The Housing Bubble

The Ventura County Star reports from California. “With the influx of foreclosures flooding the market, the cooling market is freezing out traditional home sellers like the Vicentes. It has been 13 months since Rose and Manny Vicente put their Simi Valley home up for sale and started boxing possessions. They originally listed their 1,831-square-foot, five-bedroom, 2.5-bath house for $650,000.”

“In August, they lowered their asking price to $595,000. Back then, they thought that it might take another month or two to sell. Rows of stacked boxes have sat collecting dust ever since, and the Vicentes have lowered their asking price to $495,000.”

“‘We didn’t want to, but in order to sell, we didn’t have much choice,’ Rose Vicente said. ‘I’m surprised it’s taking this long.’”

“Most of all, sellers need to be willing to lower their price, said Vickie Howell, a Realtor in Simi Valley and former Realtor for the Vicentes. She says she had suggested lowering the price substantially to compete with nearby distressed properties.”

“‘If you’re not priced very well, or are not a short sale or foreclosure, you’re just not going to get a lot of people to your house,’ Howell said. ‘You’ve just got to ride it out.’”

“The Vicentes are willing to delay their plans to move to Texas to be with their daughter until they find the right buyer. ‘I want to move, but if it takes sitting on it for another year or two, than that’s what we’ll do,’ Rose Vicente said.”

“Realtors have told them that if they want to sell immediately, they should lower their asking price to $395,000. ‘My husband has worked too hard all these years to just give it away,’ Rose Vicente said. ‘This is an investment for our future.’”

The LA Daily News. “The price of a Southern California home plunged a record 27 percent in May from a year ago as foreclosures continued to hammer the market and sales hit a 20-year low, an industry tracker said Monday.”

“Prices declined by large amounts in all six counties and are now near 2004 levels, said DataQuick. In Los Angeles County, the price fell 23.3 percent, to $422,000, also a record percentage drop.”

“Over the past 12 months the region’s median price lost $135,000, declining to $370,000 from a record $505,000 in May 2007, DataQuick said.”

“Sales of foreclosed homes continue to dominate many inland markets and accounted for a record 37.4 percent of May sales. In Los Angeles County, foreclosures accounted for 27 percent of sales - the record is 33 percent in February 1997.”

“Although last month’s sales total was the highest for any month since last August it was still the lowest for a May in DataQuick’s statistics, which go back to 1988.”

“In May, 42 percent of homes sold for less than their prior sale price - about 34 percent less, on average, DataQuick said. Most of the prior sales occurred between early 2004 and mid-2006.”

“While the sales and price numbers are grim, some good news can be found. Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said he’s been hearing from businesses that the falling home prices are attracting new workers to the area. A year ago, the higher prices were keeping them away.”

“‘If you are a seller, this is just another dose of bad news; if you are a financial institution trying to get rid of a (foreclosure) it’s not good news. But if you are a potential buyer, it’s very, very good news,’ he said.”

The Union Tribune. “Home prices continued to tumble in San Diego County last month, with the median reaching its lowest level - $380,000 - since September 2003. San Diego’s median home price peaked in November 2005 at $517,500. Since then, the median has fallen 26.5 percent.”

“William Eierman, a retired banker living in Temecula, began looking for a downtown San Diego condo this week. He and his wife are in no hurry. They don’t plan on moving from their 2.5-acre home until their daughter graduates from school in about four years.”

“Although they’re not necessarily looking to steal a property, the Eiermans think their timing is good. ‘If we can buy it at today’s price and four years from now it’s worth what it was two years ago, how in the world could we go wrong?’ Eierman said.”

“What they found, though, was that they may have to pay more to get what they want - a condo up to 1,800 square feet with a big deck, so they don’t feel like they’re living in a hotel.”

“‘I hoped to spend $500,000,’ Eierman said. ‘It looks like I may have to spend $700,000 or $750,000 to get what I want. That’s OK, because that $750,000 condo was probably a $1 million condo a couple of years ago.’”

The Press Enterprise. “Bargain hunters streamed into the Inland housing market last month, with foreclosures accounting for almost 57 percent of existing home sales in Riverside County and more than 54 percent in San Bernardino County.”

