The Housing Bubble

The San Francisco Chronicle reports from California. “In the San Francisco metropolitan area - which Case-Shiller defines as the counties of Alameda, Contra Costa, Marin, San Francisco and San Mateo - prices fell 22.9 percent in May compared with a year ago. That made the area the sixth worst-performing region in the country, according to the index, after Las Vegas (down 28.4 percent), Miami (down 28.3 percent), Phoenix (down 26.5 percent), Los Angeles (down 24.5 percent) and San Diego (down 23.2 percent).”

“‘On a relative total performance basis, San Francisco is still a market that grew quite a lot from the mid-1990s to 2006; its prices increased very sharply during that time,’ said Maureen Maitland, VP at Standard & Poor’s, which publishes the index. ‘I don’t want to undermine the fact that … San Francisco is not doing well; prices are in sharp decline, but most people who owned a home for five, 10 or 15 years are still in relatively good shape if they want to sell their home today - they just can’t sell it for (as much) as last year.’”

The Los Altos Town Crier. “In Santa Clara County, single-family home sales appear to be on an upward trend, according to information from the MLS for the Silicon Valley Association of Realtors. The average price of homes in June was $922,149, down from $970,702 in May. The average price of homes in June 2007 was $1,066,610.”

“Today’s market offers long-term value for buyers, according to SILVAR President Leannah Hunt. ‘As home prices drop a bit, there are good opportunities out there for serious home buyers,’ she said.”

The Los Gatos Weekly Times. “Santa Clara County assessor Larry Stone has been in office since 1994, and he’s seen property values rise and fall as market conditions change. At a real estate tour meeting in Los Gatos last week, Stone admitted the current market is ‘rather a drastic market,’ but noted, ‘We’ve been through the downturns, but somehow the market always rebounds.’”

“Hardest hit these days are the condo and townhome markets, and Gilroy, Morgan Hill, Milpitas and East San Jose, which he described as ‘blood-baths.’”

Bay Area Newsgroup. “Lennar Corp. has jettisoned its ownership stake in two condominium projects near Marina Bay here, another indicator that the housing market has yet to escape its multi-faceted meltdown.”

“The company sold its interest in the 488-unit Marina Shores and the 224-unit Marina Cove, residential developments located in the Marina Bay area of Richmond. Both projects were launched as a venture consisting of Lennar and Emerald Fund. Kennedy Wilson bought Lennar’s stake in the two condo projects, which total 712 units.”

“‘Builders want to focus on the inventory they are sure they can sell,’ said Matthew Anderson, a partner with Oakland-based Foresight Analytics. ‘Builders don’t want to keep a project that no longer pencils out.’”

“About 515, or almost three-fourths, of the units in the two projects remained unsold as of a few weeks ago.”

“Kennedy Wilson’s strategy will be to auction some of the homes. The company plans to auction 40 of the condos in August for $140,000 to $255,000. The homes had been offered for $275,000 to $455,000 previously.”

“Despite this aggressive effort, the prospects for the managers for the Marina Cove and Marina Shores projects remain murky. That’s because of the seemingly relentless nose-dive in sales and residential property values.”

“‘We’re still in pretty uncertain territory right now,’ said Stuart Cramer, Kennedy Wilson’s managing director for residential investments and development.”

The Sacramento Bee. “The down payment-assistance programs pioneered by Sacramento nonprofit Nehemiah Corp. of America…and others like it, will be eliminated Oct. 1 under the new housing law. Federal officials had long complained that the program, under which the down payment is supplied by the seller, leads to more defaults because it effectively inflates the total price of the property.”

“Nehemiah CEO Scott Syphax urged President Bush on Monday to veto the bill.”

“‘Our leaders are ignoring a basic fact: Seller-funded down payment assistance is the only remaining safety net available to millions of families today seeking home ownership,’ Syphax said in a press release. ‘Killing these programs will not only negatively impact generations of low- to moderate-income Americans who would have been able to use homeownership as a tool to create wealth, stature and self esteem, but to our economy as a whole.’”

The Recordnet. “Terry Hull Sr. (who) operates Stockton-based Property Management Experts, said that even in the strong rental market, fed by people who have had to find other housing after losing their homes to foreclosure, landlords have been reluctant to boost rents because of the economic slowdown.”

