The Housing Bubble

The San Francisco Chronicle reports from California. “Like an endangered rain forest, the Bay Area microclimates that still enjoy home-price appreciation are shrinking. Just six months ago, areas where median home values were still on the upswing were bigger and more widespread. ‘The entire Bay Area is correcting for the frothiness in the markets that occurred from 2003 to 2006, where by all rational economic accounts the market was outpacing what you’d normally expect to see,’ said Stan Humphries, VP of data and analytics for Zillow.”

“In the beginning of 2000, the aggregate home value in the nine-county region was just a touch less than $381,000. It peaked in the second quarter of 2005 at slightly less than $686,000. Now it’s at $563,288 - near its level in mid-2004.”

“One trouble spot shown by Zillow’s figures is that more than half of the people who bought Bay Area homes in 2005 and 2006 are under water, owing more than their home is worth. Of people who bought in 2007, there are 41.1 percent who are under water.”

Bay Area Newsgroup. “Home values in the East Bay eroded at a faster rate during the spring than they did in the early months of 2008. During the second quarter of 2008, home values plunged on a year-to-year basis by 25.6 percent in Contra Costa County, and by 18.9 percent in Alameda County, according to Zillow.com.”

“The second quarter’s deterioration in home values exceeded the year-to-year declines that occurred in the first quarter of 2008. In the January-March period, home values fell by 23 percent in Contra Costa County and 16.8 percent in Alameda County, Zillow, reported.”

“‘The rates of decline in home values are accelerating, and that tells us we are not near a bottom yet,’ said Amy Bohutinsky, Zillow’s director of communications.”

“The East Bay market with the worst year-to-year decline in home values is the Antioch ZIP code of 94531, where values have nose-dived by 38.3 percent.”

“Perhaps the biggest factor in the East Bay housing market is the effect that sales of previously foreclosed homes are having on residential property values. For example, in Antioch, about 75 percent of the homes being actively listed for sale are bank-owned residences with foreclosed mortgages, according to a survey conducted by real estate consultant Don Morton.”

“‘The good news is these foreclosed homes are selling,’ Morton said. ‘The bad news is these homes are being sold at such a low price that people are losing 40 or 50 percent of the value of their home. That makes east Contra Costa a terrible market.’”

The Marin Independent Journal. “Credit ‘repair’ specialist Hannah Fliegel of Corte Madera helped people remove the stain of foreclosure from credit reports for months before realizing she could do more. ‘I’m taking foreclosure off people’s records right and left, and in the meantime I’m seeing families destroyed because of this,’ said Fliegel. ‘Foreclosures are going to triple before the end of the year in Marin, so why don’t I just stop foreclosures. This is ridiculous.’”

“Fliegel has received several hundred inquiries about this month’s workshop after a mailing to homeowners of distressed properties across the Bay Area.”

“She invited several realty agents to join her group, but they declined because ‘they were more interested in higher sales.’ ‘The Realtors and brokers are not real helpful because they’re not going to get paid,’ Fliegel said.”

“‘The banks need to fix the loans they were giving,’ she said. ‘(People) were told to refinance and treat equity in their homes like an ATM. They got bamboozled.’”

From Bloomberg. “Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow. In five more California areas — the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera — the percentages were more than 80 percent.”

“In Stockton and Modesto, more than half the sales in the second quarter were of foreclosed homes, Zillow said.”

“‘Sellers are starting to adjust their expectations,’ Zillow Chief Financial Officer Spencer Rascoff said in a Bloomberg TV interview. ‘More sellers accepting a loss is actually a sign of optimism. It means that the transactions might start happening.’”

The Press Enterprise. “Plunging home values means 62 percent of Inland Southern Californians who bought homes in the past five years can’t pay off their mortgages if they sell today. Even 37 percent of those who entered the Inland housing market this year already have lost whatever down payment they made and possibly more, according to Zillow.”

“The median home value peaked at $409,273 in the second quarter of 2006, but by the end of June, it was $261,000, a drop of 36 percent, the report said.”

“The Zillow report noted that 53 percent of the homes sold in the Riverside/San Bernardino/Ontario metropolitan statistical area in the past 12 months sold for less than the purchase price, and seller losses have been getting progressively worse over the past few quarters.”

