrible timing.’”

“Traditional homes mostly have been left sitting on the sidelines, while foreclosure homes have started selling at fire-sale prices. This means that traditional homes have to be priced like a foreclosure to have any chance at all to sell, said Jerry Abbott, president and co-owner of the Coldwell Banker Grupe realty firm in Stockton.”

“‘A person trying to sell a home can’t price it separate from an REO (real estate- owned house),’ he said.”

“Art Godi, of Art Godi Realtors in Stockton, said that eight out of 10 existing-home sales these days are either foreclosures or short sales.”

“‘If you don’t need to sell, you’re better off to stand aside and letting the foreclosures clear out,’ said Mike Collins, of Collins Realty in Stockton. ‘Then we will see a significant bounce. False bottoms are getting created now by the bank-owned properties and to some extent, even by builders who are dropping prices dramatically and offering incentives to sell their properties.’”

The Modesto Bee. “More than 200 homeowners met with mortgage lenders and financial advisers Saturday in Modesto to discuss ways they can avoid foreclosure and keep their homes. Norma and Moises Robles of Riverbank were among them. They refinanced their home loan a year ago, but they didn’t understand the terms of their new adjustable-rate mortgage.”

“‘We wanted a fixed rate. We don’t know what happened. It was a bad decision we made,’ said Norma Robles. She said their mortgage broker had them sign the loan documents before reading them. ‘Sometimes, you trust people, and you don’t know what’s going to happen after that.’”

The Merced Sun Star. “A year after Juan Reyes bought a new house in Dunmore Homes’ Country Villas subdivision in Livingston, he thought his only headaches were an overflowing air conditioning valve and a bathroom door that won’t close. Now he’s got bigger worries.”

“After more than 50 years in business, Sacramento-based Dunmore has filed for bankruptcy and is liquidating its assets. In Reyes’ case, two companies have placed liens totaling $7,000 on his house.”

“That means people like Reyes, who bought his Dunmore house in February 2007 for about $400,000, find themselves cleaning up a financial mess they didn’t make. ‘Boy, that’s screwed up,’ said Reyes when he learned of the liens. ‘I feel bad for those contractors. It’s not cool. It’s bad for them, and it’s bad for us as homeowners.’”

“All told, 27 separate companies have placed liens totaling at least $1 million on more than 500 houses in Merced County, according to documents at the County Recorder’s Office.”

“At the sales office, faded flags with the Dunmore logo still wave in the wind, but a sign on the door tells whoever might stop by that the office is temporarily closed, effective last September. As Reyes put it, ‘They totally bailed.’”

The North County Times. “Julie Beck stood in a three-bedroom Oceanside house and imagined calling it home. For Beck, the recent tumble in home prices has been a cause for celebration. She had wanted a home for years but could not afford it.”

“She hopes to find a three-bedroom home and — for the first time in years — can pick from dozens priced less than $300,000.”

“Some real estate agents say lower prices have brought in new buyers, and the housing market will start appreciating by year’s end.”

“In opposition, some economists say the region’s median price, at $429,000, needs to drop and become affordable for a family making the median income, at $55,500, before the market recovers, a decline they say would take two or three years.”

“Don Stephensen has been ready to buy for years. Finally, he can afford something large enough for his family because prices in San Diego County have fallen sharply over the last two years, with the median price falling 17 percent from a peak of $517,500 in 2005 to $429,000 in January, according to DataQuick.”

“Regardless of what the housing market does, Stephensen said he is eager to buy. He wants his first home, and his daughter wants her first dog. ‘I will find a place if it freaking kills me. I will,’ he said.”

“Despite his desire to find the perfect home, Stephensen said he does feel pressure to act quickly. In the last month, interest rates dropped half a percentage point before jumping the same amount over the course of a week. This unusual volatility, Stephensen said, has spooked him.”

“One percentage point represents about $160 more in monthly payments and an extra $58,000 over the life of the loan for a $300,000 home with a 20 percent down payment.”

“Whether the housing market is at rock-bottom does not matter to Beck, the Oceanside teacher. She said she is tired of dumping $2,000 a month in rent into a property where she cannot paint the walls.”

