The Housing Bubble

The North County Times reports from California. “Real estate agents across North County reported strong activity throughout the summer. But slow sales in more affluent neighborhoods suggest that the flurry of activity was affecting only a sliver of the market: low-priced foreclosures. And the increased sales were concentrated among bank-owned homes, as lenders continued to seize homes at a rapid pace.”

“Cities with high rate of foreclosures such as Escondido, Vista and Oceanside posted the largest jumps in sales, with several areas seeing sales triple from the same month a year ago. On the other hand, higher-end communities with few foreclosures such as Carlsbad and Encinitas experienced losses in sales.”

“The median price last month tumbled 7 percent in just one month, to $457,500, according to the monthly HomeDex report released by the North San Diego County Association of Realtors. condo market sales increased while the median price dropped 5 percent in one month.”

“‘Now people are getting the idea that we are getting close to the bottom,’ said Dennis Smith, a real estate agent in Carlsbad. ‘If we could get the banks to lighten the reins a little bit, we might have a recovery.’”

The Tribune. “Las Lomas, a large housing subdivision started in 2003 in south Atascadero, has come to a stop and is in financial trouble. Only 60 or so of the 279 projected homes have been built and occupied, and part of the 100-acre-plus tract is in foreclosure.”

“Currently 21 lots on Via Cielo, Azor Lane and Monte Verde are scheduled for public auction next month. About half of the to-be-auctioned lots have newly-built, high-end, 3,000-square-foot homes that were on the market-but did not sell - for between $800,000 to $1 million. The rest are vacant.”

“Trimark Pacific Homes of Westlake Village near Los Angeles, has stopped building because it ‘owes the bank more than the houses are worth,’ said Kirk Chittick, Trimark Pacific’s VP of sales and marketing.”

“As recently as 2006, the company was building 500 to 600 homes a year, primarily in Southern California. This year, Trimark Pacific’s building activity has slowed to about 60 homes, Chittick said.”

“‘We had great plans to grow in Central California, and bought La Terraza (its portion of Las Lomas) from Hertel with that in mind,’ he said. ‘We even were looking to buy more property in Santa Maria and Atascadero, but as the market continued to degrade, it didn’t make economic sense, and we elected not to move forward.’”

“Part of the tract is owned by developer Ronald W. Hertel. The pending foreclosure of Hertel’s portion of Las Lomas comes as his firm retreats from real estate business in this county and elsewhere.”

“Within the past several months, it has shut down its office in Avila Village, disabled its Web site and even put its headquarters building in Ventura up for sale.”

“Also, its still-current contractor’s license appears to be in peril. Adding to its woes are other North County properties worth millions of dollars that are in default to lenders such as Transamerica Financial Life Insurance Co., Pasadena- based Indymac Bank, a thrift that failed in July, and San Luis Obispo’s Coast National Bank, according to documents filed in the county Clerk-Recorder’s Office.”

The Santa Cruz Sentinel. “After waiting nearly two decades for something new to rise on the empty dirt lot next to LuLu Carpenter’s on Pacific Avenue, city residents will have to wait a little longer.”

“A hard economy is taking its toll on developers, and the condominiums that were scheduled to break ground in October on that lot have been postponed, said Rossana Bruni, chief financial officer of Brooks Properties, the firm in charge of the property.”

“‘We are just in this morass with everybody else in the development business,’ Bruni said.”

“For Bruni, the signals she’s waiting for include steady housing prices and lenders who are not as wary of handing out money to housing developments after watching condo prices fall over recent years.”

“‘It’s not because Brooks Properties aren’t strong enough or Santa Cruz isn’t a strong enough market, but the lenders aren’t strong,’ she said.”

The Mercury News. “Nearly five times as many homeowners in Santa Clara County lost their properties to foreclosure last month than in July 2007. Even many county residents not threatened by foreclosure saw their home values plummet in the second quarter, according to a report released Tuesday.”

“Mortgage lenders and servicing companies foreclosed on 646 Santa Clara County homeowners last month, according to ForeclosureRadar, a Discovery Bay company that tracks foreclosures statewide. Together, those homeowners held a total of $364 million worth of mortgage loans.”

“Statewide, there were 28,795 foreclosures last month, with combined mortgage loan balances of $12.55 billion, a record for one month. Since January 2007, lenders have foreclosed on $100 billion in loans, said Sean O’Toole, ForeclosureRadar’s president.”

