The Housing Bubble

It’s Friday desk clearing time for this blogger. “Columbia home sales have dropped significantly from May of last year. Amy Hamby and her husband put their home up for sale last month. They have had plenty of interest, but say potential buyers don’t seem ready to plunge into an uncertain housing market. ‘The problem seems to be that they either aren’t qualified for a loan and so they can’t buy the house,’ says Hamby, ‘Or there seems to be some anxiety about investing the money into a home at this time.’”

“While agent Bettye Lay of Carolina Towne Realty said her phone is not ringing as much in 2008, she doesn’t think the sky is falling, either.”

“‘I feel that many buyers watching the news feel that prices should drop more dramatically than they have since the ‘bubble’ has burst,’ she said. ‘However, I don’t feel that Burke County saw the kind of upswing in home prices that other areas of the country saw; therefore, we are definitely not going to see the downturn in prices.’”

“‘Everyone has an expectation,’ said Mike Watts with GMAC Carolina Realty. ‘They live in a home for a couple of years and they want to make the big check when it is time to sell. Say they live in a house for five years. Instead of making $100,000, how about $50,000 or $20,000? That still is a respectable appreciation.’”

“During April and May, North Carolina’s construction labor force did something it had not done in seven years: It shrank two months in a row after a record high. ‘It’s abysmal in the residential side, and employment is falling on the commercial side as well,’ says Tony Plath, a UNC-Charlotte professor.”

“Workers from those harder-hit parts of the country are flowing to North Carolina, looking for work. The problem: Once they get here, they are finding fewer available jobs. ‘Other parts of the country haven’t gotten the memo yet,’ Plath says.”

“Mississippi likely will dodge a mortgage bust because it did not benefit from the housing boom of places such as Florida and California, Federal Reserve Bank representatives said.”

“The Mortgage Bankers Association report showed nearly 10 percent of mortgages in Mississippi were delinquent in the first quarter of 2008. ‘(But now) be glad you’re not in Florida, because that’s a disaster,’ said said Bill Emmons, a senior economist with the Federal Reserve Bank of St. Louis, which serves northern Mississippi.”

“Luxury condos have become a common sight in Austin, but recent statistics suggest that the city’s realtors may be having trouble finding buyers.

“‘Austin real estate has really slowed down in the last few months,’ said Sam Carroll, a broker at RE/MAX Downtown Austin. ‘This may be especially surprising because it’s supposed to be the busiest time of the year.’”

“Carroll said that in many cases the only way realtors can sell condominiums and homes within a reasonable time period is to lower the price. ‘If you have a time line, lowering prices is just about the only thing you can do right now,’ he said.”

“A 13 percent increase in existing home sales in May in the Battle Creek area dwarfed the 2 percent sales rise nationally. Low-end home sales more than doubled, to 139 so far this year from 61 by this time in 2007. And many of those homes, said Realtor Joy Brown, are foreclosure sales.”

“‘I had somebody actually buy a foreclosure on their credit card,’ she said.”

“Austin and Viola Lee bought their two-bedroom condo more than three years ago. Last year, they tried to upgrade, but took it off the market after four months. ‘Little did we know the market was going to continue to be on the down spiral,’ said Austin.”

“A month ago they tried again, and so far, no showings. Two weeks ago they had their third child and need to sell– fast.”

“‘Right now its definitely a buyer’s market,’ said Jeff Boals, a Colorado springs realtor for fourteen years. He says homes used to sell in less than sixty days. Now the average is about a hundred, largely because of foreclosures. Realtors who work with ’short sales’ are as busy as he used to be– the consequences of relaxed standards.”

“‘Everybody, no matter who you are or what you did or how much you made, you qualified to buy a house,’ said Boals.”

“Kent families are feeling the repossession squeeze. Canterbury homeowners are bearing the biggest burden, with a 20 per cent increase in orders compared to last year. Peter Tullett, advice work supervisor Citizens Advice Bureau, added that the number of mortgage repossession cases being brought before Tunbridge Wells County Court was also increasing, and that the credit crunch was not just affecting social housing or low income tenants.”

“He said: ‘We can expect the cards to start falling in the next few months. People have been putting off the day of reckoning for a while now, hoping that house prices will increase for ever.’”

“A homeowner who is losing £12,000-a-month while trying to sell his £1million property hopes to beat the credit crunch by selling it in a raffle. Brian Wilshaw is selling 46,000 tickets at £25 each for a chance to win his 11.5 acre Oldborough Retreat.”

“Brian said: ‘This has been our dream home but now we are retiring we want to let ordinary people have the chance of a lifetime to live here. Rising house and land prices have put property like this one way out of the reach of most people.’”

“Brian said: ‘It’s well worth £25 a ticket. At 46,000-to-one our odds are a lot better than winning the Lottery. We don’t want to make any money out of this. We just want what it’s worth.’”

