The Housing Bubble

The Great Falls Tribune reports from Montana. “A subdivision slated to be developed on 58-acre piece of land fell through and the land is back on the market. A buyer from California was looking to develop a subdivision on the land, but the sale never came to fruition, said Dick Seim, the listing real-estate agent for the property. The land is listed for $1 million, and the ad says there’s room for 90 or more lots.”

“The land is a natural fit for homes…he said. The soon-to-open ice rink also will be nearby. ‘It’s a choice piece of property,’ he said. ‘It’s got some beautiful lots.’”

The Missoulian from Montana. “In the first half of 2008, local home prices have cooled slightly, there is greater inventory and homes are taking longer to sell, according to data compiled by the Missoula Organization of Realtors.”

“Jody and Brittany Tait listed their four-bedroom house west of Missoula for sale in early July. So far, they haven’t received any phone calls or inquiries about the house. The Taits, who’ve lived in their home for 23 months, wanted to try and sell their home themselves instead of paying fees for a real estate agent.”

“‘If we want to get any of our equity, then we have to sell it ourselves. So we’re trying this at first,’ said Jody Tait.”

“Don Cole, an agent and a loan officer, said he gets two to four people into homes each month with lease options. ‘With the lending programs changing, we just don’t have the options,’ he said. ‘Probably more than half of the people going into lease options could have bought the homes outright a year ago.’”

“Asked to characterize the local market, Cole said, ‘Missoula is not really in the dumps. It isn’t where it was, but nobody is. We are better off than many places.’”

The Idaho Statesman. “Real estate agent Janet Parsons is proud of the deal she wangled for her client, a 26-year-old first-time homebuyer. Parsons helped Brandon Beveridge through a seven-month process of buying home through a ’short sale.’ She said similar homes are selling for around $170,000; Beveridge got his for $133,500.”

“Beveridge, a computer programmer, is glad he waited. If housing prices continue to tumble, he said, he’s not going to worry much because he paid less than market value to begin with.”

“‘I had a bunch of friends who told me especially right now I would be stupid not to buy,’ he said.”

“In 2005, Jenni and Ryan Kroon traded the 1,100-square-foot, three-bedroom, two-bath home in Boise they shared with their two children for a 3,500-square-foot, seven-bedroom, four-bath home in Nampa that cost $200,000. Although financed with a 30-year, fixed-rate loan, the move still tripled their monthly mortgage payment to about $2,100.”

“That’s when the problems began. Jenni Kroon’s diabetes took a turn for the worse, requiring increased out-of-pocket outlays for doctor visits and expensive medicines. Then Ryan lost his job when his brother’s residential construction company folded.”

“‘With every month, it was more and more obvious that we had bitten off more than we could chew,’ said Jenni Kroon.”

“Today, the Kroons rent a four-bedroom, two-bath home in Nampa’s Royal Meadows subdivision for $895 a month. ‘My children and my husband hate it because it so much smaller, but I’m grateful for the cover,’ Jenni Kroon said.”

“Lance Churchill’s company…specializes in acquiring foreclosures. That door is likely to stay open awhile. Five-year ARM adjustments are still to come. Plus, there are homeowners who took interest-only loans, option-rate loans with payments that might not even cover the interest due, and so-called ‘liars loans,’ where borrowers’ income was never verified, Churchill said.”

“Originally, it was estimated that the five-year loans would not begin resetting until March 2009. That’s not the case anymore, Churchill said.”

“‘If the value of the home falls beneath what’s owed on it, the lender has the right to immediately adjust the interest rate and demand that you pay full price,’ he said.”

“As a result, some homeowners with five-year adjustable rate mortgages saw their payments begin to skyrocket as early as last April, Churchill said.”

The Daily Journal of Commerce from Oregon. “For the last year and a half, Herb Giffin has kept a steady stream of work flowing into his architecture firm. But with the economy slowing down, that might change soon. ‘Around this fall, we will be looking at beating the bushes and responding to more public RFP’s,’ said Giffin.”

“At Otak Inc., principal Dennis Haden said the firm’s condo design business ‘has slowed way down.’ Otak has worked on condo projects in some of the regions hardest-hit by the housing collapse - Arizona, Nevada and California.”

“Developers are ‘trying to figure out what’s gone wrong’ and re-assessing projects that are on the boards, Haden said. In some cases, they’re even switching condo projects to market-rate apartments.”

