The Housing Bubble

The Ventura County Star reports from California. “Ventura County consumer bankruptcy filings jumped 122 percent last year as lenders toughened refinancing requirements, area bankruptcy attorneys say. The days of being able to ‘refinance away’ problems, as has been a tradition in California, are over, said Michael Sment, chairman of the Ventura County Bar Association’s Bankruptcy Section.”

“‘It’s a train wreck,’ said Louis J. Esbin, president of the Central District Consumer Bankruptcy Attorneys Association. ‘We’re seeing people who in the past may have been able to refinance their way out of debt, but now many lenders are out of business. Lenders now require proof of income, tax returns. No longer can a person who fogs a mirror get a loan.’”

The Contra Costa Times. “Frustrated with banks that refuse to renegotiate home loans, residents gathered outside the Antioch branches of three national banks Friday afternoon to voice their discontent.”

“CCISCO spokeswoman Oliba Cardona said…her group wants banks to lower mortgages to better reflect the property’s market value, thus allowing homeowners to afford the monthly payments more easily. ‘We want the banks to renegotiate people’s debt so homeowners can keep their homes,’ Cardona said.”

“Juan and Josephine Ramirez moved into their $375,000 house in Antioch three years ago. The initial monthly payment on their adjustable-rate mortgage was $2,700. Now, it’s $3,200. ‘It’s impossible,’ Josephine said. ‘We are trying to maintain the payments on our credit cards.’”

“The couple, who have two young children, said homes in their neighborhood are now selling for $150,000.”

“‘A lot of us are going into foreclosure, or in danger of going into foreclosure,’ said protester Luis Flores, who could no longer keep up with the $4,000 monthly payment on the home he’s lived in for seven years. ‘It came down to paying the bank or buying food.’”

From ABC 7 News. “In a report issued Friday, (a) real estate tracking firm finds average property values in San Jose lost 11.2 percent, San Francisco lost 14.1 percent, Los Angeles lost 19.3 percent and real estate in Sacramento is down 29.8 percent, which is the most in the nation.”

“A group of East Bay homeowners, facing foreclosure, resolutely marched through Antioch, stopping at three banks where they say no one is listening to their desperate plight.”

“Bernice Ramos is six months behind on her mortgage payments, which ballooned up to $5,600 a month on her $500,000 house which has lost half its value. Her husband is working less and the bank has sent letters threatening foreclosure. She’s packing boxes because she thinks they’ll be kicked out next month.”

“‘All of these people are in the same situation. That’s why we’re here together with our church, we decided to start doing something so somebody will listen to us,’ said Ramos.”

The Oakland Tribune. “A couple of years ago, when new lofts and condominiums throughout Oakland’s urban neighborhoods were selling for three quarters of a million dollars, Ken Stevens’ services weren’t needed. Nowadays Stevens, CEO of Accelerated Marketing Partners real estate auction company, is so busy he’ll be running auctions in two counties Sunday — selling condos in Oakland and single family homes in Pittsburg.”

“Thousands of new housing units — condos, townhomes, lofts — have sprouted up from one side of the city. Some developers are opting to sell vacant units at a great discount — often below cost — to move inventory and satisfy the bank. And that’s where Stevens comes in.”

“Last weekend his company auctioned one- and two-bedroom condominiums in the Shadow Woods development in the Oakland hills, starting with a modest $220,000 opening bid. On March 30, his company auctioned off 41 condominiums in the Eight Orchids development in Oakland’s Chinatown with a starting bid of $245,000 — up to half off previous market prices.”

“‘We’ve talked to several others in the downtown market who are in various stages of construction and or marketing, but some developers just don’t like to have auctions because of the supposed negativity,’ Stevens said, adding that he thinks they should ‘get over it.’”

“‘It’s the most effective way to move inventory in a (distressed) marketplace and it’s a great way for a buyer to get a fair to good deal,’ he said.”

“At 1 p.m. Sunday, his company will auction 34 condominiums and townhomes in the Jade development on Jefferson Street in downtown Oakland, then race to Pittsburg to auction off 37 new single-family homes in the Vista Del Mar planned community at 5 p.m.”

“According to Jade’s advertising, the company had already substantially lowered sales prices before deciding to auction a chunk of its inventory. A minimum bid has been set at $259,000, and potential buyers must be pre-qualified by a lender.”

“Michael Ghielmetti, VP of Signature Properties, said despite very slow sales, the company is not yet considering an auction to market its 130-unit Broadway Grand condominiums in Oakland’s uptown neighborhood.”

“But in the meantime, things are tough. There have been fewer than 20 sales since November, and the company has reduced asking prices and come up with innovative ways to market the homes and make buyers less anxious about taking the plunge, such as promising to refund the difference if the prices subsequently drop within two years of the sale.”