“With home values in most Silicon Valley neighborhoods dropping, it’s harder for homeowners who find themselves unable to pay their loans to sell their homes for enough money to pay off their loans and avoid foreclosure. It’s likely that about 90 percent of properties in default will end up sold on courthouse steps, up from 50 percent in a typical year, O’Toole said.”

“‘The number of notices of trustee sales we’re having as a percentage of defaults is unprecedented,’ O’Toole said.”

“In the San Jose region, 38 percent of homeowners who purchased their property in 2005 owe more than what the properties are now worth; 46 percent of those who bought their homes in 2006 have negative equity and about 32 percent of those who acquired real estate last year are under water, according to Zillow.”

The Recordnet. “Sales of existing homes - mostly foreclosures - in San Joaquin County continued to rise in July for the sixth consecutive month. the median selling price countywide continued to drop, from $220,000 in June to $215,000 last month.”

“That continuous slippage back to selling prices not seen since spring 2002 is driving sales, real estate brokers said.”

“‘The demand continues to grow, because the prices continue to come down,’ said Tom Guiliano, VP of sales and marketing at Cornerstone Real Estate Group in Stockton. ‘Every month the deals get better.’”

“RealtyTrac has reported that banks repossessed 5,878 single-family houses in San Joaquin County in the first six months of this year. That’s an average of 980 per month. That average is also about 50 fewer than the closed sales last month.”

“Still, the overall number of houses on the market basically stayed flat at fewer than 4,600 countywide.”

The Modesto Bee. “A record-breaking 3,000 homes were lost to foreclosure during July in the Northern San Joaquin Valley, pushing the 12-month foreclosure total to more than 20,000 homes. Mortgage defaults on those properties cost lenders about $1.1 billion in July, according to ForeclosureRadar.”

“Stanislaus County had one of the biggest jumps in foreclosures: 1,053 properties with outstanding loans of more than $440 million went to auction on the courthouse steps during July.”

“Only 39 of those Stanislaus homes attracted bids. Lenders got stuck with the remaining 1,014 of them, which they must try to resell. More than 7,000 homes have been foreclosed on in the county during the past year.”

“Statewide, 28,795 properties with a combined loan balance of $12.55 billion were foreclosed on during July.”

“‘We’re going to see even more foreclosures this month,’ predicted Sean O’Toole, founder of ForeclosureRadar. ‘The lenders still just have their heads in the sand.’”

“Many parts of Stanislaus, Merced and San Joaquin counties have had median home sales prices plummet 50 percent or more since the housing boom peaked in 2005.”

“So, many homeowners are trapped and some simply give up. ‘We keep hearing about people who can afford to pay their mortgage, but who walk away instead,’ said Brad German, a spokesman for Freddie Mac.”

“Even though being foreclosed on will damage someone’s credit for seven years, German said, some homeowners don’t seem to care. ‘A mortgage is a legal contract,’ German stressed. ‘It’s not an option you can walk away from based on whether a home appreciates in value.’”

“German said there are persistent stories about people who let one home be foreclosed on right after they purchase a second home.”

“‘It is very concerning and it’s fraud,’ said German, noting that some buyers misrepresent their intentions and their creditworthiness. ‘When people voluntarily leave their homes, they add more houses to the inventory. It also causes tighter lending standards, which makes mortgages harder to get.’”

“Teresa Kinney, a member of the staff of Rep. Dennis Cardoza, D-Merced…has helped organize seven foreclosure workshops the past six months.At one June event in Modesto, Kinney said more than 35 homeowners had their loans modified by Countrywide Home Loans. She knows that’s not many, considering how many people have lost their houses to foreclosure.”

“‘We’re not going to be able to save everyone because, frankly, there are people out there who lied (on their mortgage applications),’ Kinney said. ‘They have to deal with the consequences of that.’”

The Fresno Bee. “A new threat is emerging that could keep the tidal wave of foreclosures continuing into 2011, experts say. More interest-only and so-called option adjustable-rate mortgages handed out during the real-estate boom are starting to go bad as home values continue to fall. These loans also are called alternative-documentation loans, or Alt-A.”

“The loans were popular in the central San Joaquin Valley as housing prices soared during the real-estate boom. ‘I got caught with my pants down on quite a few,’ said Richard Barnes, owner of Resource Lenders of Fresno, who issued those types of loans.”

“During the most recent quarter, foreclosures made up 43.2% of all sales in Fresno County, up from 6.3% five years ago, according to Zillow. The median home price of $204,000 is off 22% from last year, according to Zillow.com, and about 80% of all homeowners who bought in 2006 are under water.”

