The Housing Bubble

It’s Friday desk clearing time. “Illinois’ year-over-year sales in February were down 23 percent, and prices were off 5.6 percent. Chicago-area sales slipped about 27 percent, the Realtors said. Francisco Ybarra hopes a price reduction to $699,000 from $719,000—plus a little jazz —will land a buyer for his West Town neighborhood rowhouse.”

“His agent, Sandesh Bilgi, hired jazz musicians to entertain at an agents’ open house cocktail party last week to raise the property’s profile. ‘[At the height of the housing boom] we wouldn’t have needed to do it; it would have been under contract before I could even plan an event,’ Bilgi said.”

“Ybarra said he’s confident the property will sell, though he agreed that the mortgage industry’s more rigorous standards—bigger down payments, stronger credit scores—have derailed some deals. ‘I think the market can only get worse if people can’t get loans,’ said Ybarra. ‘People want to buy houses, but they’re just not giving loans.’”

“Boca Developers, one of South Florida’s biggest condo builders, has stopped construction at one project, laid off most of its staff and faces millions of dollars in liens on its projects for unpaid bills. Boca Developers has at least half a dozen projects from Key West to Daytona Beach.”

“Boca Developers began planning Marina Grande four years ago, about a year before the South Florida housing market peaked. So far, the foundation of one of the two buildings has been built, but little else has been done in the last 10 months, said Steve Pizzillo, North Miami Beach’s chief building inspector.”

“A permit to build the tower has been approved, but the developer has not picked it up, he said. ‘It is a beautiful project,’ he said. ‘It is a shame it has been sitting there.’”

“Homeowners anxious to unload their Indian Hill estate or downtown penthouse condo largely have two options these days - discount the price or wait. On a list of 42 Greater Cincinnati and Northern Kentucky neighborhoods, these two communities ranked highest for monthly absorption rate.”

“With 19 and 27 months of inventory, sellers in Indian Hill and downtown must either be aggressive on price or willing to wait for the housing market to turn around, said local Realtors. ‘The run-up was just ridiculous, so Indian Hill is getting killed,’ said agent Peter Chabris.”

“‘The luster momentarily is off,’ said Lee Robinson, owner of Robinson Realtors in Hyde Park.”

“For the second month in a row, home sales in the Baton Rouge metro area came in below their 2005 levels, indicating a cooling market and the end of the post-Katrina housing bump. And inventory figures show there are significantly more homes on the market.”

“‘It’s steady, there’s still business, but I think the bubble’s gone,’ said Mandy Benton, a broker with M.A. Allen & Associates, which sells primarily in Livingston Parish.”

“Buddy Webre, who runs B&J Home Inspection with his wife and son, said that in the short term there’s little to do but wait out the downward slide and leave behind the memories of having enough work to keep them going seven days a week. ‘We just gotta forget Katrina,’ he said.”

“Spring is usually the time when the housing market heats up. But, sales of new homes fell last month for the fourth straight month in a row. Neill Amsler, CEO of Hogan Homes, a well-known homebuilder here in Corpus Christi, told KRIS 6 News that people just are not buying like they used to. Amsler said the problem is not as bad in South Texas, but he is still slashing prices.”

“Amsler said, ‘There are some that argue we never really got overbuilt here. I think we did a little bit.’”

“Old residential building units in prime locations are selling for up to 400% what they were four years ago, according to independent market watchdogs. Hoang Anh Thu, the owner of an apartment in Thanh Da, said that even though the building isn’t close to downtown, prices are going through the roof.”

“‘In 2003, my apartment was priced VND250mil,’ Thu said. ‘But I just sold it for VND650mil.’”

“House prices in Istanbul’s Kurtköy district on the Asian side keep rising. In the region, which attracts high attention for its high quality residences, flats cost up to YTL 700,000 ($565,000).”

“Kurtköy hosts housing sites for high-income groups on its last parcels of land today. In the district where second-hand house prices have also increased substantially, it is possible to buy a villa at the same price as a flat.”