“‘I’m not looking at a home for an investment. I’m looking at a home for a home,’ said Beck, who said she plans to keep her 4-year-old twin daughters and 8-year-old son in Oceanside schools through graduation. ‘I won’t be ready to sell for the next 12 years, so it doesn’t matter if prices drop some more.’”

The Press Telegram. “That long-sought higher conforming loan limit - $729,750 - is finally in effect for Los Angeles, Ventura and a dozen other California counties. But don’t get giddy with anticipation that it will pull the real estate market out of its 26-month funk. The slump seems to be a problem that can’t be fixed with either money or words.”

“Economist Christopher Thornberg makes the point that Fannie and Freddie have a rule that says no more than 35 percent of gross household income can be spent on the mortgage.”

“‘Forget it,’ Thornberg said of the possibility that the higher limits will provide any real help. ‘It’s Fannie’s and Freddie’s way of leveraging themselves into the jumbo (loan) market.’”

“And that, he notes, is something these two have lusted after for a long time.”

“‘In reality, the higher loan limit will enable Fannie and Freddie to play a greater role in California than they have historically,’ said Robert Kleinhenz, deputy chief economist at the California Association of Realtors. ‘That’s going to help some. How much remains to be seen.’”

“After foreclosure rates skyrocketed, the mortgage industry promised to try to work out solutions. Economist Thornberg doesn’t think much of the workout plan. Basically, there is nothing to work out.”

“‘The problem is what (some) people paid for their loan was way too much relative to what they could afford,’ he said. ‘Changing the terms of the mortgage doesn’t change the fact that they can’t afford the mortgage.’”

The Hackensack Record reports from New Jersey. “What do you do if you’re a single mother who can’t afford your mortgage payments of more than $3,700 a month, but you can’t sell your house for anywhere near the amount you owe on the mortgage? That’s the dilemma facing Anna, a Bergenfield, N.J., woman who bought her Cape Cod-style house, with no money down, for $445,000 two years ago. Now, in a much slower market, her real-estate agent says she’d be lucky to get $380,000.”

“‘The values of a lot of these houses were inflated as a result of the real-estate boom. Now we’re in a bust. The values aren’t there. It’s all starting to catch up with everyone,’ said Frank Ciambrone, a Rochelle Park, N.J., real-estate lawyer.”

“The solution for Anna is the one being used by an increasing number of distressed homeowners: a short sale. She reluctantly decided to give up the house and move in with relatives in the Bronx.”

“‘It’s painful,’ Anna said. ‘My children are not really happy, but we had to make this change.’ She recalled her renovations to the house but decided a short sale was the right choice because at least she’s not ‘just waiting for a foreclosure.’”

“Another short-seller, a Lodi, N.J., woman who asked not to be identified, owes $620,000 on her two-family house, which she bought in 2006. She works on commission and got a so-called stated-income mortgage. She said the mortgage broker encouraged her to overstate her income to qualify for the loan.”

“But when her commissions slowed, she could not afford the monthly payments of $6,100. She found a buyer willing to pay $525,000, but in the long wait for approval from her lender, the buyer gave up on the deal. Now she is looking for a new buyer.”

“‘I’m partly to blame,’ the homeowner said. ‘I should have known better.’ But she thinks the lender should have known better, too: ‘I should never have been able to get that loan, and I’m sorry I did.’”

“Sal Poliandro of Re/Max Properties in Ridgewood tells of a Hackensack short sale in which the homeowner owed $650,000 because he refinanced to pull out equity at the peak of the boom market. But the monthly payments were impossible. The house ultimately sold for $430,000 — $230,000 less than the amount owed on the mortgage.”

“‘The seller’s goal was to stop making payments without ruining his credit and his life,’ Poliandro said.”

The News Journal from Delaware. “Debbie Chase never imagined she would find herself in foreclosure. After moving into a bigger house but failing to sell the old one, Chase and her husband now find themselves with two mortgages — and they can’t pay both. The family has since moved back into the smaller house and has completely stopped making payments on the big one.”

“We really don’t want to go through a foreclosure, but in this market we know we won’t get what we need to pay off the house,’ said Chase, who is still trying to sell.”

“For Chase and a growing number of the 938,000-plus Americans in foreclosure, the next step is coming into focus: just walk away.”