“Saipan’s ongoing economic downturn is prompting scores of local landlords to drop prices in a bid to stand out among the hundreds of starkly vacant rental properties available on the island. The decline in rental prices is visible every day in housing advertisements.”

“‘Rents for everything, commercial property and apartments, are going down,’ one informed real estate expert on the island said, speaking on condition of anonymity. ‘All of these factors combined have meant economic suicide.’”

“In spite of the price drop, the prospects in Saipan’s real estate markets still have some rental agents and brokers optimistic that conditions could attract new investors banking that the economy will later revive. ‘Now is the right time for people who have the means and the money and want to put in the investment,’ said Mustafa Shakir, chief of Shakir’s Realty, adding that Saipan has seen increasing interest from Korean investors.”

“Rhonda Witty, a real estate agent and foreclosure specialist, said she and fellow agent Yvonne Johnson had heard about foreclosure tours in other cities, and wanted to bring the idea to Toledo.”

“Ms. Johnson, also a foreclosure specialist, said it was important to bring the tour to Toledo. ‘Unfortunately, we’re right up there with Las Vegas in terms of the number of foreclosures,’ she said.”

“For the most part, eastern Oregon real estate has been isolated from the downward spiraling national housing trend, but now it’s starting to catch up.”

“”Last year, houses were being sold before they could be built, but now the market is slowing down. Realtor Fred Oits attributes the recent decline in part to politics.”

“‘Election years usually slow down for the six months prior to an election,’ said Otis. ‘I think people are concerned with who’s going to be elected or what’s happening, although it really doesn’t affect it. They still need a home to live in.’”

“For the first time in nearly six years, the number of Jackson County workers in nonfarm jobs declined compared with the same month the previous year. ‘I think you can attribute a lot of that to the downturn in residential construction and all that it encompasses,’ said Bill Thorndike Jr., a co-chairman of the Portland branch of the regional Federal Reserve Bank of San Francisco.”

“‘Historically, housing cycles were regional and localized,’ Thorndike said. ‘One of the differences this time is that the housing crisis is more of a national phenomenon. Not only from the national downturn in housing but from the economic health of Southern California and Phoenix areas that a lot of our housing stock is dependent on. We’ve received a louder echo.”

“(Washington) state tax collections have dropped for the third straight quarter, bolstering the likelihood the Legislature will have a sizable budget hole to plug come January. And real estate excise tax collections continue to fall in dramatic fashion with the souring housing market.”

“‘We are forecasting what would essentially be the worst downturn in 25 years,’ said Steve Lerch, the state’s interim chief economist.”

“It is important to keep in mind that some segments of the Manteca market have probably hit bottom, but a lot of other segments haven’t quite yet such as McMansions and, depending upon how you view them, the diamonds in the rough or dog houses.”

“Without a doubt the one segment that is probably going to fall more is the condo conversion resales. The Cherry Lane complex - which was selling 18 months ago for $179,000 for a 944-square-unit - has had only one resale unit sell since February and that was for $114,000.’

“There are two same-sized units on the foreclosure list - one for $89,900 and the other for $94,900. There are three on the short sale list - $94,500, $114,000 and $119,000.”

“If the unit listed for $89,000 manages to fetch that much, it will represent the biggest single drop of housing value in Manteca of 50 percent in 18 months.”

“Tooele County’s residential construction industry appears to be at a virtual standstill. ‘I only get 10 percent of the calls I used to get last year, so I’ve lost 90 percent of all work because of the high costs to build,’ said Dan Grgich, owner of DG Construction in Tooele.”

“‘A lot of this stuff gets so expensive, and it drives the costs of the market up,’ he said. ‘That’s why home prices became so expensive. It doesn’t help that banks won’t give any money for spec home building, but they can’t because the federal government won’t lend them any money.’”

“Brad Sutton, broker in Tooele, said the entire homebuilding industry is hurting because of overbuilding. ‘Because there are so many houses that are already up and available, builders and contractors don’t want to build more spec homes,’ Sutton said.”

“‘Tooele County is generally in line with what’s happening throughout the Wasatch Front and the rest of the state,’ said James Robson, regional economist with the Utah Department of Workforce Services. ‘A big part is the tightening of lending standards, and there was also that major housing boom of ‘06-’07.’”

“Throughout the housing crisis, we have heard demands for every variety of government bailout. If we had a spokesman, this is what I wish he would say: ‘Dear Struggling Borrowers and Lenders…”

“It is universally recognized that when you invest in stocks, you are taking a risk-and just as you deserve the profits if the investment goes well, so you must accept the losses if it doesn’t. The same holds true for real estate.”

