The Housing Bubble

The Missoulian reports from Montana. “Larry Melia and his wife are getting ready to auction off a house in the Bitterroot they have been restoring for the past six years. This is the first time the Melias, who renovated and sold ranches in Denver before moving to Montana, have participated in a national house auction. Tommy Bone, VP of the National Auction Group Inc., said a local person might bid on the property, but he’s expecting someone from Los Angeles, Seattle or another out-of-state location to purchase it as a second home.”

“The economic downturn might affect the sale, he said. ‘The interest isn’t quite what we hoped for and the response isn’t great, but you never know,’ Bone said.”

“‘I’ve never done an auction before,’ Larry Melia said. ‘An auction is unsettling - greed is what it is all about. People will show up and try and steal this property. But when they’re in a room with someone else who wants it, greed will drive their bids.’”

The Idaho Statesman. “David Hale, one of the most prominent names in the Boise development community, saw his $1.4 million townhome project in Sewell’s subdivision in Southeast Boise fall into foreclosure this week.”

“Hale said the foreclosure action was not a surprise given the housing slump that has left area homebuilders sitting on excess inventory that they can’t unload ‘no matter what the price.’”

“‘I know a dozen developers, if not more, who are in worse shape,’ Hale said. ‘It’s unfortunate that the (credit) market turned so quickly. Financing is extremely hard to come by these days.’”

“Hale said that selling the project is the best option at this point. ‘If it goes to auction, the only person who wins is whoever purchases it,’ he said.”

The Idaho Business Review. “Default filings remained high in June in Ada and Canyon counties, IdahoDataProviders.com said in a new report. IDP viewed May’s decline as a positive sign for the local real estate. However, foreclosure filings for June are back up to previous levels, continuing the trend of steadily increasing foreclosures,’ the company said in a release.”

“Ada County saw 224 default notices filed June…the fourth highest since January 2007 and compared to 101 in June 2007. Canyon County saw 165 default notices filed in June compared to 113 a month earlier and 64 in June 2007.”

“At the start of July, the number of active short sales in the Intermountain MLS had increased by 20 percent in the past month and by 37 percent in the past two months.”

“‘More importantly, while short sales now make up over 11 percent of the currently listed and active properties in the local market, they are a staggering 26 percent of pending sales,’ IdahoDataProviders said. ‘IDP believes that the rapidly increasing number of short sales is going to result in a decline in home prices…as the lenders continue to approve short sales below current market values. This will force home sellers to drop their asking prices to compete against these discounted homes.’”

The Oregonian. “Trinity Carpet couldn’t get credit when large clients fell behind on their bills The stubborn real estate slump has forced Trinity Carpet Brokers, a major regional supplier of carpet and flooring, into bankruptcy.”

“Barry Caplan, a Portland bankruptcy lawyer working for Trinity, said the company’s ability to borrow money was restricted by the failure of two large customers to keep current on their bills. One of those customers was Renaissance Custom Homes, which owes Trinity more than $1 million, according to bankruptcy documents.”

“Nearly two years since the end of the real estate boom, an increasing number of developers, subcontractors and suppliers are flirting with insolvency.”

“‘We have a number of major (real estate industry) participants — the developers, the lenders, the customers, the suppliers — who are experiencing problems that they may not have experienced recently, or ever before,’ Caplan said. ‘There was an epidemic of overbuilding and overpaying.’”

“Wells Fargo’s Ed Kashmarek is the latest to weigh in on Oregon’s outlook, issuing a report Friday forecasting a modest downturn in the Portland area. Less sanguine is University of Oregon economics professor Tim Duy.”

“‘There’s a huge debate about whether Portland in specific and Oregon in general are just going to slide through this on a basis of: This is a nice place to live,’ Duy said.”

“To his way of thinking, it’s only a matter of time until the sharp declines in housing prices that have hit other parts of the country hit here and take a corresponding toll. ‘Things could turn here fairly quickly,’ Duy said, ‘and seem to be turning in a direction that’s not to anyone’s liking.’”

The Daily Journal of Commerce from Oregon. “A recently renovated condominium complex in Salem has been converted back to apartments after disappointing sales.”

