The Housing Bubble

The Times Herald reports from California. “Most homes for sale in Solano County are classified as “distressed,” which likely means a change is coming to the area, real estate experts said Friday. ‘This is the first time in my 20 years in the industry that the distressed properties are driving the market,’ said Beth Brittenbach of Vallejo’s Century 21 Schutjer Realty. ‘They are putting downward pressure on prices and have created what seems like the beginning of an accelerated buyers’ market.’”

“‘As of March 26, there were 3,892 residential properties of all types and price ranges countywide on the market or under contract, Brittenbach said. Of those, 1,319 (34 percent) were listed as foreclosures and 1,056 (27 percent) are listed as short sales.”

“‘Many of the short sales will never go through because the owners won’t qualify, the bank will take so long to respond that the interested buyer will disappear, or the agent has set a list price that is unrealistic and not acceptable to the bank,’ Brittenbach said. ‘But they do give us a hint of what is to come when those homes in distress are foreclosed upon and become (bank-owned).’”

“Trying to sell a non-distressed home will likely be difficult for a while, Brittenbach said.”

“‘Individuals can’t compete with the banks,’ she said. ‘People will have to be willing to deal, to give the buyers credit. They may be surprised to see how much the market has changed. We advise anyone who doesn’t have to sell their home right now, to wait.’”

The Monterey County Herald. “In 2005, when a group of developers started looking to buy the Mahara Townhouse apartment complex in Monterey for a condominium conversion, the condo market was hot. The median price for a condo in Monterey had reached $585,000, and, on average, condo units were selling in just 28 days.”

“By the time the deal closed a year later, those same condos were taking twice as long to sell, while the median price had dropped to $440,000. And more than twice as many condo listings were on the market.”

“After investing $10 million into renovations, the developers are only three-quarters of the way through the work, four months past their initial target date for completion of the project. Overly cautious buyers and the collapse of the subprime lending markets have left nearly half of the newly remodeled condos sitting vacant.”

“So April 13, 41 units at Cypress Park Monterey Bay — including some furnished model units — are going on the auction block. Minimum bids start at $225,000 for a one-bedroom, one-bath 551-square-foot condo; the largest units — two bedrooms, one bath and 920 square feet — have starting bids of $265,000.”

“Previous pricing for those same units ranged from $335,990 to $479,990.”

“Forrest Corral, owner of Cypress Park Monterey Bay, said that letting buyers determine the market value of the properties is a better option than waiting — and hoping — for sales to pick up.”

“Those unsold units are costing money — to the tune of $10,000 a month, said Corral — and infringing on the ability to complete the final phase of renovations.”

“‘The market is in disequilibrium,’ said Ken Stevens, CEO of the company handling the auction. ‘The developer is essentially trusting the market to bid the property up to where they feel is appropriate.’”

“‘We’re basically trying to sell a year’s worth of inventory in a day,’ he said, ’so I think, clearly, the buyers are going to get a good buy.’”

“‘It may bring buyers in that wouldn’t normally buy here and, all of a sudden, everything will change,’ said Bob Chorney of Pacific Home Lending. ‘That’s going to shake things up big-time so far as the market is concerned, because it’s going to establish comparables that are going to shake up all the other appraisals.’”

“Agent Joy Jacobs said she expects to see a ripple effect pushing condo prices down as a result of the auction. ‘The way condos are priced now, you can go down the road to Seaside and get a full house for that price,’ said Jacobs. ‘We need to get prices down.’”

“Craig Anapol, an agent in Carmel, has tried to steer some first-time homebuyers toward condos, but dropping single-family home prices in some communities have made some of those lower-end properties more enticing in buyers’ minds, he said.”

“Last week, 177 single-family homes were on the MLS in Seaside and, of those, about 20 properties had dropped under $300,000. One 650-square-foot house had even dropped to $149,000, he said.”

“‘Those are prices that are cheaper than the condos,’ said Anapol. ‘If all those 41 sell, it will have a domino effect and other condo prices will fall in the county.’”

“The Cypress Park condo auction isn’t the only auction Accelerated Marketing Partners is handling in Monterey County. The company was scheduled to auction off 22 new single-family homes in the Tuscany at Monte Bella development in Salinas on Saturday. Minimum bids on those properties were starting at $295,000, compared to previous asking prices of more than $800,000.”

“Carmel appraiser Alex Hale said the market has changed the way appraisers look at the current market. Rather than disregarding distress sales as irregularities, as they used to do, these days it would be impossible to avoid them when establishing comparable market prices.”

