The Housing Bubble

CNBC reports on California. “So DataQuick says home sales in the Golden State rose almost 27 percent last month compared to the month before. Hmmm, let me see, who blogged about the possibility that we were bottoming in housing. Who? Who who who… oh yes, that was me. Of course, in some places most of the houses are foreclosures or short sales, which means prices are still falling — so it’s not quite time to sell unless you have to.”

The Daily Press. “As more homes face foreclosure, home owner associations are left with dwindling dues and unsightly properties that become blights to the area.”

“It’s not an acute problem, but it will become one if the foreclosure trend continues according to Richard Munson, president of the California Association of Homeowners Associations.”

“‘There’s a tremendous impact over the last several months in particular,’ said Munson. ‘People are being foreclosed on or outright walking away from their properties.’”

“The Silver Lake Association in Helendale won’t clean up the foreclosure properties at the members’ expense, said Silver Lakes General Manager Sandra Wojecki. Some of their tenants were business owners and when the construction industry took a dive they were victims of the trickle-down effect.”

“‘Some people just walked away from their homes rather than be foreclosed on,’ Wojecki said.”

“‘We’re fortunate and we’ve had a very small delinquency rate of only 2 percent and only three foreclosures,’ said Kat Harrison, project manager for Stonebrook Estates in Apple Valley. ‘I also manage in Moreno Valley where there’s been a delinquency rate as high as 76 percent. I had to scale back services like frequency of garbage pickup, irrigation and landscaping there.’”

The Press Enterprise. “Nick Manfredi, a professional real estate investor in Corona, said he doesn’t expect the steady influx of foreclosures or price declines to end soon.”

“‘I can’t even buy right now because prices are decreasing so fast,’ he said, explaining he can’t turn over a property before it becomes less valuable than what he paid for it.”

The Daily Press. “Houses with boarded-up windows, peeling paint, tumbledown fences and overgrown lawns are cropping up across San Bernardino County. The county has been home to about 6,000 foreclosures this year, with another wave of 8,000 expected by the end of the year, officials said.”

“‘The banks are so overwhelmed,’ said Tim Adams, a broker associate and Realtor in Fontana and San Bernardino. ‘It’s like the return line at Christmas.’”

“Lisa Castro Carvalho, VP of Casablanca Associates, said houses become run-down even before the foreclosure process starts because homeowners can’t afford to make mortgage payments as well as maintain their properties.”

“‘These are people who are just barely making ends meet,’ she said. ‘Their main priority is feeding their families. It’s not watering their grass.’”

The Union Tribune. “Home loan failures in San Diego County continued to set new records in April, the 37th consecutive month of year-over-year increases for both foreclosures and notices of default.”

“The April spike in foreclosure activity comes as no surprise to Gabe del Rio, president of the Housing Opportunities Collaborative. Risky adjustable-rate loans are continuing to reset at higher interest rates, he said.”

“‘Month over month we continue to see an increase in callers for foreclosure prevention counseling,’ he said. ‘We anticipate that this will continue through the next six to 12 months.’”

The LA Daily News. “More than one-third of Los Angeles County families could afford to buy an entry-level home in the first quarter, thanks to an epidemic of foreclosures that depressed prices. During the first three months of 2008, 35 percent of county households could afford to buy their first home, the California Association of Realtors said.”

“‘I would personally wait a year, but if you are a buyer, this would be a good time to buy a home,’ said Dennis Torres, director of real estate operations for Pepperdine University’s Graziadio School of Business and Management.”

“‘Essentially we’re working our way out of the downturn and coming back up,’ said Leslie Appleton-Young, chief economist of the Los Angeles-based association.”

“Appleton-Young expects affordability to continue improving as more foreclosed homes come on the market and drive prices down further. ‘I think they are going to make a dent in the supply. Is it going to evaporate overnight? Absolutely not. It will be a slow workout,’ she said. ‘We’re still into the wave of foreclosures.’”