“Strict loan approval guidelines enforced after the subprime loan crisis meant that potential buyers had trouble getting approved for loans to buy the condos. The complex could remain apartments for up to 18 months.”

From KTVZ.com in Oregon. “The economic slowdown has hurt nearly every industry and city across America. Here on the High Desert, it’s no different. If you look far enough down any street in Bend, you’ll see construction. But in recent months, some of the sites have been sitting at a standstill, leaving lots vacant.”

“Mike Murphy, an employee of Schumacker Construction, said, ‘At our office, we have subcontractors doing cold calls on a daily basis, just trying to get more business.’”

The Mail Tribune from Oregon. “Local real estate officials released figures Friday showing continued declines in home values.

Andrea Bushnell, CEO of the Oregon Association of Realtors in Portland, said…demand may continue to decline for six to 12 months. ‘When you’ve got a big inventory, it’s less healthy,’ Bushnell said. ‘We’re seeing a return to normal, compared to 2003, when we had a screaming hot market with escalating prices that priced a lot of people - including the elderly and first-time buyers - out of the market.’”

“Broker Colin Mullane, chairman of the Southern Oregon MLS state committee, said Oregon, unlike Nevada, is not overbuilt with unsold new homes ’surrounded by tumbleweeds.’”

“A more realistic view of the market here, he said, is that values are off about 10 percent from the peak at the start of 2005, meaning a $400,000 home then is worth about $360,000 now.”

“The lesson that should be taken from the real estate boom and downturn, said Mullane, is ‘the same as the dot-com boom, that you shouldn’t treat real estate as a short-term investment and you should look realistically at what you can afford.’”

The Wenatchee World from Washington. “Soaring inventory and slowing sales could be driving down area home prices, but Wenatchee is still among the nation’s strongest markets for home-price appreciation, recent industry reports show.”

“The average price of a home sold in the Greater Wenatchee area through May was $275,601 - barely $1,300 above the average price of $274,319 recorded in May 2007. This less-than-half-a-percent increase is the closest the average sale price has come to zero or flat growth since Pacific Appraisal Associates began issuing the report in December 1999.”

“The latest Snapshot shows that the 109 building permits issued for single-family homes through May was down 46 percent from the 200 recorded through May 2007. A comparison with May 2004 shows that home sales have slid beneath sales levels recorded before the 2005-2007 real estate boom.”

“At the same time, inventories have soared. The report shows an 11-month supply of homes on the market in this year’s average price range of $251,000 to $300,000. That compares with a four-month supply of average-priced homes in 2004.”

“Pacific Appraisal co-owner Brian Vincent says he expects the local market to hold its value. ‘We’re still a desirable market,’ he said. “I don’t think we’ll see a lot of price reduction, but listing prices (the asking price) will come down. Home buying is still a strong investment.’”

The Olympian from Washington. “A slower home-sales market and tighter lending standards have resulted in brisk business for Hometown Property Management, a business that manages more than 800 single-family rental houses in Thurston County. Co-owner Andrew Barkis says the business could manage more than 1,000 houses by next year.”

“Q: What current trends are you seeing in the rental-house business?”

“A: The rental-home market typically runs opposite of the home-sales market…when the sales market slows down and people can’t buy, it forces more people into the rental market.”

“We’re renting more homes because…mortgage requirements have tightened up. We’re also averaging 10 to 15 phone calls a day and a majority of those calls start with, ‘I have a house that hasn’t sold.’”

“Q: Do you do background checks on homeowners? A: We don’t take every home or work with every owner who steps through our door…Are they in a stable financial position? Why are they leaving the area? Has the house not sold? Is it in risk of going into foreclosure?”

“We have had some issues where we have been bitten by that. If you come to us and you haven’t made a mortgage payment in five months and you’re trying to rent the house, it’s a little late.”

“In this past year, we’ve had more people come to us and say they are in that early stage of foreclosure. These are people who got into way more house than they should have.”

The Seattle PI from Washington. “Seattle and King County grew 1.1 percent and 1.2 percent, respectively, between April 1, 2007, and April 1, 2008, down from growth rates of 1.3 percent and 1.4 percent the previous year.”

