The Housing Bubble

The North County Times reports from California. “Often heralded as a fortress of strength in a weak housing market, upper-end home prices in North County’s posh neighborhoods have started to show some cracks. In Rancho Santa Fe, mostly composed of custom homes with price tags above $2 million, it would take about 20 months to sell off all the active listings, based on three-month averages of listings and sales. Many homes in Del Mar and Carlsbad have sold for 20 percent under the original asking price, with several sellers willing to let their homes go for $1 million or more below the asking price.”

“For example, one Del Mar home sold for $2.5 million after originally posting a $4.7 million list price. ‘I think people are just getting scared,’ said Diana Williams, a real estate agent who specializes in Del Mar and Rancho Santa Fe. ‘They will set the house at a lower price so they can be sure they’re going to get rid of it.’”

“Less than a year after completing OceanLofts, a luxury, live-work complex a few blocks from the beach, the project’s developer has abandoned plans to sell the units and is recasting them as rentals.”

“‘Their sales have been really weak,’ said Kathy Baker, the city’s redevelopment manager. Baker said a few other developers, with completed or nearly completed projects, have talked with the city about doing the same.”

“‘I wouldn’t be a bit surprised if a few more come forward,’ Baker said.”

“Hamid Nikkho, who is handling the OceanLofts project for the Redwood City-based Amidi Group, denied that his company’s strategy shift was prompted by slow sales. ‘The market slowed down, but that wasn’t the purpose of changing the plan,’ he said, noting that Amidi is trying the same approach with TenTen Wilshire, a 227-unit complex in Los Angeles.”

“Not everyone knows what to think about the switch. ‘We’re not sure how this is going to affect our investment,’ said Stacey Driscoll, who purchased a loft last year.”

The Union Tribune. “Analysts say banks’ eagerness to get houses off their books even if they have to slash prices could continue to be a drag on the market for some time. ‘Remember, all of this foreclosure pain we’ve seen so far has come amid an economic backdrop that, until recently, wasn’t that bad outside of real estate,’ DataQuick analyst Andrew LePage said.”

“It’s no mystery why foreclosed properties generally sell for less than nonforeclosures, said Peter Dennehy, senior VP of Sullivan Group Real Estate Advisors in San Diego.”

“‘In general, the banks are not like homeowners hoping to make a profit,’ Dennehy said. ‘They have no interest in owning real estate, especially when they’re owning more and more of it. They’re the extreme form of a motivated seller.’”

“Agent Linda Ring has sold a number of houses in eastern Chula Vista, where many first-time buyers had stretched beyond their means to buy. The typical foreclosure house in that area is two stories with three to four bedrooms and two to three baths on a 3,000-square-foot lot. Many have upgraded kitchens, Ring said.”

“‘The banks don’t want to attract a fire sale, so they price them the same as the neighbor across the street,’ she said. ‘But once it hits the 120-day mark, the price becomes pretty flexible.’”

The LA Times. “LTV Properties Inc., the Pasadena-based real estate company…runs Repo Home Tours in the Los Angeles area. For buyers, it’s a golden chance in an imploding period. Last month, 38% of homes sold in Southern California were foreclosures, compared with 8% in March 2007, according to DataQuick.”

“The banks are so eager to unload repossessed houses that they’re discounting them at 40% to 60% below market value and selling them, generally speaking, in ‘as is’ condition.”

“David Levario, a 37-year-old construction worker from Montebello, found the tour valuable. ‘I like what they’re offering,’ he said of LTV’s listings. ‘I’m a hard-working man looking for a place for my family. I’m renting and tired of making other people money.’”

The Press Democrat. “In every corner of Sonoma County, a record number of families are losing their homes to foreclosure. But a handful of neighborhoods are being hit far, far worse than others. Three of every five foreclosures in the first quarter of 2008 occurred in Santa Rosa’s west side, Rohnert Park and Windsor, based on an analysis of records collected by DataQuick.”

“‘That’s your vulnerable place. That was entry level. The people that got in at the very end probably shouldn’t have been buying at all. They were pushing it with their loans,’ said Belinda Andrews, an agent working with dozens of homeowners who could lose their houses.”

“‘I sit there and look at data all day long, but I didn’t really notice that it was really this bad until the end of last year. It just seemed certain areas just went over the cliff,’ said Pete Deatherage of Pacific Appraisals in Rohnert Park. ‘Every once in a while I think it’s pulling back, but a week later the data shows something different.’”

