The Housing Bubble

The San Francisco Chronicle reports from California. “Home sales volume in California and the Bay Area increased between March and April as lower prices brought bargain hunters out of the woodwork, according to numbers released Friday by the California Association of Realtors. Statewide, the median for single-family homes was $403,870, down 32 percent from a year ago and down 2.6 percent from a month ago.”

“In the Bay Area, the median stood at $691,930, a 17.9 percent slide from last year and a 1.8 percent dip from March. In the Bay Area, sales down 12.1 percent compared to a year ago.”

“Leslie Appleton-Young, chief economist for the Realtors trade group, said that new homes, which are not included in the CAR data, are also a source of bargains. ‘In areas where you have a lot of unoccupied new homes where the builders just want to move them and move on, those price cuts have been much steeper,’ she said.”

“That was the case for Bob Bargenquast and fiancee Ines Donnelly. In April they moved into a brand-new home in Napa. The builder was eager to close it out and move on to another project, Bargenquast said.”

“The three-bedroom house was listed for $765,000 in the summer. Over the subsequent months they watched the price steadily drop until it got to $650,000 in January.”

“They initially made a lowball offer and got the home for $645,000 after the builder threw in $52,000 worth of ‘top of the line’ upgrades for flooring, countertops, shutters and so forth.”

“‘We say, you know what, now’s the time,’ Bargenquast said. ‘Interest rates are down; it’s a buyer’s market.’”

The Tribune. “Sales of all homes in San Luis Obispo County continued to dip year-over-year, continuing in which transactions have gone down in 30 of 31 months since October 2005, DataQuick reported Wednesday. It’s also the lowest April for home sales since 1995.”

“‘A driving factor for people is the amount of inventory they have to choose from,’ said Barry Brown, an agent at Prudential California Arroyo Grande and state director for the California Association of Realtors.”

“Before … it was ‘buy this or someone else will,’ and they would just choose a property close to what their needs were. In this market, they can be very selective,’ he said.”

The Ventura County Star. “On Friday, the California Association of Realtors reported that sales of existing homes increased from a year ago, while the median price was down 28.2 percent.”

“The median price decline from $691,710 a year ago to $496,530 in April was the sharpest drop on record, said Robert Kleinhenz, deputy chief economist for CAR.”

“As a testament to the weak housing market, there are a lot of homes with ‘For Rent’ signs in the window these days.”

“Ronald Ormsby, whose property management office is in Camarillo, said there are about 55 houses for rent in the city right now. The housing market has put some people into the rental market who weren’t planning to ever become landlords.”

“‘People that might have to move and are having difficulty selling and can still manage to make the payments without going into foreclosure, I think they’ll rent by necessity rather than as an option,’ Ormsby said.”

“He estimates it could take another year before the market hits bottom. Ormsby has been through housing cycles before, including the one in California in the early 1990s. ‘I don’t think the recession we had then is anywhere near as severe as the one we’re having now,’ he said.”

The LA Daily News. “Home sales in the San Fernando Valley increased slightly in April from a year earlier, the first annual uptick in 30 months. But prices continued to tumble with the median falling 26 percent from a year ago, to $465,000, said the Southland Regional Association of Realtors.”

“The median price has fallen $160,000 in the past 12 months, an amount equal to the median price in March 1997.”

“‘There is a general feeling that the market may have hit bottom and started to rebound - definitely on the transaction side but not on the price side,’ said Jim Link, the group’s executive VP.”

“A similar picture emerged in the Santa Clarita Valley, with foreclosures also playing a big role. In that market, sales increased an annual 2 percent. The median price fell 19 percent from a year ago, to $480,000.”

“Condo sales there declined 12 percent from a year ago. The median condo price fell 26.5 percent from a year ago, to $279,000.”

The Daily Breeze. ” Home prices across the South Bay continued to slide in April, with every community cited in a report released Friday posting double-digit declines.”

“Carson was the area’s biggest year-over-year loser, with a 25.9 percent drop in median home price to $389,000, according to CAR.”

“Manhattan Beach experienced the second worst drop, of 25.8 percent, to $1,372,500. The South Bay, excluding the Palos Verdes Peninsula, saw a 12.8 percent drop last month, compared to a year earlier. That was still better than Los Angeles County, which suffered a home price decline of 19.6 percent to $435,000.”

