The Housing Bubble

The Sacramento Bee reports from California. “Nearly 10,000 Sacramento-area jobs disappeared last month as California’s troubled economy pushed the state’s July unemployment rate to its highest point in 12 years. Statewide joblessness grew to 7.3 percent, up from 7 percent in June, according to California Employment Development Department figures released Friday.”

“‘The story behind the job numbers is that the state’s economic weakness is spilling outside of real estate,’ said economist Jeff Michael, director of business forecasting at the University of the Pacific in Stockton. ‘Some people are still debating whether the nation is in a recession. For California, I think the debate is over.’”

The Desert Sun. “Cities in the Coachella Valley, which experts say is in a recession, also saw their unemployment rates rise in July. The east valley was hardest hit. Indio rose to 10.1 percent while Mecca saw 18.2 percent unemployment. Desert Hot Springs was also among the highest at 12.6 percent.”

“The impact of the valley’s jobless rate has been apparent over the past two weeks as nearly 4,000 people have applied for about 500 jobs or so at WinCo Foods and SuperTarget in Indio.”

“John Husing, economic consultant to the Coachella Valley Economic Partnership, said the most telling numbers for him came from bi-county data from Riverside and San Bernardino that pointed to a total loss of 22,000 jobs last month.”

“‘We’ve gone into a deep recession,’ Husing said. ‘There is no question about that in the Inland Empire - caused by the cutback in construction, most of which are housing construction.’”

The North County Times. “San Diego County’s jobless rate shot up to its highest level in 13 years last month as mortgage brokers, hardware stores and construction companies continued to slash payrolls in response to the cratering housing market.”

“‘”It all depends on your exposure to housing,’ said Christopher Thornberg, a partner with Beacon Economics.”

“The key factor in the housing bubble —- tens of thousands of buyers who borrowed beyond their ability to repay —- has affected other industries, too, Thornberg said. From the late 1990s into 2006, consumers financed all sort of purchases with home equity loans.”

“‘The problem we have in the U.S. economy is too much spending, too much debt,’ Thornberg said. ‘This is an economy that will underperform for a number of years.’”

The Pasadena Star News. “Employment figures released Friday offer a deteriorating job picture for Los Angeles County, with the region’s jobless rate hitting its highest point in more than 11 years.”

“The county’s biggest year-over-year job losses occurred in construction, with 10,700 jobs lost. Specialty trade contractors accounted for the majority of those losses - 8,800 jobs.”

“Steve Thurgood, general manager for Barr Lumber Co. Inc. in West Covina, said the housing meltdown has wreaked havoc with Southland contractors. ‘That business is off a good 55 to 60 percent,’ he said. ‘Drywall people, plumbers, electricians, plasterers … there’s almost no work to be done.’”

“And amid all of this, the Southland’s housing market continues to deteriorate. ‘There are a lot of foreclosure properties on the market,’ said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. ‘We’ve heard about a lot of flippers who are coming in and buying up homes, keeping them for a couple months and then turning them around to try to make a few hundred dollars.’”

The Marin Independent Journal. “The Marin jobless rate jumped in July by nearly half a percentage point, reaching 5 percent for the first time in five years. Some 7,000 people were out of work in an estimated county labor force of 140,000, according to figures released Friday by the state Department of Employment Development.”

“Ruth Kavanagh, labor market consultant for the employment department, noted the western portion of the Bay Area, including Marin, San Francisco and San Mateo counties, experienced a greater increase in the unemployment rate than typically occurs between June and July based on an average for the prior 18 years.”

“Racy Ming, program manager for the Marin Employment Connection, said Marin is feeling the impact of the sliding economy. ‘I hear that it is taking people longer to find jobs.’”

The Contra Costa Times. “The East Bay lost 2,700 jobs during July, a fresh setback for a struggling economy that has suffered a string of employment losses that now stretches to seven-straight months, according to a state labor report released Friday.”

“Adjusted for seasonal changes, the East Bay has lost nearly 19,000 jobs so far in 2008, the Employment Development Department reported. The biggest job losses came in industries linked to the fallen housing market, but economic woes have begun to spread to other sectors.”

“Jon Haveman, an economist with Beacon Economics, was asked if the East Bay is near the bottom of the downturn. ‘I would try hard to find a way to say yes, but the answer is no,’ Haveman said. ‘Everything keeps going down. The housing downturn hit the East Bay much harder and earlier than other parts of the Bay Area.’”

“The ailments have intensified, here and statewide. ‘If anything, the jobs recession that we have been talking about at Beacon is accelerating,’ Haveman said.”

The Santa Cruz Sentinel. “Nearly four out of 10 single-family homes sold for less than $500,000 in Santa Cruz County in July, as buyers took advantage of falling prices. The median price was $607,5000, dramatically down from $775,000 a year ago.”

“Justin Harp, 25, an electrician with American Licorice Co., and his wife, a stay-at-home mom, bought a three-bedroom, one-bath home in Felton for $350,000 for their family of three. ‘The correction in the market opened up a lot of opportunity,’ he said.”