“‘The (Arizona) market went so far down, I don’t know how long it will take for it to come back,’ he said, referring to condos.”

The Bend Bulletin from Oregon. “The rise and fall of Bend’s real estate economy has resulted in foreclosure proceedings against The Shire, a village-themed concept in southeast Bend patterned after J.R.R. Tolkien’s ‘Lord of the Rings’ series.”

“The Shire concept originated with Ron Meyers, who sold his share in the development for an unspecified amount to Dr. Lynn B. McDonald - a former emergency room physician at St. Charles Bend. McDonald died July 7.”

“‘It basically destroyed my life financially, but that’s the price of a dream,’ Meyers said. ‘The development wasn’t able to materialize fast enough before the market crashed.’”

“”Jan McDonald is trying to sell the 14 developed lots, one house and additional land before the 6-acre property goes to public auction in December, she said. The family owes Umpqua Bank $3.4 million on the project, according to the default notice.”

“‘It was Ron’s concept, and it was a good one,’ Jan McDonald said. ‘Had the market not gone to where it went, it had the potential to be successful.’”

“The Shire began to unravel in summer 2007 when the subprime mortgage crisis began to dry up credit sources, Meyers said. ‘Banks were getting nervous,’ Meyers said. ‘They’re still nervous.’”

“‘Some people were turned off by living in ‘Disneyland,’ he said. ‘It’s more of an artists’ community for a certain market segment that wanted something different. There’s been enough people that have come through that would say, ‘What a wonderful concept.’ But then the market crashed, and everyone (went) home.’”

The Bellinham Herald from Washington. “Last week Gragg Miller of Coldwell Banker Miller-Arnason released his mid-year report about the state of local real estate. What caught my eye, however, was his comments at the beginning of the report. The biggest challenge these days, he said, is pricing a home.”

“‘For this area, I don’t think we (the industry) are doing a good enough job with pricing. It’s a little less challenging now, because new sellers understand that the market is different now and are not insisting on the price appreciation their neighbor may had seen a couple of years ago,’ Miller said. ‘Still, it’s important to look at how comparable homes are sold a week ago; looking back six months or more won’t cut it for most homes.’”

“For used or existing homes, the Meridian area has 20 months of supply, while the Deming area has 8.5 months of supply. In Bellingham neighborhoods, Happy Valley has 12.5 months of supply.”

“In the second quarter of 2008, there were 1,206 overall properties sold in Whatcom County, continuing a downward trend from the peak in 2004, when there were 2,587 sold in that same quarter.”

“Listing a price too high is much more a problem in the current climate, he said. The buyers have much more to choose from in every home price level, so if they think it’s too high they can keep browsing. There is no competition among buyers for houses viewed as overpriced. Once the seller starts reducing the price, buyers are in a position to wait to see how far the price will fall.”

The Olympian from Washington. “A new Honda scooter, a trip to a Caribbean destination and a chance to win free gasoline are just some of the incentives that South Sound real-estate agents are using to entice prospective buyers in a slower housing market.”

“Tamera Strawn of Riley Jackson Real Estate is working with a Tacoma builder giving away Honda scooters for sales at The Overlook, a new 138-lot development at the top of Tumwater Hill, she said. ‘We’re just looking for something new and out of the box,’ Strawn said about the promotion.”

“Real-estate company John L. Scott offers visitors to its open houses the chance to enter a drawing for a trip to a Caribbean destination or Hawaii, said Eric Shull, broker of John L. Scott’s Olympia office.”

“Although the Thurston County housing market has slowed to the point where incentives are common, the market is nowhere near as slow as it is in California, he said. Shull said some homes in California are being marketed with BMWs.”

“Homeowner Karen Scherf of Chehalis and her husband, Scott Mattoon, each owned a home before they got married. Mattoon sold his house in Rainier, and Scherf still is trying to sell hers in west Olympia with real-estate agent Mark Plowman’s help. Today, she and her husband live in Chehalis, Scherf said.”

“She said she is grateful they’re not paying three mortgages, but Scherf still is eager for a sale.”

“Her 3,000-square-foot house has been on the market since April, and she’s hoping to sell it before she has to drop the price again. She also is considering renting the house, although Scherf added that she’s not particularly interested in becoming a landlord.”

The West Seattle Herald from Washington. “Area 140’s biggest economic downers over the last year were not home prices but rather inventory, and its troubled twin, ‘Days on Market.’ ‘I sometimes feel like a taxi driver showing property around,’ said Jennifer Suemnicht, with Re/Max Metro Realty in Seattle. ‘Buyers are shopping around more than a year ago.’”