“In the Riverside/San Bernardino area, Zillow reported, more than 50 percent of the homes sold in the April-through-June period have been by lenders trying to unload houses they repossessed after owners defaulted on their mortgage payments. That compares with just 0.4 percent in the same period three years ago.”

“‘I have customer after customer who calls and wants to refinance but can’t,’ said John Marcell, an Upland mortgage broker and president of the California Association of Mortgage Brokers Education and Research Foundation.”

“Although the Federal Housing Administration has loan products affordable to many first-time buyers, ‘not everybody wants to buy now because they are scared that this (falling prices) isn’t over with,’ he said.”

“‘People are going to these foreclosure auctions and buying homes thinking they are getting a … deal, but are they?’ Marcell said. ‘Until this thing bottoms out and we get rid of all these foreclosures, we have got a problem.’”

The Desert Dispatch. “After aggressively pursuing home construction loans during boom years, High Desert Federal Credit Union is now reeling from the weak real estate market. The credit union is coping with 20 percent of loans at least two months delinquent, records show. The average rate of delinquencies for California credit unions reported in the first quarter is 0.93 percent, about 22 times lower than High Desert Federal Credit Union.”

“The Members’ Own, a credit union based in Victorville, reported a 7.06 percent delinquency rate.
The credit union stopped issuing home construction loans in May to minimize future losses, after specializing in those loans for more than 20 years, said company President Tom Brown.”

“‘The real estate market has really had an adverse effect on banks and credit unions alike, and obviously High Desert was not immune to that,’ said Ralph Ramirez, a spokesman for the Apple Valley-based credit union.”

The San Gabriel Valley Tribune. “Once upon a time, First Federal Bank of California focused heavily on Alt-A, or low-documentation, home loans. But those days are long gone.”

“‘We started tightening our lending standards at the end of 2005,’ said Jim Giraldin, CEO for the Los Angeles-based bank. ‘I wish we would have done it at the end of 2004. We really saw something going wrong and pulled back from the market.’”

“Before First Federal shifted to more traditional loans, many of its Alt-A loans were defaulting. ‘Today our non-performing assets are at 8 percent and our delinquencies have been declining for about three months,’ Giraldin said. ‘We think we’ve seen the worst of it.’”

“Like many other cities suffering through the collapse of the real estate market, El Monte officials claim the number of vacant properties is increasing citywide. Officials blame lenders for failing to maintain foreclosed homes.”

“‘It’s not that we are running into properties that are owned by local banks, but we are running into global conglomerates, and finding a contact person dealing with those homes is problematic,’ said Jim Beres, El Monte’s neighborhood services manager.”

“La Puente City Manager Carol Cowley said that community preservation officers have noticed several unkempt abandoned homes. Cowley said city officials are concerned that transients could move in to the vacant homes, and that the pools could become stagnant.”

“‘We can’t get a response from the lenders and they are just letting the houses go,’ Cowley said.”

The San Diego Business Journal. “There were 7,132 bank-owned properties at the end of July and more than 2,000 listed for sale on the San Diego MLS, Houserebate of San Diego reported on Aug. 11.”

“That means another 5,000 homes that have already been repossessed from delinquent homeowners will soon be for sale on the MLS. In July, 30 percent of the 2,610 homes sold in San Diego County were bank-owned foreclosures, according to CEO Brian Yui.”

“According to Yui, there are a total of 12,000 San Diego homes currently in notice of default and a third of them are scheduled for foreclosure auction in the next 90 days.”

“‘The Alt-A loans are starting to (default),’ said Yui. ‘Those are the non doc (documentation) loans that don’t require a high FICO score.’”

The North County. Times. “For the first time since foreclosures began to rise in 2007, North County homes sold back to the bank broke 700 in one month, according to ForeclosureRadar.”

“‘I think it’s confirmation that the Hope Now Alliance is an absolute failure,’ said Sean O’Toole, founder of ForeclosureRadar. ‘The only thing they’ve accomplished is to get people to sell their last few assets and throw away the money on mortgage payments before it goes to foreclosure.’”

“Further, the notices of default precede finalized foreclosures by three to six months, meaning many of the 1,000 defaults per month since January have not yet hit the market. For each month, the number of defaults increased by about 100 percent from the same time a year earlier.”