“As the price of the typical home in Sonoma County peaked at $619,000 in August 2005…the typical southwest Santa Rosa house sold for $530,000, and in northwest Santa Rosa it cost $516,000. The median price in Cotati-Rohnert Park was $560,000. In Windsor, it was $610,000.”

“‘Those are the blue collar areas. They were good for people with no or low down payments, and the loans were easier to get,’ said Hans Bruhner, managing partner for a Forestville mortgage brokerage.”

“In Bellevue Ranch, a lender is trying to sell a home it foreclosed upon in December. On the same block, two owners are trying to avoid foreclosure by selling their homes for less than they owe.”

“And down the street, the owners of a fourth home must price their house to compete with the three distressed properties. They are asking $347,000, but owe $329,000 on the residence in a neighborhood where similar homes sold for about $540,000 three years ago.”

“Andrews has about 60 listings with homeowners who are behind on payments and attempting short sales. Each one bought two to three years ago with adjustable loans and now can’t afford monthly payments that jumped higher. The owners aren’t able to refinance because they owe more than the homes are currently worth.”

“‘They all have variable loans that adjusted in two to three years. They were all time bombs,’ she said.”

The San Francisco Chronicle. “As the foreclosure crisis continues, Saturday was a day of desperation, speculation and a whole lot of politicians. Virginia Quintero and her 59-year-old mother came to San Francisco’s Bayview neighborhood Saturday, hoping to save their Pacifica home from the clutches of the bank.”

“Quintero said she, her husband, five children, mother and 86-year-old grandmother all live together and share the cost of the mortgage, which has more than doubled since they bought the home four years ago. Her mother refinanced their house so she could buy out a second party and was seduced by a negative-amortization loan.”

“‘Now it’s at more than $5,000 a month and we just can’t afford that,’ Quintero said.”

“And for those who can’t hold on to their homes, there are hundreds waiting in the wings to buy them - if the price is right. The Cow Palace in Daly City was jammed with real estate speculators looking for good deals. More than 200 repossessed homes were being auctioned off.”

“Real estate agent Annette Vella-Melendez and her investor boyfriend, Abdul Karimian, were planning to watch, not bid. ‘We’ve been told that you can get really caught up in the moment,’ she said. ‘You have to really do your research, or you could wind up paying over market value.’”

“Karimian and his son, Derrick, caught the fever. Within 10 minutes the men had purchased two Vallejo homes: a four bedroom, two-bath for $147,500 and a three-bedroom, two-bath for $150,000.

“‘The deals,’ Vella-Melendez said, ‘were too good to pass up.’”

The Contra Costa Times. “More than 100,000 homeowners in Contra Costa and Alameda counties may see their property taxes fall this year as home values continue heading south.”

“‘Our review won’t begin until May,’ Alameda County Assessor Ron Thomsen said, ‘but we’re probably looking at $2 billion in assessed values being removed from the assessment rolls.’”

“While the numbers are only estimates, Contra Costa Assessor Gus Kramer said the reductions in his county will probably range from 2 percent to 20 percent. The value of many homes could fall to 2002 and 2003 levels. And in East Contra Costa, some homes may return to 1998 levels.”

“‘We’re seeing sales that indicate they should be rolled back to that level,’ Kramer said. ‘More than 50 percent of properties on sale on the open market, in Antioch particularly, are bank-owned. The banks in East County are the market-makers of real estate.’”

“The prospect of a lower property tax bill is little consolation to Ted Diaz, who purchased a 3,000-square-foot home in Pinole last year and is feeling the pressure.”

“Diaz purchased the three-bedroom, 31/2-bath home in the high-$500,000 range, he said. Today, a house identical to his in the same subdivision is selling for $499,000.”

“‘I happen to be one of those who got a bad loan,’ said Diaz, who has an adjustable-rate mortgage. ‘It’s going to cap in five months and go up about $200. I’m close to retirement age and thought this would be a good investment.’”

“‘Everything is coming down on me right now,’ he said. ‘I’m just trying to get by from day to day, and hope I make the right decisions.’”

From ABC 30. “A valley city that experienced a major housing boom is now the state leader in declining home values. The median price of a home in Los Banos dropped from $360,000 last March to just $196,000 last month.”

“Chris and Esther Ortiz’s Los Banos home has been on the market for seven months. They bought the home for $420, 000 three years ago. Now, they’re hoping to get $300,000, but even they acknowledge that may be wishful thinking.”