“Lenders are aggressively discounting homes they have seized and want to sell, with a result that has home prices continuing to fall. Last month, the median home price was $290,000 in Riverside County, a drop of $116,000 from a year ago, and $250,250 in San Bernardino County, a decline of $111,500, according to DataQuick.”

“Richard Tegley, a listing agent in Moreno Valley, said when a lender allowed him to slash the price on a repossessed Moreno Valley house from $199,000 to $125,000 he received 18 offers within three days.”

“Andrew LePage, an analyst with DataQuick, said it is possible that the enticement of bargain-priced foreclosures in the more remote parts of Riverside and San Bernardino counties could wane if potential buyers can’t afford to fill up their gas tanks to drive to work.”

“‘Who is to say we won’t have an uneven recovery out of this downturn, where sales volume could come back and then erode again?’ he asked.”

“Among the things that could stall a recovery, he said, would be ‘a slow economy, if not a recession, the credit crunch, continued escalation in foreclosure activity and higher gas and food costs.’”

The Recordnet. “The momentum in existing-home sales in San Joaquin County has continued to build, with May sales reaching the highest monthly level since August 2005 as more buyers snapped up primarily foreclosure properties.”

“The median selling price also continued to slip, sliding from $240,000 in April to $237,000 last month throughout the county, the report said. That’s the lowest median price seen in the county since February 2003.”

“Art Godi of Art Godi Realtors in Stockton said the current sales market feels good, even though lending remains tight, but he added: ‘It’s a different good.’”

“In a traditional sales market, a cross section of houses sell, he said. Currently, about 90 percent of sales are foreclosures and short sales, and almost all are under $250,000, he said, ‘and that’s the bottom of the market. You can get a lot of houses now in that range.’”

“Meanwhile, the auctioneering firm of Hudson & Marshall, which in November staged the first auction of foreclosed homes in Stockton, will be back for another Stockton auction Wednesday. This is a reserve auction, which means sellers have the right to accept or reject any bid.”

“Hudson & Marshall put 61 foreclosed homes up for auction seven months ago. This round, there will be 76 homes. The firm will auction more than 500 bank-owned foreclosure houses this week in Stockton, Modesto, Fresno, Sacramento, Yuba City, the Bay Area and the Seaside/Salinas area.”

From CBS 47. “It’s the latest in a string of auctions in our area, but this time, fewer people attend and the winning bids are lower. It was certainly fast but Fresno’s latest auction of bank-owned homes wasn’t as furious as similar events just a few months ago.”

“At another auction held in Fresno last July, it was standing room only, with many properties prompting bidding wars. So why are fewer people willing to bid this time around? Some speculate prices could still go lower as more foreclosures hit the market.”

The Santa Cruz Sentinel. “More single-family homes priced under $500,000 sold in Santa Cruz County in May. And many of them were on the market because the owners were in financial trouble.”

“Thirty of the 37 sales less than $500,000 were either bank-owned properties following foreclosure or a ’short sale,’ according to Gary Gangnes of Real Options Realty, who tracks the numbers. That helps explain why the median price dropped to $610,000 in May from $661,000 in April. It’s down 19.7 percent from last May, when the median was $760,000.”

“One bank-owned home in Boulder Creek sold at a discount for $212,900; another bank-owned home in Corralitos went for $240,000. ‘Banks need to clear inventory,’ said Richard Robinson, an agent with Thunderbird Real Estate, explaining the discounted pricing.”

“The heirs of a 1911 cabin in the San Lorenzo Valley sold it for $155,500.”

“May sales were up 11 percent compared to April. The typical April-to-April increase has been 9 percent, according to Gangnes. Despite the increase in activity, the number of sales was the lowest in 12 years for the month of May.”

“‘Do you think it’s a coincidence that dropping prices equal more buyers? I think not,’ said Patricia Beckwith, an Aptos accountant who has looking for a home under $550,000 for the past 18 months.”

‘She sees a change in the number of listings she gets from her agent. ‘In the beginning, I got a listing every couple of weeks,’ Beckwith said. ‘Now I get three to five listings each week.’”

“Emilio Martinez, who serves on the city of Watsonville Planning Commission, predicts the median will drop to the low $500,000s. He contends prices were inflated by subprime loans to borrowers who couldn’t afford to repay and lenders who didn’t verify borrowers’ incomes.”