“Last quarter, there were 120,000 more foreclosures than modifications in California, the Center for Responsible Lending said.”

The Daily Press. “The most recent numbers in the High Desert Real Estate market show…sales in July were up 16 percent from June and up 132 percent since July of last year, according to statistics from the MLS compiled by Larry Trombley of Century 21 Rose Realty.”

“In July, 80 percent of the homes sold were bank-owned, showing that the local market is still saturated with a large number of foreclosures. ‘I think the real estate market will bottom out when we get through these foreclosures,’ said Gary Stater of Gary Stater Realty in Apple Valley. ‘It’s a difficult question. They just keep coming.’”

“The numbers show that the home prices were down 42 percent from July of last year. Prices will probably stop dropping by the end of the year, said Caroll Yule of Shear Realty. ‘I just can’t imagine them going much lower.’”

“‘People are excited because they can actually go out and become homeowners and have an investment down the line,’ said John Hess of Shear Realty. ‘People can actually afford to purchase a home now.’”

From Reuters. “Thanks to plummeting prices and a slew of foreclosures in the county, east of Los Angeles, 31-year-old photographer Elizabeth Luma can see her dream of owning a home in Southern California come true. She is scouting for a $200,000 home for her five-member family.”

“‘The range of homes is low enough, so we can pay for it right now,’ said Luma, who rents an apartment in Los Angeles and plans to close the deal on a Riverside house within the next month. ‘Right now is the time for first-time buyers like us who couldn’t afford it earlier to take advantage of the low prices.’”

“Prices in June were down 31 percent from a year earlier year in Riverside, which is ranked second in the country for foreclosure rates behind Stockton in Northern California.”

“Tera Wunderlich, a 27-year-old hairdresser who has been planning to buy a house for years, is going to make the most of those numbers. ‘My budget is roughly $200,000 and I know there are bank-owned properties to look at,’ Wunderlich said.”

“Rows of once-luxurious properties that now lie foreclosed are bringing down home prices in entire neighborhoods in the county. Foreclosed homes accounted for more than 62 percent of homes sold in June.”

“But in the short term, Luma thinks the time is ripe and the price is right for the dream house she has been waiting for. ‘It must have a backyard for my kids, and definitely a big kitchen with an island in the middle,’ Luma said. ‘I can’t wait to get out of this condo.’”

The Merced Sun Star. “The world’s leading business newspaper has pegged Merced as one of America’s foreclosure capitals, casting the city’s housing woes onto an international stage. The London-based Financial Times story quotes local officials and real estate professionals who place much of the blame for Merced’s troubles on out-of-town speculators who snapped up houses during the 2005 boom.”

“‘There should be a special place in hell for those people,’ James Marshall, Merced city manager, says of the speculators. ‘I’ve heard about renters who were making their payments on time and then all of a sudden they would get a knock at the door.’”

“Merced Councilwoman Michele Gabriault-Acosta, a residential Realtor, hadn’t read the Financial Times piece, but…likened reports of Merced’s housing bust to coverage of the downturn Detroit experienced in the 1980s during the collapse of the American auto industry. ‘You start to second-guess whether it’s somewhere you really want to move to and bring your family to,’ she said.”

“This isn’t the first time Merced’s real estate ups and downs have garnered attention from an international media outlet. In July 2005, The Wall Street Journal listed Merced as the least affordable housing market in the country.”

“Back then, one local mortgage lender sounded a prescient note. Commenting on the Wall Street Journal story, Ed Walters of GMAC Mortgage said Merced’s boom had been fueled in large part by subprime loans with adjustable interest rates.”

“He wondered, ‘What’s going to happen two years from now when their rates are adjusted?’ Everyone in Merced knows the answer to that question now.”

The Star Phoenix reports from Canada. “The city has been buzzing about housing since the beginning of 2007, when prices suddenly began to jump and bidding wars became the norm instead of the exception. Home buyers, however, may be forgiven for wondering — if not worrying — about the recent turn in the market: Listings have jumped 46 per cent this year and sales are down 15 per cent.”

“Last year’s soaring market attracted a lot of speculation, ’so people from B.C., Alberta and even syndicates from New York were purchasing properties. Some people did a nice job in spending some money and increasing the value of properties,’ said Harry Janzen, executive officer of the Saskatoon Region Association of Realtors.”

“But 2007 changed people’s expectations, and 2008 is not fulfilling them. ‘Our measures should be further out than just 2007, which was a very unique time in Saskatchewan and certainly in Saskatoon history,’ said Janzen.”