“‘We purchased it probably at its peak. We were on a waiting list. You had to wait for it to be available. It was pretty high,’ said Chris Ortiz.”

“‘For Sale’ signs seem to be on every street in Los Banos. Most homes are vacant, and those that do sell are going for 45% less than they did last year according to the California Association of Realtors.”

“‘It’s sad. I don’t plan on going anywhere for a while but I definitely would like to see my house go up in value again. We’ve done a lot of improvements and unfortunately for now, it doesn’t show for it,’ said homeowner Erma Catalan.”

“Danny Fialho is buying this 1900 square foot home. It’s still in escrow, but he already has renters waiting. ‘This house is selling today for half of what it sold for three years ago. So that’s why it’s an opportune time to get into the market,’ said Fialho.”

“While the rental market may be flourishing, the Ortiz’s are feeling the effects of bad timing. They’re just ready to move on. ‘It’s taken a toll on us financially. It’s not going to make it any better to hang out for two to three years to see what’s going to happen,’ said Ester Ortiz.”

The Des Moines Register reports from Iowa. “Iowa’s largest home builder, Regency Cos. of Des Moines, has laid off the entire staff of its home building business and left behind 300 homes that lenders and buyers will now have to sell or finish. Jamie Myers, president of Regency, said it became impossible for the company to continue after a lending agreement with Wells Fargo & Co. ended in December without a renewal. ‘We don’t have the cash flow to pay them,’ he said of employees.”

“Regency now has about 300 homes in its inventory. Some are finished and awaiting sale, while others are still under construction. The suddenness of the decision was driven home by a draft of a press release that said home buyers and contractors are likely to have ‘more questions than there are answers at this point.’”

“Myers said lenders, who typically financed a portion of the homes the company was building, ‘are not wanting to take any more risk.’ Without their support, the company couldn’t continue to build.”

The Beacon News from Illinois. “As of March 2008, Aurora had an average 7.75-month supply of homes on the market throughout the city’s four-county area. In comparison, the supply of inventory is 10.57 months in Bolingbrook, 10.27 months in Plainfield and 8.63 months in Wheaton.”

“The average supply for the Chicagoland area’s 190 communities is about 11 months as of March, according to Chip Wagner of Headrick-Wagner Consulting Group.”

“Wagner worries that smaller communities like Oswego and Yorkville will struggle with sales of new home construction as those towns welcomed growth spurts. Wagner, who appraises homes throughout Chicagoland, said he is noticing more homeowners in Oswego dropping prices to compete with new construction from builders.”

“He worked with a client that was selling a home for $325,000, the lowest price in the subdivision. The builder of an adjacent subdivision has been offering homes valued at $425,000, but offered $150,000 in options.”

“And because the Fox Valley area is still a highly transient area, Wagner says competition will continue among resale homes and new construction. ‘Some builders are reducing homes by 50 percent. It’s a tough scenario,’ he said.”

“Billy Atchison of Yorkville, who has had his house on the market for a month, said it’s a price range that is attracting many buyers. His four-bedroom home at $258,000 has drawn serious interest from about three couples, he said.”

“‘I would be worried if I had a $500,000 home because those houses right now are a whole lot harder to sell than my price range,’ Atchison said.”

The Courier News from Illinois. “In the Fox Valley is that prices are pretty much holding their own, even though it is taking much longer to sell them. In Elgin, for example, average home sales prices have inched up 1.31 percent over the last two years, but it is taking 13 months, on average, to sell your home — almost three times as long as it took in 2006.”

“Sales prices in Kane County over the past 12 months have dropped a little more than 2 percent, said Peter Swaufield, associate co-executive of the Realtor Association of the Fox Valley. But a majority of that is due to ‘people who have had their house on the market for a while and had to drop their selling price.’”

“How long a home stays on the market often depends on its perceived value, Swaufield said. ‘Two years is not abnormal for a million-dollar home,’ he said.”

“He acknowledged that it is taking longer to sell a home these days compared to the hot real estate market prior to 2006. ‘At the peak of the housing boom, the average market time was 40 days. Now, 120 days is a typical timeline,’ depending on price point, Swaufield said.”

“Because there are so many homes on the market, those that are not in their prime…often are passed up for ‘that perfect doll house. And there are a lot more perfect doll houses these days,’ he said.”

“Realtor Judi Falbisaner of Re/Max of Northern Illinois, a 25-year veteran of the industry, describes the Elgin area market as the worst she’s ever seen.”

