The Housing Bubble

The San Diego Business Journal reports from California. “Too many buyers remain on the sidelines, according to the CEO of Century 21. ‘I’m fearful that … the average individual will miss what I think is one of the greatest opportunities I’ve seen in my years in this business,’ said Thomas Kunz in a recent interview with the Business Journal.”

“One franchisee, broker David Romero, said he recently sold a one-bedroom condominium on the 12th floor of the Aqua Vista residential high-rise in Little Italy for $260,000. ‘Two years ago, you couldn’t have touched it at that price,’ Romero said.”

“Romero said a 1,500-square-foot EastLake home sold for $438,000, and the seller purchased a $525,000 foreclosed home down the street that sold two years ago for $810,000.”

“The high rate of foreclosures is expected to peak this summer and run its course by year end, said Alan Nevin, director of research for MarketPointe Realty Advisors in San Diego. ‘We should be building 15,000 to 17,000 new housing units a year, (but) last year we built 6,000,’ said Nevin. ‘As the economy really turns around, we will (have) a housing shortage.’”

The Union Tribune. “Last month, 6,524 San Diego households went into default or foreclosure, according to Default Research. More homes went into default in that single month than in all of 2005, when the market was at its peak.”

“‘The only people doing business in this market are people handling REOs,’ said local real estate broker Bob Schwartz. ‘I’ve been in this business for more than 30 years, and I haven’t seen things this bad. Things are pretty bleak.’”

The North County Times. “From the start of a housing recession that has sent average real estate prices in North County plummeting, some housing analysts said expensive neighborhoods would persevere, dodging steep declines. That’s no longer true.”

“Several homes in one of North County’s ritzier regions, the San Diego neighborhoods of Rancho Penasquitos and Rancho Bernardo, have tumbled 30 percent in value. The drop in prices has drilled gaping holes into a theory that the higher-end market could be immune to the housing recession.”

“‘All across the board, the market’s been hit,’ said Eric Elegado, a real estate agent based in Mira Mesa. ‘Homes that sold for a million, they’re going for $600,000.’”

“Recently, the rate of foreclosures has begun to approach the county average. In May, notices of default spiked. And the 129 foreclosure filings that month were 45 percent higher than the previous high for the region, set the month before, according to ForeclosureRadar.”

“‘It’s really hard for people to realize that when they try to sell their house, they’re not going to get what their neighbor did in 2005,’ said Louie Ortiz, a high-end real estate agent based in Carmel Valley. ‘A lot of people have chosen to rent it out and even take a slight negative cash flow. I talked to one homeowner who said that even if they lost $1,000 a month, it’s better than selling now.’”

The Press Telegram. “North Long Beach resident Annabel Hall remembers the nice couple and their mother that lived across the street. But like so many other homeowners across the nation, in California, and throughout Long Beach, the couple couldn’t meet their financial obligations, so their home on Morningside Street went into foreclosure.”

“She didn’t even get a ‘goodbye’ from them before they moved out, apparently in the middle of the night, she said. ‘We woke up, and … they were gone,’ Hall said.”

“That was about a year ago. Now, the brown one-story, three-bedroom stucco house seems like a stripped-down car.”

“‘They just walked away from it,’ said next-door neighbor Tom Campion. ‘It was creative financing and they got in over their head.’”

“From April 2007 to March 2008, Long Beach racked up 748 foreclosures, according to statistics compiled by the city’s Economic Development Bureau. Of those, 561 were single-family homes, while 187 were condominiums, ranging in price from $100,000 to more than $1 million.”

“Many banks are selling the homes for far less than they had been worth, said Benny Nassiri, a Realtor who works with IndyMac Bank, which owns some foreclosed Long Beach-area properties.”

“For example, a two-unit duplex that Nassiri is trying to sell on Del Amo Boulevard in North Long Beach was assessed at $510,000 in 2007, but is now listed for sale at $268,000, she said.”

“Nassiri said many banks are willing to give a loan with no or little down payment. ‘If they don’t do that, those properties are going to sit on the market and nobody’s going to buy them,’ Nassiri said.”

“Nassiri said that some home buyers may not be able to afford their loans, even if the home price is more reasonable. ‘A lot of people aren’t qualified to buy, in my opinion, but they are buying because there’s no money down,’ Nassiri said.”

