The Housing Bubble

It’s Friday desk clearing time for this blogger. “Looking to buy a house in Culpeper? There are plenty to choose from, and they’re going cheap. Looking to sell a house in Culpeper? Lots of other homeowners are as well, values have plummeted and foreclosures are at an all-time high. A two-level rambler with three bedrooms and three bathrooms in Pelham’s Reach along Sperryville Pike sold last month for $149,000. That same house, built in 2005, went for $345,000, said Amissville Realtor Julie Emery.”

“Just down the road in Redwood Lakes, a larger Colonial-style house with four bedrooms and 3 1/2 baths sold for $230,100 last month. But the original homeowner purchased it new in November 2006 for $448,000.”

“‘You won’t see prices going up anytime soon,’ Emery said. ‘Right now, if you have to sell, be prepared to price your home very, very aggressively. The competition is based on price and it’s vicious!’”

“The Charlotte-area housing slump continues, with second-quarter sales declining more than national rates. Sales have fallen for five consecutive quarters. Mike Hiott recently had an offer on the northwest Charlotte house he’s been trying to sell since April, but the would-be buyers couldn’t meet today’s tougher lending standards. Another couple made a low offer, which he refused.”

“Hiott, who wants to move closer to his job in Union County, also couldn’t sell his home last year. ‘We’ve probably had a dozen showings, but in the last week, we haven’t had any calls,’ said Hiott, who has dropped the price a little, but says, ‘I’m not going to give my house away.’”

“All over East Tennessee, builders and home sellers are wrestling with the same problem - how to persuade people to “go ahead and buy something” and, if that doesn’t work, deciding what to do as an alternative.”

“Knoxville real estate investor Kenny Lockhart said his strategy is to buy homes, fix them up and sell them, but right now ‘you can’t sell a house.’”

“Since her brother had a stroke, Athens, Tenn., resident Annette Stephens has been trying to help him sell a Florida home. Stephens said the Sarasota County home was initially listed at $299,000 but the price has since been slashed to $179,000 and the family is now offering - in newspaper classified ads and on eBay - to trade it for a home in Tennessee.”

“‘There is still at least a market (for homes) up here,’ Stephens said. ‘Down there there’s just almost nothing … thousands of homes for sale. It’s unbelievable what’s happened in Florida. It was so overbuilt and overpriced and with the economy, people just aren’t going.’”

“Single-family home sales in New Hampshire fell 21.8 percent in the first half of this year, compared with the first half of 2007, and median sale prices dropped 8.2 percent, according to the New Hampshire Association of Realtors. And the number of homes on the market has remained steady at about 12,000 for the last year. Of the homes for sale, about 1,000 of them are foreclosure properties.”

“New Hampshire Association of Realtors President Jim Lyons stressed that real estate is still a good long-term investment. He pointed to New Hampshire real estate data from the past 10 years: Median prices have more than doubled since 2001 and the state had five years of double-digit price increases, from 2000 to 2004.”

“‘That’s why we don’t believe that it’s realistic to think of recent declines as the market crumbling or, as they like to say, the bubble bursting,’ Lyons said.”

“Sales in June fell from a year ago in the city of St. Louis and all 10 area counties reviewed by the Post-Dispatch. The median price dropped in all but three counties. Jamie and Brandon Wunderle, whose two-bedroom, 832-square-foot house is no longer big enough for them and their two children, put their house in unincorporated north St. Louis County on the market two years ago, and took it off a year ago. They’re going to try again soon.”

“‘But I am not getting my hopes up,’ she said. ‘There are three other houses for sale on the same street as us, and they haven’t sold.’”

“But the inventory of new houses remains high, and builders are offering discounts and free upgrades. Homeowners like Joan Helmholt can’t match those perks. Helmholt put her Lake Saint Louis house on the market for $288,900 in April 2007, but took it off when it didn’t sell, even after a drop of nearly $20,000. Now it’s back on the market — for $259,900.”

“If it doesn’t sell by fall, she’ll try again when the market turns around. ‘Maybe next year … hopefully,’ she said.”

“The dollar volume of real estate sales was down 50 percent through June compared to the first six months of last year, according to a report by Land Title Guarantee Co. The number of transactions was off nearly 33 percent from last year’s pace, the report said.”