“‘Last year, we had 10 buyers for each house,’ says Gary Busch, a real estate agent with Century 21. ‘This year we have 10 houses for each buyer.’”

“‘It’s hard not to watch all these market reports,’ said new homeowner Janet French, a StarPhoenix reporter who takes possession of her home in September.”

“French and her fiance thought about buying a home last year, but were so turned off by the bidding wars and fast-rising prices, they decided against it. But in late May, friends of theirs put a house on the market, and eventually dropped the $260,000 asking price to $235,000.”

“‘When I heard how much they were dropping the price, I thought, something is changing here,’ she said.”

“French hopes the market correction won’t affect the value of her house, which she purchased for $11,000 below the original asking price. ‘The point is, I’m not pouring money into rent any more.’”

The Billings Gazette from Montana. “‘Sold! To the highest bidder’ is a shout used to close deals for antiques and even Picassos. Now, new high-end homes in Billings will be sold next month under that same auctioneer’s cry.”

“For what may be the first time since the 1980s, as many as 15 custom-built homes in the Billings area will be sold at auction on Sept. 9. Kenmark Construction has teamed up with United Country-Musser Bros. to sell the ’spec’ homes, built before a buyer has been lined up, ranging in price from $244,000 to $549,900.”

“On Tuesday, Mark Kennedy, one of the owners of Kenmark Construction, opened the front door to a 4,827-square-foot home at 4535 Gram’s Court in Rehberg Ranch to show off the granite countertops, faux-painted walls, crown molding and the wood floors. ‘This is the finest inventory in my career,’ he said. ‘They aren’t going to buy them for $1.’”

“While the occasional Montana trophy ranch or home is sold at auction, auctioneer Mert Musser said this sale is unique. ‘I would say it is the first time this has happened on this scale in Billings and in Montana,’ Musser said.”

“Marilyn Floberg, president of Prudential Floberg Realtors, said the auction approach is just one sign of changing business practices driven by the Internet. ‘I look at it as an alternative marketing plan not totally out of the realm of possibility, but not necessarily a sign of distress,’ she said.”

The Idaho Statesman. “Treasure Valley housing sales remained mired in a slump in July, with total transactions off 39 percent from a year ago, according to industry statistics. Mike Pennington, a residential specialist with John L. Scott, said consumers are hoping prices will fall further.”

“However, with the Federal Reserve expected to begin raising interest rates to combat inflation, waiting to buy may be a costly strategy, he said.”

“‘Somebody has to say that it’s safe to go back in the water,’ Pennington said. ‘If consumers wait hoping to save a few dollars, and interest rates shoot up, they could end up shooting themselves in the foot.’”

“Adding to the industry’s problems were inventory numbers that have risen 24 percent since the start of the year, from 6,668 in January to 8,270 in July. Experts say the growing number of homes in foreclosure could be adding to the inventory problem.”

“Home prices also continued to slide. The median price of a home sold in July was off 12 percent in Ada and Canyon counties from a year ago.”

“Another disheartening sign of market conditions is that even ‘competitively priced’ homes have not been selling, added associate broker Shaun Tracy. ‘It doesn’t appear that there is a great (upward) thrust in sales on the horizon,’ he said. ‘We’re just trudging along, selling a home here and there.’”

The Daily News from Washington. “Housing prices in Cowlitz County rebounded for a second month in a row in July, leading to speculation that the worst of the slump might be over locally. However, the number of home sales still is lagging well behind last year’s pace, and there’s still a big surplus of homes on the market.”

“‘Things are not looking dark around here. Gray, perhaps, but in the business here we feel like we’re seeing sunshine poking through,’ said Jerry Flaskerud, broker in Longview.”

“Buyers still have the advantage over sellers, but not by much, Flaskerud suggested. ‘Homes that are priced well from a buyers’ prospective are getting offers. But there are not a lot of buyers. It is a very difficult market for sellers and real estate agents now. But for buyers who think they can or should offer 20 to 30 percent less than sellers are asking, they are going to be disappointed. We do not have a lot of sellers who are motivated to sell for that much less.’”

“‘A house sold today would have sold for more a couple years ago, but we’re not seeing as many distressed people and properties as they are seeing in Clark County,’ said Sue Lantz, broker in Longview. ‘It is still difficult and we certainly have sellers who want to sell their properties … but they are willing to wait it out.’”

“Flaskerud said housing inventory continues to build locally because people reaching retirement age want to downsize and may want to sell, but don’t need to sell. ‘The market is not where we’d like it to be, but it’s OK. We are seeing buyers come back into the market. We’re debating, perhaps we have seen the bottom in Cowlitz County.’”