The LA Times. “Thousands of abandoned swimming pools, another casualty of the real estate market meltdown, have become breeding grounds for mosquitoes that can carry the West Nile virus, Orange County vector control officials said Tuesday.”

“‘One of the problems we’re having is with all the foreclosures, we have many abandoned swimming pools and also neglected or uncollected trash,’ said said Truc Dever, a spokeswoman for the Greater Los Angeles County Vector Control.”

“The number of Orange County homes going into foreclosure jumped 167% from the first quarter of 2007 to the same period this year. That represents a dramatic increase from 2,644 homes to 7,082 — though not all homes had pools.”

The Fresno Bee. “Marilyn Schutt, an agent in Fresno…attached a ’sold’ sign to a real estate sign in the Fig Garden neighborhood last week — after walking down Maroa and Rialto avenues waving it like those sign-twirlers at intersections in Clovis and Fresno.”

“The house was on the market for six months before it was sold for almost $150,000 less than its original asking price. ‘It was a sign that things are better,’ Schutt said.”

“Foreclosures continue to rise and new-home sales are struggling. Sales of new houses in Fresno County fell 27.2% and prices declined 13.6% from April 2007, DataQuick reported.”

“Some analysts suggest this is not the time to sell property. ‘It’s best to sit on the sidelines and get that absorbed,’ real estate analyst Robin Kane of Fresno said of foreclosures. ‘There is no one left who doesn’t know this is a tough market.’”

The Modesto Bee. “Stanislaus County homes sold for a median $225,000 last month, which was $5,500 less than March. At the market peak, Stanislaus homes sold for a median $396,000. That’s a 43.2 percent decline in 2½ years.”

“San Joaquin County prices have dropped even more. Last month, the median sales price hit $245,000, which was $20,000 less than March. San Joaquin homes peaked at $451,500, but prices have plunged 45.7 percent since.”

“Merced County is even worse. Its homes sold for a median $186,000 last month, which was $17,000 less than March. Merced’s homes peaked at $382,750 before plummeting 51.4 percent.”

“New home sales remain gloomy throughout the Northern San Joaquin Valley. Only 54 new houses were sold during March throughout Stanislaus County, which was less than half as many as in March 2007. New home sales declined even more in Merced and San Joaquin counties, according to the California Building Industry Association.”

“‘We expect the market to stabilize in the third quarter of 2008 and start picking up in 2009. With a decline in housing inventory and rising demand, home prices are likely to start moving up in 2009, thereby impacting affordability,’ said Gopal Ahluwalia, VP of research for the National Association of Home Builders.”

The Capitol Weekly. “As the real estate market softened in 2007, the new owner of a three-bedroom, 1,600-square-foot house in Sacramento’s Curtis Park neighborhood ran into trouble. The house that was purchased for $535,000 in January had lost equity. The owner fell behind in her payments, and eventually, the bank seized the home.”

“What makes this story different from the thousands like it is that the owner of this house was a member of Congress.”

“While Long Beach Democrat Laura Richardson walked away from her loan, she bested Oropeza in a June special election, and moved on to Congress.”

“‘The neighbors are extremely unhappy with her,’ said Sharon Helmar, who sold the home to Richardson. ‘She didn’t mow the lawn or take out the garbage while she was there. We lived there for a long time, 30 years, and we had to hide our heads whenever we came back to the neighborhood.’”

The Mercury News. “The median price of the existing houses that changed hands in Santa Clara County last month was $699,500, the Dataquick said. That was down 12.9 percent from $803,000 in April 2007. The median price of condos sold in the county slid 13.5 percent from a year ago, to $467,000.”

“‘The overwhelming trend across the state is markets that have seen the biggest price declines are now posting some of the biggest sales increases,’ said DataQuick’s Andrew LePage.”

“Median house prices were down 38.4 percent in Contra Costa last month from April 2007, and down 24.9 percent in Solano. DataQuick also reported that a quarter of all home sales in the Bay Area last month were of properties that had been foreclosed upon sometime in the past 12 months.”

