The Housing Bubble

The Press Democrat reports from California. “Every week in Sonoma County, banks take back 60 homes from owners who have fallen behind on their loan payments. Sensing an opportunity in an otherwise slow market, real estate agents and mortgage brokers are organizing tours to showcase foreclosure properties to potential buyers. Almost every weekend this summer, buses carrying first-time buyers and investors roll through neighborhoods across the county. Most foreclosure properties can be bought for less than $400,000 — sometimes much less.”

“‘Almost everything I look at these days is a foreclosure. I’m surprised when it isn’t,’ said Pete Deatherage, co-owner of Pacific Appraisals in Rohnert Park.”

“‘I can never remember the market dropping as much as it’s dropped and this many people rushing in to buy in this short time frame,’ said James Madison, a foreclosure specialist at Coldwell Banker with three decades in real estate.”

“Richard and Teja Faria paid $330,000 in the same Santa Rosa neighborhood where they sold a similar home for $590,000 three years ago — a 44 percent difference. ‘It’s scary because it’s a declining market. But we want to buy because we want an affordable mortgage payment,’ he said. ‘The timing is perfect.’”

“The couple recently returned to Sonoma County to raise their two children. Driving the county with his agent for several weeks, Faria found plenty of foreclosed homes, but twice came up short with purchase offers.”

“‘We were frustrated,’ he said. ‘But we took a shot and like everybody else in today’s market, that’s what you have to do.’”

“Not wanting to miss out again, Faria offered $12,000 above the bank’s price for the 1,700-square-foot home in southwest Santa Rosa. The deal should close within a month.”

“Tosh Lu took the tour to aid his search for investment property. ‘In one tour you get many neighborhoods. This saves a lot of time,’ said the Rohnert Park resident. ‘I’m going to buy before the market goes back up again.’”

“Now a renter, Gary Everson, a 19-year-old looking with his mom…figures he can buy a house and make the mortgage payment with help from roommates. ‘Before, I didn’t think I was ever going to be able to buy a house, not until I saw these prices,’ he said.”

The Sacramento Bee. “For two years and three months, Doug Pautsch ran a division of Centex Homes that routinely led the Sacramento region in sales of new homes. On July 11, Centex ousted Pautsch. Pautsch has called the move an apparent retaliation for his lawsuit against Centex, a publicly traded home builder based in Dallas. The lawsuit, filed in Placer Superior Court, alleges that Centex didn’t pay Pautsch $355,000 in promised bonus money.”

“Recently, the 16-year veteran of the region’s home-building scene talked about his bird’s-eye view of the housing downturn. Q: Sacramento was one of the first U.S. housing markets to fall apart. Was it a problem communicating that to headquarters?”

“A: The first nine months everyone was in denial: ‘That’s just a little cold that Sacramento has, just a little speed bump. We’ll get through it. It’s just Sacramento.’”

“They didn’t realize it was a flu that would become an epidemic. My local counterparts and I would talk about it. At their respective corporate offices, not just mine, people just didn’t understand. Across the country everyone was full speed ahead. Money was flowing and sales were happening. It must just be Sacramento because it went up so quickly.”

“It was six to nine months before people realized this wasn’t just a Sacramento issue. They’d say maybe it was just California or Florida, and maybe it was just Northern California. There was a lot of denial going on. But as we know, everybody caught the flu.”

“Q: Where is this market going? A: I think we’re at the bottom. We’re going to bounce around a little bit. We moved through the foreclosures. They’re being absorbed by the market. Inventory has been coming down so there’s not a huge inventory issue anymore. I believe we’re at the bottom.”

“I think it will be next year when we start to see recovery. I define that as prices starting to go up.”

“Q: What keeps you up at night? A: I think there’s going to be a shortage of lots…When the herd leaves and the market has changed, they will chase the same lots. There will be a shortage of developable lots.”

The Press Enterprise. “Canyon Lake resident Matthew Larson is trying to help fight the foreclosure crisis. His weapons of choice are gallons of green paint. The battlefields are dead, brown front lawns.”

“Armed with a sprayer that resembles a pearl-colored jet pack, Larson paints lawns with a turf colorant traditionally used at golf courses. ‘It gives a home instant curb appeal,’ Larson said as he sprayed the green paint on the lawn of a repossessed home on Longhorn Drive in Canyon Lake.”

