The Housing Bubble

The North County Times reports from California. “As economists debate whether San Diego County has entered a recession, homeowners have lost $118 billion in equity, thousands have lost their jobs and fewer from out of the area are visiting. Many analysts look to jobs as a primary indicator of local economic recessions.”

“By that measure, a recession is here. For the first time since 1993, the county in March employed fewer workers than the year before.”

“The first wave of job losses came from construction and real estate workers, such as Patricia Hunter of San Marcos. ‘When I was laid off, they offered a (health insurance) plan,’ she said. ‘They were talking about $400 a month. I can’t even make my house payment, much less $400 a month.’ She missed her first mortgage payment in January.”

“The sabotage of San Diego County’s economy by just one sector blows apart assertions by regional economists that the economy was too diversified to suffer a recession.”

“‘That’s total hogwash. … People grab it because it sounds good. The entire U.S. economy is way more diversified than any city, and we’ve had lots of recessions, so how could you possibly say that?’ said Christopher Thornberg, an economist with Beacon Economics in Los Angeles.”

The Orange County Register. “Roberta Lacken fears her retirement is in jeopardy after her lender slashed the amount she can borrow against her Anaheim home. Lacken said Washington Mutual reduced by about $20,000 the amount she can borrow on her home equity line of credit. She had planned to use that money to make a balloon payment on a second mortgage she and her husband have on an apartment building in San Bernardino.”

“Now she fears they won’t be able to come up with the $28,000 they have to pay next year. ‘We don’t know what we are going to do,’ Lacken said. ‘We could be just another number on the foreclosure list.’”

“Laymond Wiseman said Bank of America cut the HELOC on his Stanton home from $150,000 to $89,000, which is just $2,000 more than the amount he has already withdrawn. He is upset because he was considering using the money to help his daughter and husband by a home. Yet he doesn’t plan to fight it.”

“‘It may be a blessing in disguise,’ Wiseman said.”

“Riverside County appears to have tipped into an economic recession, as homeowners have lost $71 billion in equity. The county’s median home price reached a high in December 2006 at $432,000 and had tumbled 33 percent to $290,000 by May, according to DataQuick”

“Today’s jobs contraction has put people such as Gary Huber, of Corona, in an unexpected place: the unemployment office. A mortgage underwriter for 25 years, he was laid off in August 2006 and has been struggling to find work.”

“Since losing his job, Huber has exhausted his savings, sold his car and worked toward landing a job with the city government, even if it pays less, he said. ‘It’d still be a tremendous pay cut, but it’d be enough where we could make ends meet,’ Huber said.”

The Daily Bulletin. “A house that once brought joy and comfort to a family now sits vacant. It has become an eyesore. The one-time owners are long gone, forced out by the mortgage crisis, and local cities are stuck footing unexpected bills.”

“‘The reason so many cities are concerned right now is because of so many foreclosures,’ said Rex Gutierrez, inter-governmental relations officer for the San Bernardino County assessor and a Rancho Cucamonga councilman. ‘People are just abandoning properties.’”

“This year alone, Ontario has had 464 foreclosures, Rancho Cucamonga 321, Chino 221, Upland 127, Montclair 92 and Chino Hills 53, according to statistics from the San Bernardino County Assessor’s Office.”

“Three years ago, the market was smoking hot, said Robb Quincey, Upland’s city manager.”

“‘Homes that someone bought for $500,000 were selling for $800,000,’ Quincey said. ‘Now, with the foreclosures, a house that was $500,000 is going for $350,000. It’s the new houses built a few years ago that are going into foreclosure, and that doesn’t make us feel good’”

The Press Enterprise. “Work on the entrance sign at Meadowview’s parking lot will have to wait. The sign and other improvements in the Temecula neighborhood are being delayed because revenue from the homeowners association’s dues is lagging, according to Meadowview Community Association President Debra Thomas.”

“In Meadowview, which has about 900 homes, at least 40 families ‘just up and left,’ Thomas said.”

“‘As soon as someone has financial problems, the association fee is the first thing they stop paying,’ Thomas said. ‘(They think) ‘I’m not using the facilities, so why even pay for it.’”

“In April, Riverside and San Bernardino counties combined had 14,081 foreclosed-related filings, one for every 99 households and the fourth-highest foreclosure rate in the nation.”