“This range of prices not only offers high income, but makes the resident profile more cosmopolitan as well.”

“Prime Minister Jose Luis Rodriguez Zapatero is increasing government spending to avoid a real estate fire sale. In a country with an 86 percent home ownership rate, highest in the 15-nation euro region, the collapsing housing market is already slowing the economy.”

“Residential construction, which accounts for about 6 percent of Spain’s economy, peaked in 2006 after a decade-long surge fueled by a drop in interest rates, growing incomes and vacation home purchases by Britons, Germans and other northern Europeans. Housing prices gained 11 percent a year on average, as even ordinary Spaniards speculated in real estate.”

“Now, a glut of properties weighs on the market, and interest rate increases and tighter bank lending standards make it more difficult for buyers to finance. The supply of new homes in 2006 outstripped demand by about 50 percent, according to government estimates.”

“Pavel Santa, a Romanian construction foreman, brought his wife and son to live in Spain last year after he joined the management committee of the property company where he’s worked for five years. Then his mortgage interest rate reset, causing the monthly payment to take up almost all of his 1,800 euros monthly salary.”

“‘I’m at the limit,’ says Santa. ‘I live worse than I did in Romania.’”

“The mortgage loan modification plans put forward by the governor and, at various times and in various forms, by the U.S. Treasury Department all failed to fix the problems in the housing markets.”

“Why? They pretended that the problem is the structures of the mortgages used to buy houses — in other words, fix the interest rate and you fix the problem. Make the loan ‘fair’ and everything will be fine.”

“Nothing could be further from the truth. The real issue in today’s housing markets is that prices currently sit at levels that are unaffordable given income levels in our state.”

“Every buyer over the last few years had a choice: Buy a home or rent an apartment until income was more in line with prices. Many leaped into the housing market even as prices climbed to such high levels because they thought they could sell at a higher price. To a degree, they were all speculators.”

“Many people made a very unwise decision in recent years: They bought a house they couldn’t possibly afford. Needless to say, they had help. But it all started with buyers who bought something they couldn’t afford and listened to the words they wanted to hear to help themselves justify that bad decision.”

“People make mistakes. We give them a second chance by allowing them to bankrupt themselves out of debt they couldn’t afford even if they arrived in this situation because they made an error. But the game is simple — if you can’t make the payment, you lose the house.”

“Happy days are here again: Real estate agents met Thursday in Lynn­wood, and they’ve got a good handle on what’s wrong with the housing market: Nothing!”

“The only real problem, they say, is that the media make people nervous by telling them there’s bad news. (Not us: A 2-bedroom mobile home in Stanwood is definitely worth half a million).”

“Seriously, haven’t the real estate agents seen CNN lately? All they had to do was hold up something shiny and nobody would’ve noticed all those risky home loans.”

“And human ancestors started walking 6 million years ago, according to new research. That’s about 1 million years earlier than previously thought, and roughly 5 million years before early man decided a subprime loan was so crazy, even a caveman wouldn’t do it.”

Some housing bubble news from Wall Street and Washington. Bloomberg, “KB Home, the fifth-largest U.S. homebuilder, reported a fiscal first-quarter net loss was $268.2 million. Revenue fell 43 percent and net orders plunged 75 percent to 1,449 homes, the company said in a statement. Los Angeles-based KB Home recorded $223.9 million in pretax expenses to write down the value of land, joint ventures and options on property.”

“‘Many potential buyers either cannot or will not make a purchase commitment today,’ CEO Jeffrey Mezger said on the conference call. ‘Some are worried about losing their jobs, others believe prices have further to fall. Many are simply unable to qualify for financing given the more restrictive lending environment.’”

“The number of homes sold tumbled 43 percent in the quarter, KB Home said. The value of the company’s backlog, or homes under contract and not yet sold and a sign of future revenue, fell 59 percent. The number of homes in backlog tumbled 57 percent.”