“Which means the foreclosure crisis may not be over yet, she said. ‘I have a feeling the people buying today, (their) property will go into foreclosure again,’ Nassiri said.”

The Wall Street Journal. “Mark Verge, owner of an apartment-finding service in Santa Monica, Calif., says he’s getting 7,000 to 8,000 inquiries a month from would-be renters, up 15 percent from last year. Many are from people who are facing or have gone through foreclosure, he says.”

“Matthew Cooper, a 31-year-old advertising salesman, was excited to buy his first place in 2002: a two-bedroom condo with a fireplace a few blocks from the beach in Santa Monica.”

“And he found the payments on the $450,000 property affordable; his interest-only loan cost about $2,800 a month. But by 2005, the payments were about $4,500. He lost the condo eight months ago.”

“Now he’s living in a one-bedroom rental not far away for $1,700 a month. He’s had to squeeze his office into his bedroom, and he says he holds fewer dinner parties because the apartment feels cramped. Although the stress of trying to make impossible mortgage payments is gone, he would like to own again-with a fixed-rate loan.”

“‘Buying is the only way to accumulate wealth,’ he says.”

The Ventura County Star. “Community leaders are looking at the feasibility of converting 100 foreclosed homes in Ventura County into shelters for the homeless. With a newly released survey showing more than half the people staying in shelters had been sleeping outdoors and in cars, officials see a chance in the surging foreclosures and falling prices.”

“About 2,000 homes in Ventura County are now owned by banks, said county Supervisor Kathy Long, one of the key figures behind the meeting.”

“‘There has to be an opportunity,’ she said.”

The Times Herald. “The city’s bankruptcy notwithstanding, existing home sales in Vallejo are booming despite continued declines in new home sales, according to a new study and local experts.”

“The latest report from the California Building Industry Association shows overall new home sales in April were off by 55 percent over last year in the Vallejo area, a figure slightly worse than the state’s numbers, said Jonathan Dienhart of the firm that conducted the survey.”

“There were 49 sales of new homes in subdivisions of 10 units or more in Solano County in April compared to 109 a year ago, Dienhart said. And prices of those homes were down about 11 percent from a year ago, he added.”

“The activity in the Napa area is so slight it’s not statistically applicable, Dienhart said.”

“‘(Solano County’s numbers) are fairly typical of what we’re seeing around the state, which shows that we’re sort of scraping around the bottom in a general sense,’ he said.”

“The resale market in Vallejo, on the other hand, is doing well, likely because prices have dropped to levels many thought would never be seen again in the Bay Area, said Solano Association of Realtors president Lori Collins.”

“‘I wrote three offers this week and I spoke to another agent who wrote six,’ Collins said. ‘I know of a nice 3-bedroom, 1-bath home that sold for about $160,000.’”

“The plethora of bank-owned homes has forced prices down below where many homeowners can realize any equity, she said. This is bad news for homeowners hoping to sell but good news for first-time home buyers and investors, who can now hope to get rents to cover a home’s mortgage often with money left over, she added.”

“‘Real estate is a long-term investment and always has been,’ Collins said. ‘Since 1900, you can go back and see cycles like this, but in the long term, values always increase.’”

“‘Things don’t seem to be getting worse faster,’ Dienhart said. ‘The pace at which it’s getting worse is slowing. But how long we’re down along the bottom is anybody’s guess.’”

The Record Searchlight. “Redding has made itself a land deal it could not refuse. The Redevelopment Agency last week bought 113 surplus acres near Quartz Hill Road from the city for $3.2 million. That was the property’s appraised value in June 2006, just after the real estate market peaked.”

“A note on the city’s surplus property Web page said an updated appraisal on the property was needed. But Redding did not seek such an appraisal when it bought the land — known as the Hammon property — from itself.”

“‘We chose not to have it reappraised, in part because it’s a transaction between two related entities,’ said City Manager Kurt Starman, noting the legal distinction between the city and its redevelopment agency. The City Council doubles as the agency board.”

“The city could certainly use the cash from a surplus land sale right now. Money from the sale will reimburse Redding’s wastewater utility and general fund nearly $900,000 for payment of delinquent taxes, assessments and other Hammon property purchases costs.”