The Desert Sun. “The biggest drag on the valley’s economy in the first quarter of 2008 was construction spending, which plunged more than 41 percent compared to the same period in 2007. Chapman University economist Esmael Adibi said the desert economy began slumping last summer, and the Inland Empire of Riverside and San Bernardino counties entered recession in the final months of 2007.”

“‘The country may not be in recession, but the Inland Empire definitely is - and so is the Coachella Valley,’ agreed John Husing, economic consultant to the Coachella Valley Economic Partnership. He has been studying Southern California’s economic trends since the 1960s.”

“The prices we’re seeing are abnormal, Husing said. ‘We’re not looking at a regular supply and demand market: We have home buyers now who might be described as bottom-feeders, and sellers who are under pressure given information from DataQuick that 56.6 percent of all sales in Riverside County in May were foreclosures,’ he said.”

“‘We went from being one of the fastest-growing counties in the state to being the king of sub-prime foreclosures,’ said Larry Ward, the Riverside County assessor-clerk-recorder.”

The Manteca Bulletin. “It is without the doubt the largest housing-related foreclosure yet in the Manteca-Lathrop market. Hundreds of lots in Beck Properties’ highly-touted Oakwood Lake Shores and two sister developments in Mossdale Landing are now in the foreclosure process.”

“It marks the first, major development to start the foreclosure process and is a clear sign that a significant up tick in home sales since March may not be enough to rescue large segments of the collapsing real estate economy.”

“Beck Properties started building what it touted as luxury homes built around man-made lakes filled with natural groundwater. The recorded message from Bella Lago at Oakwood Shores describes the homes on sale at this community as lakefront homes ranging in sizes from 2,600 to 4,600 square feet.”

“Prices for the Tuscan-style homes at Tra Vigna originally ranged from $644,990 to $764,990 with additional $100,000 to $200,000 for those with lakefront locations.”

“The employee contacted on the phone Thursday hung up before this reporter could ask the current prices for these homes.”

The Santa Cruz Sentinel. “Affordable units set aside for low-income buyers at 2030 North Pacific Ave. in Santa Cruz were snapped up quickly this year, but fewer new projects are on the drawing board since the subprime mortgage mess last year triggered a credit crunch.”

“The median price for condos sold in May was $380,000, down more than $100,000 from the levels in 2005, 2006 and 2007.”

“Seb Frey, a real estate agent in Capitola, is starting to see lower prices. He said a condo foreclosed at Capitola Shores in the Jewel Box neighborhood recently sold for $300,000, about the same price as in 2001.”

“Condos on River Street in Santa Cruz across from Lumbermens are selling for $250,000, he added. He expects prices to fall with more foreclosures. ‘You might be able to get something for $225,000,’ he said.”

The Press Democrat. “More than 19,000 Sonoma County homeowners — a record number — will see their property tax bills fall this year because of declining home values.”

“Most of the affected properties were purchased at the height of the housing boom, and they now are worth $100,000 less on average, said Bill Rousseau, the county’s chief deputy assessor.”

“The number of homes dwarfs those that received property value reductions a year ago, a reflection of the ongoing toll from the region’s housing downturn. Last year, the county lowered values on about 2,500 homes. The average reduction was $70,000.”

“The review centers on homes purchased between January 2004 and September 2007. The hardest-hit areas of the county have been northwest and southwest Santa Rosa, Windsor, Rohnert Park and east Petaluma, Rousseau said.”

“Those communities often were hotbeds for subprime lending that stoked an already sizzling housing market, which peaked in summer 2005. Foreclosure rates now are highest in many of the same areas.”

“The reassessments are the first the county has initiated since the mid-1990s housing slump. About 15,000 homes had values lowered throughout that downturn, which lasted several years, Rousseau said.”

“During the last slump a decade back, homes didn’t regain values for several years, Rousseau said. ‘This downturn is worse,’ he said.”

The Times Call reports from Colorado. “Randy Wilber moved his wife and two kids to Longmont in 2003. He bought a house here with an adjustable-rate mortgage. At first, his monthly payment was nearly $2,000. Two years into the loan, when his rate adjusted upward, the payment went up about $600 a month. At about the same time, Wilber’s wife switched jobs and their annual income dropped.”