“Orders tumbled 83 percent in both KB Home’s Southwest region of Arizona, Nevada and New Mexico and its central region of Colorado, Illinois and Texas. KB Home got contracts for the most houses in the quarter in California. Still, orders in California fell 63 percent.”

“KB Home’s average selling price in the quarter fell 7.2 percent to $248,200. In fiscal 2007, the average price fell 9 percent to $261,600 from the same period a year earlier.”

“KB Home obtained the most revenue in 2007 from California. It sold homes there at an average price of $433,600, down 11 percent from 2006.”

The Chicago Tribune. “Foreclosures are piling up on the books of lenders, and Corus Bankshares Inc. is no exception.”

“The Chicago area’s second-biggest locally headquartered bank has seen its ‘real estate owned’ on its books jump from $8.4 million at year-end 2006, involving a Libertyville office complex, to $37 million at the end of 2007, consisting mostly of a Naples, Fla., condominium conversion.”

“The Naples condominium project, which was being converted from a relatively new apartment complex, is under contract for sale. Asked how Corus was able to sell the properties, CEO Robert Glickman replied, ‘By reducing the price.’”

“‘Naples, Fla., is a nice town, but we didn’t get the price we wanted,’ he said.”

“‘We could hold on in hopes the market will get better in ‘09 or 2010, or otherwise we’ll take what the market brings us,’ Glickman said. ‘It’s an important decision. We wouldn’t sell at too much of a sacrifice because we’re not under pressure to sell, but if the price seems good enough, we’ll let it go.’”

“The Naples condo conversion had sold 90 of 450 units, but then sales slowed.”

“‘The borrowers needed to come up with more money. While they’re renting units, there isn’t enough rental income to make our mortgage payments,’ he said. ‘So they’ve got to dig in their pockets or give us the keys, and they gave us the keys.’”

“While Corus has made progress in disposing of two foreclosures, more could be coming. In late January, Corus said it expected to begin foreclosure proceedings on as many as three loans in early 2008.”

“It has taken title to a condo-apartment project in San Diego. A Phoenix property is winding its way through the courts, and one in Tampa is on a ‘long journey through the court,’ Glickman said. Both of those are apartments being converted to condos.”

The Washington Business Journal. “A New York-based investment company has picked up a Rockville residential building for millions of dollars less than the distressed seller paid for it in 2005. Like dozens of other multifamily developers in the region and across the country, the buyer plans to take the building out of the condo market and put it back where it started — in the rental apartment market.”

“The would-be condo building, called the Monterey, went bust last May, after its then-owner failed to make payments to a mezzanine lender. Triton paid $117 million, or nearly $271,000 a unit, for the 432-unit building in November 2005, and then spent as much as $30 million renovating it to compete in the condo market. The buyer plunked down $97 million for the property.”

“Since mid-2006, 156 condo projects were either canceled or turned into rental apartment buildings, taking more than 31,000 condo units off the market, said William Rich, a VP at Delta Associates. The flips and busts have left a little more than 16,000 condo units on the market in the metro area.”

“‘Reducing the condo supply helps other developers in the submarket, but it also shakes the confidence of buyers when they see a building that they were looking to live in as a condo [become] an apartment,’ Rich said.”

Investors Business Daily. “Developers are putting some communities on hold for lack of demand, incentives may not provide good value, and prices are still falling. Buyer beware, real estate agents say. Be informed and very, very cautious. What looks like a bargain might be a bad bet.”

“One risk, especially realistic now, is that a builder could mothball the project, leaving would-be residents in a lurch and those who’ve already moved in stuck, surrounded by vacant lots. Pulte Homes, D.R. Horton CTX and other big developers have all been mothballing communities during this dramatic real estate downturn.”