“The Hammon land transfer also serves a strategic purpose, Starman said. California legislators have discussed siphoning affordable housing money from cities into state coffers to help plug a yawning deficit.”

“‘We thought it would be good to encumber those funds so the state cannot confiscate them,’ Starman said.”

“The Hammon property came to the city courtesy of California’s last housing slump, in the early 1990s. Max and Marcella Hammon had applied for a subdivision map in 1990, but the property went into foreclosure in 1992, piling up unpaid property taxes, water and sewer assessments and penalties ultimately totaling $826,804.”

“The Hammon property purchase means the agency also will be funding affordable housing on vacant land near where developers over the past 10 years have built some of Redding’s largest and most expensive homes. The city bought the land from the county for $2,500 in 2003.”

A report from the Arizona Republic. “Thirty percent of all homes on the market in Anthem are being sold by banks, not homeowners. And the end may not be in sight. One Anthem homeowner who got caught up in the market frenzy of a few years ago is Tom Zotovich. ‘I was under the assumption that the real estate market would still go up for a while or at least maintain itself,’ Zotovich said.”

“Two years ago, after a divorce, he bought his ex-wife’s share of their home and decided to refinance at the worst possible time. Home prices soon spiraled downward, and Zotovich’s mortgage became more than he could bear. Although he regrets not selling his house at the time of his divorce, when the market had peaked, he does not blame his lender or even himself.”

“‘It was nobody’s fault,’ Zotovich said. ‘It’s just the way the market worked out.’”

“The impact of foreclosures and short sales in Anthem is even being felt in the state Capitol. State Rep. Doug Clark announced earlier this year that he would not be running for re-election in November because of the housing woes.”

“Clark, who has worked in real estate in Anthem for eight years, has been unable to sufficiently supplement his modest legislative paycheck. In the short term, he foresees at least two more years of struggling housing market in Anthem.”

“‘I would definitely return to the state House of Representatives if real estate were better,’ Clark said.”

“The housing market continues to search for a bottom as foreclosures continue to climb across metropolitan Phoenix. In May, 3,402 homes across Maricopa County went into foreclosure, according to the Information Market. Almost all of those homes went back to the lenders. May’s foreclosure figure is up from the 2,969 foreclosures, or trustee deed sales, filed in April.”

“Don’t expect foreclosures to slow this month either. The number of pre-foreclosures, or notice of trustee sales, filed also climbed in May. Last month, there were 6,384 pre-foreclosures filed in Maricopa County, compared with 6,143 in April.”

“New and existing Valley home sales ticked up in May, according to analyst RL Brown’s Phoenix Housing Market Letter. Building permits were up slightly.”

“There were a total of 7,202 new and existing home sales in May, compared with 6,636 in April. Home-building permits totaled 1,552 in May, up from 1,473 in April.”

“The median price of a new Valley home has dropped to $218,861, down from $267,934 a year ago. That’s an 18 percent drop, but Brown said it improves the market’s affordability, which will draw more buyers.”

The East Valley Tribune from Arizona. “A few builders are bucking the trend and starting work on new master-planned communities with thousands of homes - betting the right price and location will entice buyers. Tempe-based Fulton Homes opened sales for its latest project - a 2,100-home master-planned community near Queen Creek.”

“‘Houses are selling if they’re priced right, if they’re in good shape and in a good area,’ said Dennis Webb, Fulton’s VP of operations.”

“When Fulton began planning out the project three years ago, prices were originally set from the mid-$200,000s up to $450,000. Now, houses start at just less than $150,000 for starter homes and reach up to $300,000 for a more-than-4,000-square-foot house.”

“The company was able to cut prices by redesigning the houses, Webb said. Laminate countertops became standard instead of granite. And 10-foot ceilings were lowered to 9 feet.”

“Fulton isn’t the only builder moving forward on projects. Blandford Homes recently started work on a 1,200-home development, called Mountain Bridge in northeast Mesa.”

“‘Just because the market is down doesn’t necessarily mean it wouldn’t be a good time to enter the market,’ said Ben Sage, head of Houston-based Metrostudy’s Arizona division.”

“Some builders want to be prepared for the market’s return. Others have poured so much money into projects, it’s not that much more expensive to build some model homes, Sage said.”