“Stockton has consistently been at the top of metro areas nationally for home foreclosure activity. This puts many former homeowners into the rental market. But Thomas said that apartment occupancy numbers could be threatened in coming months by the rising number of foreclosure homes being snapped up by investors who intend to put them on the rental market.”

“As the number of rental houses in the county jumps, investor owners will probably have to lower their rents to compete for renters, Thomas said. ‘That spread can tighten, and that means it will ultimately impact apartments,’ he said. ‘Those homes will end up cannibalizing apartment rents at some level.’”

“Stockton area real estate brokers say that at least 80 percent of home sales this year are foreclosure homes and that as much as half of those sales involve investors.”

The LA Daily News. “Home values plunged by nearly a quarter-million dollars in the San Fernando Valley during June as a record number of foreclosures flooded the market and sales continued to lag, a trade group said Tuesday.”

“The median resale house price tumbled 34 percent, to $431,000 - a loss of $224,000 from the record high price of $655,000 the previous June, said the Southland Regional Association of Realtors. The price fell 4 percent, or $19,000, from May, and is now nearing the $425,000 median recorded in February 2004.”

“‘I think that’s indicative of the impact the (foreclosures) are having on the market,’ Jim Link, the association’s executive VP, said of the steep price decline. ‘It’s going to be a while yet before the (foreclosures) work their way through the market.’”

“Most of the foreclosures are concentrated in communities dominated by first-time buyers who got in as the market was peaking in 2005.”

The Orange County Register. “Four Santa Ana ZIP codes had the highest concentration of foreclosures in the county in the second quarter, according to an analysis by DataQuick for The Orange County Register. In some ZIPs, the ratio of foreclosures to the total number of houses and condos doubled from the first quarter.”

“In parts of Santa Ana in 2005, the peak of the housing boom, 75 percent of the money borrowed to buy homes was subprime.”

“Foreclosures also are spreading to areas not targeted by subprime lenders. Some South County ZIPs rank in the county’s top third for concentration of foreclosures, including parts of Lake Forest, Ladera Ranch, Rancho Santa Margarita and Aliso Viejo.”

“Steve Thomas, president of RE/MAX Real Estate Services in Aliso Viejo, said first-time homebuyers are scooping up bank-owned properties and other distressed sales in cities like Santa Ana. By his math, foreclosures and short sales make up about 75 percent of the homes for sale in Santa Ana.”

“‘Prices have come down to the point where the affordability is screaming, ‘First-time homebuyer, you can buy more home in Santa Ana, Garden Grove or Anaheim,’ Thomas said.”

The Union Tribune. “San Diego and many other metro areas around the country continued to see record home price declines in May, the Standard & Poor’s/Case-Shiller Home Price Index showed yesterday. According to Case-Shiller, San Diego’s index has dropped from a high of 250.34 in November 2005 to May’s 178.03, compared with a baseline of 100 in January 2000.”

“That means a house that sold for the county’s median price of $230,000 in January 2000 theoretically rose to a peak $575,800 before falling back to $409,500 in May.”

“Andrew LePage, an analyst for DataQuick, whose data shows similar trends to Case-Shiller, warned against drawing any conclusions about the immediate future. ‘It’s possible that the decline in prices in certain areas has subsided but that doesn’t mean it can’t pick up again,’ LePage said, noting that the proportion of high-priced home sales could grow and falsely suggest that overall prices are on the rise.”

“He said it will take another few months to see if overall prices are bottoming out. ‘Even the most pessimistic folks out there, I assume, don’t believe prices are going to zero,’ he said. ‘At some point, the curve has to change and we won’t be racing down as fast, especially in hard-hit areas.’”

The Daily Bulletin. “Kellee Hawkes is on the verge of losing her Upland home. She was laid off in December and isn’t making enough in her new job to make the mortgage payments and pay off the debt that she accrued when she was unemployed. She will have to be out by October unless she can do something to save her home.”

“Her credit score has been affected by the missed payments and although her house is on the market as a short sale, she does not think that she will be able to sell it before it goes to auction in October. She said that there are many homes for sale within her neighborhood and most are bank owned.”

“‘(The bank) seemed OK with short selling my home to a new buyer and writing off the total sum of my loan,’ Hawkins wrote. ‘Why not, in essence, do the same thing but with the person already in the home and motivated to keep it?’”

“Bruce Engles, a real estate agent in Upland, said it’s a situation he sees too often. It’s hard for people to consider all possible scenarios before committing to purchasing property, but it’s something that could save heartache in the end.”