“David Martz said he is listing an East San Jose home that the owner tried to sell months ago for $480,000. But perhaps 80 percent of the other homes for sale in the neighborhood are bank-owned properties or ’short sales.’”

“Prices in this owner’s area are dropping. ‘He had to go down to $350,000; that’s what the neighborhood is doing,’ Martz said.”

“Vickie Nyland, president of home builder Taylor Morrison’s Bay Area division, said new home prices are definitely falling in the South Bay. ‘We have to move our inventory through,’ she said. For example, at one of the company’s townhouse developments in San Jose, ‘We’ve got three-bedroom homes . . . in the $450,000s,’ she said.”

“‘A year ago we might not have had anything for sale in Santa Clara County under $505,000,’ the median new-home price in April.”

The Record Searchlight. “Redding real estate agent Rick Goates said we’re awfully close to the bottom. Activity is picking up, especially with foreclosed properties that have been taken back by the bank. Goates noted a bank-owned house last week sold in less than four hours for $115,000 — a snug 1,400-square-foot, four-bedroom home.”

“‘I think there are buyers but they all want the same thing — a deal — and are willing to wait if they don’t come across one,’ Goates said.”

Some housing bubble news from Wall Street and Washington. CNN Money, “With prices crashing around the nation, home price affordability has improved dramatically in many U.S. cities…during the first three months of 2007 with home prices the most affordable they’ve been since the three month period that ended June 30, 2004…according to the latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders.”

“‘This measure can only take you so far in implications for the market,” said Dave Seiders, NAHB’s chief economist. ‘There’re several factors that the index does not capture.’”

“These include buyer expectations. Many are reluctant to act in falling markets. That sentiment can contribute to market overshoot, according to Seiders, in which prices fall lower than would be their logical bottom.”

From Reuters. “Impac Mortgage Holdings Inc, a struggling lender, said its survival could be threatened following a $2.05 billion loss in 2007, and that the U.S. Securities and Exchange Commission was inquiring into its operations.”

“Impac said its liabilities exceeded its assets at year-end, giving it negative shareholder equity of $1.08 billion.”

The Banking Times. “UBS, the Swiss investment bank that has so far recorded larger losses from the credit crisis than any other financial institution, has sold some of its mortgage-backed securities to BlackRock, the fund manager.”

“The disposal has been made for $15 billion representing a $7 billion loss on the nominal value of the loans. The bank had written down around $37 billion prior to the sale and analysts estimate that its exposure to US sup-prime mortgage debt now stands at around $17 billion.”

“UBS said the vast majority of the positions sold were subprime assets — the lowest quality of real estate loans, and so-called Alt-A assets — ranked one step above subprime, in roughly equal parts. The remainder was ranked prime.”

“The face value of the portfolio was $22 billion, meaning UBS received about 68 cents to the dollar on the sale.”

“National City Corp said on Wednesday that it may sell ‘problem’ assets or put some of them in separate entities, after large mortgage losses drove Ohio’s largest bank to raise $7 billion of capital.”

“Speaking at a Lehman Brothers Inc conference in London, Chief Executive Peter Raskind said National City is evaluating its alternatives ‘along with our many friends on Wall Street.’”

The Associated Press. “Credit ratings agency Fitch Ratings said Tuesday night it downgraded four of Standard Pacific Corp.’s ratings due to continued weakness in two of the homebuilder’s core markets. All four ratings are considered junk status.”

“Fitch cut the ratings because of continued weakness in the housing markets, especially in Standard Pacific’s key California and Florida markets.”

“Shares of Moody’s Corp fell after the rating agency said a computer snafu resulted in incorrect top ratings for complex debt.”

“‘Moody’s is simply telling the truth slowly, and there’s more truth to be told,’ said Janet Tavakoli, a consultant and president of Tavakoli Structured Finance in Chicago. ‘Up until now I thought the rating agencies were incompetent rookies in structured products. Now I’m suspicious that they may be crooked.’”