“‘With so many houses on the market, and so many foreclosures, and auctions for foreclosure properties and banks selling foreclosed properties, it’s no longer an extraordinary situation,’ said Hale. ‘It’s the market.’”

“He and many other appraisers are looking back over a shorter time span — three months as opposed to six months or even a year — because it would be too hard to adjust for rapidly changing economic conditions, he said.”

The Whittier Daily News. “Standing at his second-story bedroom window, Gilbert Campos looks out at a lot of dirt. An empty cement swimming pool and unfinished recreation center lie tauntingly in his line of sight. He said he waited 12 years to buy a Rosedale home and finally moved in Sept. 18, and although he does not regret the move, he and many other residents are frustrated.”

“‘I went to Houston on a business trip, and when I came back everyone was gone,’ he said. ‘They promised us (the construction) would be done in February of this year and here we are, still waiting.’”

“Campos, his wife and infant daughter are one of about 60 families that have moved into what will be the 1,250-home Rosedale development in northeast Azusa. But since mid-January, officials said, two of Rosedale’s four builders have stopped construction.” “Officials attributed the halt to a faltering housing market that has plagued the overall economy.”

“‘The economy always comes back, the pendulum always reverses, but the tough part for (the residents) and the developer is that wait,’ said Tom Adams, owner of 21st Century Adams & Barnes in Monrovia. ‘They’re living, to some degree, in a no-man’s land.’”

“Campos said he and many residents are frustrated with the lack of amenities and progress, coupled with high HOA fees. He said nearly all his neighbors have children who have nowhere to play.”

“‘There are supposed to be nine parks,’ he said. ‘We don’t even have one park.’”

“‘It’s affecting everybody in residential construction,’ said Azusa City Manager Fran Delach. ‘Right now a lot of builders are having trouble getting money from their lenders to continue.’”

“‘Prices are down substantially, inventory is up and interest rates are down,’ Adams said. ‘You can buy the same house that a couple of years ago (cost) at least 20 percent more.’”

The Recordnet. “The Central Valley Association of Realtors, a trade group covering Stanislaus County and much of San Joaquin County, was expecting a huge membership loss this year as more and more agents dropped out of the sales market.”

“But instead of an expected drop from 2,900 to 1,700 year to year, the association has seen membership shrivel to about 1,200. Cliff Coler, the group’s interim chief executive officer, said declining membership and revenue have meant a cutback in staff from 13 to four.”

“‘Some of the numbers hit us in the face like a cold bucket of ice water,’ said Karl Enzmann, Realtors group president-elect.”

The Press Enterprise. “Massive jumps in payments on home loans and an economy that’s taking a beating are creating work for auto repossessors, say those who lend money on vehicles.”

“Tom Kontos VP of Adesa Analytical Services, which owns auto auctions in Mira Loma and San Diego. He said repossessions are up about 15 percent from last year.”

“‘In part it’s a thing you’d naturally see because of an economic slowdown,’ Kontos said. ‘But there are some unique aspects to this economic cycle related to subprime financing.’”

“He said some borrowers find themselves without enough money to make payments on both their home and their car. ‘There are cases where people say the lesser of the two evils is (to default on) the car.’”

“‘A lot of the people who are now delinquent have never been delinquent in their life,’ said Gene Shabinaw, senior VP of lending at Arrowhead Credit Union in San Bernardino. ‘And, frankly, they’re afraid to talk about it.’”

“He said the real estate meltdown is also leading to repossessions in other ways, such as borrowers who lose their jobs in related industries.”

“He said while all types of vehicles are being repossessed, the rate of repossession seems to be highest among gas-guzzling pickups and SUVs, some purchased by people employed in construction or other fields.”

The North County Times. “As some real estate agents struggle and mortgage brokers close up shop, one real estate industry is booming: foreclosure advice.”

“The proliferation of foreclosure companies has troubled some housing advocates, who point to government-sponsored agencies that provide the same services free.”

“‘It’s motivated by greed and desperation,’ said Daniel Scott, director of an Oceanside nonprofit that provides assistance to families facing foreclosure. ‘People are desperate for something that sounds like it will help them, and people who are greedy look to benefit from it.’”

“Over the last three months, banks purchased almost 4,000 foreclosed homes in San Diego County, a 250 percent increase from the same time a year earlier, according to a Discovery Bay tracking service. And in February alone, more than 3,000 homes received notices of default, the first step in the foreclosure process.”