“‘A homeowner with a mortgage that exceeds the value of his house has a strong incentive to default,’ Martin Feldstein, a Harvard professor, wrote in a Wall Street Journal editorial. ‘Optimists note that homeowners with negative equity have generally been reluctant to default in past years. That was sensible when house prices were rising. But with house prices falling, defaulting on the mortgage is the rational thing to do.’”

“In January, Chase stopped making payments on the new home in January. ‘Our plan was to start getting the new one back on track,’ she says. ‘Now we’re just trying to unload it. If the first house had sold, we never would have been in this position.’”

The News Post from Maryland. “Outspoken local appraiser Wayne Six addressed a packed room of more than 100 real estate professionals at Dutch’s Daughter Restaurant, saying ‘there is a ray of sunshine in the storm.’ Six was referring to the current housing market where prices are falling, and foreclosures are rising along with expenses.”

“He noted there were only 375 houses on the market in Frederick County on June 2005. That was the turning point for the housing market.”

“‘We knew it was coming. For several years we had prices going up 20 percent a year. Did anyone’s income go up 20 percent a year?,’ Six said. ‘A normal market for Frederick County is 1,000 to 1,200 houses. Having 375 was bad, it meant people bidding on properties and a lot of unhappy people.’”

“Inventory as of March 3 was 1,900 homes, he said, down from 2,500 in September. ‘It might level off quicker than we thought,’ Six said of the inventory of unsold homes. ‘But I’m also worried that everyone and his brother is waiting to put their house on the market.’”

“‘The cows are out of the barn and (Realtors) are getting blamed for letting the door open,’ he said referring to foreclosures.”

“Many property owners Six called ‘big hat, no cattle.’ ‘They have a big house, big car, swimming pool, but no equity’ and are constantly refinancing to keep afloat.”

“Someone moving from a townhouse to a single family home can find a bargain, he said, because townhouse prices fell less than those for single family dwellings. He gave an example of a house in Clover Ridge, built in 2005 and sold then for $600,000. It just sold for less than $400,000.”

“Another bad sign is that more unfinished houses are coming on the market, Six said, prompting him to offer the following advice to the Realtors: ‘When you try to sell that, you need to knock off more than just the cost of finishing the house,’ he said.”

The Washington Post. “The four-bedroom, 1950s rambler on Hanover Avenue in Springfield was an illegal boardinghouse, neighbors complained in February 2007. County inspectors…cited the owner, Elsa DeLeon, for a series of code violations and ordered her to bring the property into compliance.”

“DeLeon, a Honduran immigrant, told The Washington Post at the time that only eight people lived there, all family members who were needed to help make the mortgage on the house she bought for $550,000 in 2006.”

“By May, it was in foreclosure, sold to Deutsche Bank National Trust of Kansas City for $120,600, according to county records. The house has been vacant for months; DeLeon could not be located to comment.”

“It will go up for auction today, along with hundreds of other foreclosed properties areawide, at the Washington Convention Center. The starting price is $169,000 — less than half the value of surrounding homes.”

“This situation is not what Fairfax County officials had in mind when they started cracking down on overcrowding. The goal was to restore stability in older neighborhoods.”

“‘It’s mixed feelings,’ said Supervisor Jeff C. McKay. ‘You hate to be the keeper of a neighborhood with a lot of foreclosures, but a lot of these are due to our systematic strike-team efforts. When you can’t rent rooms in a boardinghouse, you’re going to go out of business.’”

“Asked whether they prefer living near an empty, foreclosed house to one that is overcrowded, some Springfield residents have mixed feelings.”

“‘Do you want me to shoot you or stab you? Neither choice is good,’ said Harry Gault, who lives in the 6300 block of Dana Avenue in Springfield, where two of the three houses targeted by the strike team are in foreclosure.”

“Gault said that he supports the county’s toughened enforcement stance but that it might have been more effective had it started before the subprime market collapsed. ‘They should have cracked down a long time ago,’ he said.”

The Free Lance Star from Virginia. “Looking for more peace and quiet at work? If so, you might be jealous of John LaFratta. LaFratta runs a law office in Richmond. He handles home foreclosure legal work across central Virginia for law firms in Bethesda, Md., and Virginia Beach.”