‘Wilber immediately started working with the lender to try to lower the payments. ‘They really wouldn’t work with us at all on it,’ he said.”

“The couple soon got behind on their payments, and when the interest rate went up again, it brought their payment to $2,700 a month. Wilber went so far as to take a loan against his retirement account to keep up.”

“‘It put a lot of strain on my family, on my marriage,’ he said. ‘So about the same time, my marriage started to fall apart, too, and then there was no way I could continue making payments just on one paycheck.’”

“When Wilber stopped making mortgage payments, the lender agreed to move on the short sale. Five months after the house went on the market, the deal closed. The lender lost about $32,000 of the principal of the loan.”

“‘It actually was kind of a relief, but at the same time I felt bad - terrible,’ Wilber said. “I felt bad that I defaulted on a debt. I felt humiliated by the process that I had to go through.’”

“Wilber recently tried to buy another home and was told the short sale would affect his credit for another year. ‘That’s just cruel and unusual punishment, if you ask me,’ Ingvaldsen said.”

The Coloradoan. “Fallout from the subprime mortgage fiasco and a tight credit market have led to a resurgence in Fort Collins’ multifamily housing market while single-family building permits are on track to hit an 18-year low.”

“Homebuyers who might not have been able to afford to buy got into homes through subprime loans, no money down and 100 percent loan to value, said Rick Kness, managing broker at Keller Williams.”

“‘The real estate market stole from the rental market for their buyers,’ Kness said. ‘Now the real estate market is giving those buyers back to the rental market.’”

The Arizona Republic. “In a state where one in 20 mortgage borrowers is already at least 30 days behind on payments, more Arizonans than ever before will face the threat of foreclosure this summer as their adjustable-rate mortgage loans jump to a higher interest bracket.”

“As of February, an estimated 157,000 adjustable-rate loans had yet to reach their initial reset dates in Arizona, according to First American CoreLogic. The total value of those Arizona loans was roughly $38.7 billion, company spokeswoman Meghan Donovan said.”

“First American determined that nearly 10 percent of those loans would reach their initial reset dates between March and August, with the highest monthly total - about 2,600 loans, valued at nearly $665 million - occurring in July.”

“Most borrowers awaiting initial loan resets have accrued no equity because of plummeting land values, making it virtually impossible to refinance. For some of them, foreclosure is all but inevitable.”

“‘My opinion is that we haven’t seen the worst of it,’ said Kevin Murphy, executive director of Labor’s Community Service Agency in Phoenix. ‘People who got into those stupid loans did so with the idea that the property value would increase.’”

The Globest.com. on Arizona. “Harvard Investments Inc. and Meritage Homes of Arizona Inc. paid $27 million to acquire 650 acres of residential development land in the Lakes at Rancho El Dorado. The Scottsdale, AZ-based companies bought the property at auction from Wachovia Bank and Wells Fargo Bank, which had taken it back from a previous Meritage partnership.”

“It originally was bought for $39 million by Scottsdale-based Maricopa Lakes LLC, a partnership of Meritage and Scottsdale-based Hacienda Builders Inc. formed in November 2004.”

“The land is a mix of partially developed land and finished lots at the northeast corner of Smith Enke and Porter roads in Pinal County. The acreage is approved for construction of 1,985 single-family homes.”

The Arizona Daily Star. “The green and gold hills of the 530-acre Campstone property in Huachuca City ripple into the distance, surrounded by mountains and few signs of civilization other than an occasional plane from nearby Fort Huachuca. The owners, developers Michael Combs and Mark Johnson, want to add about 1,400 homes there - doubling the population of Huachuca City.”

“Combs and Johnson put their development companies into Chapter 11 bankruptcy last week to buy time. Mayor George Nerhan said the market already is in a slump, and a new development wouldn’t make sense. ‘It’s the wrong time,’ he said.”

“The credit crunch could make salvaging the plan difficult, said Neubeck, the planning consultant. It’s ‘very, very hard to get financing right now,’ he said. ‘The traditional banks, right now they won’t do raw land at all. You need to have so much liquidity that it’s pretty impractical.’”