“The nationwide housing market slowdown has made it harder for people to move to Washington, said Theresa Lowe, the state’s chief demographer.”

“‘Many job seekers are finding it difficult to sell their homes or to relocate to accept employment at the price of paying two mortgages for an extended period,’ she said. ‘Thus, even those states faring better in terms of housing and job opportunities are not experiencing the level of migration that would be expected under more normal circumstances.’”

“Janice Yawman moved to Seattle from Oregon before selling her house. She rented in Seattle while her Oregon home sat on the market. ‘It took me well over a year to sell my house, and I had a fabulous place,’ Yawman said.”

“Donna Thompson, the state’s regional labor economist for Snohomish County, said she has heard stories of people turning down jobs because they couldn’t sell their homes elsewhere.”

“The housing slowdown is affecting the local mortgage and construction industries, as well as seemingly unrelated issues like municipal bonds that depend on insurers reeling from the collapse of mortgage-backed securities, Thompson said. ‘As time goes on, you find it kind of crawls into more and more corners, and affects more and more things.’”

“Pam Johnson took a new job in Seattle and was out shopping for a house Sunday, despite the fact that she hasn’t sold her San Francisco Bay Area home yet.”

“She expected her old home would fetch less than it would have a year ago, but she’d also be buying in a market that has slowed.”

“‘I’m selling at a discount,’ she said. ‘I’m buying at a discount here.’”

The McLean Connection reports from Virginia. “By all accounts, Ali and Shanaz Alavi bought their new home in Great Falls for a bargain basement price. The couple purchased the five-bedroom home sitting on five acres of gated woodland for $1.1 million. The property owner, Jennifer Lynne Ridley, had been trying to sell the house for just under $2 million for the past 18 months.”

“With no success through traditional channels, Ridley decided to put the house up for auction June 22, with the bidding starting at $750,000. Even with initial bidding starting so low, auctioneer Azzie Kahn had expected the house to draw a higher selling price.”

“‘That is incredible. We were expecting much more than that. This home, ladies and gentlemen, is going to make some family very happy, especially at that price,’ said Kahn, before calling the property for the Alavis.”

“Almost all Realtors would admit the housing market, even in areas like Great Falls and McLean, has slowed. ‘There are more homes in the market than there are buyers for,’ said Realtor Sepideh Farivar, who added, a person has to be motivated to sell in this market.”

“Joe O’Hara, a Realtor with Washington Fine Properties, said he expects to see prices drop on many of the homes in and around Georgetown Pike. ‘Most of the homes along Georgetown Pike are very expensive. There are a limited number of buyers and lots of sellers.’”

The Star Exponent from Virginia. “Six months into the year and it’s already worse than last year. Through June 13, a total of 187 properties went into foreclosure this year in Culpeper, county records show. The month of February was the worst so far with 55 foreclosures, including the vacant lots.”

“In 2007, banks foreclosed on 182 properties in all in the town and county of Culpeper.”

“Today’s foreclosure problem is also caused by declining home values, like in Culpeper County, ‘that put homeowners ‘upside down’ with their mortgage,’ the Virginia Department of Housing and Community Development report says, ‘and lead to tightened credit standards that limit homeowners’ refinancing and resale opportunities.’”

“Nancy Heflin, president of the Greater Piedmont Area Association of Realtors, said she has never seen anything like it in her 19 years in the business. And she doesn’t expect the picture to improve anytime soon.”

“‘We are anticipating another flood of foreclosures in the fall,’ said Heflin of Front Royal.”

“‘It was the people who the bank tried to make exceptions for because of the market we were riding like a rocket ship,’ she said. ‘The home sales prices were escalating every year - it was 20 percent one year and 20 percent more on top of that the next year.’”

“Lower income citizens or people with less-than-stellar credit that banks would typically pass over for home loans suddenly qualified, Heflin said. ‘But then the market stopped all these people who shouldn’t have gotten these loans were in trouble.’”

“Steve Baugher, executive director of the Virginia Association of Mortgage Bankers said northern Virginia has been hardest hit by the foreclosure crisis.”