“The question we face today is: Do we let the market function? There is no conflict between individual responsibility and a functioning housing market; to the contrary, the second requires the first. If we let the market function, home values would fall to some market bottom, new buyers would eagerly seize on lower home prices, borrowing from lenders who would have learned to lend rationally.”

“Clearly, the just and the American solution is for all of us to tell the government that we will take responsibility for our decisions, and that no one has the right to make anyone else pay for his mistakes.”

The Miami Herald reports from Florida. “The median price of an existing single-family house fell in Miami-Dade and Broward counties by roughly 20 percent in May. The number of houses sold were down 31 percent in Miami-Dade and 8 percent in Broward for the year. Compared to houses listed for sale, the raw sales numbers are striking. In both counties, 33,678 houses were for offered for sale, yet fewer than 900 changed hands.”

“Existing condo sales dropped dismally from last year but. In Broward, the median plunged 31 percent to $138,900. Real estate agents have attributed Broward’s steeper declines to the high number of conversion projects. The two counties had a combined 49,255 units for sale; 1,059 were sold.”

“One heavily discounted example: A one-bedroom, renovated unit in the Roney Palace Oceanfront Condominium, last purchased for $460,000, was listed at $165,000.”

“In 2004, Gabhan Kenna, a real estate investor and landlord, saw an opportunity to expand his business in Broward. Leveraging his appreciating properties, he increased his portfolio to nine homes. He rented several as Section 8 housing. Four years later, Kenna faces foreclosure on all nine because the rental market won’t support the overhead.”

“‘I am a landlord for 10 years. I have three kids in school. I am 47 and I have hit a brick wall,’ Kenna said.”

“All nine homes are for sale at less than $200,000.”

“Baton Rouge, La. investor Jerry Harper bought a second home last month at the Cosmopolitan, a luxury condo. The unit was reduced to $350,000 from $565,000 two years ago.”

“He also bought a second unit overlooking the water for $155,000, which he plans to rent. ‘Well, gee, when that stuff prices at what my stuff in Louisiana is pricing for. . ., it’s a no-brainer,’ Harper said.”

From CBS 4.com. “Because of recent skyrocketing short sales and foreclosures in Miami’s real estate market, many high rise buildings now have mold growing inside. Even some of the most luxurious condos in town have been affected.”

“This often happens because owners who are going through short sales or foreclosures end up cutting off their AC, sealing up the unit, and never looking back.”

“Even if the unit owner is long gone, condo law lawyer Kristy Phillips says once a bank takes over, legally it has to act like any other owner. This is something she says many banks are resisting. ‘They’re not paying their assessment the majority of time; they just leave the units vacant, they don’t turn the power on or anything,’ Phillips said.”

The Sun Sentinel. “Palm Beach County’s median price last month was $330,900, down 15 percent from $387,800 in May 2007, the Florida Association of Realtors said Thursday. The county had 702 homes change hands, off 5 percent from 741 a year ago.”

“‘Sellers are willing to make concessions, but they’re not willing to come down to what I call the ‘frantic’ prices,’ said Douglas Rill of Century 21 America’s Choice in West Palm Beach. ‘Buyers are still trying to buy at frantic prices.’”

The Palm Beach Post. “‘We believe the bottom is behind us,’ said Mike Pappas, CEO of a Miami-based brokerage. ‘Prices are at their bottom or close to their bottom.’”

“He acknowledged that the mounting number of foreclosed homes is bad for home prices: ‘The catch is the foreclosure market.’”

“Falling consumer confidence, rising job layoffs and higher mortgage rates still stand in the way of a sustained housing rebound, economists say. ‘We do not expect residential real estate markets to turn around soon,’ said Stuart Hoffman, chief economist at PNC Financial Services. ‘In a sea of weak data, home sales will remain an anchor, not a lifeboat.’”

The News Press. “Statewide, the number of houses sold dropped 5 percent to 12,175 from 12,882 a year earlier while the median price dropped 15 percent from $239,000 to $203,300 in the same period. Sales edged up and prices reversed a downward spiral that’s been going on since October for existing homes in Lee County.”

“The median price reached its all-time high of $322,300 in December 2005. Compared to May 2007, the price was down 25 percent from $281,500, but the number of sales was up 43 percent from 575.”

“So far, at least, the bottom end of the market’s been driving the boom in sales, said Charles Richardson, regional senior VP of Coldwell Banker Residential Real Estate, Southwest Florida.”

“‘There’s been a substantial number of price reductions over the last couple years, and now you see great affordability in the market,’ he said. Even with the increasing number of sales, he said, ‘It’s still a very strong buyer’s market from a point of view of being able to negotiate aggressively with sellers.’”

“The number of condos purchased fell, from 351 to 257. Wendy King and Steve Kimball of Cape Coral are trying to sell the two-bedroom, two-bath canalfront condo they own on Tudor Drive for $299,000. They paid $340,000 in November 2005.”