“Of course, feng shui and accent pieces only help if the potential buyer has the money for the home in the first place. ‘You’d be surprised how many people don’t have any savings,’ said Ginny Lee of a privately owned mortgage bank near Safeco Field.”

“‘Lenders want to see you spend no more than about 36-percent of your net household income on your mortgage payment,’ said Kevin Ehlers of Cobalt Mortgage, Inc., in Kirkland, who specializes in ‘Area 140′ homes.”

“‘The average-priced West Seattle house the first five months of 2008 was $465,000,’ he said. ‘Your total payment at that price would be about $2,700 with 20-percent down with a 6.25 (percent) 30-year fixed rate. You’d need to net $90,000 a year, about one Microsoft salary. I realize that’s a lot of money. And if you only put 3-percent down with an FHA your monthly payment goes way up.’”

The Seattle PI from Washington. “Michelle Miran didn’t realize that there was something wrong with her mortgage until the interest rate reset last year. Her truth-in-lending statement noted a 30-year fixed rate with monthly payments of $1,311 for 359 months. But two years into it, her monthly payment shot up to about $1,700, and she and her husband fell behind.”

“They’re now fighting foreclosure on their Tacoma home and fighting back in court, suing the mortgage broker and lender.”

“Deb Bortner, head of the Department of Financial Institutions’ consumer services division, said the agency has been able to scrutinize lenders better over the past two years because of an increase in enforcement staff and examiners, along with a shrinking field of consumer loan companies.”

“And more charges are in the pipeline, she said. ‘I see more problems coming up. There’s a credit crunch, so I think each mortgage broker and each consumer loan company is struggling to maintain their business,’ she said.”

“Ari Brown, the Mirans’ attorney, and others say the increased oversight comes too late for thousands of borrowers who were duped by unscrupulous lenders and brokers.”

“Miran said the loan officer rushed her through the closing process, sending her a 2-inch- thick stack of documents while she was out of town on business. Miran signed the documents alone in her hotel room, and not in the presence of an escrow agent, even though an agent’s signature appears on the documents, according to the lawsuit.”

“Miran and her husband were able to make the mortgage payments on their three-bedroom home until the loan rate reset. The increase of about $400 a month, coupled with a maternity leave, made it difficult for them to keep up with payments.”

“‘I’m worried, knowing that I’m going to lose my house,’ said Miran, who works two jobs. ‘It’s going to be very hard for me.’”

The Star Press reports from Indiana. “How hard is it to sell a house in today’s real estate market? How about two houses? That’s the challenge facing the Cantu family. After 10 years in Muncie, Sandy and Dean Cantu are moving to Illinois. They’ve just bought a house there, in Peoria. As the Cantus and their three kids prepare for the move, they’re hoping to sell not only their own home but a house that Dean’s father lived in recently.”

“The two-story is now priced at $219,000, cut from the original asking price of $224,000, while the one-story ranch is priced at $99,000 — cut twice since the original price of $114,900. ‘We might not have dropped it if we were not moving out of state and had two homes to sell,’ Sandy Cantu said. ‘At this point, we’ve got to liquidate.’”

The Fort Wayne Business Weekly in Indiana. “Legislation signed July 30 by President George W. Bush will be good for hundreds of thousands of homeowners facing foreclosure and could help real-estate markets nationally, but the impact in northeast Indiana probably won’t be as significant, said Bob Coffee, president of the Fort Wayne Area Association of Realtors.”

“‘I’d have liked to see (an incentive) that was more immediate,’ Coffee said. For first-time home buyers, ‘the most help is needed in the down payment.’”

“Mortgage rates are up slightly and lenders also have tightened their lending standards, Coffee noted. Tighter standards for mortgage loan originators, which will eliminate some of the fly-by-night operators, should help home buyers, however.”

“‘Even in Fort Wayne, there were mortgage brokers popping up all over,’ Coffee said.”

“‘This is a market correction,’ Coffee said. ‘Real estate is cyclical. 2002 through 2007 were the five best years ever, and we’re still above 2002 levels. Some people believe that the sky is falling, but it’s really not. This is something we kind of expected to see because (the market) just couldn’t sustain the growth.’”

The Daily Herald from Illinois. “The French doors, custom windows and hardwood floors in Pamela Olander’s home are beautiful. They’re also bleeding her dry. Unable to unload the Palatine house Olander and her husband built as an investment, they’ve turned to guerrilla marketing tactics.”