“‘I am still of the opinion that we did not have a work force back in 2002 to substantiate a median-priced home of $400,000,’ he said. ‘If the average income has not changed and the median was in the upper $400,000 or less at that time, we are still in a nose-dive tailspin.’”

The Sacramento Bee. “Developer Allen Wayne Warren once planned to build hundreds of new housing units on and around Del Paso Boulevard, the North Sacramento main street the city has worked for years to revitalize.”

“But the falling real estate market caused Warren to scale back his dreams. Now, he’s negotiating to sell three mostly vacant properties on the boulevard to the Sacramento Housing and Redevelopment Agency.”

“According to a staff report presented to the City Council, money for the purchase could come from $3 million previously set aside by the agency to subsidize a condominium and office project planned by Warren at 2001/2005 Del Paso Blvd. That property is among those he is now offering for sale.”

“If Warren accepts $1.4 million for the mostly vacant properties, he will be taking a substantial loss. According to property records, he paid about $2.5 million for the properties in 2005 and 2006.”

“In 2006, Warren told The Bee that Del Paso was where his New Faze Development was ‘going to make our statement.’”

“Warren was traveling Monday and could not be reached for comment. But in an April interview, he confirmed he was discussing a sale to SHRA. ‘I said to them, ‘We’re going to sell this stuff because we bought it under different circumstances,’ Warren said.”

The Times Standard. “The housing crisis is hitting home. Humboldt County’s notice of default foreclosures hit their highest mark in at least three decades in April.”

“The county’s 63 Notices of default in April represent the highest mark since computerized records began in 1979. The second-highest level was 51, hit in January 1981. Trustee deeds, which occur when the bank officially takes ownership of a property, are also near record highs.”

“HSU Economics professor Erick Eschker said that, with this precipitous increase, the housing market has entered uncharted territory.”

“‘In ‘81 and ‘82, that was during the biggest recession since the Great Depression,’ Eschker said. ‘This is very different. Foreclosures are skyrocketing and we are not in a major recession. People say we may be entering one, but the unemployment rate is, by historical standards, very mild.’”

“Eschker said the jump has less to do with the well-publicized loose lending standards and adjustable-rate mortgages than declining home values. ‘When prices go down, especially for people who purchased a home with no money down, they immediately have negative equity,’ Eschker said. ‘They owe more than the house is worth.’”

“According to figures on ForeclosureRadar, several homeowners in Humboldt County have found themselves in just that scenario. A home currently at auction on 18th Street in Eureka has an estimated value of $160,059. The amount owed is $217,902.”

“In McKinleyville, where 20 homes are currently in some stage of foreclosure, a house on Silverado Avenue is at auction with an estimated value of $140,940 and an outstanding loan amount of $267,719.”

“Similar situations exist in Fortuna, Crescent City, Rio Dell and elsewhere in the county.”

“Eschker said it may be a good time to sell a home, but buyers might want to wait a while longer. ‘If the economy continues to deteriorate, then it will accelerate this wave of foreclosures,’ Eschker said. ‘But (the wave) is not driven by a poor economy; it’s driven by the financial housing bust.’”

“The housing market will correct itself, he said, regardless of whether the government intervenes with bail-out legislation. And the rise in foreclosures, he said, may be collateral damage in a natural market correction.”

“‘Somebody has to chalk up a loss,’ Eschker said. ‘But I’d rather live in a world where housing is affordable, and I think most people would agree.’”

Some housing bubble news from Wall Street and Washington. Bloomberg, “Builders in the U.S. broke ground in May on the fewest houses in 17 years. Housing starts fell 3.3 percent to a 975,000 pace from a revised 1.008 million in April, the Commerce Department said today in Washington. The reading was the lowest since March 1991. The five largest homebuilders have reported a combined $3.4 billion in losses in their most recent quarters as new-home sales fell.”

The Independent from the UK. “The number of new homes built in 2008 will be the lowest in any year since the end of the Second World War, the construction industry said yesterday.”

“‘The impact on the new-build housing market has been more severe than any of us anticipated,’ said Michael Ankers, the Construction Products Association’s chief executive.”

“Mr Ankers also warned that without immediate support for the industry, production cuts would leave most builders without the ability to increase quickly construction once the economic environment improves.”