“The record year was 2006, with total sales of $2.4 billion. ‘It’s probably never going to be repeated,’ said Bob Starodoj, a real estate broker who has worked in Aspen for more than 40 years.”

“Starodoj said there are still ‘a hell of a lot’ of people looking at real estate in the Aspen area. It’s just not resulting in a lot of sales right now. Many buyers are being conservative and want to see where prices are going; many sellers ‘are in denial,’ said Starodoj. ‘They still think it’s 2007.’”

“As the number of foreclosures increase in the Valley, some believe it may help the ailing housing market by attracting buyers looking for a good deal. ‘The market is still sinking, but it’s exciting. The banks are about to become the major player in the Valley,’ said real estate agent Stanley Fosha.”

“The John Hall & Associates agent points to an area north of Paradise Valley in Phoenix as an example of how foreclosures are fueling buyers. He said from January to June the area off Tatum & Paradise Village Parkway was essentially silent in sales.”

“But Fosha said several foreclosed properties have driven prices down. ‘In the past month there have been six sales, one condominium went on the market Friday and sold on Monday,’ Fosha said. That condo sold in 2005 for $370,000 and sold days ago for $149,000, according to the agent.”

“Fosha expects many more foreclosures to pop up within the next few months. ‘There are 24,000 homes in foreclosure right now, 15,000 have been taken back, that’s 38,000 to 39,000 homes right there that could be on the market in the next 90-days,’ Fosha said.”

“The Las Vegas housing market is flying close to the bottom but giving mixed signals as to where the actual ground may be, housing analyst Larry Murphy said Thursday. ‘The bad news is housing prices are down and the double-whammy is oil prices are up,’ Murphy told about 325 real estate professionals. ‘The good news is beer is cheaper than gas. So drink, don’t drive.’”

“Murphy shows a $215,000 median price for existing homes, the same as it was four years ago — and falling. ‘The scary thing right now is the foreclosure iceberg,’ he said.”

“About half the homes sold in June were foreclosures, and their median price was $113 a square foot, he said. Lenders are slashing prices on foreclosed homes as the numbers surge.”

“Consultant Steve Bottfeld said Las Vegas is going through a rolling ‘Goldilocks’ recovery. ‘It’s not too hot. It’s not too cold. Unfortunately, it’s not just right for everybody,’ he said.”

“Defaults in the April-to-June quarter more than doubled in the East Bay and San Mateo County compared with the same period in 2007, DataQuick reported. And single-family housing starts fell 48 percent in the East Bay in June compared with June 2007, the California Building Industry Association said.”

“In several California markets, including the East Bay and San Joaquin County, foreclosed homes - many quite new - make up the majority of home sales. ‘The builders are in competition with the foreclosure market, and they can’t compete,’ said Alan Nevin, chief economist of the California builders group.”

“A 30-year decision was made in a matter of seconds for 16 people Sunday night, with DeNova Homes-hired auctioneers selling the new single-family houses in the high $600,000 range.”

“This is the second home auction in Morgan Hill in recent months. The trend, which is happening throughout California and the West Coast, especially in highly desirable areas like Morgan Hill, is caused by the housing slump, with homes sitting on the market for months even with prices at the lowest level in years.”

“The starting prices were as low as $475,000 for the four- and five-bedroom homes. Their suggested prices - the price DeNova could have sold them for about two years ago, perhaps - ranged from $822,000 to $958,000. Buyers left with an average purchase price of $650,000.”

“Bidder Greg Berg, who didn’t raise his hand once during the hour-long auction, had a more cynical view.”

“‘They probably realized their goal, and probably got the prices they wanted,’ he said. Berg called the process manipulative. ‘The artificial excitement of the barkers, the shouting that they do, grinning like they’re having the best time in their lives. It’s their goal to make as much money as they can.’”

“New home construction in the Valley and Virginia is dragging to a standstill, and the prognosis for the remainder of this year and next is bleak, builders and economists said Monday. ‘There is a complete stop, almost, on construction,’ Waynesboro builder/Realtor Rick Kane said. ‘People are renovating or remodeling.’”

“Augusta County Chief Building Inspector Mike Nickell said the sluggish market has changed the mentality of local contractors. ‘Five years ago, they would laugh at remodeling,’ he said. ‘Now, builders are falling back on remodeling.’”