“Ghielmetti said the auctions may help the market in the long term by removing excess inventory. But the auctions have definitely hurt his sales in the short-term. When Eight Orchids announced its auction, nothing moved at Broadway Grand for six weeks. After the auction, Signature sold two units. When Jade announced its auction, the same thing happened.”

“Still, he believes Broadway Grand is reasonably priced for the market, now he just needs to convince nervous buyers. ‘In 20 years people will say ‘I wish I bought in 2008,’ he said. ‘It won’t stay like this forever.’”

The Tracy Press. “For close-up view of what ails the nation’s economy, look no further than San Joaquin County. The March jobless rate climbed to 10.3 percent, up from 9.9 percent in February and from 8.2 percent in March 2007.”

“The March statistics suggest there’s more at work than normal cycles. Foreclosures, tight credit, layoffs and a weak dollar are also making a difference. ‘It’s not just the San Joaquin Valley that’s being impacted,’ said Liz Baker, a labor market analyst with the state Labor Market Information Division. ‘It’s every county in the state.’”

“The mortgage meltdown also continues to be felt. RealtyTrac shows nearly 9,000 homes in San Joaquin County in some state of foreclosure — 1,537 in Tracy alone.”

“And there isn’t any immediate help in sight, as many in the real estate sector foresee a continued housing drain through 2008 and into 2009. Grace Alvarez, a real estate agent for 20 years in Tracy, expects another wave of adjustable loan trouble in the early summer.”

“‘Those folks are going to be in dire straits again,’ Alvarez said. ‘That’s depressing, but that’s just the nature of the beast.’”

“Now the county’s Achilles’ heel, falling housing prices could turn out to be the key to reigniting the area’s economic engine. ‘It’s the best thing that could happen,’ said Jeffrey Michael of the University of the Pacific’s Eberhart Business Forecasting Center. ‘It’ll get buyers back in and get activity going again.’”

“Lower housing costs present an opportunity for working families, as many who could only rent during the housing bonanza can now become owners. ‘I am so busy with buyers,’ Alvarez said. ‘Most of them are first-time buyers now, because now they have the opportunity to buy a home for the first time in their lives because the market has dropped so dramatically.’”

“John Solis, who is responsible for helping foster economic growth in San Joaquin County, also sees hope for the future. ‘Industries will continue to move into this area, because it lends itself for opportunity to growth,’ he said. ‘And the cost of real estate has gone down, and that will likely stimulate individuals coming into the area.’”

The Fresno Bee. “Investment groups and home builders are starting to buy excess lots from distressed developers in the central San Joaquin Valley, leading some observers to think the real estate slump may be close to playing itself out.”

“The practice is textbook and happens in every real estate cycle — the last time in the early 1990s. Developers wind up with excess lots after a booming market and want to get them off their books.”

“‘They are a liability to a builder until they build a house on it,’ said Robin Kane, a real estate analyst and broker in Fresno. ‘On every transaction where there is a loser, there also is a winner.’”

“John Trotter hopes he’s one of those winners, and he’s gambling that his read on the market will pay off. ‘We think the bottom is near,’ said Trotter, senior VP of San Diego-based Capstone Advisors.”

“The company is financing acquisitions and buying land to hold until prices rise, and then plans to sell it back to developers. ‘We hold for three or four years and wait for a recovery,’ Trotter said.”

“Capstone has completed two deals, spending about $20 million, and is considering more. Trotter has looked at deals in the central San Joaquin Valley but hasn’t completed any.”

“Prices of raw land in Fresno have fallen 30% to 40% over the past several years, making them more attractive to speculators. And finished lots also have declined in value.”

“Longtime Fresno builder John Bonadelle said he bought land in the Fancher Creek project from Dallas-based Centex Homes last year. Centex officials declined to comment. In Sacramento, privately held Elliott Homes Inc. paid $10 million for 400 acres of excess land last month.”

“Financial institutions foreclosing on land will be the next big sellers of subdivisions, analysts said. ‘The foreclosures are starting to happen,’ said Eric Segal, a real estate appraiser in Fresno. ‘A number of properties have been in default and gone to auction.’”

“The tough times also allow small companies with low overhead to offer more. Purchasers at Elizabeth Heights in Fresno can buy a house ranging from 1,536 square feet to 1,932 square feet for $199,900 to $230,500. The homes have tile entries, larger secondary bedrooms, a tankless energy-efficient water heater and lots of storage.”

“At Laurel Tree in Fresno, buyers can choose from six models ranging from $189,950 to $329,950. With standard features such as tile floors, maple cabinets, tankless water heaters, kitchen appliances, backyard landscaping and finished garages, the houses go way beyond what most first-time home buyers get.”