“‘Unless something is done urgently to address this problem, the capacity in the industry will be cut to a level which will take a long time to build up and it will not be able to meet the inevitable pent-up demand,’ he said.”

From This Is Money UK. “Debt-laden housebuilder Barratt has been telling suppliers it will not be paying some bills in June. Analyst Chris Millington said: ‘I would be surprised if they are not trying to hold onto cash. It is a perfectly sensible business practice, but obviously the knock-on effects for others are not good. I don’t think Barratt will be the only ones doing it. It’s a sharing of the pain if you like.’”

The Pioneer Press. “One of the state’s largest home builders has filed for Chapter 11 bankruptcy reorganization, citing declining home sales and tight credit markets.”

“Lakeville-based MW Johnson Construction Inc. and its Florida operation both will remain open but require immediate financing to cover operating expenses and payroll while they restructure, according to documents filed Friday in U.S. Bankruptcy Court in St. Paul.”

“The two companies reported combined liabilities of between $60 million and $150 million. The filing indicates assets in the same range.”

“Owner Bill Johnson…said the company is ‘deeply saddened by this outcome.’ ‘Our lenders have recently made it very clear that Chapter 11 is the only option they will accept at this point,’ he said.”

From Marketplace. “From Chicago Public Radio, Ashley Gross reports: ‘Justin VanVooren is showing me a dusty field in a village called Sugar Grove, about 45 miles west of Chicago.’”

“Gross: ‘So we’re standing on corn husks here. What have you been hoping for this area to be?’ Justin VanVooren, Sugar Grove’s finance director: ‘The intent is to have a new downtown in this area, stores close to the street…’ Instead, the site is still just a dried-up cornfield. The developer pulled out last year.”

“The village more than doubled in size over the last eight years as Chicagoans moved to the suburbs. But about two years ago, that growth ground to a halt. The development was supposed to have 2,500 homes built around its own town square, but after two years, only about 130 homes have been built. The developer, Kimball Hill, filed for bankruptcy in April.”

“Mike Cohoon is shoveling dirt for a fence he’s building around his house in this new residential community in Sugar Grove. Cohoon: ‘You have major builders that are completely gone off the map right now that three years ago, they were rocking and rolling with building houses, turning houses as fast as they can. We don’t have a town, but we have a house, so can’t complain, right?’”

The Buffalo News. “M&T Bank Corp. sued German banking giant Deutsche Bank AG Monday evening, accusing the global investment banking powerhouse of knowingly selling M&T unsafe mortgage investments.”

“The complex layered securities were ultimately backed by ’subprime mortgages.’ But the investments were highly rated by two of the nation’s major debt-ratings agencies, Standard & Poor’s and Moody’s Corp., giving the bank some comfort.”

“In its lawsuit, M&T claims Deutsche Bank deceived M&T by claiming the two securities it sold were ’safe, secure, and nearly risk-free’ - even safer than corporate debt and nearly as safe as Treasury bills.”

“In fact, the suit says, Deutsche Bank knew that its underwriting standards and due diligence had deteriorated, and bank officials were already experiencing problems with subprime loans and collateral ‘under their control’ in 2006 and early 2007.”

“Also, M&T claims the ratings from Moody’s and S&P were also ‘fraudulent and false’ because Deutsche Bank allegedly withheld information from the ratings firms, including about fraud with some of the loans and the refusal by the loan originators to stand behind them.”

“In the end, M&T cut the value of all three investments from $132 million to just $4.4 million less than a year after buying them.”

“‘If M&T had been aware of the true facts . . . M&T would not have purchased the notes,’ the bank said in the 51-page suit.”

The Plain Dealer. “The foreclosure crisis in Cuyahoga County and other urban communities is now largely a matter of cleaning up a mess that one Cleveland official called ‘Hurricane Greed’ during a congressional field hearing Monday at Cleveland State University.”

“‘We are trying to recover from devastation . . . devastation from unchecked predatory lending practices,’ said Chris Warren, chief of regional development for the city of Cleveland. ‘This has been a murderous, unnatural disaster. One that has wiped out decades of patient, community development work.’”

“During the session, members of Ohio’s congressional delegation listened to and echoed calls for investigations and prosecutions of mortgage fraud.”