“In North Texas, new-home sales dropped 27 percent in the 12 months ended in June, says research firm Metrostudy. Nationwide, new-home sales fell 40 percent from May 2007 to May 2008. Year-over-year…Dallas prices declined 3.4 percent.”

“The current level of home building, on a pace of about 32,000 homes annually, is about the same as in 2000. That’s a more sustainable rate, says research economist Jim Gaines of the Texas A&M Real Estate Center.”

“Speaking to a room full of home builders, Gaines asked them what they were if they weren’t building houses. ‘A remodeler,’ one guy quipped.”

“Everyday the papers are filled with sad financial stories about how some struggling family may have to give up their four cell phones, new Lexus SUV, three Jet Skis and yearly trip to Italy in order to keep their house.”

“A few years ago, it was very easy to get a loan. You could be out driving around when you’d find yourself needing to use the bathroom. So you’d pull up to a random business, which happened to be mortgage company, and you’d ask to use the restroom, and they’d say, ‘Sure,’ and you’d strike up a conversation with the employee in the stall next to you, and by the time you flushed, you’d have a 30-year mortgage at 6.25 percent with 1 point origination fee.”

“Needless to say, some companies weren’t real picky about the credit checks either: MORTGAGE APPLICANT: ‘Hi. I don’t have a job and I’m not looking for one. Besides massive debt, I have a serious heroin problem and I declared bankruptcy 12 minutes ago.’”

“LOAN OFFICER: ‘Here! Take all this money. Please!’”

“Not that I’m making light of foreclosures. As a kid growing up in Grand Junction during the 1980s, many of my neighbors lost their houses. For example: We had some neighbors across the street who were very odd. Then one day they got foreclosed upon and had to move.”

“And I’ve noticed that when people get evicted, they don’t exactly tidy up the place and leave it sparkling clean for the new occupants. They tend to be mad at the bank and want revenge. And boy, did my neighbor sure show them. He not only took the appliances with him when he moved, he (true story) even took the light bulbs.”

“This, I’m sure, was devastating to the company that held the mortgage: Mortgage headquarters in New York… ASSISTANT: ‘Sir!’”

“CEO: ‘What’s the emergency?’ ASSISTANT: ‘It’s the Johnson family in Grand Junction, Colorado. When they moved out, they took all the light bulbs!’ CEO ‘What! No! Those are 49 cents each. How am I supposed to explain that to the board of directors?’”

“So hopefully we’ll all get through this huge crisis. Because it can happen to anyone. It can happen to me. I could get foreclosed upon. If so, those bastards aren’t getting my light bulbs.”

CBS 4 reports from Florida. “These numbers are sobering: If you are a homeowner reading this right now, when you wake up in the morning, the value of your house will have dropped about 45 dollars. And that’s if you sleep just 8 hours. When a homeowner is losing $5.70 an hour right now, renters actually are the ones who are making money. The average home value in South Florida has dropped $100,000 in just two years. That’s roughly $4,100 a month, $136 a day.”

“‘I knew it was softening,’ said investor Philip Logue. ‘I just didn’t realize how quickly, how fast the market was dropping.’”

“When Logue put his Coral Gables house on the market, he thought for sure it would sell. He started at $650,000 in 2006. A couple of years later, and a $175,000 price drop. He’s now renting the house out.”

“‘I was really surprised,’ said Logue. ‘Especially at the end when we really dropped our pants down and I felt we were giving it away, and we still couldn’t sell it.’”

“Broker Ray Jourdain isn’t surprised by the numbers. ‘Can you afford the payments? Can you have the insurance, the property taxes, the monthly payments with a normal 20% down sale? Does it work for the average person? And when that happens, when we hit that, that’s when we hit the bottom,’ he said.”

The Miami Herald. “In Miami-Dade and Broward counties, the median existing home price fell an average of 20.5 percent in June to about $299,300. The number of home sales in Miami-Dade fell 6 percent in June from last year, while for-sale listings grew by 24 percent.”

“In Miami-Dade, 984 condos and single-family homes were sold in June, of 43,188 properties listed in the MLS. In Broward, June sales were 1,230 of 39,703.”

“In the three-month period ending June 30, more than 10.13 percent of borrowers in Miami-Dade with first mortgage loans were behind on payments by 30 days, up from 5.61 percent last year. In Broward, the delinquency rate was 9.34 percent, up from 5.15 percent during the same three-month period a year ago.”