“At the end of February, Centex stopped building at its Cypress at Kavala Ranch development in Rancho Cordova, Calif., near Sacramento. Pulte has mothballed 58 communities, executives told analysts. Forty-six of the communities ‘have never been opened,’ Chief Financial Officer Roger Cregg said on the late-January call. That leaves 12 opened but now sitting unfinished.”

“Near Lake Tahoe, the new luxury communities of Old Greenwood and Gray’s Crossing are both Mello-Roos Districts. These developments among others in the Truckee, Calif., vicinity also are subject to town transfer taxes that can run 0.25% to 1.75% of a home’s sale price, says David Hipkins, a local agent.”

“‘New developments can have a lot of hidden extras, especially in California,’ Hipkins said. ‘This is the way cash-strapped counties and municipalities generate additional revenue.’”

The Dallas Morning News. “Dallas-Fort Worth homebuilders are packing away their hammers, dramatically reducing the number of homes they are building in the area. Fort Worth-based D.R. Horton Inc., which was the lead builder in North Texas in 2006, chopped its starts in 2007 by 57 percent – from more than 4,800 to fewer than 2,100 units last year.”

“Centex Corp., which topped the builder list in 2007, reduced its starts almost 30 percent to 2,170 homes. Florida-based Lennar Corp., which started almost 3,000 homes in Dallas-Fort Worth in 2006, began only about 800 last year. That’s a drop of more than 70 percent.”

“Texas A&M University economist Mark Dotzour would like to see even more restraint. ‘There are some that haven’t cut back very much at all,’ Dr. Dotzour said.”

“He frets that in some neighborhoods, ‘builders are still bringing too much product into a market that may not need it currently.’”

From Reuters. “Fremont General Corp said on Friday that U.S. banking regulators declared its banking unit undercapitalized and has required the company to raise money or find a buyer in two months.”

“Fremont, which earlier this month received default notices related to $3.15 billion of subprime mortgages and said its survival could be threatened if it were sued, said that on Wednesday the company received a directive from the U.S. Federal Deposit Insurance Corp requiring it to take corrective action by May 26.”

“Fremont had been one of the 10 largest U.S. subprime mortgage lenders until regulators, including the FDIC, ordered it to stop risky lending last March.”

“The Oregonian. “A newly surfaced memo from banking giant JPMorgan Chase provides a rare glimpse into the mentality that fueled the mortgage crisis. The memo’s title says it all: ‘Zippy Cheats & Tricks.’”

“It is a primer on how to get risky mortgage loans approved by Zippy, Chase’s in-house automated loan underwriting system. The secret to approval? Inflate the borrowers’ income or otherwise falsify their loan application.”

“Even if the memo was penned by a single employee, it illustrates an attitude prevalent in certain corners of the mortgage industry during the boom years. Some local mortgage brokers view the memo as vindication. Brokers have argued they’ve been unfairly blamed for the lax lending standards that led to a wave of defaults. The large national lenders drove the weakening standards, they argue.”

“The Chase memo is ‘a perfect example of one of the big five banks out and out telling mortgage brokers to commit fraud,’ said Todd Williams, a broker in Portland. ‘And this has been going on for years.’”

From Cox News. “The home foreclosure rate will rise for at least another year and residential real estate prices won’t improve until 2010, said Frank Nothaft, chief economist for Freddie Mac.”

“‘We’re likely to have worse news’ on foreclosures throughout 2008, Nothaft said Thursday in a speech. As a result, homeowners will see ‘huge increases in the average amount of time it takes to sell a house.’”

“With so many properties sitting on the market, families that want to move before 2010 will find that ‘it’s a lot harder to sell a home,’ he said. ‘It’ll take some time to wear down this inventory.’”

From MarketWatch. “Returning to lecterns around the country after the self-imposed silence before and after rate policy meetings, one Fed official said hopes of a short and shallow downturn were probably misguided. Another said that the Fed’s hands-off approach to asset bubbles not might be such a good idea.”