“The hearing was part of the subcommittee on housing and community opportunity, which is chaired by Rep. Maxine Waters, a California Democrat. Waters was joined at Monday’s hearing by Reps. Stephanie Tubbs Jones, Dennis Kucinich, Betty Sutton, Marcy Kaptur and Charles Wilson, all Ohio Democrats.”

“Kaptur, who represents the Toledo area, called the subprime lending model a ‘Ponzi-like scheme.’”

“‘I believe it incumbent that Congress authorize a full independent investigation of the roots of this crisis that traces back to the unstable period following the savings-and-loan crisis in the late 1980s,’ she said.”

“High-risk, subprime mortgage lending has existed since the mid-1990s. The subprime lending boom began in 2002 as interest rates dropped to historic lows, leaving mortgage companies and Wall Street with excess billions to spend and invest. That boom went bust in 2007 as real estate prices plummeted, leaving people owing more than their homes were worth.”

“Subprime lending peaked in Cuyahoga County in 2005, federal mortgage data show. Nearly $1.6 billion in subprime loans were originated that year in the county. The number dropped to $1.4 billion in 2006. Today, few subprime programs remain.”

“In poorer cities like Cleveland, abandonment of homes is accelerated by foreclosures. The city has an estimated 10,000 vacant or abandoned properties. Cleveland Councilman Tony Brancatelli, who represents the hard-hit Slavic Village neighborhood, calls those properties: ‘10,000 points of blight.’”

“A better place to host a congressional hearing on foreclosures Wednesday might have been East 144th Street. On this boarded-up and overgrown half-mile block of Cleveland, there have been foreclosure filings against at least 37 homes since 2006.”

“Retired factory worker Lloyd Allen has taken it upon himself to tidy up the house next door to him, another foreclosed property. When thieves broke out the third-floor window and left the glass on the lawn below, he cleaned it up.”

“‘When I moved here, it was beautiful,’ said Allen, a 50-year resident of the street. ‘The homeowners were older people. Now they’ve passed away, the kids took over the property and started renting to anybody.’”

“He, like other neighbors, complained about the crime the empty houses breed. ‘I bet there’s not an abandoned house on this street that has any copper in it.’”

“He cuts the grass on the front yard of the empty home next door ‘because it looks good for my property.’ Anne Spires owes him a thank you, although she doesn’t know him. The South Carolina woman bought the home next to Allen through a bank sale, with a partner.”

“She has never seen it. When contacted by a reporter, she said: ‘I’m looking for someone to rent it.’”

The Associated Press. “U.S. Rep. Maxine Waters, who chairs the subcommittee on Housing and Community Opportunity, told an audience at Cleveland State University that she hopes the House can negotiate a foreclosure rescue package with the Senate that will reach President Bush’s desk by July 4.”

“In January, Cleveland sued 21 of the nation’s biggest mortgage leaders, seeking to win hundreds of millions of dollars that it wants to use to rebuild neighborhoods devastated by the subprime lending crisis.”

“The defendants include both sides of a pending $4.1 billion takeover — Bank of America and Countrywide Financial, which will be bought by BofA. The acquisition will make Charlotte-based Bank of America Corp. the nation’s biggest mortgage lender and loan servicer.”

“Michael Gross, a managing director for Countrywide, told the panel that the company has refused to join other Ohio lenders in a compact to curb foreclosures because it services nine million loans across the nation and must maintain consistent loan standards in every state.”

“‘Countrywide can’t get off just with the sale to Bank of America,’ Waters told Gross. ‘You have become a poster child for what is wrong.’”

“Questions linger about the sweetheart loans Senator Christopher Dodd got in 2003 from Angelo Mozilo. At the time, Mr. Mozilo was chairman and CEO of Countrywide, which would become a leading player in the subprime-mortgage crisis and would benefit greatly if Congress passes Sen. Dodd’s lending-industry bailout bill.”

“Does anyone believe Sen. Dodd when he says he and his wife did not ‘anticipate any special treatment’ from Countrywide and were unaware they got it? As ranking member of the Banking Committee (he’s now its chairman), he was keenly aware of mortgage rates in 2003.”

“Yet he implausibly suggests Countrywide issued him and his wife two subprime loans totaling $781,000 and charged them below-market rates, waived $10,000 in fees and points, and ultimately saved them $75,000 simply because they ’shopped around.’”