“‘(They must) make sure that they can really afford it in the bad times, not just the good times,’ Engles said. The average price of a home in Upland (is) $403,529.”

“Nannette Miller has lived in Upland for most of her life and would like to buy a home in the city. The single mother of 13-year-old triplets is looking for a three-bedroom, one-bath house, but is finding it hard to find one within her price range.”

“‘In order to buy a house, there’s a lot of hoops to jump through,’ Miller said. ‘I’m wondering when the people in Upland that are selling their homes will realize that they need to lower their prices.’”

The Bakersfield Californian. “Multiple loan applications kept secret from lenders. Discrepancies in income and job statements sent to various mortgage banks. Such details, which will become the foundation of state real estate regulators’ case against Carl Cole, 61, and David Crisp, 28, continued to be laid into the record Tuesday during the second day of an administrative hearing in Bakersfield.”

“In one loan application, David Crisp’s gross income was listed as $350,000 a month. In another application made at the same time to a different lender, Crisp listed gross income as $99,000 a month, documents indicated.”

“Crisp, who is representing himself, went after lenders during cross examination. He questioned one witness about the large commission Crisp & Cole had received - $51,000 - for handling the sale of a Seven Oaks mansion Crisp himself bought.”

“An ongoing Californian tally has found nearly $78 million in troubled loans related to operations of Crisp & Cole’s employees, family members and business associates. Most involved homes in the Bakersfield area.”

“Of those home loans, 113 have so far been foreclosed on as of last week, the tally shows.”

The Manteca Bulletin. “Some advice from ‘The House Doctor’ might just help those struggling to make sense of the ailing Northern San Joaquin Valley housing market to get started on the road to recovery. Christine Papworth - aka ‘The House Doctor’ - fields questions from callers Saturdays from 10 to 10:30 a.m. on the Modesto news radio KFIV 1360AM on ‘the “House Calls’ show started six weeks ago.”

“Papworth - who is part of the Re/Max Executive team in Manteca - has 31 years of experience selling real estate.”

“Papworth doesn’t pull punches. She’ll tell you that this is one of the most challenging housing markets she’s ever seen but at the same time she’ll tell you it’s a good thing as the ‘cleansing’ taking place with problem loans, prices out of whack, loose lending standards, and a cavalier attitude of buyers was long over due and will be better for the economy and the housing market in the long run.”

“‘Every market has its problems,’ Papworth noted. ‘This one just has a lot more.’”

“Papworth agreed…that ‘houses are selling so that’s a good sign.’ But most of those homes - at least 90 percent of the 519 existing homes sold in Manteca through MLS since Jan. 1 have been under duress as short sales and banked-owned properties.”

“‘The House Doctor’s’ prognosis for Manteca is partciuarly upbeat. ‘It (Manteca) will be the No. 1 or No. 2 city in Northern California in terms of coming back first’ Papworth said. ‘Manteca is well positioned because of the growth.’”

“But even so, she doesn’t see the market bottoming out quite yet. Having said that, she noted buying makes a lot of sense as the good homes are going quick with multiple offers while interest rates are going to be a dicey gamble especially if the Federal Reserve Board decides to get tough on inflation.”

“Papworth also puts her money where her mouth is. She is going to…purchase another rental home for $100,000. She’s confident that in six years…she will have a home worth $350,000 that could then be sold to help pay for her grandchildren’s college.”

“‘You can’t go wrong on homes in California,’ Papworth said. ‘Prices will always come back.’”

The Fulton Sun reports from Missouri. “There is no doubt that the mortgage crisis has made its way to Missouri, and the effects are slowly trickling down to the state and county level. Mikki Starmer, a real estate agent, said she thought the reason for an increase in foreclosures was due to lenders giving loans to home-owners that do not have the ability to properly manage their debt.”

“‘They are too quick to loan,’ she said. ‘They call them fast and easy loans, and it turns out they are not so easy. In this area it has more to do with bad loans and people getting in over their head.’”

“Rick Gohring, president of the Callaway County Market for The Callaway Bank, said most of the banks that are responsible for foreclosures in the area are national or statewide lenders.”

“‘I would have to say that when you see a trustee that is handling a foreclosure, they are not the trustees that work with local banks - these are mortgage companies,’ he said. ‘This happens because of the way they were organized when they did the loans, they made deals that may not have been in the best interest of the consumers.’”