The Yuma Sun from Arizona. “As testimony to the slow real estate market, there were no bidders for an auction last month of about 121 acres of state trust land located at 40th Street and Avenue 9E, said Jamie Hogue, deputy land commissioner.”

“The property had been appraised at $6.2 million. It will be at least a year before the land comes up for auction again, hopefully with a recovery of the market, Hogue said.”

“In contrast, New Sun Homes paid $14 million - twice the appraised value - for 160 acres two years ago after a bidding war with Elliott Homes.”

The Las Vegas Sun From Nevada. “At North Las Vegas’ Bargain Pawn, nearly every transaction has a back story: Someone is struggling through hard times. Lately the shop has been seeing a rush of middle-class customers. A lot of them seem to have jobs in real estate and auto sales, manager David Bramlett said.”

“Customers say they’re facing foreclosure, no longer have credit cards and need cash. That’s where Bramlett’s pawnshop comes in. They hock jewelry, electronics, guns. ‘They bluntly tell us, I never had to pawn anything in my life and here I am,’ he said.”

“Carolyn Trepner-Kirson, proprietor of a consignment shop that offers secondhand Gucci evening wear and Jimmy Choo sandals, has seen a 40 percent drop in business over the past five years.”

“And now it’s worse. Storefront signs advertise brands such as Chanel, Valentino and Prada, but a few weeks ago, Trepner-Kirson hand-wrote a larger and more telling message on the front door with white shoe polish: ‘Sale.’ She’s slashing prices.”

“Her customers have forsaken Armani and Prada for Target and Forever 21. She blames the economy. Realtors and mortgage brokers who used to be regulars come in sporadically, Trepner-Kirson said.”

“Customers who used to purchase a purse in every color are now buying one in a neutral shade. The woman who would replenish her wardrobe every season in better times might now make due with the same outfits for one more year.”

“And the clothes brought in to sell? They’re a little more tired than normal. ‘They’re resoling their shoes instead of buying new,’ she said. ‘There’s no money to buy a new pair of Manolo Blahniks.’”

“But, there is no shortage of people who want to exchange clothes for cash. In less than an hour on a recent weekday, three women entered the store bearing handbags, furs and armloads of sparkling evening gowns and St. John’s suits.”

The Telegraph on Nevada. “Casino owners in Las Vegas have been warned that America’s economic slowdown had left the gambling mecca facing ‘its most severe downturn ever.’”

“Keith Foley, a gaming analyst who tracks 55 gambling companies for Moody’s, said the casino industry was ‘in the midst of what could be its most severe downturn ever.’”

“‘After 9/11, when it bounced back really quickly, everyone thought Vegas was immune to just about anything,’ he said. ‘It is suddenly obvious and maybe kind of scarey that it is not.’”

In Business Las Vegas from Nevada. “Nevada’s unemployment rate made its biggest month-over-month jump since 1980, the earliest available numbers. This is the largest month-over-month change for the state’s unemployment rate, said Jered McDonald, an economist for the department’s research and analysis bureau.”

“‘It’s the biggest we’ve seen,’ McDonald said. ‘It’s a pretty big jump. Things are getting pretty bad.’”

“Construction job losses were responsible for the highest percentage of unemployment claims, he said, followed by office and administrative support, food preparation, sales and related fields, and management, he said.”

“‘It shows that we’ve got a lot of people hitting the job market looking for jobs that just aren’t there,’ McDonald said. ‘It’s hard to say: Is this a new level? Are we going to go up from here or down from here? It’s too early to tell.’”

The Review Journal from Nevada. “Nicolas and Juanita Cignetti are bringing down Las Vegas just as they built it, a little bit at a time. The Canton, Ohio, couple has been visiting Las Vegas — sometimes as often as six times a year — since the Rat Pack prowled the Sands hotel and a gallon of gasoline cost 33 cents.”

“Now gasoline costs more than $4 a gallon and the Cignettis aren’t planning a return to Las Vegas. Wall Street is fearful that middle-class vacationers like the Cignettis who helped fuel the rise of modern-day Las Vegas are ready to turn their backs on Sin City.”

“‘We are just going to hang tight until we see some relief,’ said Nicolas Cignetti. ‘I can wait until prices come down and, if they don’t, so be it.’”