“With direct access to the Gulf of Mexico, King said, ‘it’s a fantastic location and that’s a little less than what we paid for it three years ago when the market was great. We get very little traffic and maybe we’re asking too much, but we’re not in the position to lose $30,000, $40,000.’”

The Cape Coral Daily Breeze. “The housing collapse in Southwest Florida has caused great upheaval in realty and construction, and the numbers produced by the ESRI show just how devastating the home value drop was over the last year.”

“The average Cape home was worth $274,120 in 2007, but that number dropped to $219,781 this year. The northwest section of the city was particularly hard hit as the typical house’s value fell from $268,538 last year to $202,668 in 2008.”

“City economic development director Mike Jackson sees a silver lining in the numbers. While home values may be shedding even more value because of foreclosures, he pointed out that many homes in the Cape that are in foreclosure have no residents.”

“‘Thirty percent of those (properties in foreclosure) are lived in by people,’ said Jackson. ‘Seventy percent of those are investor homes that have never been lived in.’”

The Herald Tribune. “May sales in Sarasota-Bradenton climbed 11 percent from a year ago while rising 24 percent in Charlotte County-North Port. It was the third consecutive month of gains to the south and the second to the north.”

“Prices were another story, with only one market in the state posting a gain. Sarasota-Bradenton’s median sales price fell 16 percent last month to $246,200 from the same time last year. The median was also 8.2 percent less than April’s $268,200.”

“A total of 2,161 foreclosure filings — default notices, auction sale notices and bank repossessions — entered the court systems last month, a 12 percent increase from the previous month.”

“‘We are still having some difficulty with banks, because they haven’t been been set up to deal with these foreclosures and short sales,’ said said Helen Sosso, president of the Sarasota Association of Realtors. ‘But that being said, it’s getting better by the day. Banks are getting better at understanding that it doesn’t matter what is owed, that’s not the value of it anymore.’”

“Dave Richie, an agent in Sarasota, said, ‘If people can qualify for a loan, they are going to get one heck of a deal.’”

“He pointed to one of his listings: a four-bedroom, three-bath home with a pool in the Whitfield neighborhood that was worth about $390,000 a little over a year ago and now is going for $180,000.”

The St Petersburg Times. “A divided County Commission has approved Little Harbor’s request to allow daily rentals in 158 condo units. In a meeting earlier this month, representatives of developer Earthmark Inc. said the change would help make the Ruskin resort more appealing to tourists and decrease the project’s impact on surrounding neighborhoods.”

“But several residents who live near Little Harbor disagreed, arguing that late-night parties and traffic jams would destroy their peaceful community.”

‘That, Mariella Smith said, ‘is a Tampa hotel, not a Ruskin hotel. There’s no market for this in Ruskin.’”

From WMBB TV. “If you’ve crossed the Hathaway Bridge in the past year, odds are you’ve seen the Marina Landing. ‘This is probably the most beautiful condo on the whole coastline,’ says Project Manager Ward Pell.’

“The 16 story building has 87 units, only 30 of them occupied. ‘When you build something of this magnitude, it is disappointing,’ Pell said.”

“The project finished two years after the 2004-2005 housing boom, just in time to see the market slow down. ‘People can not close on their units,’ says Site Director Sue Levin. ‘This has happened to a number of developers and it isn’t just here it’s all over.’”

“A two bedroom condo initially sold for nearly 600-thousand dollars at Marina Landing. Now those unclaimed condos will hit the auction block. When bidding opens for 45 condos, half of them will have no minimum price.”

“‘We did a great accelerated marketing program for them and we hope that people can appreciate the beauty of this building and Panama City Beach,’ Pell said.”

The News Journal. “Falling home prices are encouraging more home sales and possibly signal a bottoming out of the declining housing market. Realtors in Volusia and Flagler counties sold 607 existing homes in May, down 6 percent from 644 homes sold in May 2007, according to a Florida Association of Realtors report.”

“The median sales price of an existing single-family home in the two county region fell 12 percent from $196,800 in May 2007 to $174,100 last month.”

“‘Our prices went up so fast in 2005, you can throw that year out as an abnormality. The decline in home prices is not as big as it seems,’ said Gloria Weimer, head of the New Smyrna Beach Board of Realtors.”

“Sales of existing condominiums in Volusia and Flagler fell 16 percent from 99 in May 2007 to 83 last month. That is below the 10 percent statewide drop in condo sales, but not as bad as the 54 percent drop in Jacksonville.”

“After months of home sales in Flagler County hovering close to 100, about 135 homes sold last month, said Jimmy Millhollin, head of the Flagler County Association of Realtors. ‘We are seeing a small rise in residential sales and inventory of homes is down,’ Millhollin said. ‘We are little different here.’”

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