“Ernesto Castillo said he could not keep up after the interest rate on his adjustable mortgage jumped and his payments increased by $1,200 a month to $4,700. Castillo decided to let his Florida home fall into foreclosure and move to Chula Vista as a renter.”

“It takes about one month to secure an appointment with Community HousingWorks. Adelina Enriquez, the sole counselor, has file cabinets stuffed with hundreds of folders for the cases she juggles. She said she spends at least an hour simply transcribing information from the 60 voice mails she gets every day.”

“‘It’s very intense. Can you imagine a 60-year-old man crying on the chair in front of you? That’s stressful,’ Enriquez said. ‘In the beginning, I didn’t know what to do.’”

“Enriquez said she counseled 215 families in the first six months she was assigned to the job. Of those, she kept 28 families out of foreclosure by modifying the loan, she said.”

“Castillo now rents in Chula Vista and is working to repair his credit so he can eventually buy another home. He said he owed too much to even consider a loan modification.”

“‘It was an emotional roller coaster. We bought a home, put in a pool and had the American Dream,’ Castillo said. ‘But it’s life. Now, we’re getting our credit fixed.’”

The Herald Tribune reports from Florida. “The crowd filed in to the large white tent behind the Bahia Mar resort for Friday’s real estate auction organized by Sotheby’s and Daniel DeCaro Auctions as a four-piece jazz band played a peppy rendition of ‘I Feel Good.’ Only a handful of the properties would be selling absolute, where any bid would be accepted. The rest carried a non-disclosed reserve, or minimum bid. The auction, which was anticipated to take four to five hours, wound up clocking in at barely two.”

“The first property out of the gate was not a good omen: auctioneer Daniel DeCaro tried opening the bidding for 1850 South Treasure Drive in Miami Beach, a waterfront lot, at $1 million. There was no response.”

“He then tried to get something started at $500,000, but again, no dice. $250,000? Still dead air. $100,000? Silence. At that point, DeCaro threw in the towel and passed the property by.”

“‘Please come see us afterwards,’ he told the crowd.”

“By the time it was over, 67 of the 99 properties on the block had no bids. ‘This was a disaster,’ said Fort Lauderdale broker Paul Merlesena following the auction. ‘They’re basically going to have to give them away now.’”

The Bradenton Herald. “Realtor Don Schroder said some of his clients are floored by the prices currently available on Anna Maria Island.”

“‘If people haven’t been to the island in two or three years, they are finding prices are way, way down,’ he said. ‘The prices on Anna Maria Island are down probably to 2002 or 2003 levels…Even the homes on water are starting to stabilize. I know there is a canal front property on the island that I saw the other day that is under $600,000, which is extraordinary.’”

“With approximately 575 homes and condos on the market on Anna Maria Island, broker Jesse Brisson said wealthy buyers have the opportunity to be more selective.”

“‘In the past, when a buyer would come in the door and say, ‘I am looking for a three-bedroom house on the canal with a 10,000-pound boat lift and a pool,’ it would be hard to find,’ he said. ‘But now, I can say, ‘Here is six.’”

“Real estate broker Marie Franklin said she has seen a lot of changes in the market since she first began selling homes in 1974.”

“‘The condos that people are amazed they can now get for $200,000 to the mid-$200,000, do you realize that in 1973 when those things were built they were going for $8,000 and $11,000?’ Franklin said. ‘People don’t realize it but we are just going back to where we should be. So have we increased in value? Of course we have. It is just that we aren’t the inflated market we saw in 2004 and 2005 where people were going crazy.’”

The News Press. “The narrow slice of east Fort Myers is sandwiched in between Palm Beach Boulevard and the Caloosahatchee, stretching from Royal Palm Park to Riverside Community Center, near downtown. Eclectic is an apt description of U.S. Census tract 3.01’s inhabitants and its homes.”

“Rental housing is plentiful. Some of the empty rental units in the tract belong to Charlie Walters. Walters said he has apartments and single-family homes for rent in 3.01 and that his vacancy rate has skyrocketed over the last year, as the economy has faltered.”

“‘I’ve cut the rents on almost everything I have from $100 to $400 bucks a month and I’ve got more vacancies than I’ve ever had,’ he said.”

“‘Roofers who don’t have anything to do now, they’re on their way to Alabama, Louisiana and Mississippi,’ he said.”