“Riverside County has been among the counties hardest hit by the mortgage crisis nationwide, according to real estate statistics. ‘I got into this because this crisis is not going to get any smaller, and someone has to step up,’ Larson said. ‘We’ve got beautiful, new communities and it is a shame to see them fall apart.’”

“It was a fix Jerry DiBernardo, the real estate agent listed for the Longhorn Drive home Larson painted, was willing to try. ‘I’ve seen it done on other properties. It was an opportunity to see if it will help sell the property,’ DiBernardo said. ‘It’s got to look better than the dying brush. Anything is an improvement.’”

“Perhaps the biggest obstacle, however, is psychological, said Robert Green, a turfgrass research specialist at the UC Riverside College of Natural and Agricultural Sciences. ‘There will be some who just aren’t used to the idea of painting grass,’ Green said.”

The North County Times. “It’s called a note job. Someone, usually a man, walks up to a bank teller and slips a piece of paper across the counter. Note jobs are the most common kind of bank robbery, a crime that decreased nationwide in 2007, but increased in San Diego and Imperial counties, said Special Agent Darrell Foxworth of the FBI’s San Diego field office.”

“In 2006, the two-county area had 146 bank robberies. In 2007, that number went up to 171. By July 16 of this year, there had been 108 bank robberies and, if prior years are any indication, there will be more robberies in the second half of 2008 than there were in the first.”

“Though the majority of bank robbers are drug addicts, a certain type of robber —- likely to pull a note job —- may be particularly active in a stagnant economy, said William Rehder, a Los Angeles-based bank robbery consultant formerly with the FBI.”

“These so-called subsistence bandits aren’t necessarily trying to support an addiction. They may have lost their jobs, lost the financial stability of a marriage, or finally cracked under the stress of mounting credit-card debt, Rehder said.”

“‘More recently, of course, they face the home mortgage foreclosure problem,’ he said. ‘There have been a number of these folks that maybe wouldn’t consider bank robbery ever in their lives —- but they’re facing the world-shaking desperation of these problems and they see this as a last resort.’”

The Mercury. “In a bad economy, fun is often the first casualty. For James Hedrick, that means it’s a busy time in his line of work. He’s one of those dreaded ‘repo men’ who repossess items after people fall behind on their payments.”

“He spends his days scanning megayachts, sailboats and fishing skiffs. Hedrick is an agent with National Liquidators, considered by industry experts to be the world’s largest marine repo company.”

“The company has tripled its business in the past three years, and now takes possession of about 200 boats a month in Florida, Ohio and California. The company’s competitors also say they’ve seen similar increases in business.”

“‘They’re going to hang on to the car, they’re going to hang on to the house. But they’re going to give up on the boat,’ said Hedrick, whose employer has doubled its staff in two years to 85 repo agents so they can meet demand from the banks and lenders.”

“It’s not just boats: Repo agents say banks and lenders have been asking them to reclaim all-terrain vehicles, motorcycles, small planes, snowmobiles, semi-trucks and, of, course, cars. Vehicle repossessions were up 10 percent in 2007 over the previous year, said Tom Webb, an analyst for Manheim, the largest car auction company in the nation.”

“Sometimes, owners turn the boats in to the repo agencies when they realize they can no longer pay. But other times, they hide or vandalize the boats before they can be seized, said Megan McQuaide, the owner of Repo Yacht Sales in San Diego. She’s boarded boats with oil splashed around the cabin, engines intentionally overheated and feces on the deck.”

“‘Sometimes it’s really malicious stuff,’ she said.”

“One boat dealer, whose company also does recovery for banks and lenders, says those facing boat repossession were typically involved in the housing boom either as a real estate agent, construction worker or mortgage broker.”

“‘A lot of this is self-inflicted. It’s somebody who three years ago made $50-$60,000 and didn’t save a penny,’ said Ray Jones, the owner of Long Beach Yacht Sales in California. ‘They thought the income would never end. But the income stopped and the toys went away.’”

The News Press reports from Florida. “Michael and Judith Van Dress have a lot of privacy and not a lot of competition when they use the brand-new fitness center at their condominium in Concordia. They moved to the north Cape Coral community a year ago, just as construction of the project was grinding to a halt in Southwest Florida’s floundering residential real estate market.”

Living at Concordia is a strange mixture of sparkling new amenities and subtle signs of decay, says Judith, who with her husband retired from Ohio. ‘There’s not a lot of occupants here,’ she said.”

“Welcome to life at the half-builts, the many projects large and small that sit largely vacant and partly completed - left high and dry when the housing market tide went out.”