The Kingman Daily Miner from Arizona. “Sharon Givans, the 2009 president-elect of the Kingman/Golden Valley Association of Realtors, said that while it’s hard to say whether or not the local market has bottomed out for certain, signs seem to be pointing to an uptick over last year’s sales figures.”

“Looking solely at single-family residences, Givans said 35 homes were sold in January and only 27 in February. Then, for the first time in two years, the market finally began outpacing the previous year’s figures. Givans said the primary reason more homes are being sold is because prices are finally dropping to levels buyers find reasonable.”

‘Houses within the $140-160,000 range have been selling the best thus far this year, with the median price for June hovering around $157,000. She did not, however, go so far as to say the market has hit bottom just yet. ‘What’s really happening in the market is prices are trending down,’ Givans said.”

“Kingman Realtor Todd Tarson conducts his own analyses of the housing numbers each month. He takes his sample data from a smaller area encompassing Kingman proper, north Kingman, the Hualapai Mountain area and the Valle Vista area.”

“Tarson is also optimistic about the market, but much more guardedly so than Givans. While his numbers agree that sales since March have been edging out 2007’s, Tarson noted the first two months of the year were the worst he’s seen since he started tracking data in 2004.”

“‘In 2006, clearly you can see activity falling off a cliff, and then in 2007, none of the figures beat 2006,’ Tarson said. ‘I predict 2007 won’t be hard to beat this year, but the first two months of this year were historic lows. They were the lowest numbers I ever posted.’”

“Tarson also pointed out that, while home sales are higher than they were a year ago, they still have yet to come anywhere near earlier levels. The 52 homes sold in his coverage area for 2008 only barely edged out last year’s figure of 51.”

“‘In 2005, in April, we sold a little over 90 homes,’ he said. ‘92 in 2005, 52 in 2008.’”

“Tarson also expressed concern that, even though there are plenty of homes for sale at increasingly reasonable prices, the demand for those houses could be best generated if people saw Kingman as a place worth moving to. As long as the local economy continues to stagnate, he said, that wasn’t likely to happen.”

“‘We have a surplus of homes for sale,’ he said. ‘There’s too many of us trying to sell to too small of a population of buyers at this time.’”

The Review Journal from Nevada. “Clark County has determined that the Meridian Luxury Suites on Flamingo Road, just east of the Strip, is illegally renting condominium units for overnight use. The Meridian is in the process of converting its upscale condominium units from owner occupancy and long-term rentals only, to resort condo use as well.”

“The upscale property’s practice also has caused friction with resident owners — who bought without the expectation that their neighbors might change nightly.”

“Kathleen Mannix, who owns the Meridian unit in which she lives, believes the property has been doing overnight rentals since at least May 2007, when she moved in. She said no one informed her at the time of her purchase about the short-term rentals.”

“‘I could tell. People were coming with suitcases,’ she recalled.”

“When challenged to prove that the visitors were paying by the night, she did Internet research that turned up guest reviews of the Meridian accommodations, dating back to early 2007.”

“At a Monday meeting of the Meridian Private Residences Homeowners Association, assoc. president Michael Mackenzie gave no indication that the hotel operations had ceased. In fact he discussed short-term rentals available that day, according to a tape recording given to the newspaper.”

“The hotel operation involves 420 of the of the property’s 678 condo units, Mackenzie told his audience. But only about half of the 420 are being rented. He cited the sagging economy as the reason that more units are not being rented out in the hotel operation.”

“Several Meridian guests, who were sunning poolside on May 18, told a reporter they had paid for short stays.”

“Melbourne, Fla., resident Kirk Wayne, marveled at the low room price his wife booked online for a spacious suite for him at the off-Strip location.”

“‘She said, ‘Cancel (the Venetian reservations),’ Wayne recalled. He said he was paying $119 a night during the week and $169 on the weekend. ‘The cheapest room at the Venetian was $400,’ Wayne added.”

“Another guest, Ian Schmidt, described the Meridian as ‘the cheapest hotel I ever stayed at.’ He reported paying only $800 for a five-day stay for his party of six from the Midwest.”

“‘I didn’t realize until 10 seconds ago that people actually live here,’ Schmidt said.”

“Donald Trump’s $1.2 billion Trump International Hotel & Tower and carry prices between $700,000 and $5 million. Trump, the opinionated billionaire developer, crowed over how quickly units were being sold at his noncasino Las Vegas venture.”