“Again, Oceanside and Escondido dominated the region’s foreclosure filings. For the first time, Carlsbad posted a significant increase in finalized foreclosures with 54. Though relatively low compared to North County’s foreclosure capitals, Carlsbad foreclosure number in July was 75 percent higher than its previous peak, 31 in May.”

The Union Tribune. “Six years ago, at the height of the housing boom, the architect-developer partners of Concepto Design Group International in the Gaslamp Quarter and Hoku Properties of San Diego bought a historic home on Hillside Drive in La Jolla for $1.8 million, relocated it and replaced it with a $10 million, 8,910-square-foot showcase property.”

“Completed in 2006, it was listed for $21.5 million and in January 2007, San Diego Magazine published a three-page spread titled ‘Above It All.’ Proud of their work, the partners rejected several offers they considered too low and held out for the gold. That turned out to be a major blunder.”

“In June, the lender, Federal Home Loans Corp., foreclosed on the property and listed it for $12.9 million. The fall of Essencia was not a fluke. At the Union-Tribune’s request, Zillow identified more than 130 homes priced at $1 million or more that were foreclosed on locally from January 2007 through June this year.”

“DataQuick searched public records to identify the most expensive foreclosures in the county, using Zillow as well as its own findings, and came up with the 23 most expensive properties.”

“They include five properties each in La Jolla and Rancho Santa Fe, four in Carmel Valley, two each in Del Mar and Encinitas and one each in Bonita, downtown San Diego, Jamul, Point Loma and Poway.”

“A check of addresses, court records and employment data revealed that the owners included business executives, real estate experts, partnerships, a teacher and others. Most could not be reached, and none would speak on the record.”

“‘It will open some wounds I wish weren’t there,’ said the project architect on the Concepto Design Group house, adding that he and his partners should have taken one of the rejected offers. ‘It’s a beautiful white elephant.’”

The Press Democrat. “The financial bad tiding take more than just a toll on your pocketbook. They also affect your health. Short of winning the lottery or coming into an inheritance, there are practical ways to address the problem: Plan a budget, consolidate debt, trim expenses, live more simply.”

“But there also are strategies and recommendations from the experts for dealing with the underlying stress linked to the struggle for legal tender, before it takes its toll on your health. For a person who cannot afford their mortgage payments and is losing their home, they may need a period of grieving.”

“‘Don’t lose sight of the fact you are alive, you’re breathing, you’re hugging someone you love and your legs work,’ said Alan Dreifuss, a Santa Rosa Kaiser clinical psychologist.”

The Sun Sentinel reports from Florida. “For South Florida’s sluggish housing market, one word became shorthand for the magic elixir to get buyers and sellers on the move again: portability. Gov. Charlie Crist predicted it would spark a ’sonic boom’ in home buying. But the state’s home turnover rate of 3 percent is the lowest in years, state economists said in a newly released report.”

“Analysts say any portability-fueled boost in home sales was swamped by stronger forces pulling down the real estate market in Florida and nationwide: crumbling home prices, tightening credit standards and a wave of foreclosures.”

“‘Unfortunately, the credit crunch hit at the same time as portability,’ said John Mike, president of the Realtors Association of the Palm Beaches. ‘If we weren’t experiencing that, portability would be really, really impressing people. It will work for us yet, I’m utterly convinced of that.’”

From WTVJ 6 in Florida. “The foreclosure rates in Broward and Miami-Dade counties increased dramatically between 2006 and 2007. In Miami-Dade County, 9,814 homes were foreclosed in 2006 and 26,931 were foreclosed in 2007. The foreclosure rate in Broward County went from 516 homes in 2006 to 3,616 in 2007.”

“Deerfield Beach resident Dino Lapena said the property next door to his has not been cared for since its foreclosure and he is worried about his own property.”

“‘This is a nice neighborhood, but now there’re so many homes for sale,’ Lapena said. ‘A house was sold, beautiful house, for $180,000, a neighbor. That house was (worth) $300,000. Nobody buys no more.’”

The Herald Tribune from Florida. “My recent column about the war of words between the presidents of the state’s banking and mortgage-broker trade associations brought this reaction from Bradenton appraiser Jeff Deuitch, owner of Manatee Appraisal Service.”