“Experts say the wave of speculation that peaked at the end of 2005 - when the median resale price of a home was $322,300 - caused a spurt of construction at prices nobody could pay. According to figures released Thursday, the median resale price in June was $172,400.”

“There are no exact statistics on how many such developments there are in Lee County, but ‘you’re not talking about a few units,’ according to commercial real estate broker Jim Simon.”

“‘It’s in the thousands,’ he said.”

“A typical condo in Concordia can be had for about $100,000. That’s 63 percent less than the $267,900 the Van Dresses paid in April 2007.”

“Concordia’s sales office is still open, but the developer ran out of money last summer when its main lender pulled the plug on financing and filed a foreclosure action for $23.4 million on the partially completed, 34-building, 340-unit condominium.”

“Robert Thomas signed a pre-construction contract to buy a condo in the new Green’s Edge development in December 2005, at the height of the housing boom. The market crashed the following month and his unit was never built at the huge project off Colonial Boulevard in Fort Myers.”

“Now he’s trying to get his $84,000 down payment back from builder Harp Development, because the builder never put up his building and he counts himself lucky. The project sits empty.”

“Thomas freely admits he was buying the Green’s Edge unit as an investment. He hoped to sell it for a profit after it was built.”

“‘I had no intention to live there,’ Thomas said.”

“For the Van Dresses, a little peace and quiet isn’t all bad, but ‘there’s a lot of little things you see that are going to wrack and ruin,’ Judith Van Dress said, such as clotheslines and basketball hoops and people walking large dogs without the use of pooper scoopers - all in violation of the community’s regulations.”

“‘It isn’t one thing, it’s a lot of things,’ she said. ‘It wouldn’t attract people to buy the property. I would never buy it at this point.’”

The Herald Tribune. “Gloria Chaignet’s attempt at real estate ‘flipping’ three years ago has left her life upside-down today. Chaignet and hundreds of others were trying to tap into the frenzied real estate market where homes and condos often ‘flipped,’ or resold, one or more times while being built — each time leaving many a buyer with a bucketload of money.”

“So with an eye out to help her children, Chaignet and some co-workers got wind of a can’t-miss deal — and bit.”

“But it turned out that pretty much everyone lost. ‘It wasn’t done by greed,’ Chaignet said. ‘I’m a single mom with two kids going into college and I thought this could help pay for their college.’”

“Ground was never broken on Chaignet’s North Port home, but the builder continued to take draws on the mortgage loan she signed for, that one that seemed oh-so-easy to get. She said her builder stopped returning phone calls. E-mails to the company bounced back as undeliverable.”

“‘It sounded like a really great deal, but the more we got involved in it we found out differently,’ she said. ‘They probably never had any intention of building any of the homes.’”

“She said her sons will still be able to go to college, but it will be paid for by a lot of credit cards instead of investment returns. ‘I feel like I was raked over the coals,’ she said. ‘I feel like I was part of a bank scam and I feel like I was completely snowed.’”

The Cape Coral Daily Breeze. “The tide of low sales in Cape Coral and Fort Myers may be turning, according to a June 2008 report from the Florida Association of Realtors. Last month 719 single family homes were sold in the region, an increase from 558 sold in June 2007. Some Realtors may consider these sales good news because it decreases the unprecedented vacant home supply, but while sales continue upward, prices dropped 32 percent.”

“Median prices for single family homes dropped from $253,900 a year earlier to $172,400 today.”

“‘In my opinion anytime we are up is a good sign,’ said Tommy Lee, president of the Cape Coral Realtor’s Association. ‘There is no doubt property is moving. It is the land of affordable properties again.’”

“Gloria Tate, a Realtor with Raso Realty, said that the sales increases are a result of the banks dealing more swiftly with pre-foreclosures and short sales. ‘A lot of listings we have are short sales. People are making offers on short sales and banks are getting a little more quicker on their response time making it easier to close,’ said Tate.”

“Today there are 4,835 pre-foreclosure properties in Cape Coral, according to Realty Trac. According to Tate, lower prices and an expedited foreclosures process ‘is making it affordable for people to own a home in Cape Coral.’”

The St Petersburg Times. “For two years, real estate agents have had no luck finding a buyer for the 3,800-square-foot home David Frishman built as an investment on Bradenton’s exclusive Hawk Island. Now, stuck with $12,000 monthly payments, Frishman is trying to sell the house in a less conventional way - he has put it up for bid on eBay.”