“Before the building was topped off a year ago, Trump said all the units had been reserved. Buyers plunked down 20 percent nonrefundable deposits for the 64-story tower’s studios, one-bedrooms and penthouses.”

“This week, Trump continued to paint a positive picture despite having closed sales on only roughly 20 percent of the building. Banks, he said, are not as quick these days to loan money for high-rise condo purchases.”

“‘Some of my buyers are richer than the banks,’ Trump said from his New York offices. ‘We’re working with people and I think we’re doing pretty well. Listen, we only started closings a short time ago. It’s a much more complicated process today.’”

“The major issue facing Trump is that a unit can’t be placed into the hotel’s reservation system until it is sold. Trump bookings start at $349 per night, some of the highest rates on the Strip.”

“‘This is a wonderful property,’ Trump said of the tower, which is wrapped in 24-karat gold glass and has a lobby decorated with ornate chandeliers, gold-accented features and Italian marble.”

“‘People love the building. I love the building,’ he added. ‘Everyone, including Las Vegas, is going through a tough time, however. We’ll be fine.’”

“A state panel on Friday offered the most pessimistic tax revenue projection to date, prompting Gov. Jim Gibbons to delay a special legislative session to allow more time to grapple with a quarter billion dollars in new budget cuts.”

“The new shortfall figure is $250 million…on top of $913 million in cuts already made to the current 2007-2009 two-year budget, bringing the total to nearly $1.2 billion.”

“Gibbons said the size of the new shortfall, combined with an announcement Friday of a dramatic jump in the unemployment rate to a level not seen since 1994, made it prudent to give lawmakers more time to consider how to balance the budget.”

“‘Today’s revelation that unemployment in Nevada has reached levels not seen even in the months following the terrorist attacks of Sept. 11 reinforces the need for this special session of the Legislature to cope with our budget crisis,’ he said.”

“‘The trucking industry, the one that I represent, we’ve seen a decrease in the number of trucks registered in the state of Nevada since the first of the year, by almost 12 percent,’ said Paul Enos of the Nevada Motor Transport Association. ‘I think everybody’s hurting. It’s painful for everybody right now.’”

The Nevada Appeal. “‘There is no expectation the market is going to improve at this time,’ said Cathy Santoro, a VP with MGM-Mirage in Las Vegas.”

“She said hard economic times are reducing the number of people going to shows and the amount they are willing to pay for tickets, which can range up to $200 or more for premium concerts.”

“Santoro said MGM-Mirage is seeing a drop in food services, a large category for sales tax revenues. And she pointed out there has been a big drop in auto sales as well. And all agreed housing sales are in the tank right now.”

“Mike Alastuey, named to the panel by Assembly Speaker Barbara Buckley, questioned whether housing sales and construction might be starting to stabilize. But no one else on the panel was willing to bet on that.”

“In fact, the worst drop in any revenue category was to the Real Property Transfer Tax. The forum members Friday predicted that revenue source will fall 51 percent below the 2007 projections to just $119.6 million for the biennium.”

From Fox 5 News in Nevada. “Nevada’s jobless rate of 6.2 percent is its highest mark in more than 20 years. Sen. Harry Reid released the following statement Friday regarding the increase of more than half a percent in unemployment in Nevada from April to May 2008.”

“‘This is terrible news for the people of Nevada and our state’s economy. There was once a time when people thought Nevada was immune to national economic downturns, but this time, it’s different. Our nationwide struggle appears even more acute in Nevada because of the struggling housing market and rising costs of fuel and energy. Unfortunately, this leads to job loss in many important industries.’”

“‘We must support our Nevada economy with energy reform to strengthen tourism and strong housing legislation to stabilize and kick-start Nevada’s housing industry that supplies so many jobs in good times.’”

What do you see in your housing market this weekend? Incentives? “Facing a soft housing market, Nashville’s real estate agents are moving in for a hard sell. The Nashville real estate market is glutted with an estimated 25,000 unsold properties. Stuck with properties they can’t unload, homeowners, real estate agents and developers are resorting to increasingly wild incentive offers to get potential buyers through the door.”

“‘We’re calling it ’smart luxury,’ said Realtor Sheri C. Smith, whose clients are offering a free Mercedes Smart Car to anyone who buys their $1.58 million home.”