“Atlanta Fed president Dennis Lockhart said that his previous forecast of a turnaround by mid-year was probably too optimistic. ‘The recovery in growth I had expected in the second half of this year may be delayed,’ he said.”

“Home prices most likely wouldn’t bottom out until then and ‘preconditions’ of stability in financial markets were likely to be absent until the fourth quarter as well.”

“Minneapolis Fed president Gary Stern called Thursday for a reexamination of the view that it was impossible for a central bank to uncover an asset bubble before it burst.”

“That viewpoint has been dominant at the Fed over the last two decades. In basic terms, the theory was that any central bank attempt to pop a bubble before it got too big might do more harm than good.”

“Stern said he was reviewing this long-standing belief in wake of the fallout from the plunge in housing prices and the earlier collapse in technology stocks. ‘I suspect there may be practical, albeit far from infallible, ways to identify excesses in asset prices,’ Stern said.”

“‘It is not-clear, however, that such policies would necessarily pass a cost-benefit test, for actions to limit or reduce asset prices quite likely would have implications for economywide growth and employment,’ he said. ‘But then, so, of course, do asset-price collapse,’ he noted.”

“Stern, the longest-serving (Fed) policy maker, said in a speech yesterday that it’s possible ‘to build support’ for practices ‘designed to prevent excesses.’”

“For Fed policy makers, ‘the consequences of their permissiveness have become so disastrous that they simply can’t keep singing the same old tune in public,’ said Tom Schlesinger, executive director at the Financial Markets Center.”

“Stern’s comments show how the credit freeze has forced officials to scrutinize long-held philosophies about the Fed’s role in markets, and even ask how their current policies may undercut those views.”

“‘As a risk manager, the Fed needs to take account of both directions, not just dealing with the aftermath,’ said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. ‘We have had two asset-prices bubbles in the last 10 years that have had big implications for the Fed’s desire for a more stable macroeconomy.’”

“For two decades, the ruling philosophy has been former Chairman Alan Greenspan’s. ‘I have always said if we could defuse a nascent asset bubble, I would be all for it,’ Greenspan, 82, said in an e- mailed response to a question yesterday. ‘The reason I am against is that in my experience it cannot be done. I know of no occasion when such actions have been successful.’”

“The Federal Reserve must exercise its supervisory authority over banks in order to gain access to confidential financial information that will enable it to make sound decisions, a top central bank official said.”

“Boston Fed President Eric Rosengren said in prepared remarks on Friday that public earnings statements often do not offer enough of a basis for prudent policy.”

“‘While U.S. banks report detailed information on their balance sheets and their income statements, these reports do not provide sufficient information to allow central banks to really discern how banks are responding to problems,’ Rosengren said in remarks for delivery to the Bank of Korea and Bank of International Settlements Seminar.”

“Rosengren said the turbulence was difficult to foresee because bank models focused solely on their exposure to riskier assets like subprime mortgages, ignoring the possible knock-on effects on other sectors.”

“‘What these stress tests crucially failed to capture was the effect of house price declines on the large holdings of highly rated securities that global banks held — the products of mortgage securitization activities, with their payment streams ultimately tied to the performance of subprime loans,’ he said.”

“The belief that housing prices would never fall on a national basis, which permeated even the Fed itself, was partly to blame for this underestimation of risk, Rosengren said.”

The Rio Rancho Observer reports from New Mexico. “According to realtor Cari Barlow with Sunland Realty in Rio Rancho, the housing market is returning to what it was before the big upward rise in prices Rio Rancho experienced several years ago. ‘For those two years it was a seller’s market,’ Barlow said. ‘But, it is back to being what it had always been: a buyer’s market.’”

“Sunland Realty is encouraging house sellers to consider leasing their property until they find the right candidate, who wants to buy. ‘Sellers can’t afford to keep them on the market,’ Barlow said. ‘Renters can lease until they sell.’”