“Data from Callaway combined with other counties shows a sharp decrease in sales. ‘In looking at what all of Callaway and Cole did, we are down 35 percent from a year ago,’ Starmer said. ‘In Callaway and Audrain we are down 45 percent - we did 55 percent of what we did last year at this time.’”

“Gohring said even though interest rates are low and that it is a buyers’ market, there has been a decrease in customers at The Callaway Bank looking for home loans. Gohring attributed that fact to concerns that new home owners may have about the ailing economy and the future of the housing market.”

“‘There is a saying that the decision to by real estate is the most postponeable decision you can make,’ he said. ‘In terms of home sales, when you have uncertainty in the market… you can hold off on buying a house because you always have the option to continue to rent. Once you buy a house you are set in it no matter what happens.’”

The Post Dispatch from Missouri. “Jan Winters took a proactive approach with her lender, First National, for her 2-bedroom, 2½-bath town house in a new subdivision in O’Fallon, Mo. It was built for her two years ago while she was going through a divorce.”

“But shortly after the divorce, Winters quickly realized she was in trouble trying to make payments on her $199,000 mortgage. Her expenses exceeded income by $400 a month. By March 2007, she was constantly one mortgage payment behind, and that was before the interest rate rose on her adjustable mortgage.”

“‘I knew they didn’t want my house and I did. I tried selling the house but couldn’t,’ Winters said. ‘So I told the lender if they helped me through this, life’s going to turn around.’”

“In the end, she agreed to get a second job - in information technology - and seek credit counseling. First National let her skip three payments and added them to the end of her loan. So far, Winters has managed to make all of her payments on time.”

“Even borrowers like Winters who work out solutions to stave off foreclosure continue to teeter on the brink of financial ruin. Winters’ credit was hurt by the payments she missed, and that means she cannot refinance to a fixed-rate mortgage.”

“But First National recently agreed to keep the interest rate, which was due to reset this year, fixed for three more years. Still, more than half of her monthly income is going toward repaying debts, including the mortgage, credit cards and car loan. She recently lost her second job, and is now sewing clothing and upholstery out of her house.”

From WSBT South Bend in Indiana. “The relief bill…would give some home buyers a tax credit up to $7,500. Experts say it may encourage people to reconsider buying a home, especially with prices dropping on foreclosed homes.”

“The Nortons are searching for their dream home. One South Bend home caught their eye, but the price may still be a little high. ‘We only have $3,000 for the down or closing,’ explained Geri Norton, a first time home buyer. And they don’t qualify for low income help. ‘We fall between the cracks,’ said Norton.”

“The relief for first time homeowners could turn the Norton’s dream into a reality. ‘Yea that would be wonderful,’ said Norton. ‘We don’t want the house to own us.’”

The Journal Star from Illinois. “Belief that the U.S. housing market will not recover for an extended period of time played a large part in Standex International Corp.’s decision to close its Bartonville plant, the company said in a news release.”

In its first statement since informing nearly 60 employees of the Acme Standex Co. of the decision, the Salem, N.H.-based company issued a one-paragraph release.”

“‘The company made the decision to close the facility after careful consideration and in light of the continued severe recession in the new housing construction market…It was necessary considering that the housing market is not forecast to recover for an extended period of time,’ said the statement.”

From ABC 4. “Home prices have fallen as much as 50% in some cities around the country recently. That’s bad news if you’re selling, but great news if you’re buying. One prime example is a home in Cleveland, Ohio: a 3-bedroom, 2-bath multi-level house that had an estimated value of $112,692. Today, it’s yours for just under $37,000.”

“‘One thing that is really unprecedented is the speed at which the prices have fallen in these markets,’ said Paul Bishop, Ph.D. of the National Association of Realtors.”

“While hard-hit states like California, Nevada and Florida come to mind, some of the best deals for home buyers today can be found in Detroit, Michigan, where a whopping 1,754 homes are currently on the market, all for under $10,000.”

“‘Five years ago, this house would’ve gone for 69-89 thousand,’ said Carl Williams of Saturn Group Realty in Detroit. ‘Right now, this is one of Detroit’s great values, and it’s going for $7500 — a real steal.’”

“That home is located in a middle-class neighborhood, and experts say that when the market goes back up, the value will, too.”

“‘While it is painful for sellers, it is a good opportunity for buyers who are in the market to get a good deal on a house,’ Bishop said.”