“For the first time in recent memory, two benchmark indicators of the health of Las Vegas, the number of hotel rooms in development and airline seat capacity at McCarran International Airport, are moving in opposite directions.”

“According to the Official Airline Guide, seat capacity at McCarran is expected to decline 12 percent in the fourth quarter. Meanwhile, the number of available hotel rooms on the Strip is expected to increase 18 percent by the end of 2009.”

“‘They are worried,’ said Tom Parsons, CEO of BestFares.com, of the airlines. ‘You have to be worried, too, in Las Vegas. You are truly a discretionary city.’”

“The economic downturn grabbing national headlines looks very personal up close, in the midnight lighting of a Rapid Cash store on Nellis Boulevard. Between 9 p.m. and 1 a.m. on a nothing-special Friday, two dozen working Las Vegans find themselves where they never imagined they’d be: in line for a short-term loan just to make ends meet.”

“Rapid Cash employees see an appreciable increase in customers with variable-rate mortgage woes. ‘It’s really killing me,’ says Yvonne Acfalle, a 39-year-old banquet manager and mother of three, as she collects a short-term loan of $800 to avoid yet another late mortgage fee.”

“‘Even if I got a big raise,’ she says, ‘it still wouldn’t be enough.’”

“The mortgage Acfalle and her husband took out to buy a house in 2005 jumped from $1,200 to $1,600 per month in May, and probably will continue increasing every six months. She says she wants to sell, but can’t because her house has lost $50,000 in value.”

“‘I don’t know what we’re gonna do,’ she says.”

KCPW from Utah. “A new report from the Utah Foundation shows that purchasing a condo or townhouse, what’s known as multifamily housing, is becoming a popular choice for young Utah families. The main factor is the high appreciation rates of single-family homes.”

“‘And it used to be, just 3 years ago or so, a young Utah family could still find a single family home for $150,000 or something like that. And you just can’t find that anymore unless it’s very small and very old,’ says Utah Foundation Executive Director Stephen Kroes.”

The Spectrum from Utah. “Call it the state of real estate in Southern Utah, as homeowners, sellers and buyers attempt to adjust to a settling market after record appreciation took the nation by storm three years ago.”

“About a year ago, some buyers found their homes worth less than what they paid for them, and some sellers kicked themselves for not selling when the market was at its peak.”

“‘”We just got a notice the other day advising us to watch for foreclosed homes with pools that can now go bad without maintenance,’ said Ronnie Vause, a 36-year veteran of the real estate market.”

“The current housing market isn’t all doom and gloom in Southern Utah, although Washington County building permits are expected to be only 600 this year compared to a projected 1,200, said H. Allen Carter of Southern Utah Title.”

“‘We didn’t err in our calculations,’ Carter wrote of the figures that are at a 20-year low. ‘We simply underestimated the quantity of foreclosures and the speed with which lenders would bring the gavel down.’”

“Washington County prices dropped from an average of $339,135 in 2006 to today’s level of $219,140. ‘I’d say that home sales are picking up from what they were a year ago, but they’re selling for less,’ said Vause. ‘The downturn caught a lot of speculators by surprise, and most of them are facing losses because of it.’”

“‘As the market heated up in Vegas, it also heated up here,’ Vause explained. ‘On a percentage basis, we fared about like Vegas did, although we’re a much smaller population with a much smaller realtor population. Nevertheless, we saw prices go up while supply was at a minimum, making prices increase even more. St. George became a haven for investors.’”

“Cedar City has gained activity in real estate over the past six months, said Ron Ragona of Century 21 First Choice Realty. ‘Prices have dropped up here in the last year. Some of the expensive homes have dropped 20 to 25 percent,’ he said.”

“Duck Creek, which is about 30 miles east of Cedar City, has seen a downturn in activity for second-home residences, said Jerry Koller of Duck Creek Realty.”

“‘I’d say that sales fell as much as 75 percent,’ Koller explained. ‘We noticed the change beginning in June of ‘07. Since our market is directly related to Las Vegas, people are a little apprehensive about investing in the real estate market at the present time. People up here need to be more realistic with their sales prices. However, most people still haven’t lowered their prices.’”

“Koller said sales have been in the upper price ranges from $600,000 to $1.2 million. ‘We have a lot of stuff up here in that price range,’ he said. ‘Two years ago, cabins in the price range sold before they were ever completed. Now, they have been sitting on the market for three months. We need buyers. That’s for sure.’”