Business Intelligence. “Credit rating agencies, criticised for failing to warn investors about the risks of US subprime mortgage-related products, should support a proposed global industry oversight body or face more regulation, European Union market watchdogs said this week.”

“The new body should ‘name and shame’ agencies that fall short. Agencies like Moody’s Corp, McGraw-Hill Cos. Inc.’s Standard & Poor’s and Fimalac’s Fitch Ratings have been under pressure by investors, regulators and critics for the past year for incorrectly rating subprime mortgage debt.”

The Baltimore Sun. “A 2 1/2 year housing slump paired with increasingly restrictive borrowing rules and a shift to lenders handling more of their own loans? Very bad. ‘Each week it’s harder,’ said Charles J. DiPino, co-owner of Universal Trust Mortgage in Columbia, which is fighting to keep business level. ‘Mortgage brokers are facing an extreme uphill battle.’”

“Brokers, for their part, contend that they were simply following the relaxed rules set by mortgage companies. ‘Lenders threw away their underwriting guidelines,’ said Roy DeLoach, executive VP of the National Association of Mortgage Brokers.”

“Said Guy Cecala, publisher of Inside Mortgage Finance, who doesn’t think consumers would be well served if the broker industry disappeared: ‘There’s plenty of blame to go around.’”

From WAPT.com. “Experts say that every home that goes into foreclosure forces down the values of nearby homes by 1 percent. Madison officials said the city has long been a target of mortgage fraud.”

“Madison Mayor Mary Hawkins-Butler said mortgage fraud in the city first caught her attention seven years ago. Homeowners noticed houses would sell, but would never be occupied.”

“‘Madison has been targeted and it’s my duty as mayor to do something about it,’ Hawkins-Butler said. ‘Madison is not in denial about it. We are not saying it doesn’t exist. It exists all over the country.’”

“In 2006, FBI research estimated that mortgage fraud would reach $4.2 billion nationwide. Madison officials do not know how many houses were purchased through mortgage fraud schemes. ‘If you have ever seen the movie ‘Forrest Gump,’ you know there are a lot of different ways to cook shrimp. There are just about as many ways to commit mortgage fraud,’ said Madison County assistant district attorney Dow Yodder.”

The Wall Street Journal. “Efforts to stem the record tide of U.S. foreclosures are a ‘train wreck,’ hampered by a lack of resources and the continued deterioration of the real-estate market, a federal banking regulator said.”

“‘There are more loan lines and I think servicers are doing more but it’s just not keeping pace,’ Federal Deposit Insurance Corp. Chairman Sheila Bair told reporters.”

“Bair, who has been a leading voice at the federal level in addressing the housing crisis, said a recent report that suggested two-thirds of seriously delinquent borrowers aren’t in a workout plan was ‘pretty depressing.’”

“‘They’re overwhelmed, and the counselors are overwhelmed .. it’s a train wreck,’ Bair said.”

The Grand Rapids Press. “Fifth Third Bancorp.’s CEO said Tuesday the banking environment is the toughest he has seen in his nearly three-decade career. Kevin Kabat, CEO since April 2007, said the Cincinnati-based bank has been hit by sagging economies in major markets such as Michigan and Florida and the downturn in real estate markets.”

“‘I’ve been in banking for 28 years … and in all that time I’ve never seen a more challenging operating environment than what we’re seeing today,’ Kabat told donors during a speech for Junior Achievement of the Michigan Great Lakes.”

“In less than a year, more than $10 billion in shareholder value has been wiped out at Fifth Third. The declining stock price has come along with price drops at other banks across the country.”

“Kabat said the lack of merger activity is a reflection of banks waiting out the capital crunch and trying to make sure their due diligence is complete so there are no surprises once a deal is announced.”

“‘We’re probably going to see more bank failures in this next 12- to 24-month period than we’ve seen in the past 15 years,’ he said.”