“What’s the difference between accepting sweetheart mortgages and unsolicited bribes? Was Sen. Dodd’s bailout bill that would shift $300 billion in non-performing mortgages - Countrywide alone holds $6 billion - from reckless lenders to taxpayers the quid pro quo payoff?”

“Did Sen. Dodd illegally accept special loans offered solely because of his position? Did he violate Senate rules that bar members from receiving gifts worth $100 or more a year from companies that have registered lobbyists?”

“When will Sen. Dodd come clean? When can Americans expect the criminal and ethics investigations to begin?”

The Denver Post reports from Colorado. “Andy Klein is a bargain shopper - on a huge scale. Since late last year, Klein has bought a few hundred lots for about half of what they sold for just two years ago. Klein is buying properties from banks and builders from as far north as Longmont and Brighton to as far south as Colorado Springs. ‘Homebuilders don’t want to hold inventory of platted lots or finished lots unless they believe they can be built on in the next three years,’ Klein said. ‘That leaves a lot of disposable inventory.’”

“The 10 largest public homebuilders reduced the number of lots in their inventory by 39 percent last year, according to the report by the real-estate investment arm of Deutsche Bank’s asset-management division. The majority of the decreases came from write-offs of land options.”

“‘There was a lot of speculative hoarding by homebuilders in the face of rapidly rising prices,’ said Robert Denk, an economist at the National Association of Homebuilders. ‘Now that it’s hit its height, it makes sense that a lot is going to get dumped at lower prices.’”

The Daily Planet from Colorado. “Wrap your head around this one. Right now in Telluride, real-estate sales volume is at its lowest point since 2003, and the number of properties changing hands has dipped to levels not seen since 1988. And yet, the average price of real estate has never been higher.”

“‘As much as we like to pretend that we’re recession-proof and believe that we’re recession-proof the national economy has an effect on us,’ said Lars Carlson, a broker with Peaks Real Estate.”

“And yet, home prices aren’t really budging.”

“‘Properties in this market do not lose value,’ said Judi Kiernan, owner of Telluride Consulting. ‘There’s a limited number we can’t make anymore. We’re not expanding like a Steamboat or Vail. I don’t want to sound like a Pollyanna, but the idea is, Is value falling? No, value is not falling. Expectations are being adjusted.’”

“Brokers say that buyers seem to be circling the airport right now, unsure about whether they should buy homes or wait another few months and hope they’ll be able to bargain sellers to a better deal.”

“‘Everyone’s trying to time the bottom of the market. They don’t want to be the guy who bought something and paid too much,’ said Matt Hintermeister, a broker with Peaks Real Estate.”

The Sun News from New Mexico. “Juan Arrendondo would like to own a house some day. The Las Cruces teacher, though, is engaged to be married and is not too sure a mortgage fits his life right now. ‘I do want to buy, but later,’ the 33-year-old New Mexico State grad said.”

“Arrendondo said he has researched a possible purchase but he and his fiancee have decided for now to rent a house near Roadrunner Parkway. The tightening of the credit market over the past year has caused him to delay taking on a mortgage, Arrendondo said. ‘Renting makes the most sense right now,’ he said.”

“Many are people who can’t afford to buy right now, thus houses also are taking longer to sell, said Cheryl Butler of Active Rentals. ‘I live on Topley (Avenue) and there are seven houses for sale within a two block radius,’ she said.”

“Jennifer Zappone of Landmark Real Estate said some builders have decided to put their homes up for rent while they try to sell them. ‘They’re trying to make the mortgage payment,’ she said.”

The Arizona Republic. “For decades, everyone assumed Arizona’s population-projection figures were reliable. Turns out they are not. Metropolitan Phoenix’s housing boom of 2003-06 skewed the state’s population numbers, leading to projections that planners, economists and government officials agree are inflated.”

“‘Population growth is the beginning of the food chain of Arizona’s economy,’ said Ioanna Morfessis, founding chief executive of the Greater Phoenix Economic Council. ‘But if the numbers are wrong, and I think the state’s population numbers are inflated, it’s going to be a house of cards for the economy.’”

“During the height of the boom in 2005, state and census estimates showed a record 196,000 people moved to the Phoenix area. But those projections, based largely on housing permits and occupancy numbers, didn’t accurately reflect how many people were moving to the Valley.”