The Columbian from Washington. “Two Creeks was meant to bring luxury living to east Clark County. Instead its upscale Camas townhouses continue to bring financial ruin for its developers and to cost those who backed the project millions. Now 29 unsold homes, out of 31 built near the Camas Meadows Golf Course in 2006, are heading to the auction block.”

“The timing couldn’t be worse. Home sales are down 41 percent and prices are down 3 to 5 percent from a year ago, which will make it difficult to find buyers for the Two Creeks homes in time.”

“It wasn’t supposed to end this way. When husband and wife Rick Bowler and Marilee Thompson unveiled plans for Two Creeks at Camas Meadows in 2004, the housing market was on the upswing and financing was available.”

“They borrowed from Columbia Credit Union, and planned eventually to build 122 two-story townhomes, each with 2,200 to 3,000 square feet of living space and each equipped with elevators.”

“They envisioned tennis courts, a pool and Jacuzzi, barbecue stations, charging stations for golf carts, walking trails, RV storage and more, Bowler said at the time.”

“The first phase, 31 townhouses, went on the market in 2006. Two people bought homes that year, paying $750,000 and $825,000. Since then, no other sales have closed.”

The Seattle PI from Washington. “When Moda Condominiums started accepting reservations in September 2006, prospective buyers lined up hours early and quickly locked up all 251 units.

Now, with the Belltown building two months from completion, Moda’s developers have changed it to rental apartments.

“The market and the financing conditions for condominiums have really taken a drastic turn,’ said developer G. David Hoy, head of HMI Real Estate Inc. ‘The vast majority of (Moda’s) buyers decided not to proceed with the purchase of their unit.’”

“Some buyers found they could no longer get a loan, particularly for second homes or investment units, while others just got cold feet, Hoy said. ‘Because the vast majority have bailed out on us, we have no choice now but to turn it into a rental.’”

“Several prominent area projects have switched from condos to apartments in recent months, citing the slowing for-sale market and relatively strong one for rentals.”

“Jereld Hamilton has been keeping his house in showing shape, despite his two small boys, since putting it on the market July 7. But few buyers have seen the fruits of his Sisyphean labor. ‘Traffic is so slow,’ Hamilton, an agent with Windermere Real Estate, said during an open house in late July. ‘It’s just been really brutal.’”

“Nearby, agent Paul Lau said the lonely open house he was hosting Sunday was consistent with his recent experience in southeast Seattle. ‘You’re lucky if you get five people,’ he said.”

“Lenders cutting back on loans and tightening lending standards since last summer might have hit southeast Seattle particularly hard because the area has a higher share of first-time buyers, who generally have smaller down payments and less-established credit.”

“‘A lot of the entry-level buyers have just disappeared,’ Hamilton said.”

“In Columbia City, seller Gabriel Newton had a steady stream of visitors flowing through his self-hosted open house July 27. Gary Montgomery, who was at the open house, said he was looking in Columbia City because he liked the neighborhood’s feel, older houses and prices.”

“‘Any other neighborhood where I like the home, it’s $600,000 or $700,000,’ he said.”

“Montgomery rents in Redmond and planned to hold off on buying until his girlfriend sold her house in Portland. But he got tired of waiting. ‘I’ll buy what I can - a smaller home - now, while prices are low,’ he said.”

The Enterprise from Washington. “Record high prices on gas and food are causing people across the Puget Sound to pinch pennies. In Shoreline, that has meant large crowds at food banks, officials said. ‘Donations are down by quite a bit, but we’ve seen an uptake in our recipients,’ said Hopelink’s Denise Stephens. ‘People really are using food banks more than what we’re used to.’”

“At the same time that people are paying more for food and gas, wary employers have been reluctant to raise wages. Unemployment has risen, too.”

“At the Family Center in Lynnwood, director Tim Gahm has been busy working with his staff to broaden their services in the wake of rising prices. ‘For the past six to seven meetings, what we have been discussing is the increasing needs of families surrounding basic needs,’ he said.”

“For some people, the price jump is forcing them to make decisions they wouldn’t normally consider. Take Kerry Breakfield of Lynnwood, for example. The married mother of two drives a school bus part time. A subsidy helps cover her $4,000 a month day care bill but it’s still not enough.”

“‘I’m actually having to consider taking my kids out of day care,’ she said. Her mother-in-law lives with the family ‘to help pay the mortgage and everything else,’ she said.”

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