“Robin Hood, who lost her job last year, had to put her home near South Miami on the market in January. Not yet behind but barely scraping by, she failed to persuade the lender to negotiate new terms. Having to compete with cheap foreclosures in the neighborhood has made attracting even window shoppers difficult. She’s on the edge of giving up.”

“‘I don’t think you can fault them because if I was a buyer, I’d be looking for bargains, too,’ said Hood. ‘I have to sell, and it just so happens to be in a market that is destroyed.’”

The Daily Business Review. “As more (condo) units go into foreclosure, communities - especially newly built or converted projects - are struggling with rising nonpayment of association fees. Beleaguered board members are ratcheting up legal pressure on lenders.”

“Colin Hendrick, president of Surfside’s Carlisle On the Ocean, is also going after delinquent lenders. Last month, the association began foreclosing on five condos owned by delinquent lenders, said attorney Ralph Ruocco, with Glazer & Associates in Hallandale Beach. The lenders are often trustees for the bondholders who invested in a securitized mortgage pool, according to public records.”

“Glazer & Association last month successfully forced the sale of a bank-owned condo at the luxury Residences at the Bath Club in Miami Beach. The condo at the Bath Club sold for $1.45 million during the height of the condo boom. At last month’s foreclosure auction, the unit sold for $438,100.”

“Ruocco predicts more lenders will lose properties to auctions because they didn’t make maintenance payments on time. ‘Their organization is horrible,’ he said. ‘Their left hand doesn’t seem to know what the right hand is doing. Banks’ representatives call me to ask me who the prior owner of a unit was because they are trying to figure out who internally is responsible for talking with me.’”

“Hendrick hired Ruocco’s firm more than a year ago, when the Carlisle was $300,000 in debt. At that time, only 30 owners were paying the maintenance fees, Hendrick said. ‘It was so bad, we had no idea how we were going to pay the electrical bill,’ he said.”

The Sun Sentinel. “Price cuts still ruled in June as South Florida’s housing slump trudged into its 30th month. Palm Beach County’s median price for existing homes was $334,300, off 12 percent from $377,900 a year ago, the Florida Association of Realtors said Thursday. Sales fell 3 percent, to 744 from 764 during the same period last year.”

“Individual sellers are struggling, in part because they can’t drop their prices as low as lenders, said agent Kulbeer Sanghera. ‘How can sellers compete with the banks on price? They can’t,’ Sanghera said.”

The Palm Beach Post. “The median price of an existing condominium in Palm Beach County fell 24 percent from June 2007 to $153,200 last month, according to the Florida Association of Realtors. The median price of an existing condo in Martin and St. Lucie counties fell 28 percent to $165,000.”

“The median price of an existing home in those two counties fell to $160,800 from $237,100 in June 2007 - 32 percent.”

“Inventory remains the elephant in the room in Palm Beach County, which has more than 22,000 properties listed for sale, according to IPRE.com. At June’s sales pace, that’s nearly a 17-month supply, Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach pointed out.”

“‘Foreclosure sales will accelerate in the next 24 months,’ predicts McCabe. ‘As long as they do, there will be continued pricing pressures and we are going to continue to see price declines.’”

“Treasure Coast home prices have fallen more than $100,000 from their high point nearly three years ago, said mortgage broker Jim Sahnger. Qualifying income for a median-priced home has fallen $18,000 in the past year.”

“‘For Treasure Coast home buyers, monthly payments have declined $500 on a median-priced home, putting 10 percent down,’ he said.”

The News Journal. “Sales of existing houses and condominiums along with median sale prices in the Volusia and Flagler county market continue to decline.”

“‘The aura out there is not good in Florida,’ sand Nancy Dance, president of the Daytona Beach Area Association of Realtors. “We are waiting to see what the buyers will accept, waiting to see the sellers to be more realistic than the values that skyrocketed in ‘05 and ‘06. We’re waiting to try and find the level price. It will take awhile to lower costs and appraisals.’”

“‘This (declining housing industry) will still take awhile to turn around,’ said Jimmy Millhollin, head of the Flagler County Association of Realtors. ‘Many homeowners are still in trouble. One-quarter of our sales are short sales or bank owned.’”