“He has a building with seven, one-bedroom apartments on Veronica Shoemaker Boulevard where three of the units are empty, despite the fact he’s lowered rent to $450 from $600. ‘I’ve had it for about three years and I never had this problem before,’ he said.”

“Bonnie Gaschk and her husband Harry have lived in 3.01 for three years, in the gated-development The River. ‘We moved here from Wisconsin and we think it’s a paradise,’ said Gaschk.”

“She said they considered some of the waterfront high-rises closer to downtown, ‘and for the value and the price, we could get three-to-four-bedrooms and four bathrooms, approximately 2,400-square-feet, with a boat lift on the river for approximately $300,000.’”

“Gaschk said they love life there, but have their home on the market for $289,900, so they can move to a single-family home they own in the Waterway Estates community in North Fort Myers. She said they plan to make their departure a temporary one, by selling the Waterway Estates house to purchase another unit in The River.”

The Daily Herald. “With the nation’s housing market in a slump and the mortgage market in disarray, many home builders are putting up fewer supersize homes and offering smaller floor plans. That seems to be what buyers suddenly want in an era of high prices and tougher financing.”

“In some cases, home builders are making the shift to smaller, less costly homes in existing subdivisions, angering homeowners who bought large homes during an earlier stage of the project’s development.”

“David Raidman moved into his 2,760-square-foot lake-front home in Fort Pierce, Fla., last fall in the first phase of a gated community developed by Lennar Corp.”

“Raidman said he was told that his home would be surrounded by similarly sized and priced homes. But when he heard Lennar was planning to build much smaller homes in his neighborhood, he and other homeowners fought the company’s plans.”

“‘Our biggest concern is what it would do to the value of our homes,’ said Raidman, who doubts he can sell his home today for the $300,000 he paid for it last year. Standing on his back porch, he can look out across the lake and see at least six newer, smaller homes. ‘The garage looks bigger than the house,’ he said.”

The Miami Herald. “Seth Gissen is a process server, a sworn court officer called upon to deliver official notices to homeowners that their lenders have filed foreclosure. As the mortgage meltdown hits a critical mass in South Florida, it seems that his presence in neighborhoods throughout the region is becoming almost as common as that of the mail carrier or meter reader.”

“About a year ago, business from foreclosures started to pick up. In the last two or three months, it has become a deluge. Last month, 7,499 foreclosure actions were filed in Miami-Dade and Broward counties alone.”

“As the workload grows, the Gissen & Zawyer firm must hire. The firm is glad to be in a position to hire. Many recent employees have come from the real-estate industry — agents, mortgage brokers, appraisers and support-staff members driven out of work by the slowdown.”

“‘We have people that were without jobs for six, seven months,’ Sean Zawyer said. ‘They were dying. I feel like a few of them almost cried when we offered them a job. They were so happy.’”

“‘Most of them aren’t surprised,’ Zawyer said. ‘Most of the time, they’ve already been sent letters or been contacted by the banks and I guess they know it’s coming, or know it’s inevitable.’”

“That’s when the firm actually serves a homeowner, which has become increasingly hard to do in recent months. In eight addresses that Gissen visited Thursday night, three tenants were served, but not a single homeowner. A few of the properties seemed vacant.”

“Census figures show that Miami-Dade County had among the highest home vacancy rates of major U.S. metropolitan areas at the end of last year — about 4.4 percent, up from 1.6 percent in 2001. The national average is 2.8 percent. A lot of that is perhaps due to new construction.”

“‘Some of the people are walking away from their houses — they’re upside down,’ Zawyer says. ‘A lot of them were investors.’”

“When he steps into the lobby of Jade, a luxury condo building, Gissen says he is not optimistic about serving Raul Reina, who owes $1 million on a unit. Reina’s listed phone number in New Jersey was disconnected.”

“‘This is about the eighth time we’ve come here,’ Gissen says. ‘The people in this building, they’re never here. Everyone we’ve done here has been an investor.’”

“The concierge knows the routine; he answers no questions. The security guard, Yoel Estrada, also knows the routine. The man who works the 7 a.m. to 3 p.m. shift does, too. He takes Gissen to the 45th floor. Gissen knocks. Nothing. ‘It sounds empty. It sounds hollow,’ Gissen says.”

“Estrada nods. ‘These people think they can live a lavish lifestyle, but they can’t even pay the maintenance fees,’ Estrada says.”

“Gissen glances at the service papers. The party behind the foreclosure: Bear Stearns.”