“Falbisaner said sellers are no longer in the driver’s seat. ‘I don’t think the market is going to change at all until sellers are willing to accept the fact that their homes are (not going to sell) at their perceived value,’ she said. ‘Right now, they want top dollar for their house — and buyers are not paying it.’”

“Asked is she saw a turnaround anytime soon, Falbisaner said, ‘No. How do you like that for optimism?’”

“Swaufield agrees — to a point. ‘Real estate is a cyclical industry. It will always change — and not always up,’ he said.”

The Toledo Blade from Ohio. “Opinions on what downtown Toledo needs have been as bountiful through the years as vacant storefronts are today. While the number of people living downtown has grown in the past decade, the real estate market has not taken off in the ways that some urban pioneers anticipated.”

“Downtown restaurants and shops are closing, condominiums remain unsold, and plans have slowed for new housing units. In the condo market, Bartley Lofts at 745 Washington St., has sold only 31 of its 52 units.”

“Downtown investors once held hopes for the 2002 opening of Fifth Third Field, home of the Triple-A Mud Hens. There was talk of how the new ballpark would help lure a ‘critical mass’ of people whose dollars would then support a host of new amenities such as cafes and restaurants. Those new businesses, the theory goes, in turn would attract more people to set up residence downtown.”

“Luke Welch, 22, said that three years ago he and a roommate moved to a market-rate apartment at New Cheney Flats apartments in the UpTown area. A year later, they moved out.”

“We said, ‘Downtown - that sounds exciting. There should be coffee shops, and there are art galleries, and we should be right where the action is,’ Mr. Welch recalled. ‘And as soon as we moved in, we realized there pretty much was no downtown action. We didn’t have any problems or break-ins, but it was just super boring; there was just more to do in the suburbs.’”

“He added: ‘Once we moved downtown, we actually started driving more.’”

“For others, downtown offers an amenity seldom found in the suburbs: DUI-free nightlife. ‘It’s like, ‘Oh man, I can just walk to the bar,’ said Ryan Agee, property manager for Museum Place apartments.”

The Detroit News from Michigan. “Carl Grewe has tried to sell his Richmond childhood home for almost two years. Despite monthly open houses, the 1900s-era home originally listed at $279,000 is now priced at $149,000, and he’s still getting nary a nibble.”

“‘The market is just not there,’ said Grewe. ‘We’re going to stay where we’re at. It’s a steal at that price.’”

“Real estate agents hope to sell Grewe’s and nearly 2,100 other Metro Detroit homes by hosting an open house Sunday being billed as the biggest event of its kind nationwide. Organizers of the Big Open House expect hundreds of prospective home buyers to tour homes and jumpstart the regional housing market, devastated by the foreclosure crisis.”

“Lori Polzin put up her recently renovated 744-square-foot ranch in Rochester Hills for sale in February after she and her husband found a new home in Armada set to close next week. They’ve already dropped the asking price $10,000 to $119,000.”

“‘There’s so many foreclosed homes right now. We’re trying to compete,’ she said.”

The Appleton Post Crescent from Wisconsin. “Anyone seeking local proof of the national foreclosure crisis can find it papering the lobby at the Outagamie County Justice Center. The public notices of sheriff’s foreclosure sales posted there numbered 76 on Friday. That’s three more than at the start of the week.”

“The trio of glass-enclosed bulletin boards that have been put up expressly for foreclosure postings could not contain them all, so 22 packets of legal paperwork were taped to the wall.”

“If anyone could have foreseen the mortgage meltdown, it might have been Jeff Daniel of Appleton. Daniel, a homebuyer and rehabilitator since 1971, faces four separate foreclosure actions — one involving his heart-of-the-city home and another that claimed a duplex he purchased in 1973.”

“‘I debt-serviced it until there was nothing left,’ he said of the duplex. ‘Now, they have my money and the property.’”

“Each of the foreclosures grew from adjustable-rate mortgages (ARMs) he obtained on separate properties between 2003 and 2006. Last spring, the interest rates on each of the loans reset, causing the minimum monthly payments to soar.”

“The monthly payments on his Appleton residence rose from $601 to $849. The mortgage was sold from one lender to another, then to a third company along the way. ‘The people who did the mortgage filed for bankruptcy,’ Daniel said.”

“More than half of the loan originators in Wisconsin left the business during 2007, their number dropping from about 15,000 to fewer than 7,000, said Caty Patton, manager of the Wisconsin Association of Mortgage Brokers.”