“‘I do have to agree (with the bankers) that a higher proportion of mortgage brokers are unscrupulous than bankers,’ Deuitch wrote in an e-mail.”

“‘In my experience, a phone call from a mortgage broker requesting an appraisal for a residential property would nearly always include language about us guaranteeing that a property would achieve some kind of minimum value prior to granting the appraisal assignment,’ said Deuitch.”

“‘During the 2003-05 period, I was fielding one to two calls per day of this type. Clearly, mortgage brokers would try to influence appraisers. In my experience, this was more than just a widespread practice — it was nearly ubiquitous amongst small mortgage brokers.’”

“‘It is not to say that this did not occur with banks. If you research the incidents that have resulted in Andrew Cuomo’s pressure on Fannie Mae and Freddie Mac, you will see a good example of a large firm that has been accused of pressuring appraisers to ‘hit’ predetermined values via their large, third-party, vendor-management company.’”

The Jax Daily Record from Florida. “According to figures released June 25 by the U.S. Department of Housing and Urban development and the U.S. Census Bureau, 512,000 new single-family homes were sold in May of this year. That number is 40.3 percent below the number of homes sold in May 2007.”

“The data confirmed what has been known by developers who aren’t developing and real estate agents who aren’t listing because nobody’s buying so nobody’s selling.”

“The effects of the real estate slump are also being felt by attorneys who practice in the area of real estate law. ‘Compared to a year ago, my real estate practice is only a third of what it was,’ said Bryan Goode of DiRito Goode Dempsey at Jacksonville Beach.”

“Obviously closings are down but our firm is diversified so we’re focusing on other areas like wills, trusts, probate and commercial litigation. We’re continuing to pursue real estate but we’ve got to watch our overhead,” he added.

Bill Ryan of Ryan and Marks has been practicing since 1972 and said, ‘Every now and then we see a blip and think it’s going to get better but then the blip disappears.’”

“Crabtree & Fallar’s Randy Crabtree has also watched his practice change with the real estate market. ‘Our market is down 75 percent. I went through the high interest rates in the ‘70s and the depreciation in the ‘80s and the lean periods in the ‘90s but I’ve never seen anything like this before. I think the sub-prime loans are the main factor in the current dynamic. It has caused investors to have no faith in the mortgage companies.’”

“Crabtree also has no idea as to when the market will turn around but did predict, ‘It could be an astronomical collapse if something isn’t done to get things going again.’”

“‘But even if you could get land at zero cost, you can’t build right now for a price anyone can afford. And even if interest rates were at 0 percent, nobody would make any money so the system wouldn’t work. It’s like a tornado. Everything we knew about real estate is no longer true,’ Crabtree said.”

The Post & Courier from South Carolina. “Outspoken local real estate observer Brad Runbaken has his worries about the Charleston housing market but also sees some positive signs.”

“‘The Charleston foreclosure market is growing and let’s all hope it does not become as large as certain parts of California and Florida,’ he says in a second quarter report on the local real estate outlook. At the same time, ‘There are very good deals out there if you look,’ Runbaken says.”

“Runbaken says there is a ’shadow inventory in Charleston’ that does not show up in the Multiple Listing Service figures. He’s especially concerned about $500,000 or higher valued homes due to high inventory and jumbo loan rates.”

“‘I feel we are exiting what has been a 20-year cycle of low interest rates and we all know the impact interest rates have on the price and financing of homes,’ he says.”

The Sun News from South Carolina. “The prices of condominiums sold on the Grand Strand continued falling in July as did the amount of condo inventory, according to the monthly Coastal Carolinas Association of Realtors report.”

“The median condo price fell to $149,000 in July. That’s 16 percent less than its peak this year at $177,500 in March and down 20 percent from July 2007.”

“What’s promising for condo sellers is that the number of condos on the market also dropped in July. But just because inventory is going down doesn’t mean the property is selling, said real estate broker Eddie Marshall.”

“Some of his clients, unwilling to budge on their prices, have thrown in the towel for the time being, he said.”

“‘Some obviously sell, and then others, when they’ve been on the market for a while, the sellers just decide to take them off the market,’ Marshall said. ‘When the prices go down, some of the sellers just will not accept that. They won’t accept the reality that they’re going to sell for less.’”