“‘Part of the problem is that the lenders are sitting on some really tight approval criteria,’ said Realtor John Parsons, a Redondo Beach planning commissioner and former councilman. ‘Now they’ve gone too far the other way. It’s hurting everyone, including lenders.’”

The Press Enterprise. “A shifting of sales to foreclosure bargains in the under-$500,000 category especially energized the housing market in Riverside and San Bernardino counties, where existing home sales in April surged almost 33 percent above a year earlier.”

“Yet, as sales rose, prices kept falling. The median price of an existing detached single-family home in California last month was $403,870, down 32 percent in a year. In the Inland region, the median price was $278,800, down nearly 30 percent from April 2007.”

“More first-time buyers are deciding to act now rather than wait for further price declines, Appleton-Young said, adding that the trend could be cut short if mortgage interest rates increase.”

“‘For people who are doing the buy-or-rent calculation, buying could clearly trump renting in many places at this point,’ she said.”

The North County Times. “In this frail real estate market, taking a more innovative approach to selling property has become so popular, it’s even acquired a nickname: extreme open houses.”

“When Escondido real estate agent Harry Martin really wants to sell a home, his secret weapon is sausage-and-egg breakfast casserole. ‘Let me tell you, two things draw agents to come see your property —- food and money…I find that good food ensures the best turnout,’ said Martin, who has sold homes in Escondido and Scripps for the past 13 years.”

“‘The agents come by, tour the property, and then have breakfast,’ he said. ‘The most important thing is that it keeps them in the property longer, giving them time to appreciate it more and for me to tout what it offers. It works every time.’”

The Modesto Bee. “Rodney Lowe admits his timing isn’t the best. The housing industry was red hot 6 1/2 years ago when the prominent Modesto builder quit the business. Lowe publicly predicted the real estate market had soared too high and was about to crash.”

“Here’s the weird part: Lowe has decided to start building houses again. ‘When many builders are exiting the industry, I’m making a return. I guess I’m a glutton for punishment,’ Lowe said. ‘I think people would say that my timing is pretty crazy.’”

“Lowe competed with Wall Street-financed big builders during his tract home days. He recalled how publicly trading development companies helped push up land prices in Modesto’s Village I from $35,000 per acre to $350,000 per acre, which was far beyond what small local builders could afford.”

“But now that the region’s real estate market is in recession, most of the national builders have scaled down or canceled their construction projects. Land prices have plummeted, and many ready-to-build-on lots have been deeply discounted.”

“That’s good for local builders, according to Lowe: ‘I think you’re going to see a lot of local contractors come back into the game.’”

The Tracy Press. “The house at 28 E. Third St. in Tracy embodies in many ways today’s housing crisis. It’s an average-sized, middle-aged suburban abode that time, vandals and subprime lending left in disrepair.”

“Though pending home sales are on the rise in and around Tracy, banks are still taking on more homes than they’re selling. Wachovia sold 825 during the first three months this year, but added about 1,100 homes from foreclosure to its inventory during that same time, according to company spokesman Don Vecchiarello.”

“It’s telling when easily a third of homes on the market, according to the California Department of Real Estate, are in some way vandalized, said local real estate and mortgage company owner Brian Cable. Oftentimes, embittered former homeowners swipe anything not bolted down, punch holes in drywall or tag a home’s interior, like an angry calling card.”

“‘You wouldn’t believe some of these homes,’ Cable said. ‘I don’t think people realize what the former tenants do to them.’”

“Rep. Laura Richardson, who lost her Sacramento home in a recent foreclosure auction, has also defaulted on properties in Long Beach and San Pedro, records show.”

“Richardson was able to bring her payments up to date on the Long Beach home relatively quickly, but the San Pedro property lingered in the foreclosure process for almost eight months, and still has a pending auction date.”

“‘I am not financially wealthy,’ she said. ‘I am not a millionaire. - Based upon what I was going through, changing four jobs in less than one year, I think any American would understand what that does in terms of a person’s financial stability.’”

“As a member of Congress, Richardson makes $169,300 a year. As a member of the Assembly, she made about $116,000, plus a per diem for living expenses in Sacramento.”

‘When it was pointed out that the average American makes far less than that, Richardson responded, ‘The average American is not responsible for maintaining several households.’”