“Daniel referred to a real estate trade group’s estimate that about 1,100 Fox Valley homes are in some state of foreclosure right now. ‘These are people who had good credit and they took pride in that, and they all got hooked,’ he said.”

“Fox Valley Home Buyers owner Jim Couch, who began buying, fixing and reselling repossessed homes about a decade ago, said he has noticed few other third-party bidders at the sheriff’s sales in Outagamie County since the year began.”

“‘A lot of the other people went broke,’ Couch said. ‘Or else they got out of the business when the (real estate) market went bad.’”

“That happened more than a year ago, Couch said, admitting he didn’t recognize the signs at first. Couch noted both of one recent day’s opening bids were well below their respective bank debts — about $30,000 less in one case. Still, nobody was willing to buy them.”

“Andy Lewis, a UW-Extension analyst, said his office began studying state court records of foreclosure cases in Wisconsin last year, after learning no other state agency was doing so. Lewis said the four-county foreclosure case filings…total of 473 was about double the volume five years earlier and about six times that of the same period a decade ago.”

“Lewis said the above-state- average Fox Cities foreclosure rates probably reflect on its above-average rate of growth during the building boom.”

“‘When you were in markets like the Fox Cities or Dane County where the property values were going up 10 or 15 percent a year, the prices of those mortgages probably didn’t seem out of line,’ he said.”

“The mortgage attached to Daniel’s residence was $59,000 at its start. The debt grew to more than $100,000 while he made the scheduled monthly payments, he said. ‘Now I’m 58, and I’m having to start all over again,’ he said, adding that he doesn’t know if he will lose his present home or not.”

“For Daniel, the cost of the mortgage he took out on his residence wasn’t realized until it was already too late. A handmade for-sale sign sprouts from his home’s lawn, advertising his willingness to cut his losses. ‘No money down,’ the sign said.”

What do you see in your housing market this weekend? Borrowers underwater? “Local real estate professionals say the Katy market continues to remain active while many parts of the country are battling with dropping home values and buyers who cannot qualify for home loans. In Area 25, there is an 11 month inventory. One of the issues facing those trying to sell in Area 25 is new construction, broker Taylor Stout said.”

“Homeowners who purchased new construction homes with interest only or no-money-down loans and are now trying to sell, are having a difficult time breaking even let alone walking away with a profit. ‘We’re seeing homes that are not priced to sell, but priced to alleviate the loss. Some sellers are bringing $10,000 to the table just to get out,’ he said.”

Lower prices? “Median home prices fell 7.1 percent in Louisville last month from a year earlier to $130,000, according to the Greater Louisville Association of Realtors, whose members sold 19.5 percent fewer homes.”

“Agent Scott Panella said he’s advising sellers to wait until early 2009 if they want meaningful price gains compared to a few years ago. ‘If it’s overpriced, in bad condition, it’s going to sit on the market,’ Panella said. ‘Even if it’s in bad condition and priced accordingly, it will sit.’”

“‘Foreclosures are driving all the prices down and glutting the market,’ said Frank Poschinger, who recently started a company that buys homes at risk of foreclosure and rents them to the former owners until they’re able to purchase again. ‘It’s affecting every area of the city.’”

Urban pioneering? “One of Canada’s largest real estate developers believes it has struck gold in the nation’s most wretched neighbourhood, with plans to build a new condominium project for the moneyed — and the daring.”

“Next door to the planned Greenwich condo complex: A ramshackle hotel and rowdy country and western bar. And immediately to the east, a building that provides accommodation to adults suffering from mental illness, addictions, and other health problems.”

“Across the street sits the shambolic, downright scary Funky Winkerbeans pub, and an outdoor strip where stolen goods are frequently sold. Addicts inject drugs in alleyways nearby. And just down the street are more seedy hotels and bars.”

“It’s not a pretty place. But a sustained real estate boom combined with a shortage of available land has made the neighbourhood irresistible to developers. And, it seems, to buyers, who just a few years ago would not have set foot in the area, let alone live there.”

“A handful of other condo projects are already underway. Well-off residents will live separately, high above ground level, where they will enjoy commanding mountain and ocean views.”

“‘This [new] housing won’t be for any of us. It’s a very unjust situation,’ declared Sister Kelliher. ‘Three quarters of the units [in the new complex] should be social housing.’”

“‘Right on!’ yelled another protester, waving a joint.”

“Peter Webb, Concord Pacific’s senior VP of development, has no doubt that all 154 units inside the Greenwich will sell quickly.”

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