“What that means is that LaFratta spends a good deal of time these days traveling from courthouse to courthouse auctioning off foreclosed properties.”

“Problem is, nowadays banks are often owed more on the homes than what the houses are fetching on the open market. So the minimum bid required to buy the house at auction is typically too high for most.”

“But LaFratta and other attorneys handling foreclosure auctions are required to go through the motions even if no buyers show up. He reads the notice from the newspaper–’frequently to myself,’ he says–before opening the bidding. When nobody bids, the bank adds another home to its growing real-estate portfolio.”

“‘People just aren’t real comfortable investing money right now,’ said Rich Donaldson, a member of the Fredericksburg firm TLC Property LLC, which buys foreclosed properties. ‘Everyone’s waiting for the bottom.’”

“LaFratta had two public auctions scheduled Wednesday in front of King George County Circuit Court. LaFratta told an audience of one what was needed to buy the two-story home in the Oakland Park subdivision off Fletchers Chapel Road in King George.”

“The original principal amount from March 2005 was $330,600, according to the ad. The opening bid was $299,000. Donaldson, the lone attendee, shook his head as he heard the figure. ‘$299,000, going once, going twice, sold,’ LaFratta said.”

“The winner? HSBC Mortgages Services Inc., which would likely put the home on the market soon. LaFratta said the four auctions he did earlier that day in Spotsylvania had similar results. He’s starting to get some bidders in the Richmond area, but buyers remain scarce farther north.”

“But the show must go on. LaFratta’s Wednesday had started in Goochland County at 8 a.m. Before returning to Richmond for criminal court that afternoon, he had one more auction at 12:30 p.m. in Westmoreland County.”

What do you see in your housing market this weekend? Overbuilding? “The Home Builders Association of Fort Wayne has decided to skip the organization’s traditional Parade of Homes this fall. The HBA couldn’t get a minimum of six builders to commit to any one location. Builders complained ‘they already had enough inventory on the market; they didn’t need more,’ said Matt Lancia, the association’s president.”

Cheaper materials? “The slump in the housing market is starting to hurt to families in southern Douglas County. Swanson Group has closed its mills in several Oregon communities for the next couple weeks. ‘Ya know, prices today are at levels that they’re lower than the levels that I saw when I joined this company in 1977. We haven’t seen ‘em this low frankly since the early 80’s and that’s unadjusted for inflation,’ said CEO Steve Swanson.”

“‘My mom was just getting ready to buy a house and she’s not sure what she’s gonna do now. My husband and I have four little ones at home so it’s gonna be a big impact,’ said Gina Watson. Watson’s husband was among the workers that were laid off.”

Related fallout? “Tallahassee, Pasco school superintendent Heather Fiorentino is a realist, as she made perfectly clear to the School Board on Tuesday during a meeting and workshop where money became a pivotal issue. ‘It is going to be bad,’ Fiorentino told the board.”

“Even hot dogs are under scrutiny. Food and nutrition director Rick Kurtz told the board of plans to switch from hot dogs to turkey franks to save $25,000 through the rest of the year.”

Lower prices? “The housing slump does not discriminate on the basis of wealth with property values falling in parts of the upscale Hamptons, the New York Post said Friday. The median price of a single-family home in East Hampton, N.Y., has fallen below $1 million, the report said.”

“The neighborhood of posh, and really posh, beach property homes dropped 20.4 percent from a median price of $1.225 million a year ago to the relatively there-goes-the-neighborhood price of $975,000. ‘It’s really the $2-million-to-$3-million market, and the under-$800,000 houses, that are getting hit the hardest,’ one realtor said.”

Or foreclosures. “The numbers are spiraling out of control and Connecticut is taking a heavy toll. People are losing their homes, because they can’t pay the mortgage. ‘I love my house, I want my house, I want to keep it,’ Mary Henderson of West Haven said. ‘The mortgage started at 139 and I end up now paying $228,000 and I don’t understand how we got to this point.’”

“‘I just wanted a piece of the American dream, you see what I’m saying, cause I worked,’ Henderson said. ‘I worked, I earned it.’”

“‘Every counselor has a box of kleenex on their desks,’ Bridget Russell of Neighborhood Housing Service said.”

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