“Realtors are counting on incentives, not slashed prices, to close the deal. ‘Has anyone bought (a home) because of the incentive? Not yet,’ said Mandy Wachtler, president of the Greater Nashville Association of Realtors.”

Tax increases.? “Many Fannin taxpayers must be shaking their heads in disbelief, thinking they are in a bad dream receiving notices that their property values have doubled. But, this is exactly what has happened.”

“One of the examples Fannin County’s chief tax appraiser, Lori Galloway, used was a home valued at $114,607 that sold for $190,000 in 2004. In 2007 it sold again for $295,000. Those who have followed the housing market know this is not likely an extreme example, but a common one.”

Slower sales? “Bob Jehl looked down from the 26th floor of the National City Bank Building at the new ballpark quickly taking shape a few blocks away. Jehl’s not a big baseball fan, but the 45-year-old electrical engineer envisions the day he and the Wizards are neighbors.”

“Developers of Harrison Square’s 62 proposed condominiums wined and dined Jehl and other prospective buyers. ‘But the prices are a little high, and I’d have to sell my house first,’ he said.”

“Springfield real estate broker Dick Sage has specialized for almost 30 years in rural properties, and he…wasn’t a bit surprised when sales of outlying homes took the hardest hit in Lane County’s most recent monthly market report. ‘It’s the fuel prices,’ he said. ‘The further away (from town) you get, the more that’s going to be an input (in people’s home-buying evaluations). It’s a fixed cost, just like an increased mortgage.’”

“The area extending from Pleasant Hill to Oakridge went from 25 pending sales in May 2007 to seven last month (down 72 percent), Veneta/Elmira went from 24 sales to 12 (down 50 percent) and Cottage Grove/Creswell went from 42 sales to 24 (down 42.9 percent).”

Economic fallout? “The economic slowdown has cranked up the pressure for many Rogue Valley job seekers. The combination of a declining real estate market, hiring freezes by some employers grappling with rising fuel and shipping costs and the entry of college and high school graduates ready to work has made for a crowded job market.”

“‘There doesn’t seem to be light at the end of any particular tunnel,’ says Fred Holloway of Holloway Human Resource Consulting. ‘Some don’t even know where the tunnel is right now.’”

“As a world-class culinary destination, Las Vegas should offer a buffet of job opportunities for food-and-beverage worker Jeff Hill. Instead of feasting on multiple offers, though, Hill finds little appetite for new hires among local hotels and restaurants.”

“‘I hear a lot of, ‘No, thank you,’ or, ‘We’ll keep your resume on file and call you in 90 days,’ said Hill. ‘It’s been very difficult.’”

“May’s results lay to rest the ‘myth’ that Nevada feels economic torpor less, and for shorter periods, than the rest of the country, said Jered McDonald, an economist with the employment department.”

“But Brian Gordon, a principal in (an) economic-research firm, said it’s tough to draw broader conclusions from the current downturn because it comes from a unique coalescence of factors, including a bust in record housing prices and a cyclical dip in resort openings.”

“‘I think there’s some validity to the concept that Las Vegas is both resourceful and resilient, but we have several factors creating a negative situation,’ Gordon said. ‘We never saw peaks in the housing market like the ones we had, and we’ll probably never see those kinds of peaks again.’”

Or foreclosures? “Of the 350 resold homes in Surprise in May 2008, 105 were foreclosure sales. Last year in the city, 240 homes were resold, of which 25 were foreclosures. The median resale price for all homes this year was $185,240, whereas last year the median price was $245,070.”

“Glendale, like Surprise, experienced a spike in home resale activity last month as 375 homes changed hands compared to 355 transactions last year. Of the 375 sales, 105 were foreclosures. The median price in the city was $190,000 in May 2008, compared to $243,000 last year.”

“More than half of the townhouse/condominium resales during the month of May in Glendale were the result of a foreclosure. There were 25 townhouse sales at a median price of $111,945, of which 15 were foreclosed. Last year there were 50 traditional condominium sales at a median price of $147,000.”

“Of the 90 homes resold in El Mirage last month, 35 were foreclosures. The 90 homes resold at a median price of $132,000. Last year during the month of May, 55 homes were sold at a median price of $200,000, of which 10 were foreclosures.”