“Residential land has mostly been divided into small lots, which is how developers wanted it from the beginning. ‘Developers bought it and sold the land as postage-size lots,’ explains Scotty Scott, working for the same real estate office. ‘Carpetbaggers drove the market up. And, now, they are driving the market down.’”

“Scott says 100,000 acres have already been sold there, but there is between 65,000 and 75,000 acres still available for sale at Rio Rancho Estates. Upper-end lots can go as high as $125,000 per half-acre, while if you go outside the Rio Rancho city limits, land can run as low as $3,000 per acre.”

“Molly Kraft from Pulte Homes thinks it is a great time for the market, and that buyers sitting on the fence waiting for changes either way should go out and buy.”

“‘It will not get any worse,’ Kraft says, ‘or any better for the buyer.’”

“Karen Gauze with Desert West Properties, explains that because we don’t having the housing boom we had 18 or 24 months ago, there is no reason to consider that Rio Rancho is still not a good market. ‘Investors are looking for long-time investments now, rather than a fast flip,’ Gauze said.”

The Las Cruces Sun News from New Mexico. “The value of property in Doña Ana County has nearly doubled since the 2000 tax year ‘The main reason why our tax base has been increasing so much has been due to new construction added to the tax base,’ said Doña Ana County Assessor Gary Pérez. ‘The base also changes and increases because of an increase in market value for existing homes.’”

“A decrease in residential construction is expected to be felt this year, however, and will be reflected in 2009’s taxable value. In 2007…nearly 600 fewer building permits were issued by the city of Las Cruces than in 2006.”

“‘2006 was a banner year,’ Pérez said. ‘I think there’s going to be a little bit less of an increase this year.’”

“But Pérez said he does not expect the value of property to actually decline. ‘The Las Cruces area will still increase in value,’ he said. ‘It may not be as high as other years, but it’ll be higher than the national average. We’re still booming, we’re still a desirable area.’”

The Arizona Republic. “Charles DeWitt hadn’t planned to stop last week at the abandoned house on South Williams Street. DeWitt had other work in mind, a list of complaints about shabby properties in the area he patrols as a Mesa code compliance supervisor. But en route, the small ranch house caught his eye. Weeds were almost hip-high and a side gate stood ajar.”

“DeWitt called City Hall to check on the property, and in short order his suspicions were confirmed. Another foreclosure had hit home in Mesa. The people living here had just walked away, leaving a mess, an unpaid $400 city electric bill and an eyesore for neighbors struggling to maintain their own property values.”

“‘It’s actually been an issue that we’ve been tracking over the last 18 months,’ said said Mike Renshaw, who runs the code compliance team. Since prices peaked, the collapse of the subprime mortgage market and falling real estate values have plunged millions of homeowners and real estate investors into financial hot water.”

“A Web site lists more than 3,600 distressed properties, either bank-owned or heading for auction in Mesa. The problem is citywide, Renshaw said.”

“‘I think, unfortunately, it runs from east to west,’ he said. ‘It’s obviously gotten much worse over the past few months.’”

“DeWitt pointed out several apartment buildings along Elton Avenue that are either in foreclosure or on the brink. One eight-unit building has one occupied apartment. Investors bought many such properties during the 2005 boom, DeWitt said, but now they can’t collect enough rent to cover mortgage payments or repairs.”

“‘The crime rate in these neighborhoods is just astronomical,’ DeWitt said.”

“Single-family investment homes have been hit, too. As an example, DeWitt pointed to an empty house on South Forest Street, purchased by an out-of-state investor in 2005. Trashed by previous tenants, the house needs repairs the owner can’t afford for the amount of rent she can charge.”

The Arizona Daily Star. “A developer is planning to use a live auction to sell nine new homes in a Green Valley subdivision. Mark Hughes, owner of Hughes Development, will use that method to sell some of the homes in Las Campanas Village, a retiree-oriented community.”

“Three of the nine homes will be sold ‘absolute’ — that is, no matter how low the winning bids are.”