The Herald Tribune. “Both the Sarasota-Venice and Charlotte County-North Port markets pushed to post-boom pricing lows during June as the region’s rampant foreclosure phenomenon made itself felt.”

“The median sales price in Sarasota-Venice dropped 20 percent to $235,500 from the same month a year earlier. It was the lowest median seen in the market since April 2004, and, because sales from Manatee County were not included because of technical difficulties, the true median is likely even lower.”

“The drop pushed prices out of the relatively stable band of $240,000 to $270,000 that they had maintained for nearly a year, data released Thursday from the Florida Association of Realtors showed.”

“The $141,000 median in Charlotte County-North Port — a 29 percent drop from $199,000 in June 2007 — was the lowest price since November 2003.”

“‘What’s happening is that the sale of all this foreclosed property is causing prices to fall,’ said Art Schwartz, a retired University of South Florida finance and real estate professor who lives in Sarasota. ‘Banks just want to get these properties off their books.’”

“‘Five years from now, people will point back and say this was the moment when they could get the greatest deals,’ Schwartz said. ‘And if mortgage rates start rising again, which may happen if the Federal Reserve starts reacting to inflation, people of the future will really be kicking themselves.’”

“There is a 78.4-week supply of single-family homes on the market, more than three times the normal 24-week supply, the Team DuToit numbers show.”

“‘For every three foreclosures that we’ve seen, there are seven more to go over the next 24 months,’ said consultant Jack McCabe. ‘It will take three years before we see price appreciation in the market, and I think prices will drop another 10 to 15 percent.’”

“The market clearly departed from fundamentals on the way up, said Bill Seider, a real estate attorney with the Williams Parker law firm in Sarasota.”

“Now it looks like it is departing from fundamentals on the way down. He pointed to the sale of a three-bedroom home in the Southgate neighborhood for $195,000. The same house sold for more than $400,000 during the boom.”

“‘That house has got to be worth $250,000,’ Seider said. ‘There are a lot of bargains out there.’”

The News Press. “Lee County real estate agents sold slightly more homes in the first half of this year than a year ago - but the future’s uncertain for the rest of the year. Most of the homes sold these days are low-end houses being sold by financial institutions that got them back in foreclosure and that’s reflected in the June figures released Thursday, said Steve Koffman of Century 21 Sunbelt Realty in Cape Coral.”

“The county’s median price of an existing single-family home dropped 19 percent in June to $172,400 from May’s $212,400, and June’s median price was off 32 percent from a year ago, when it was $253,900. It’s the first time since November 2004 that the median price fell below $200,000.”

“Prices and the number of sales have generally been declining since the market reached an all-time high of $322,300 in December 2005 at the height of the housing boom in Southwest Florida.”

“Expect a seasonal slump as the market heads into summer doldrums, but ‘I think the number of sales is sustainable,’ Koffman said.”

“‘The average person couldn’t afford a house and now they can,’ he said. He has a new house listed in north Cape Coral for $104,000 - about a third of what it would have gone for at the height of the boom.”

“At issue, Koffman said, is whether surging unemployment - now at 7.5 percent - and a local economy ‘in shambles’ will dampen demand for homes.”

“‘There is concern whether there are enough of those people,’ he said.”

From Hernando Today. “County commissioners didn’t need another reminder of the bleakness of the Hernando County economy. But they got one Tuesday after hearing twin reports from economic experts who gave a snapshot of current conditions.”

“‘This is just an ugly period of time,’ said Henry Fishkind, an economist with Fishkind & Associates. ‘This is the absolutely worst recession I’ve seen since 1975.’”

“Lee Ellzey, CEO of Pasco-Hernando Jobs & Education Partnership, started things off by saying 35 to 40 percent of Hernando County’s workforce leaves the county to go to work. Most of them travel south to Hillsborough, Pinellas and Pasco counties.”

“David Hamilton, also with the PHJEP, said much of the economic decline locally was fueled by the decrease in construction jobs, once the mainstay of the county economy. Construction jobs in Hernando County reached a peak in May and June 2006 and have declined steadily since then, Hamilton said.”

“‘We have lost 1,100 jobs in construction,’ Hamilton said. By contrast Florida lost 75,000 jobs during the last 12 months, mostly in construction.”

“More people in Hernando County are employed in the retail trade industry than any other sector, Hamilton said. Unfortunately, those jobs typically are low-paying.”

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