“With a day left to go, the responses have been disappointing. ‘Most are just sort of predatorial,’ says Frishman, who has heard from people wanting him to refinance or take less than his $1.5-million starting bid.”

“As of Sunday, eBay’s real estate category had 4,029 listings, a tiny but growing number of the site’s 17-million listings. Among the properties offered for sale were 348 in Florida.”

“A five-bedroom canal-front home in the MiraBay development of southern Hillsborough County. Bought for $695,000 in 2005 at the peak of the boom, it was foreclosed by the lender and is now listed for $399,999.”

“A two-story, lakefront home in the Lee County town of Estero for $265,000. The owners, who paid $346,800 for the house in 2005, need to sell because they have another place in foreclosure proceedings.”

“At a starting bid of $1.5-million, the assessed value, the Hawk Island house would seem a great deal in a new gated community where some lots alone are listed at the same price. But while the auction has drawn 3,804 views, not one bid had come in as of Sunday.”

“‘We’re just trying anything at this point,’ Frishman says of his eBay auction, which ends today. ‘It certainly wouldn’t be our first option, but when you’re trying to save your home, you don’t leave any option unturned.’”

My Fox Tampa Bay. “The Greater Tampa Association of realtors says home sales are up by 76% since January. At the same time, California based Realty Trac reports we have double the rate of home foreclosures.”

“All this conflicting information leaves some people feeling as though they’re caught in the middle. Morgan Barfield is one of them. He put $80,000.00 worth of renovations into a south Tampa home.”

“‘Countless people have come by offering just a real low ball offer, probably a third of the value,’ Barfield said.”

“If there is one statistic everyone can agree on, it’s the price of a home. It’s down by nearly 8% since January.”

The Palm Beach Post. “Melbourne-based Mercedes Homes continues to cleanse its books of land in Port St. Lucie. The latest deal: The builder’s 29.5-acre Savanna Trace development sold for $1.35 million this month. The buyer was not a house builder - it was a house of worship.”

“Mercedes was approved to build 80 homes on the property, but the market flagged and construction never started. The company bought the property in 2004, St. Lucie County property records show. Last year, it transferred it internally for $1.9 million, records show.”

“In December, the firm got rid of 130 of its vacant lots in Port St. Lucie, selling them for $2.52 million to investor William Brisben. Brisben snagged some of the lots for as much as $70,000 less than what Mercedes paid for them.”

The Orlando Sentinel. “Former Darden executive Doug Doran, who had partnered with Veranda Park developer Kevin Azzouz to develop restaurants for the Italian-themed town center in MetroWest, said last week he has parted ways with Azzouz.”

“Doran said he stopped working with Azzouz in late March as a result of the sharp downturn in the real-estate market. Doran, who had formed a partnership with Azzouz called Group Four Restaurants, said the ‘horrible economic’ environment made it ‘tough’ to open additional restaurants in Azzouz’s development.”

“‘It made no sense,’ Doran told the Orlando Sentinel.”

“Azzouz has run into financial trouble with condo developments in Veranda Park, facing several foreclosure lawsuits.”

The News Herald. “The population of every city in Bay County, except Panama City Beach, decreased between July 2006 and July 2007, according to recently released annual estimates from the U.S. Census Bureau. For Panama City, it was the third straight year of decline, from 37,526 in July 2005 and 37,227 in July 2006 to 36,805 for July 2007.”

“Panama City Mayor Scott Clemons was not alarmed by the numbers. ‘Our growth has been flat for many years,’ he said. ‘Our area has been affected by the economy, it’s more expensive to build and we’re landlocked, with the exception of northern Panama City and the current airport property.’”

“‘Our decrease in population in other municipalities could be due to the many Katrina evacuees that are slowly moving back to their home states,’ said Carol Roberts, president of the Bay County Chamber of Commerce. ‘In addition, individuals are also moving to unincorporated areas of our county, pursuing more affordable housing.’”

“Bay County Economic Development Alliance Executive Director Ted Clem said it’s hard to cite one cause of population decline in the area, but he believes the construction slowdown is a main player.”

“‘From 2003 to 2006, construction was our strongest engine for job growth. Since then, we’ve had 3,000 workers displaced’ in that field, he said.”

“Lynn Haven Commissioner Joseph Ashbrook said the minimal dip could be due to some people getting fed up with living in hurricane- and flood-prone areas, and new residential construction ‘isn’t selling.’”