“The homes previously were listed in the $250,000 range. The developer said he has 27 unsold homes in the subdivision that have been sitting on the market for about nine months.”

“Hughes said he’s taking an experimental approach to ‘kind of see where the market is.’ ‘They just need to be sold,’ he said.”

“Green Valley saw a huge upswing in investor activity about two years ago, rapidly driving up prices, said Steve Smith, president of the Green Valley Association of Realtors. Now, there is ‘just too much on the market,’ he said.”

“Hughes said builders ‘just couldn’t keep up with the demand’ during the boom years. But sometime last year, the market ‘came to a screeching halt’ in Green Valley.”

The Green Valley News & Sun from Arizona. “Hughes says the housing market ’slowed’ in 2006 and ’stopped’ in 2007. ‘I’ve built 12,000 homes over 15 years in the Phoenix Valley and Tucson-area, and this is the first time I’ve had to start auctioning,’ Hughes said.”

“‘Obviously, we’re seeing falling prices in a falling market. We know what these homes are worth, but if the public’s not willing to buy at that price, it doesn’t matter,’ he said.”

The Arizona Capital Times. “Home foreclosures have skyrocketed, gas prices have spiked, unemployment has risen and the stock market has teetered like a drunkard. Sara Wedeman, an economic psychologist, said consumers are feeling frightened by the negative reports about the housing and credit markets, which leads them to be cynical about the likelihood of a quick recovery.”

“‘Fear-mongering of any type tends to cause people to hunker down and not invest and circle the wagons,’ she said. ‘That’s the worst thing for the economy.’”

“Doug Clark has witnessed the psychological impact that a sour economy can have on potential homebuyers. As a real estate broker, he has had many clients balk at buying houses in reaction to news reports about a struggling housing market, opting instead to wait to purchase the property at the best possible price.”

“‘Sometimes, I think it’s a self-fulfilling prophecy,’ said Clark, who is also a Republican state representative from Anthem. ‘If buyers would just buy the house, (the market) would turn around.’”

“Even more frustrating, he said, is that delaying a purchase by a few weeks will lead to minimal saving for the buyer. Stalling for a month or two may result in only a $5,000 savings on a $300,000 house.”

“‘Unless you are a flipper, a house value isn’t going to change that much in two weeks that it’s going to impact you negatively,’ he said.”

“Wedeman said that irrationality is a hallmark of economics, in both good and bad times…even if the clichéd mantra of ‘buy low, sell high,’ is the logical course of action. That irrationality is on full display in the scenario Clark mentioned, she said.”

“‘The risk that they might lose $5,000 is nothing compared to the fact that they will buy a house at a great price that will rise in value,’ Wedeman said. ‘It’s that refusal to take a risk that makes this cycle perpetuate itself.’”

“Clark said he expected the housing slump to be over by now. ‘Instead of coming out of it, we’re actually worse than we were a year ago,’ he said, estimating client traffic at his firm is down about 75 percent from last March.”

“Elliott Pollack, a Scottsdale-based economist, said the credit crunch means about 25 percent of potential homebuyers can’t qualify for loans now. The oversupply is so acute that it could take more than three years for the excess homes to be absorbed and the market to return to its equilibrium, Pollack said.”

“The supply of homes listed for sale in the Phoenix area will take up to 18 months to dry up. Tucson has enough homes for sale to keep buyers busy for the next 12 months.”

“‘The only thing the government could do (to fix it) is go out and buy 1.7 million homes and blow them up to restore supply and demand,’ Pollack said. ‘In the absence of that, we simply have to live through it.’”

“Arizona had the fourth-highest foreclosure rate in the nation in February, according to RealtyTrac. The 9,540 foreclosures for the month were a 210-percent jump from the prior year.”

“The housing market is the cornerstone for what University of Arizona economist Marshall Vest calls the ‘growth industry’ that employs 20 percent of the state’s workforce: construction, mortgage lending, title companies, home inspectors, architects, landscapers and the like.”