“She said she ultimately hopes to testify about her situation in front of the Senate, and will write to the president to urge him to sign a package of foreclosure legislation.”

“‘We need to put a better process in place, so a person’s home is not being sold up underneath them,’ she said. ‘We have to improve the way we respond to this crisis.’”

The Capitol Weekly. “The Curtis Park house is not Richardson’s primary residence. She also owns a four-bedroom house in Long Beach, in her congressional district. Real estate records show she purchased that house in 1999 for $135,000. An estimate from Zillow.com puts the current value of that house at $474,000.”

“Like many homes that have gone through foreclosure, Richardson’s new residence quickly became an eyesore. With Richardson gone, upkeep on the home lapsed, and neighbors began to get angry.”

“Sharon Helmar, and her husband, Mark, sold the Curtis Park home to Richardson because Sharon’s arthritis required the couple to move into a one-story house. With the area’s real estate market slowing down, the house remained on the market for months, and the Helmars, who lived in the house for more than 30 years, were getting desperate to sell.”

“Helmar said that she has never met Richardson personally, but dealt with Richardson through her realtor. The Helmars wound up giving Richardson $15,000 toward closing costs, she said.”

“And she is still angry over what happened to a home that clearly she never really wanted to leave.”

“‘It’s kind of silly. You would think people who are making decisions for others would be able to make good decisions for themselves,’ she said. ‘She should have known what she could afford and not afford. In this neighborhood, you just don’t do that.’”

“While Richardson walked away from her bank loan, she has begun to pay herself back for the money she personally invested in her initial race.”

TC Palm reports from Florida. “Sales of existing single-family homes and condominiums in the region increased in April, a report from the Florida Association of Realtors showed Friday. However, home prices in the Fort Pierce-Port St. Lucie metropolitan statistical area dropped 34 percent to $159,200 in April, down from $242,600 the prior year. The last time prices were this low was during September 2003, when the median price was $154,100.”

“‘This is stating the obvious, but the overheated housing market caused escalation in the pricing and market value of homes that was just not sustainable,’ said Richard Hope, past president of the Treasure Coast Builders Association. ‘Consumers became well aware of this and backed off on home purchases so they didn’t end up upside down.’”

The Sun Sentinel. “Sales of existing homes in Palm Beach County dropped slightly in April, FAR said Friday. The median price of an existing home in Palm Beach County last month dropped 17 percent, to $314,000 from $376,300 last year.”

“The supply of foreclosed properties will continue to drag down prices across the area, real estate experts say. ‘It’s shark time right now,’ said Ryan Greenblatt, a real estate agent in Boca Raton. ‘Everybody’s swimming, looking for deals.’”

“Greenblatt’s clients, Seth and Stefanie Ellis, bought a four-bedroom home in a new development west of Delray Beach two years ago. But they’re already outgrowing it.”

“They started by asking $799,000, then reduced the price to $775,000. Even so, they’ve had only a few showings in three months. ‘I’m surprised,’ said Seth Ellis. ‘There are a lot of opportunities for buyers out there.’”

“Many buyers are bottom feeding on so-called short sales. Agents say they aren’t having much luck negotiating those deals because overwhelmed lenders don’t respond in a timely manner. In some cases, banks are foreclosing on properties and listing them for less than the short-sale offers that they either rejected or failed to acknowledge.”

“‘I won’t even show short sales anymore,’ said Pamela Orr of Balistreri Realty in Palm Beach and Broward counties. ‘Ninety percent of the time, it doesn’t work out.’”

“‘Nationally, housing activity remains weak,’ said Chris Lafakis, associate economist covering Florida for Moody’s Economy.com. ‘But in Florida prices are coming down and sales activity is picking up. The only way to work through this correction is for prices to fall to a level that’s best for housing affordability and demand.’”

The Miami Herald. “In April, the median price of a single-family home in Miami-Dade fell 24 percent from a year ago to $291,900 and 18 percent in Broward to $298,100. Condo prices also fell in Broward by 24 percent, to a median of $150,000.”

“Doug DeWitt, a Miami real estate agent said he has nine properties under contract and more listings — mostly bank foreclosures — than ever. But, he added, he wouldn’t want to be a seller. ‘If you have to sell right now, you’re at the mercy of a mean, bottom-feeding market.’”