What do you see in your housing market this weekend? Cancelled projects? “The Penfield, an upscale condominium project that was to be downtown St. Paul’s first residential high-rise in more than 20 years, is the latest casualty of the condo market meltdown. The Penfield condos were priced from about $200,000 to more than $1 million.”

“That market dried up because people have not been able to sell their houses for as much as they would like. ‘There’s a group of people out there that will move to the downtowns and will still live in a condo, they’re just not doing it right now,’ said Mary Bujold of a Minneapolis-based market research company.”

“Building work on a 135-home housing development has ’slowed down’ while bosses ‘assess the market.’ Liverpool-based McInerney Homes started construction on its Belgrave Mill development in September 2006. So far, 44 of the 135 homes set to be built on the site have been completed.”

“The firm has launched a new marketing campaign which promotes the homes as ‘ideal pads for lads and girls.’ McInerney is offering a ‘lads’ pad’ with an LCD TV, games console, stereo, DVD player and Espresso machine. And there’s a ‘girls’ pad’ which includes a karaoke machine, hair straighteners, foot spa, stereo and pink kitchen pack.”

Off-beat bubble zones? “Through May of this year, existing single-family homes in Fargo, Moorhead, West Fargo and Dilworth spent an average of 77 days on the market before selling. That’s up from 71 days in 2006, 66 days in 2005, 62 days in 2004 and 56 days in 2003 - a period that Brenda Martinson, president of the F-M Area Association of Realtors, called ‘almost a feeding frenzy’ for homebuyers.”

“When inventory is limited and the market is robust, homes priced in the proper target range will sell quickly. ‘Unlike today, where they really have to be show-ready and priced in the market,’ Martinson said. ‘They can’t just speculate and hope.’”

“With a larger supply of homes and about a 7 percent increase in average sales price from last year, the summer selling season that likely won’t take off in other parts of the country already is well under way in Midland.”

“‘We’re a hot market in the country,’ said Carroll Nall, member services director of the Permian Basin Board of Realtors. ‘We’ve got people from all over trying to get in here and get a piece of this.’”

“There are about 418 units for sale in the area this week, Nall said, up from closer to 250 at this time last year.”

“The average price for homes sold in Midland-Odessa in May was $169,700, according to the Real Estate Center at Texas A&M University. Compared to last year when average home prices increased by nearly $35,000 from May 2006, prices are starting to level off and increase at more normal rate, according to local agents.”

“‘It was just a little bit more difficult to find something and made the prices go up rapidly, which is not good,’ said Dene Kelly with Dene Kelly Inc. Realtors.”

Bubble fallout? “In the latest sign of troubled economic times, some communities across the Commonwealth are struggling to cobble together the private donations necessary to throw Fourth of July celebrations.”

“The telephone rang at Nancy Hurst’s desk in Abington Town Hall one morning this week, and Hurst had her reply ready. ‘No,’ she told the caller. ‘They’re canceled.’”

“Hurst, an administrative assistant for the town, hung up the phone and sighed. ‘That’s about the 10th call today,’ she explained, and it wasn’t even lunchtime.”

“‘It’s the economy, stupid.’ That’s what it is. This is all a reflection of the poor economy going on right now,’ said Herb Lemon, chairman of the Board of Selectmen in Bridgewater. ‘You drive by gas stations and look at prices that leap right out at you. You go into supermarkets - the prices are up there, too. Foreclosures are at high levels. It is the economy. I don’t think I’m going out on a limb in saying that.’”

Or housing humor? “It’s a tradition people across the country still partake in each week. ‘They come and have a good time,” said Bob Joyce, general manager of a comedy theater and restaurant in Tampa.’”

“Comics, known to make light of bad moments, flip the coin on these situations to get a laugh. After all, comedy streams from tragedy, Joyce said. ‘We can’t have one without the other,’ he said.”

“When Les McCurdy, owner of McCurdy’s Comedy Theatre and Humor Institute in Sarasota, opens a show, he’ll ask who’s new to his theater, which is sometimes followed by, ‘Don’t you have a condo to unload? Let’s get rid of that thing.’”

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