“‘I have a feeling you guys are six, eight months late coming into it,’ he said of why the rate in Culpeper keeps getting dramatically worse. Baugher said, he got a report indicating that some 60 percent of the home sales in northern Virginia were from bank-owned sources, or foreclosure properties.”

“‘So there’s a heavy inventory of bank owned properties that needs to be liquidated, a lot of foreclosures properties that have to be sold,’ he said. With real estate values dropping, homeowners get frustrated, Baugher said. ‘They are struggling, the house is worth less than what I paid for it so what’s the point?,’ he said.”

“Baugher said he’s never seen so many foreclosures in his 35 years in banking. ‘We just came out of a frantic market, got overheated and it sort of collapsed.’”

The Virginia Pilot. “Wachovia Corp., the Charlotte, N.C.-based bank with a major presence in Hampton Roads, continued its retreat on speculation that it would cut its dividend for the second time this year. Battered by losses on mortgaged-backed securities that it packaged and sold, the nation’s fourth-largest bank is under mounting pressure to raise additional capital.”

“Shares of Bank of America and SunTrust Banks, two other large banks that have suffered losses on mortgage-related securities, are both down since year-end 2007. Both have a strong presence locally.”

“‘The news keeps getting worse because banks didn’t know what they owned,’ said Larry Bernert, a principal at the Norfolk money management firm Wilbanks, Smith & Thomas Asset Management. ‘That’s still the case.’”

My Fox Washington DC. “Thousands of DC homeowners could lose their houses and not just because of the mortgage crisis. In the first six months of this year, foreclosures in the District jumped 30% over all of 2007.”

“Homeowners owe the District a combined $45 million in property taxes and the city is demanding the money.”

“As of July 1st, 6,500 property owners are behind on their taxes. The Office of Tax and Revenue says if not paid up the property will not only be sold at a tax sale in September, they will also be foreclosed on in six months.”

The Community Times from Maryland. “The Office of Community Conservation recently added a staffperson to help homeowners facing foreclosure, which has quadrupled in Baltimore County over the past year.”

“A state report from the first quarter of 2008 shows 11,380 ‘foreclosure events” in Maryland that include mortgage loan defaults, notices of foreclosure sales and lender purchases of foreclosed properties. That was a 17 percent increase over fourth-quarter 2007 and a 617 percent rise since this time last year.”

‘Baltimore County had 930 foreclosure events in the first quarter of 2008…in contrast to a year ago, when first-quarter foreclosure events totaled 236. ‘I’m receiving a lot of calls from people who never thought they would be faced with foreclosure,’ said Yvette L. Foreman, the office’s new housing and community development coordinator.”

“Foreman said that the mortgage crisis is hitting every income level. ‘The difference is, they’re not just low- and middle-income homeowners,’ Foreman said. ‘Now it’s everybody.’”

“Mary Harvey, director of the Office of Community Conservation, agrees. ‘We have heard from everyone. From very modest income homeowners to folks with the $600,000 house in the valley. It also impacts your ability to rent because of [bad] credit ratings.’”

The Gazette from Maryland. “Home foreclosures are skyrocketing in Montgomery County, jumping six-fold over the last year, hitting Silver Spring, Gaithersburg Germantown and Montgomery Village the hardest, according to a recently released state report. Foreclosure activity in Montgomery County jumped nearly 800 percent in the last year.”

“Eric Friedman, director of the county’s Office of Consumer Protection, said the county has had to play ‘catch-up,’ noting that until recently his office didn’t even have a category for logging foreclosure issues.”

“‘Whenever there’s a crisis, in Montgomery County you say ‘Oh, that won’t happen here.’ That clearly wasn’t the case,’ Friedman said.”

“on April 3, Gov. Martin O’Malley signed a package of laws that halted new foreclosures, slows the foreclosure process and safeguards against future abuses. But those reforms are only a 90-day ‘de facto moratorium’ on new foreclosures, foreclosure specialist Jacob Geesing, said at the COG conference last week.”

“‘The [court] clerks better be ready for a tsunami of all tsunamis because there’s a huge backlog that’s about to explode,’ he said.”