“Tracy Lopez said she and her husband took the plunge last month despite the likelihood of further price declines because they were tired of renting. Lopez said they negotiated a great deal with a motivated seller who cut his asking price by $100,000.”

“The couple got the deal on a home that sits on an acre behind Baptist Hospital, partly because it had been on sale for nearly a year and a half. ‘What my husband’s tactic was, he went in very low. The house was listed at $999,000. He put in an offer at $850,000 or less,’ Lopez said.”

“Eventually, the sellers settled on $900,000. The couple will close next month. Lopez said they found plenty of homes for sale, but many they considered still overpriced. ‘When you look at a $1 million house, you expect a castle, what we found were average houses. What we were finding was really nothing.’”

The Daily Business Review. “Buyers hoping to profit from South Florida’s troubled condo market - are eyeing the expanding inventory of thousands of unsold units. But they can’t get them for the rock bottom prices they are willing to pay.’

“The vultures put much of the blame on lenders who won’t agree to deals. Developers mostly have their hands tied by pricing set in loan agreements made before the condo market crashed. The bargain hunters can be patient. They have the upper hand.”

“An investor who acquires the remaining units in a failed development can be responsible for many of a developer’s legal liabilities, depending on the percentage of units owned by the investor, according to Martin A. Schwartz, an attorney at Miami-based Bilzin Sumberg.”

“Broker Peter Zalewski said most developers are willing to remain liable for any problems that surface in a project for a year after the sale, he said. He said the one prime reason more deals haven’t closed: ‘The moment of capitulation has not occurred with the banks yet.’”

“Until banks are willing to take a short-sale, bulk condo deals will not happen, Zalewski said. ‘There is not a lack of funding, product or willingness,’ he said. ‘Developers want to sell, buyers want to buy, but banks don’t want to take a writeoff.’”

“Zalewski and others in the condo industry said the game will turn once regulators step in.”

The News Press. “Existing homes sales in Lee County in April rose sharply from a year earlier as prices plunged and builders offered deep discounts. The median price fell 29 percent from $283,200 to $200,300 in the same period. Charlotte County sales showed a similar trend: The price was down 27 percent from $197,100 to $143,400.”

“One recent buyer said he’s glad to be buying after a long decline in the market. The median price of a single-family home is now 37 percent off the all-time high of $322,300 reached in December 2005.”

“‘We found it cheaper to buy than rent,’ said Bernie Connor, 71, a retiree from Maine who’s under contract to buy a four-bedroom, two-bath house in northwest Cape Coral for about $110,000.”

“‘I found it more reasonable to buy, naturally, because of the equity,’ he said. ‘The low home market’s probably going to last for another year or so but then it’s going back up - there’s no question about that.’”

“Lawrence Yun, chief economist for the National Association of Realtors, said he saw reasons for optimism for the second half of this year. ‘I would encourage buyers who were disappointed by poor mortgage options to take another look at the market because the lending changes are significant,’ he said.”

“However, other economists were not as optimistic about a rebound in sales. ‘With prices collapsing, the incentive not to buy a home is increasing by the week, and with inventory showing no sign of improvement, prices will keep falling,’ predicted Ian Shepherdson, chief U.S. economist at High Frequency Economics.”

The Herald Tribune. “Realtors have been saying for several months that sales were perking up in Southwest Florida. ‘The market is much healthier now than during this time last year,’ said Luke Andreae of Re/Max Harbor Realty in Punta Gorda. ‘I don’t mean prices, I mean the number of buyers and people out there looking.’”

“Sales in other part of the state continued to fall. In Miami, sales dropped 47 percent, with just 281 homes changing hands — only 13 more than were sold last month in Charlotte County-North Port.”

“In Southwest Florida, median sales prices are still lower than a year ago: 11 percent lower in Sarasota-Bradenton and 27 percent lower in Charlotte County-North Port.”

“Lillian St. George of Punta Gorda Realty thinks it will be several more months until sales pick up significantly. Some homeowners in her territory still refuse to accept the reality of the market and lower their prices, she said.”

“‘Those owners will never sell their properties,’ she said. ‘They’re waiting for the next big boom.’”

“Steve Dutoit, a broker in Sarasota, said inventory is the real problem now. ‘We’ve seen an increase in sales activity, which is good, but we’re still very far away from a balance in our inventory,’ Dutoit said.”