“Thousands of drivers can find a pajama-clad Olander plastered on a digital billboard along Route 53, advertising an open auction that takes place at the home at noon today. ‘The idea is I’m not going to sleep until I sell this property,’ Olander said, who lives elsewhere in Palatine.”

“The original April listing price for the four-bedroom, three-bathroom house was $799,000. Today’s minimum bid is $500,000, though she’s not obligated to accept an offer. ‘This has been very taxing emotionally and financially,’ Olander said. ‘I doubt we’ll break even, so this is going to be a very costly learning experience.’”

“Olander realizes she took a gamble and lost. ‘It will be a long time to build back what we lost,’ she said. ‘It’s been a mountain of headaches, but I’m in the same boat as a lot of people.’”

The Plain Dealer from Ohio. “Officials estimate that Cuyahoga County has 20,000 vacant or abandoned lots. But now, with the population and economy slipping, some officials say building new houses on all of them would depress the values of old homes around the region by raising the supply beyond the demand.”

“‘We should have a countywide goal to tear down two houses for every new home,’ said Paul Oyaski, Cuyahoga County’s development director.”

“A couple of neighbors have begun to talk to Shaker officials about buying recently leveled property for side lots. But not everyone wants an extra lot. One neighbor who withheld her name scoffed at the idea. She said she could barely afford her current property with the city’s high taxes and strict exterior maintenance codes.”

“A few years ago, Euclid tried to interest neighbors in side lots, with no luck, said Oyaski, the city’s former mayor. Neighbors would mow the lots and use them, but none wanted the costs of owning them.”

The Leader Telegram from Wisconsin. “In the past 10 years, the value of farmland has more than doubled across Wisconsin and tripled or more in several west-central Wisconsin counties, according to a new state report.”

“In Barron County, the average value of land sold nearly tripled from $847 an acre in 1998 to $2,444 in 2007. Values also nearly tripled in Eau Claire, Buffalo and Pepin counties. Values more than tripled in Pierce County, which went from $1,249 to $4,223, the highest in the region.”

“‘People are converting farmland into residential for housing or buying it for recreational purposes for hunting,’ said Tim Jergenson, Barron County UW-Extension Agricultural department administrator. ‘It was often people out of the area that wanted that land.’”

The Capital Times from Wisconsin. “Foreclosure filings in Wisconsin continued at record levels in July. New figures released Monday show close to 14,300 foreclosure filings recorded in the first seven months of 2008, a 31 percent increase over the first seven months of 2007.”

“‘Wisconsin foreclosures have been building up to the current levels for the past three years,’ said Robert Jensen, president of ForeclosuresWI.”

“He said foreclosures averaged 11,687 a year in Wisconsin from 2003 to 2005 and rose to 16,473 in 2006 and 20,995 in 2007. At the current level of filings, more than 25,000 foreclosures are expected to be filed in the state this year.”

The Green Bay Press Gazette from Wisconsin. “Brown County had 489 homes in foreclosure in the first six months of 2008, according to a report.”

“‘When a neighborhood is struck with multiple foreclosures, like many are right now in Brown County, the potential for blight and vandalism increases, as does the potential for more lasting neighborhood decline and instability,’ said Andrew Higgins, president of the Astor Neighborhood Association.”

“The city first sends notifications to the owner of the property to take care of it and if necessary will eventually mow the lawn and charge the owner through the property tax bill. Depending on the severity, the city may condemn the building or order it be torn down, said Cheryl Renier-Wigg, Green Bay neighborhood development supervisor.”

“‘That’s the problem we are experiencing right now in the city,’ she said. ‘If a property is foreclosed on, generally the owners have left it. Often times, the lawn isn’t getting mowed or there might have been code issues with the property that are now getting worse.’”

Living Lake Country from Wisconsin. “Should Lake Country’s potential homeowners be worried? First Weber Executive VP Roger Rushman estimates that Lake Country homes had experienced five to six years of ‘tremendous highs’ but now might be suffering from a lack of appreciation. ‘Three to four years ago, if you bought a lakefront property, you knew it would appreciate,’ he said. ‘Now, it has bottomed out. You don’t see the properties appreciating like they were.’”

“‘It may seem bad because houses that were bought for $2 million may be selling for $1.8 million, but if you look at the percentage difference, it’s not that far from lesser-priced homes. The large amount of money just makes it seem worse,’ Rushman said.”