The New York Post. “It turns out that not even the father of the mortgage-backed securities market is immune to the mother of all mortgage busts. Lewis Ranieri’s Franklin Bank Corp., a Houston-based savings and loan of which he is chairman, is getting hammered by bad bets on home mortgages and commercial loans.”

“Making matters worse, yesterday Franklin CEO Anthony Nocella was ousted after an internal audit uncovered accounting errors, the bank said. The Securities and Exchange Commission also is investigating the thrift.”

“Ranieri is widely seen as the man who helped package mortgages into bonds that now make up the multi-trillion dollar mortgage-backed securities market that is at the center of today’s credit crunch.”

“Franklin’s share price, which had a 52-week high of $17 in May 2007, closed yesterday at 98 cents a share on the news.”

“For Ranieri, an inductee into the 1997 National Housing Hall of Fame, righting the ship at Franklin, or finding a willing buyer, may be a tall order - and is something even Ranieri seemed to recognize more than a year ago.”

“‘This is the leading edge of the storm,’ Ranieri said in an interview with Bloomberg News in February 2007. ‘If you think this is bad, imagine what it’s going to be like in the middle of the crisis.’”

KMBC Kansas City reports from Missouri. “You may hear a lot about all the great deals on foreclosures out there. But are they really bargains? ‘The market here on foreclosures is one out of every four houses sold is going to be a foreclosure now,’ said Mike Phillips, who owns Century 21 All Pro. ‘We used to do a lot of new homes and that’s all but dried up. For now, the business volume for us is all foreclosures.’”

“Why are people snatching them up? ‘The big advantage on the bank properties is being priced correctly seems like a bargain,’ Phillips said.”

“Phillips said that there are deals out there, but most foreclosures seem like a better buy because they are priced to sell in 30 days.”

The Indy Channel from Indiana. “Like thousands of Hoosiers, Michael Kaylor is behind on his mortgage payments. Indiana has one of the highest foreclosure rates in the U.S.”

“‘I can’t pay my mortgage because gas prices went up so much,” said Kaylor, who works in the home service industry. ‘I am paying $600 a month just to do my job.’”

“As a real estate agent, Kelly Clark was hurt in more ways than one by the downturn of the housing market. The market decline cut her income and forced her into foreclosure.”

“‘Things started to fall apart about a year ago,’ Clark said. ‘I have a sale date on Wednesday. I am trying to get that put off.’”

“A common theme emerged from some of the personal stories — adjustable rate mortgages. Payments that were low to begin with skyrocketed over the last couple of years for many homeowners.”

“More than a half-dozen houses on the same street Clark lives on have been foreclosed upon since she moved there two years ago.”

The Toledo Blade from Ohio. “Metropolitan Toledo homes are selling more cheaply than they did last year, but residents are even less likely to be able to afford them, a new study shows.”

“Local experts blamed the area’s high unemployment rate and tight lending practices as contributing to the decline in home affordability. ‘A lot of this relates to our economic underperformance, and our unemployment,’ said Richard DeKaser, chief economist with National City Bank in Cleveland.”

“It doesn’t matter how low home prices are if residents don’t have jobs and income to purchase them, he added.”

“Area home builders in Toledo said they continue to build homes of all sizes, but mostly focus on more entry-level houses and dwellings that are very expensive. ‘The lower end and the higher end is where the majority of the activity is,’ said Tony Plath, executive VP of the Home Builders Association of Greater Toledo.”

From WOOD TV in Michigan. “Hundreds of Michigan home builders gathered at the state Capitol Tuesday to let lawmakers know they need help. Home building created 153,000 Michigan jobs three years ago. Since then, that number has fallen by 69,000 workers.”

“‘Nobody’s buying homes,’ Dave Roberts, a Kalamazoo home builder, told 24 Hour News 8. ‘I’m talking to some people to build homes but it’s just extremely, extremely slow in the building industry.’”

“‘Right now, a lot of our members are paying on properties that are not selling, and those taxes are very difficult for them. If they could get a relief that would help them to stay in business…’ adds Judy Barnes of the Home & Builders Association of Greater Grand Rapids.”