The Pioneer Press from Minnesota. “U.S. home prices took their steepest dive yet in May by one key measure, though the erosion in the Twin Cities market appeared to moderate slightly. The Standard & Poor’s/Case-Shiller 20-city index dropped 15.8 percent in May compared with a year ago and the 10-city index dropped 16.9 percent - both record annual declines since the two gauges started in 2000 and 1987, respectively.”

“The Twin Cities index posted a glint of possible hope, plunging 14.8 percent from a year ago - a steep drop but not a record.”

“Persistent declines have returned Twin Cities prices to their 2003 levels, according to the index, wiping out years of gains for homeowners.”

“Have housing prices hit bottom? Jeff and Anne Deeb would like to know. They’ve had their Blaine town home on the market for nearly nine months and cut the price more than a dozen times, to $170,000.”

“Eager to move closer to their jobs in Minnetonka and Eden Prairie since they pay $700 a month to fuel long commutes, the Deebs are mulling another markdown - and possibly taking a loss on the home to get a sale done.”

“‘It’s frustrating,’ said Jeff Deeb. ‘We’re trying to figure out if it’s worth dropping now. Do you do it now and get rid of it and move on? Or do you try to wait it out? Maybe we’ve hit rock bottom. I don’t know.’”

“Christopher Galler, senior VP of the Minnesota Association of Realtors, describes the Twin Cities as being ‘in the midst of a muddy turnaround.’”

“It’s not clear when the tide of foreclosures and short sales that have flooded the overloaded market will subside. In the first half of this year, lenders have repossessed 9,176 homes in the seven-county Twin Cities area, according to a Pioneer Press survey of sheriff’s foreclosure auctions, compared with about 13,000 for all of 2007.”

“Warren Hanson, head of the Greater Minnesota Housing Fund, predicts metro foreclosures will climb more than 50 percent over last year, or reach nearly 20,000 by year’s end.”

“Such ‘lender-mediated sales’ make up about 20 percent of metro home sales, or more than 6,000 listings, pressuring down prices overall, according to a Minneapolis Area Association of Realtors study.”

“Finally, there’s still a lot of new construction that needs to be burned off. About 8,600 homes are under construction or finished and vacant around the Twin Cities, most of which aren’t counted in the total for-sale inventory the Realtor groups report.”

“The Deebs…two-bedroom town home in Blaine is 7 years old, with windows on both sides and a back patio that opens onto a small woods. But there’s an oversupply of brand-new empty town homes nearby in Blaine, said Ryan Karasek, the Deebs’ agent with Edina Realty’s Champlin Park office.”

“So the Deebs are stuck. They’ve held off hunting for a home closer to Minnetonka or Eden Prairie lest they fall in love with something before they can sell the town home, Jeff Deeb said.”

“‘When we first priced it, we thought we were right in the ballpark,’ Deeb said. ‘We don’t want to give it away.’”

From KFYR TV in North Dakota. “The housing bubble has not burst in western North Dakota like it has in many other areas, but there are more homes on the market in the Bismarck area waiting to be sold now than in the last four or five years.”

“Doug Scheetz`s northwest Bismarck home is for sale. His real estate agent says it has everything a buyer could want. The house has been on sale for two months. ‘We`ve had a lot of interest. A lot of people though the house, and then also online,’ says Doug.”

‘But so far, there hasn`t been a buyer who was willing to commit. Doug`s real estate agent says that`s because many interested buyers are scared to buy because of what might happen instead of what`s actually happening.”

“Century 21 real estate agent Sonja Tkach says, ‘What we`re seeing is that we have a lot of impact that`s coming from our national media. It`s a good market in Bismarck. And what people need to understand is we`ve been very insulated, and we`re not as affected by what we`re seeing nationally as what someone might think.’”

“Inventory levels are different for homes at different prices. Some have enough homes to last for a year and a half. Prospective buyers can be a little more picky. And once they do choose a home, they have extra wiggle room to haggle. Buyers might want to also consider the fact that it`s a good time to find a reasonable mortgage.”

“Tkach says, ‘If you`re looking at a $200,000 house in today`s market, interest rates are 6.25%. Logically, we`ll see that interest rates will probably go up. If they go up to 7.25%, that`s about a $200 difference in home payments.’”

“So buyers who wait could miss out on saving money on both the purchase price and the mortgage.”

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