The Stillwater Courier from Minnesota. “Armed with nearly $500,000 in grants, a Lake Elmo-based organization is on Washington County’s front lines, battling the effects of a nationwide home-foreclosure epidemic. Recently, the Metropolitan Council awarded the organization a $200,000 grant so it can acquire and rehabilitate homes for resale, primarily in Cottage Grove, Forest Lake, Newport, Oakdale, St. Paul Park and Stillwater.”

“Further, the Washington County government awarded it $310,000 to ‘recapture and recreate starter homes,’ according to information from Two Rivers Community Land Trust.”

“Beyond these efforts, keeping track of housing data is crucial to the HRA’s work, said Executive Director Barbara Dacy. At the same time, the HRA sees the same opportunities as does the land trust. Now that the real estate bubble has burst, the post-foreclosure era should provide opportunities to acquire, improve and resell properties, Dacy said.”

“‘We want to document what I would call the suburban experience,’ she said. ‘In general, the problem is impacting all across the board’ in the county.”

The Pioneer Press from Minnesota. “They were high school sweethearts who grew up to be two of the most well-regarded homebuilders in the metro area, then watched their company crumble amid their own fraud and illegal borrowing.”

“Michael and Ardith Parish, the architects of what is presumed to be the largest case of mortgage fraud in Minnesota history, were sentenced Thursday in U.S. District Court in Minneapolis. Michael Parish, 63, received 13 years in federal prison or a work c his wife, Ardith, 62, received five years.”

“Their son-in-law, Christopher Troup, 40, was sentenced to 10 years for playing a lead role in the massive housing scheme, which the courts believe involved 240 homes now in various stages of foreclosure.”

“Cindy Novak, who owns a plumbing company with boyfriend Tim Olsen, told the court Thursday that the fraud has ruined her family’s financial life.”

“‘I think they should be doing life. I think they should have to sell their (home). How do they afford their Christmases?’ said Novak, a contractor who has not been paid.”

“The Parishes began to run into financial troubles about four years ago when they were unable to find buyers for their luxury-style homes, including more than 100 in New Prague and dozens in New Market and Lonsdale.”

“Rather than stop or slow construction, they kept building expansive houses worth $300,000 to $500,000, according to prosecutors and court documents.”

“In an April letter to the court, court-appointed receiver Gary Hansen painted a bleak picture of the fallout, noting that dozens of foreclosed homes were clustered together, dragging their market value an estimated $100,000 below their mortgage debt.”

“‘I believe that all residents of New Prague have been affected by this, (with) the loss of home equity totaling millions of dollars,’ said Karen Witt, a real estate broker who owns a land-development company. She told the court she was an ‘indirect victim’ of the Parish’s fraud.”

“‘I can’t sell a $150,000 house and I can’t sell a $450,000 house because of this,’ Witt said.”

The Granite City Press Record. “Homeowners facing the possibility of losing their home need to take action as soon as possible. And there is help available. That is part of the message the Federal Reserve Bank of St. Louis is trying to get out to area homeowners as the number of foreclosures continues to rise.”

“Many homeowners who got adjustable rate mortgages had expected to refinance their homes before the lower rate expired by using their home’s value as equity. When the housing market weakened in 2006, those homes often lost enough of their worth to be valued less than the cost of the adjustable rate mortgage, leaving borrowers stuck paying more than they could afford.”

“‘It’s like a natural disaster,’ said Bill Emmons, supervisory officer and economist at the Federal Reserve. ‘It’s been a rapid turn of events. A booming market in 2006 to utter collapse today. It’s still very serious.’”

“Emmons said that after years of a highly profitable housing market, the process began to collapse in on itself in 2006. ‘Part of the problem is lending got fast and loose and a lot of borrowers got over their heads and got into overheated markets and that’s why we’re experiencing the correction,’ Emmons said.”

“‘We’ll…liaison with the homeowner and the lender service so we can figure out if the family can stay in their home, whatever the situation may be, so that family can stay in their home,’ said Chris Krehmeyer, CEO of Beyond Housing, based out of St. Louis.”

“There is no charge for the organization’s service. ‘More than half the people who get foreclosed never call anybody,’ Krehmeyer said.”

“In the mean time, the market is unlikely to stabilize again anytime soon, Emmons said. ‘This is a major, major correction that is going on and we’re not finished,’ he said.”

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