What do you see in your housing market this weekend? Price cuts? “James Matey, a Cape Coral builder, leans on the granite counter of an empty riverfront house he built for New York real-estate marketer Ted Kurz. Mr. Matey says the 5,139-square-foot house, with five bedrooms, wood-coffered ceilings and river views, was advertised at $4.2 million three years ago. The asking price is now $2.4 million — which covers only the cost of land and construction.”

“‘At this point, we’re just dumping it,’ Mr.Matey says.”

“Mr. Kurz says he’d like to hold on to the house for a few years until the market turns, but that would cost him more than $200,000 in interest, taxes and other expenses — money he doesn’t have now that the market has collapsed. ‘I’ll entertain any offer,’ he says.”

Or foreclosures? “Suffolk and Nassau counties accounted for 33 percent of subprime loans that were made in 2006 in New York State and that are now in foreclosure, according to a report. At the same time, Long Island has 30 percent of all subprime loans scheduled to be reset before October 2009, according to the study of subprime loans given out in 2006.”

“‘When you drove around two or three years ago, on every corner there was a new mortgage broker or a new mortgage banker,’ said Adrian Fassett, chief executive of the Economic Opportunity Council of Suffolk.”

“While Alaskans aren’t seeing the number of failed loans as some places in the Lower 48, plenty of people in the Matanuska-Susitna Borough are feeling the pain of bad home-buying decisions.”

“The number of people seeking foreclosure counseling — mostly linked to subprime loans — at the Anchorage office of the Consumer Credit Counseling Service of Alaska rose sharply in recent months. ‘The Valley is one area in the state where foreclosures are definitely increasing,’ said Wendy Romberg, for the nonprofit credit counseling service.”

Housing fallout? ” A nationwide slump in new home construction has hit one of Ashe County’s largest employers, Leviton Manufacturing Company, and prompted the closing of one of its three local manufacturing plants, according to company officials.”

“‘I think this is going to be a very severe housing downturn that’s going to last well into next year,’ said Lou Lovelace, the company’s general manager of North Carolina operations. ‘We had been clearing out that plant to develop and implement a new wall plate line, and it just became apparent that this is not the time to be making multi-million-dollar investments the way the housing market is right now. So we decided to just indefinitely suspend that project.’”

Legal charges? “Mark Strodtman, a Greeley developer who owns close to 400 acres in Mesa County, was indicted Tuesday on 23 felonies, including racketeering, a Class 2 felony.”

“A Weld County grand jury indicted Strodtman and two others who were involved with him in a mortgage fraud scheme that left many Greeley area families in foreclosure, reduced property values of neighboring homes and defrauded lenders, according to the Weld County District Attorney’s Office.”

Slower sales? “Sales of Central Texas homes dropped for the eighth consecutive month in February, and a bigger slowdown could be ahead. Pending sales plunged 49 percent, the greatest decrease on record, according to the Austin Board of Realtors.”

“‘It’s plateaued,’ said Mark Sprague, Austin partner of Residential Strategies. ‘But all that said, it’s going to be the third best year in new-home starts and probably the third best year in resales. It’s not as good as it was two years ago, but it’s better than it was five years ago.’”

Knife catchers? “During the housing boom, investors flocked to metro Phoenix and climbed onto buses that took them to the Valley’s fringes. Now, the bus tours to those edge suburbs are starting again. But this time, home buyers are looking for foreclosure properties they can flip for a fast profit.”

“Last month, 2,500 homes in metro Phoenix were foreclosed on, the highest monthly tally since the real-estate recession of 1990. One bidder at the auction, Saul Grotstein of Los Angeles, said there was more competition for the properties than he expected.”

“‘We aren’t done buying in Phoenix,’ said Grotstein, who was heading to Florida for another foreclosure auction.”

“‘Last time around, it was the amateurs who believed the infomercials and used all the home equity in their own homes to buy rental properties,’ said Jay Butler, at Arizona State University Polytechnic. ‘Now, many of those houses are in foreclosure and selling to a similar group of investors.’”

“Diane Drain, a Phoenix bankruptcy and foreclosure attorney, said she is working with two to three investors a day who are going to lose homes to foreclosure because lenders won’t negotiate with them.”

“‘If it’s money you would take to Vegas and drop on a table, then invest it in foreclosure properties,’ said Drain. ‘But if it’s your retirement account or home equity, don’t touch it. I am seeing too many people now who are losing everything because they invested in homes they thought they could flip for a profit.’”

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