“‘They’re all downsizing, consolidating at this point,’ he said.”

“Vest said the same psychology that is now creating a negative pull on the market is also the same thing that will help the economy recover. After all, he said, part of the reason for the situation we’re in now was the market-induced frenzy of home buying.”

“‘At a point, the psychology will turn and people will decide they can afford a house now,’ he said. ‘You’ll find it’s like a light switch. After all, Arizona’s the state where growth is good and too much is just right.’?”

The Review Journal from Nevada. “Median existing-home prices have fallen to $237,000, below the $240,000 threshold that local housing analysts predicted would be the low point. Las Vegas made national headlines again this week with a 19 percent decline in the January Standard & Poor’s/Case-Shiller index, tied with Miami for the biggest drop among 20 cities measured in the index.”

“New-home sales in Las Vegas are down 49 percent for the first two months of the year, existing-home sales are off 37 percent and home building permits have plunged 70 percent, housing analyst Dennis Smith said at Las Vegas Housing Outlook 2008.”

“‘Obviously we’ve got tight credit and qualifying requirements,’ Smith said. ‘Those are factors, too. I could go on and on. I think we’re close to the bottom, but it’s going to be an extended bottom.’”

“‘It almost couldn’t get any worse. I hate to say that,’ Bernard Markstein, director of forecasting and analysis for the National Home Builders Association, said at forum. ‘The tough times are not over, but we may be reaching the bottom. Of course, affordability remains an issue, but prices are starting to adjust.’”

“‘What’s going to get us out of this? Demand needs to stabilize and improve before there is a recovery,’ he said. ‘Again, we’re talking about a modest rebound. We don’t want to get back to 2004.’”

From KVBC.com in Nevada. “Nearly half of all the resale homes being sold in southern Nevada are foreclosures, but analysts believe the worst of the housing slump may be over.”

“‘Now it’s not going to happen overnight, we’re going to be at the bottom for a while, but at least it’s stopped going down,’ Home Builders Research President, Dennis Smith, said.”

“‘I can’t tell you when the prices are going to stop going down, but right now they’re as low as they’re going to get,’ Smith said.”

“Las Vegas-based SalesTraq reported a median existing home price of $250,000 in February, down 13.2 percent from the same month a year ago. That followed a 14.1 percent decline in January.”

“SalesTraq President Larry Murphy said he was doing research on the housing market in Pahrump, about 50 miles southwest of Las Vegas, and found stories from 2004 about how land prices had doubled and developers were selling more lots in three months than they had in the previous 10 years.”

“‘It gave me pause to think here we are four years later and it’s hard to believe the attitude and mind-set of everybody back then, that it would last forever and you’d better get on the bandwagon,’ Murphy said. ‘Four years later it’s doom and gloom and we feel like this is going to last forever. We’re just in these real estate cycles. What’s it going to be like four years from now?’”

The Associated Press on Nevada. “In Las Vegas alone, nearly half the homes currently on the market have seen their prices reduced at least once, according to an analysis by ZipRealty.”

“Greg and Barbara Abbott have already cut the price twice on the two-bedroom condominium they are trying to sell on the Las Vegas strip. They’re asking $669,900 now — and an offer in the $650,000 range means they’ll lose money.”

“Abbott thinks hesitant buyers don’t realize how reasonable the current price is. ‘They’re not really being realistic about what the place is worth,’ he said.”

“His broker, Bruce Hiatt said there was no shortage of interested buyers — but none had decided to buy. ‘They’re all waiting for the magic bottom,’ he said.”

“Abbott, the condo owner in Las Vegas, is asking a monthly rent of $2,300, down from the $3,500 he had originally wanted. ‘It’s empty at the moment,’ Abbott said. ‘We’d intended to rent it, but the timing, of course, was bad.’”

Due to server downtime last weekend, this thread has been forwarded so it can be used this weekend.
And send your housing bubble pics to:

hbbphotos@gmail.com

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