“Amid the staggering foreclosure statistics, what stunned County Council President Michael J. Knapp perhaps the most was to learn that more than half of all foreclosed homeowners never responded to letters and calls from their lenders.”

“In Montgomery Village’s Eastgate community, homeowners association dues delinquent more than 90 days totaled $5,661 in May, a spike 80 percent higher than the 443-home community has seen since the beginning of last year. In Germantown’s 684-home Cinnamon Woods community, 42 percent of homeowners were late with their $124 monthly HOA fees through the end of 2007. Nearly half of those were more than 90 days past due.”

“In Silver Spring’s Glen Waye Gardens Condominiums, six of 214 units have been abandoned in the past year. Inevitably, communities will face the specter of emergency fee increases, said Frank Rathbun, a spokesman for the Community Association Institute.”

“‘Commonly metered’ condo communities - older communities where electricity, water and gas are paid collectively - such as Silver Spring’s Glen Waye Gardens are being hit the hardest, said board President Vicki Vergagni.”

“Vergagni has lived in the 214-condo community since 1975. She has never seen anything on the scale of the associations are facing now.”

“‘It’s hitting us every which way you can guess, and it’s hitting the people who had nothing to do this mess in the first place,’ Vergagni said referring to high foreclosure and bankruptcy rates. ‘It’s like we’re hitting the people that can least afford it. They’re hitting them again and again and again.’”

The Cape May County Herald from New Jersey. “Judy Kruk is packing up her things. This used to be her grandmother’s home, and was hers, until June 18. That’s the day she lost it to the bank.”

“After she lost her job she went on unemployment but it wasn’t sufficient to cover her mortgage. The mortgage, like so many others who are facing similar financial straits, had an adjustable interest rate.”

“‘Once it went to variable, every three months it seemed it was going up and up and up,’ she said. ‘Because of late payments, the interest and late fees were adding up.’”

“In Cape May County, foreclosures since 2004 have been on the rise. From 275 In 2004, to 615 In 2007. In 2008, in the first quarter alone, 247 were filed. If 2008 continues at the rate filed through March, by the end of the year there will be 988.”

“While Kruk was still working, she ended up declaring bankruptcy, and it wasn’t the first time, she said, candidly. But after she lost her job, it became impossible to keep up payments.”

“‘Once I lost my job there were no payments being made at all,’ she said. ‘They started threatening the sheriff’s sale.’ That happened in September 2007. The balance of the mortgage owed was approximately $118,000.”

“She had the house listed for sale. It’s been on the market, she said, since last May. If the short sale had gone through, she might have come out of the sheriff’s sale with some cash in hand, as the buyer would have bought the contents of the house as well. But that didn’t happen.”

“Kruk said the reality of her situation has finally sunk in. She had ‘a rough weekend’ she said, after the sheriff’s sale on June 18. ‘It’s been hell,’ she said.”

The Wayne Independent from Pennsylvania. “One hundred twenty-five writs of execution - the last step before a foreclosed home goes up for Sheriff’s sale - have been filed in Wayne County through the first half of 2008. The total matches the number of filings for all of 2007.”
“‘And we’re only in July,’ said Linda Billard, chief clerk of the Wayne County Sheriff’s Department.”

“Wayne Bank President Bill Davis, says the sub-prime foreclosure crisis can be laid at the feet of big money center banks and investment houses who made loans that, ‘really weren’t prudent for the borrower.’”

“Davis says payments made by the borrowers weren’t even covering interest. ‘The value of the home is worth less than what they paid. The mortgage is more than the original amount, so they’re really in a box,’ he said.”

“Honesdale National Bank VP Mark Graziadio says they know their customers and would never put them in a loan that wasn’t right for them. When it comes to the national problem, Graziadio says, ‘You have people in loans who shouldn’t have been there to start out with. That’s really the crux of the crisis at this point.’”

“Like in Florida, where a man told Graziadio there are 52 foreclosures in his hometown. ‘What were (lenders) doing? They were lending more than they should have. They got people into loans that weren’t structured right for the people. And they did it just so they could generate mortgages …or so they could sell real estate,’ Graziadio said.”

Please post off-topic ideas, links and Craigslist finds here.