“The large number of investor-owned properties inflated figures. And the number of building permits exceeded the number of houses actually sold. For example, a record 62,000 new homes went up in metro Phoenix during 2005 but only about 40,000 of those were bought by people who moved into them.”

“Jay Butler, director of realty studies at Arizona State University Polytechnic, says part of the current formula for projecting Arizona’s population assumes 1 to 2 percent of the state’s homes are vacant.”

“‘Now we know at least 10 percent of the new homes built during the boom were vacant, and foreclosures are leaving more homes empty,’ Butler said. ‘No one really knows how many homes are empty.’”

The Yuma Sun from Arizona. “The American Dream has become a nightmare for many Americans - Yumans among them - who got caught up in the real estate boom of a few years ago. ‘There’s more lower-end homes selling now,’ said Joe Wehrle, Yuma County Assessor. ‘We have a different picture. In the past, we had several upper-range homes sold. The top end just is not selling well.’”

“Michael Hall, broker for ERA Matt Fischer Realtor, said he thinks a better reflection of the market is a 20-25 percent drop in the average sales prices in the Yuma area in the past couple of years. ‘Prices have dropped in all the neighborhoods,’ he said.”

“With the inventory of homes on the resale market or being built, potential buyers have a lot of choices. Meanwhile, interest rates remain low and FHA loan levels have been raised to $271,050 through 2008.”

“‘That’s opened the door for anything under that price through the end of the year,’ said Hall. ‘There’s been so much negative media. But that’s national. Yuma is in a bubble.’”

The Daily News on Arizona. “Life hasn’t turned out to be a dream in the desert for the retired Queens man who moved to Arizona by cab along with his wife and two cats. Just months after Bob and Betty Matas last year made their cross-country trek and international headlines, Betty, 75, passed away.”

‘Now, Bob Matas, 74, says he can’t afford the payments on the house in upscale Sedona that the couple bought - and he’s moving into a trailer park.”

“The eccentric couple opted for a cab to Arizona in April 2007 in part because they wanted to start a promising chapter of their lives with an adventure. They also didn’t want to put their beloved cats through the ordeal of traveling in the cargo hold of a plane.”

“Matas said he recently consulted a lawyer because he was unable to get a loan. The value of his Sedona house at the foot of a mountain range had plummeted in the national housing market crisis.”

“His mortgage, credit card and other debts were substantial - his savings, modest. The lawyer urged Bob Matas to ‘walk away’ from his new home and let it slide into foreclosure, Matas said. He bought a $40,000 mobile home in a trailer park, also in Sedona, Matas said.”

“‘People are doing it all over the country,’ he said. ‘I never thought I would have to do it. It hurts, but what am I going to do.’”

“Matas doesn’t have an exact moving date. California transplant and friend Robin Briggman, who’s been helping Matas, said the move was unavoidable. ‘We looked at it from every angle,’ she said. ‘It’s just the way it is. It’s the bottom line. He’s off to the next chapter.’”

The Las Vegas Business Press from Nevada. “Vegas Grand, the local condominium complex in foreclosure, will finish construction next month. The 20-acre, 212-unit development is for sale. There is no official asking price.”

“‘We have been seeing strong interest in the property,’ said Geoffrey West, a first vice president with CB Richard Ellis. ‘This is the first fully completed vacant mid-rise condo project that has come to market.’”

“It cost $72 million to complete. There is also an adjacent undeveloped 16 acre tract, with entitlements for 782 more units. Its estimated value is $44 million, or $2.75 million per acre, which is 40 percent less than last year.”

“Lehman Bros. gained control of the project in October for $55 million, or $2.75 million-per-acre, after Orlando, Fla.-based developer Del American defaulted on its loan. The outstanding balance was reportedly between $90 million to $100 million.”

“Del American acquired the Vegas Grand property in May 2003 for about $4 million, or $200,000-per-acre. In 2004, the developer received $240 million in project financing from Lehman Bros. and Munich, Germany-based Hypo Real Estate Capital Corp.”

“At one time, about 90 percent of the project’s first phase…(which) started in the $200,000s, had been reserved. But Del American later canceled those reservations and raised prices by up to 50 percent due to market condition changes. It prompted a class-action lawsuit by buyers for breach of contract, fraud and deceptive trade practices.”