The Daily Press. “The housing slump has driven several local suppliers of construction materials out of business, and those who remain are hard pressed to find customers for their wares in the High Desert. Supplies of lumber, glass and cement have outstacked demand in the Victor Valley and Buck Byers, co-owner of Barr Lumber in Victorville, said the many unsold houses in the area are to blame.”

“‘Until that God awful number of unsold houses diminishes, I wouldn’t look for too much change in Victor Valley,’ said Byers, who started working in a lumber yard in 1974 and now owns six Barr Lumber locations.”

“Byers thinks the housing recession between 1991 and 1994 lasted longer in Southern California also because of unsold, overpriced houses.”

“‘There’s way more people to supply lumber than there are construction customers for lumber, so glass and windows have got to be in the same jam,’ said Byers. ‘Almost every segment of construction supply is.’”

“After closing its doors in Barstow and Hesperia, H&E Hardware closed its final store recently in Victorville, where All-Star Materials masonry yard also recently went out of business. This came as a shock to fellow Victorville hardware supplier Ron L. Reyes, owner of A&L Builders Supply since 1977.”

“‘Ever since the housing market failed everything went with it,’ said Reyes.”

“Byers expects building suppliers should dig in for low sales into mid-2009. ‘All of them seem to last about a year, but this time we pushed prices to an all-time high so it might last longer,’ said Byers. ‘We’re coming off of the best demand you’ve ever seen from 2004 and 2005, when people were begging for lumber and glass, and now you need to beg to ship to them.’”

Highlands Today reports from Florida. “Now that the construction industry in Highlands County is grinding slower and slower, Don Maddox spends a lot more time in his truck. ‘I’m on the computer, or looking at jobs out of town,’ said Maddox, the owner of Central Florida Glass & Mirror. To keep his installers busy, they’ve been riding to jobs from Pensacola to Miami. ‘We have 10 men less this year than we did last year,’ said Maddox. ‘We had to lay them off.’”

“Locals blame the mortgage foreclosure crisis, a slowdown in the construction industry, zooming gasoline prices, the recessionary national economy and fewer numbers of people moving to Florida and Highlands County.”

“John Minor, Highlands County’s human relations manager, said huge numbers of workers have been asking for menial jobs. ‘Last year, we advertised a custodial job, and as many as 130 applied,’ Minor said.”

“‘We get a constant flow of people. Three or four a week,’ said Maddox. ‘Subcontractors are going broke right and left, professional subcontractors who do everything right.’”

The News Press. “Dressed in a pale blue work shirt, dress pants and a tie, Cape Coral resident John Howell stood on the side of Del Prado Boulevard near the Coralwood Shopping Center on Tuesday and held up a sign. It read: ‘I NEED A JOB!!’”

“Howell said he is strapped to find work fast especially since he has a $1,700 a month mortgage and a $300-a month car payment. Howell, who was formally a car salesman, currently sells framing to construction companies. But he said his current job no longer pays the bills because of the slowdown in the construction industry.”

“He said he is mostly skilled in sales, but he will take whatever job will pay the bills. He has had about 12 interviews over the past few weeks, including a few at the Olive Garden on Pine Island Road, but none panned out.”

“‘I’m off the beaten path,’ Howell said. ‘I’m not looking for a handout. I’m looking for a job. I’m losing my home. I haven’t paid my mortgage in four months.’”

“Foreclosure actions filed in Lee County spiked up sharply to a record high of 2,160 in April - with almost a third for primary residences, according to the Southwest Florida Real Estate Investors Association.”

“Investors and homeowners alike have been hit hard as the median price of a single-family home has fallen 34 percent from a peak of $322,300 in December 2005 to $212,500 in March.”

“Joanne Long is one of the homeowners who’s facing foreclosure - she and her husband expect to lose their southwest Cape Coral home because they can’t pay off more than $236,000 they owe lender.”

“There’s little chance of selling the house to pay off that debt because it’s now worth only about $105,000, she said.”

“The straw that broke the camel’s back was having to refinance with an adjustable rate mortgage to pay the water and sewer assessment to Cape Coral in 2006, said Long, who works at the Lee County clerk of court’s office and also part time as a real estate agent.”

“‘We were paying about $1,000 a month but once that happened the payment jumped to $2,200,’ Long said.”

“Of April’s foreclosures, 692 were homesteaded primary residences: 32 percent of the total and up from 554 in March. Mortgage broker and investor Jeff Tumbarello said foreclosed houses are coming back onto the markets as the banks take them back and then sell them.”

“‘But they’re losing, on average, 50 to 60 percent of what they lent,’ he said.”