“Sales remained sluggish in July at 263 condos sales and 267 single-family house sales, down 22 percent and 35 percent from July 2007, respectively.”

“‘It’s discouraging on the sales numbers, that they’re not rebounding,’ said Tom Maeser, market analyst for the Coastal Carolinas Association of Realtors. ‘It’s down a little more than last year was down, and last year was a slow market.’”

The Independent Mail from South Carolina. “Twenty years ago, the Anderson County Master in Equity’s Office handled as few as eight foreclosure cases a month. Today it’s not unusual to have 80 to 100 foreclosure sales in a month.”

“Housekeeper Joyce Lusk found herself unemployed after business slowed at Oconee Memorial Hospital. A series of migraines kept the 59-year-old from working, and soon she was five months behind on her mortgage.”

“Lusk said she asked her lender to move payments to the end of her mortgage or drop her monthly bill to $600 until she was earning a steady income. The lender was unwilling to do either, and now she’s facing foreclosure.”

“‘I don’t understand why they don’t want to work with me,’ Lusk said. ‘Why do they want to take the house when the house is going to sit there for God knows how long?’”

“Elaine Worzala, director of Clemson University’s Center for Real Estate Development, was interviewed by National Public Radio at the height of lenders’ aggressiveness. She remembers advising people to rent, but says her efforts couldn’t overcome the hype about the need to own and how you can’t lose in real estate.”

“‘What’s sad is that people were trying to tell the financial community and were trying to tell borrowers, but it was like a feeding frenzy, and they didn’t want to hear it,’ Worzala said.”

The Charlotte Observer from North Carolina. “Statewide, N.C. foreclosure filings were up 19 percent through June, compared with the first six months of last year, according to Observer analysis of state data. These filings mark the start of foreclosures. Filings this year could top 60,000, an increase of more than 10,000 from last year’s historic high.”

“‘Foreclosures have a cascading effect on the community,’ said Mark Pearce, N.C. deputy commissioner of banks. ‘We’re trying to prevent that cycle from feeding on itself.’”

“So far this year, foreclosure counselor Kerri Roseman has worked with 216 people fighting to save their homes. That’s one-third more than she saw all of last year.”

“‘Some of the people don’t have enough money with gas and food prices going up,’ said Roseman, who works for Prosperity Unlimited, a nonprofit serving the Charlotte area. ‘I see people who lost their jobs, people whose interest rates have gone up, some who just had bad budgeting.’”

“The North Carolina coast also is seeing a spike in foreclosure activity. Dare County, stretching along the Outer Banks, has the highest foreclosure filing rate, more than double the Mecklenburg rate. The rate - foreclosure filings per 1,000 people - is 24 in Dare versus 10.5 in Mecklenburg. More than half the county’s houses are owned by non-residents, many as vacation homes or investment properties.”

“Those second-home properties are where Charles Evans, a real estate attorney in Dare County’s Manteo, said he is seeing the foreclosures.”

The Star News from North Carolina. “Lesley Whitman is from Wayne County, but when she accompanied her husband to Wilmington on Thursday, she shopped at the Goodwill store on Kerr Avenue while he attended a meeting at work.”

“They’re feeling the pinch of high gas prices and they’re worried about the economy. They’re not alone. Becky Lytle, a spokeswoman for Goodwill Industries of Eastern North Carolina, said sales this summer were below last year’s, which she blamed on the economy. People who had shopped there as often as several times a day are now coming in less often, although they still come.”

“Local Salvation Army Maj. Butch Mallard said he’s seen an upturn in the number of customers at the two Salvation Army stores in Wilmington and another in Southport, and he’s definite about the reason.”

“‘As the economy worsens, people are looking to save any way they can,’ he said. ‘You’ve got people coming in who never shopped at a thrift store before. … They tell me they’re having rough times and are having to save where they can.’”

“Whitman, the Wayne County teacher, said she and her husband live a comfortable life - they own a vacation trailer in Oriental, a 19-foot boat, a newly installed in-ground pool, another lot in the country. But they’re feeling the pinch of high gas prices and, being parents, they feel vulnerable to any economic weakness.”

“‘We’re living the American dream,’ she said. ‘But it’s hard to have the American dream anymore with the economy being what it is.’”

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