“Before the exuberance of the boom, for example, there were about 2,500 listings in the Sarasota MLS. There are now more than 12,000.”

“While the pace of sales is increasing, there is trouble closing a sizable percentage of pending offers — a phenomenon Dutoit thinks is partly because of short sales being denied by the banks.”

“‘We’re seeing over 50 percent of the homes that go pending come back on the market,’ he said.”

“Markets where speculation was rampant during the boom also showed rebounding sales during April. In Fort Myers-Cape Coral, the number of homes sold spiked 41 percent last month, with the median price slipping by about $83,000 to $200,300.”

The Bradenton Herald. “For the past year, Realtors have talked about pricing a home properly but in an ever-changing market, that is not always an easy task so Ron Cornette, director of training and marketing, and Wagner Realty VP Polly Gaar have been going to all the company’s offices teaching agents how to price homes right.”

“‘You almost have to do a new market analysis every 60 to 90 days because the market is changing,’ Cornette said.”

“Determining what people are willing to pay per square foot to live in a particular neighborhood is one way to ensure a home is priced properly, Cornette said. ‘Our job is to sell it, not just to list it,’ Cornette said.”

“As predicted, condos are taking longer to show signs of recovery. In April, condo sales were down 16 percent from last year, and average prices fell 11 percent to $212,000.”

“‘It took a long time for us to get in the real estate mess we are in today, and it could take a long time to get out of it,’ said broker Rod Rawlings.”

The St Petersburg Times. “Pending sales, homes under contract waiting to close, were up in April in every county in the Tampa Bay area compared to a year earlier. Higher sales correlated with lower prices. The Tampa region’s median home price is $176,000, 26 percent below the high mark of $239,300 in June 2006.”

“‘Price, price, price is what sells a house. Period,’ said Nikki Ubaldini, a Palm Harbor real estate broker. ‘Nine of 10 people just want to know they’re paying a fair price.’”

“April sales in Pinellas, Pasco, Hillsborough and Hernando counties totalled 2,087. That’s 8 percent below April 2007’s total of 2,257. Purchases approximated those of April 1999.”

“Tempering the optimism is the recognition that many homes changed hands through short sales. One-third of Ubaldini’s current business is short sales.”

“The market seems most stable in Hillsborough, where the Greater Tampa Association of Realtors reported sales down only a hair year to year, 1,235 vs. 1,249 a year earlier. Deborah Farmer of Star Light Realty, this year’s president of the Tampa association, hopes to press that advantage into what is now the peak selling season.”

“‘If we don’t make it in April, May or June, that’s pretty much it for us,’ Farmer said.”

The Naples News. “Broker Carla Bonten said one major reason why the Sunshine State defies the country’s average is Florida’s weather. ‘We’re in paradise. That’s what everybody says,’ she said.”

“Broker Wes Brodersen said…when it comes to interpreting how the housing market is doing…people will often see what they want to see. ‘Perception is everything in this business,’ he said. ‘Doom and gloomers always find doom and gloom. They’ve been telling me the sky is falling for the past few years, and you know what? I don’t have a single piece of sky in my hair.’”

“The Tampa Bay metro area lost at least 27,000 jobs in the past year, according to a report released last week. Three days before the report came out, Carl Smith was standing outside the room he had rented by the week. With him were his only possessions - a suitcase and a guitar. The room was clean and the rent was cheap. Only $150 a week. But he could no longer afford even that.”

“So now he had to decide whether to keep trying or give up on Florida for good, take what was left of his savings and hop the 7 p.m. bus to Nashville.”

“Smith is 50, single, and has worked as a carpenter for half his life, usually making around $18 an hour. But that was before the housing market tanked last year.”

“He said that in order to compete for the few remaining jobs, contractors have had to slash costs. To do that, they hire people willing to work for less than half the going wage.”

“‘Illegal workers,’ Smith said. ‘It’s frustrating as hell. I’d be glad to work for a living. I can do framing and high-end trim work. I can cut rafters and stairs. I know what I’m doing. But try to make it on $6 or $7 an hour.’”

“He sold magazine subscriptions over the phone after the construction jobs dried up. But after he paid his rent last week, he had $20 left. ‘You’ve got to eat,’ he said. ‘And the bus costs $3 a day. I don’t know what to say. I’d just as soon get out of here.’”

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