“The bank sales have had the effect of finally boosting the number of houses being sold in the county because they’re going so cheaply, he said. ‘The foreclosed homes are the pearl our market’s got to offer.’”

“The foreclosure problem is escalating throughout Southwest Florida. There were 3,267 foreclosures in Collier County last year compared to about 1,440 foreclosures from 1999 through 2005, Undersheriff Kevin Rambosk said.. The county lists 181 foreclosures this year and another 1,500 cases are pending, he said.”

“There were 10,700 foreclosures last year in Lee County and 1,784 foreclosure actions were filed in Lee Circuit Court in March.”

“The foreclosure problem has hit all areas of Collier County. ‘We are a gated community, but unfortunately, the gates didn’t keep out foreclosures,’ said Jake Sullivan, president of the Waterways of Naples Homeowners Association.”

The Naples News. “Florida’s change back to a paper ballot system will add about $500,000 to Lee County Supervisor of Elections Sharon Harrington’s budget this year. That’s a drop in the bucket compared to the at least $140 million revenue decrease County Manager Don Stilwell says county budgets face.”

“But some areas will need more employees. ‘Circuit court cases are up 84 percent since ‘05,’ said Chief Judge Keith Carey. ‘We have 16,000 foreclosures pending. Criminal division felonies are up 61 percent since ‘05.’”

From Marketplace. “Dan Grech: Celebration Point is a luxury condo development in Miami Lakes, Florida. It has a pool, a spa, a clubhouse — and a problem: 15 percent of unit owners have stopped paying their monthly maintenance fee. Now their neighbors have to foot the bill.”

“Albert Marques lives in Celebration Point and is the condo’s treasurer. He says the condo faces a $250,000 a year shortfall. To stay afloat, it’s pulling $20,000 a month from an emergency reserve funded by residents.”

“Marques: ‘I mean, it’s money that could have been used to upgrade the amenities and as a result, is going to be used for bad debt.’”

“Celebration Point is actually in better shape than many of Florida’s 25,000 condominium associations. Up to 90 percent of owners in some condos aren’t paying their maintenance fees.”

“Jeremy Resnick is with a firm that helps homeowners who owe more on their home than it’s currently worth. He said one client was just handed a bill for $40,000 to help cover an association fee shortfall. This isn’t just a problem in Florida. Resnick says 51 million people in the U.S. live under a homeowner or condo association, and nearly all of those communities face some financial fallout from foreclosures.”

“Resnick: ‘In the bigger areas, in the Miamis, in the San Diegos, in the Phoenixes of the world, these are $50,000 and $100,000 assessments.’”

“Condo boards do have a trump card: they can foreclose on past-due properties. Marques says Celebration Point just took over the property title of one delinquent owner. The board is waiting for the police to evict the owner.”

“Marques: ‘Given that we have 30 units that are just habitually not paying, we’ve only foreclosed on one, that doesn’t give me any warm, fuzzy feelings that this is about to end any time soon.’”

The News Journal. “With its English, country-like elegance, the brick house on a hill in Ormond Beach would fit on the cover of Better Homes & Gardens. But behind the walls is a vacated interior that lacks the most basic essentials, including appliances and toilets. They are gone like the owners who once lived there, a casualty of foreclosure.”

“‘We see people who vacuum and clean when they leave. And then we get other houses that are trashed, stripped,’ said Frank Cardarelli, a Port Orange real estate broker who has specialized in foreclosures for 25 years.”

“Cardarelli said he has seen air conditioning units, hot water heaters, sinks, closet doors, even heating vents ripped out and taken when owners left their homes, no longer able to pay mortgages.”

“‘It goes from mild to severe. Some people take everything. It’s incredible,’ he said. ‘But there’s not much value for what they’re taking, like a used ceiling fan or rusted water heater.’”

“Area real estate brokers say stripping of foreclosed houses to some extent occurs about a quarter of the time. Sharon Barbaro, who handles many foreclosures, said the houses run the spectrum from being left in good condition to where some former owners ‘take it or break it.’”

“‘It’s not only the lower middle class. It’s across the board,’ she said.”

“For those looking to buy, Barbaro said foreclosures often offer buyers a good deal, although some houses need sprucing up. ‘It’s a fantastic deal for people who perhaps couldn’t afford a house two years ago,’ she said. ‘I must have 40-something on the market.’”

“But real estate broker Joyce Marsh said foreclosures are not necessarily a bargain, adding the ‘deals are incredible now’ in the more traditional housing market.”

“‘People seem to feel foreclosures are a very good buy. But not always,’ she said. ‘Typically foreclosures are in poor condition and can become your worst nightmare. You could be left with a house of horrors.’”

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