“Grand Valley State University business professor Paul Isely said the construction slow-down runs deep. For starters, our state continues losing jobs.”

“‘And when you lose jobs people leave the state,’ said Isely. ‘You’re seeing a decrease in population, and if people are leaving the state they don’t need to buy a house here.’”

“Isely believes the housing bubble caught builders off guard when it burst. ‘Houses were already being built, materials were already purchased, houses were put up and that created a back-log of housing,’ Isely said.”

“The Grand Rapids Association of Realtors said there is a 12-month inventory in most places across West Michigan. It is an inventory that includes an excessive number of foreclosures. That results in banks scrutinizing home loans, with the effects suffocating the industry.”

The Fond du Lac Reporter from Wisconsin. “Amid a drooping housing market, Jessica and John Westphal are eager to break even when they sell their first home. They’ve given up trying to make a profit.”

“The young couple listed the three-bedroom home at 27 Sibley St. for sale in March while seeking bigger digs to start a family. They have already lowered the asking price by $5,000 after a sluggish first month, but they aren’t discouraged.”

“In fact, the couple is hoping to get a good deal on their next house. ‘In today’s market, we are able to find houses well below their appraised value,’ Jessica Westphal said.”

“The Westphals’ experience is becoming more common as prices drop in a well-stocked, buyer-friendly real estate market.”

“During the first quarter of 2008, home sales in Fond du Lac County dropped 12 percent compared to the same period last year, said Scott Swick, owner of First Weber Group Realtors. Prices also fell in the first quarter. The median home price tumbled 6 percent from the same period last year to $112,000, Swick said.”

“‘Are you happy about a 12 percent drop? No. But compared to the state, it doesn’t seem so bad,’ he said.”

“Wisconsin home sales fell 24 percent during the first quarter. In the Midwest region, home sales dropped 18.3 percent, according to the Wisconsin Realtors Association.”

“Median home prices slumped 3.8 percent statewide to $154,000 during the first quarter compared to the same period in 2007. The WRA blamed bad weather and price moderation for the downturn.”

“Dawn Kimpel is hoping she doesn’t lose money selling the Fond du Lac home she purchased two years ago. Kimpel recently moved to take a job in La Crosse. She is renting out her home at 296 E. 11th St. and hoping to sell it before Thanksgiving.”

“‘I’m concerned about it going on too long. I don’t want to have to pay two mortgages,’ she said. Only one person has looked at the home since she put it on the market for $89,900 two months ago.”

The way sellers look at the market has changed, said broker Frank Adashun. ‘They are being realistic in today’s market. It’s a different attitude than there was in 2004 when homes were flying off the shelves,’ he said.”

“However, not every seller is sensible about the market. Both Adashun and Swick said they have had to turn away potential customers who wouldn’t set practical prices.”

“‘It doesn’t make sense to waste our time and efforts if the seller is unrealistic,’ Adashun said.”

The Post Bulletin from Minnesota. “Ask Rep. Tim Walz about the housing crisis, and he will tell you he sees it out the front window of his Mankato home. ‘My personal story is that the house right next to (mine) has been in foreclosure for a year and my property value dropped 20 percent this year,’ he said.”

“Walz is not alone in seeing the effects of the bursting of the housing bubble in Minnesota. Lawmakers from both parties and in both chambers of Congress have heard from constituents and community leaders about falling home prices and vacant properties resulting from the home ownership crisis.”

“Walz said he backed the notion of having the government insure refinanced loans made on a voluntary basis between lenders and borrowers. He dismissed the the debate over whether struggling borrowers should have been denied loans or lenders were lax as not helpful.”

“‘It’s almost as if, as the forest fire is burning, we’re arguing who started it,’ he said.”

“Walz said the crisis should be addressed at both the borrower level and the broader housing and mortgage sector level. ‘If it’s at all possible, it has to be both. I know our homebuilders are hurting,’ he said.”

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