“Although the Vegas Grand was originally envisioned as luxury condos, the property is now expected to be used as apartments, time shares, student housing or hotel rooms. The project has been cleared of all encumbrances. The property is expected to be under contract by month’s end, with the deal closing by the third quarter.

“‘Although there is no official asking price, about $107 million has been spent on the development thus far,’ West said. ‘Unfortunately, we probably won’t recover every dollar from it due to the market conditions.’”

The Review Journal from Nevada. “Luxury homes in Las Vegas have held their value in a declining housing market in which one in every 44 homes has entered some stage of foreclosure, a local appraiser said. ‘I’m not so sure at $1 million, but at $1.5 million and up, it’s stronger today than it has ever been in this city,’ Scott Dugan of R. Scott Dugan Appraisal said.”

“The luxury segment from $1 million to $3 million is not looking quite as good, said Ken Lowman, broker and owner of Luxury Homes of Las Vegas. Sales dropped to 53 in the first quarter from 123 a year ago.”

“Homes that were valued at or near $1 million, including tract homes in upscale neighborhoods, have dropped back below the seven-figure threshold, resulting in fewer luxury sales, Lowman said.”

“Steve Hawks of ReMax Platinum said the luxury housing market is about to be butchered in the ‘million-dollar massacre.’”

“He said so-called ‘jumbo loans’ have all but dried up because of the massive amount of mortgage fraud that found Las Vegas at the center of an FBI investigation. Jumbo rates have increased by a point or two and the borrower has to put down 15 percent to 25 percent, Hawks said.”

“Homes with artificially inflated values are now going into foreclosure or short sale, Hawks said.”

“‘We’re in the first inning of the million-dollar market plunge,’ he said. ‘We see some examples already. Several guard-gated communities that have a high amount of vacant homes, short sales and bank-owned (homes) are starting to pop up slowly.’”

“The hardest-hit sector will be semicustom homes in guard-gated communities, Hawks said. Homes in those areas that were going for $1 million to $1.5 million are now listed for $600,000 to $800,000 and will probably drop to $500,000 or $600,000, he said.”

“Though not as prevalent as they are in the lower markets, ‘mortgage walkers’ are letting banks take back high-end homes, Hawks said. His partner has a Seven Hills foreclosure home in escrow for $750,000 that was once valued at $1.4 million.”

Las Vegas Now from Nevada. “Our community’s foreclosure crisis has many parts, some of which are only coming to light with the passage of time. With banks now owning so many homes, local realtors say they aren’t moving fast enough when it comes to selling property banks admit they don’t want to own in the first place.”

“When Karen Reffner got divorced and lost her job due to an illness, she was convinced she was going to lose the home she had lived in for the past nine years.”

“‘I spent all these years putting my heart into it, and it’s gone. Sorry. I had a lot of good times, but when you spend every day and night working and doing all of this, it is very hard,’ she said.”

“So Reffner moved into a rental home and started working with a realtor to sell her home in what is called a short sale. She was hoping to convince her lender, Bank of America, to accept less than the loan amount in exchange for a quick sale.”

“The problem is Reffner says it was next to impossible to get any kind of answer from the bank, ‘At that point, we did not have any contact person. It goes in a pile. When the things come in, it just goes in a pile. They did not know how to work with it and they’ve even told me this is all new to us.’”

“Bill Uffelman represents the banking industry in Nevada, ‘We’re certainly not in the property management business.’”

“He says banks themselves are in unfamiliar territory and are actively working to adapt to today’s market conditions. ‘They are shifting staff, shifting resources. It becomes a re-training, re-direction. You’ve got staff so can we do something to make it better? And this is literally a developing process,’ he said.”

“Gail Selter, Karen Reffner’s realtor, says she’s seeing signs that some of the bigger lenders are slowly adapting, but the frustrations are ongoing.”

“‘They will say, ‘We’ll call you back in two business days,’ and they don’t. And then we have to get back on the phone with them. So it’s an aggravating part of our business to have to be able to maintain a log and keep on top of them,’ she said.”

“Selter says delays have caused two potential buyers to walk from this short sale and for every day that passes without a sale, Reffner says her credit, and her spirit, is taking a beating.”

“‘It is to the point where I am so tired of dealing with it, I just want to go on with my life,’ she said.”

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