“When the Harps first saw the 1,100-square-foot home, the sellers had accepted an earlier offer. ‘When the other family backed out, we jumped on it,’ Harp said. ‘We got lucky.’”

The Hollister Free Lance. “While the number of San Benito County homes entering the foreclosure process continues to inflate over already stunning figures, the area also has shown a hefty hike in bank repossessions after properties fail to sell at public auctions, according to RealtyTrack.”

“During the second quarter of 2008, banks seized 120 foreclosed homes in San Benito County that failed to sell. During that same time last year, there were just three.”

“In total, the number of homes at some level of foreclosure reached 528 for the second quarter, including 279 notices of default. In that period last year, there were 90 cases of homes entering the foreclosure process, and that had been a near tripling of the figure from 2006, according to RealtyTrack’s statistics.”

“Israel Gonzalez of Beale Properties believes that no one can really tell if the market has hit rock bottom. ‘You have all these homes on the market at low prices making buyers salivate,’ he said. ‘Meanwhile, a lot of people have lost their homes, and a lot have moved out and just decided to let the bank have it because they have lost $200,000 in equity.’”

“‘Then you have all these people whose adjustable rates are going to go way up in the next year,’ said Gonzalez, noting that some of them would increase from 1 percent to 6.5 percent.”

“Gonzalez, like everyone involved in the housing issue, can’t say for sure whether it’ll get any worse. ‘I would say we are between the middle and the tail end,’ he sighed. ‘No one can say for sure right now.’”

From KCRA 3. “A new trend within bank-owned foreclosures may be causing an artificial price jump that could cost taxpayers hundreds of thousands of dollars, some real estate experts said. Beefed-up code enforcement of bank-owned homes is leading to more violations and liens being placed on foreclosed properties, officials said.”

“The problem for taxpayers, KCRA 3 has learned, is that multiple banks — instead of paying those fees to fix the properties — are dropping sale prices as much as 50 percent to get the property out of their hands.”

“‘What they (code enforcement agencies) are doing is not forcing the bank to fix it up,’ said Mike Lyon of Lyon Real Estate. ‘They are forcing the bank to give it away.’”

The Voice of San Diego. “When the buyers at El Cortez signed stacks of papers to purchase their condos in fall 2004 and 2005, they signed a two-page item called a ‘repurchase addendum.’ Buyers say it was marketed to them as a protection — if they had any qualms with the developer over the construction or design of the project, the developer would purchase their unit back at whatever the current market value would be.”

“They signed it in the heady days when appreciation in real estate seemed a sure thing. It seemed like a ’satisfaction guaranteed’ promise at a store.”

“‘The way the real estate agents presented it, it was like a comforting thing,’ said Barry Bruins, one of the first condo buyers at El Cortez and the president of the building’s HOA.”

“Barry and his wife Deborah Bruins own a condo in the building, for which they paid $419,000 in fall 2004. They were among the first buyers in the building after it was converted to condos by developers Peter Janopaul and Anthony Block.”

“In fall 2006, the Bruins added their names to the list of plaintiffs in a lawsuit against the Centre City Development Corp. and the developers, alleging fraud, breach of fiduciary duty and construction defects.”

“Since last summer, the Bruins have received letters from the developers threatening to invoke the repurchase addendum. That would force them to sell their condo back to the developers for $260,000, which the letters claimed was the current market value. The Bruins refused. In March, the Bruins were served with a lawsuit.”

“Judge Ronald S. Prager found that the Bruins’ lawsuit against the developer fit within their constitutionally protected rights in a final ruling issued last Friday. ‘The provisions of the Repurchase Addendum are highly unconscionable,’ the judge wrote in his ruling.”

“He wrote that the contract was ‘oppressive’ because it left buyers of the condos with no choice. In the frenzied real estate market of 2004 and 2005, buyers signed purchase documents and closed sales as quickly as possible. By the time buyers found the item in their purchase agreement, they knew that if they refused to sign the forms, their unit would be snapped up by another buyer, the judge wrote.”

“‘Given the current condition of the housing market, Defendants argue that the forced sale of their home at a price far below what they bought it for in 2004 would cause them considerable financial hardship as they would be forced to come up with additional money to pay off the current mortgage on the home,’ the judge wrote.”

The Tampa Tribune reports from Florida. “Median home prices in the Tampa metropolitan area which includes Clearwater and St. Petersburg, fell to $180,800. That is more than $40,000 less than the median price in the year-ago period, $222,700, the National Association of Realtors said. The Tampa Bay area wasn’t the hardest-hit region in Florida. The median price dropped 19.3 percent in the Miami metropolitan area, and the Cape Coral-Fort Myers area saw a 33.1 percent median price decline in the quarter.”

“As reported in the Tribune on Thursday, Florida now ranks third in the rate of foreclosures nationwide.”

The News Press. “The median price of a Realtor-assisted existing home sale fell 28 percent in Lee County to $196,400 from $273,500 a year earlier, according to a separate report released by the Florida Association of Realtors.”

“For condominiums, the price fell 10 percent from $246,900 to $222,600.”

“Lee County led the nation in the rate of foreclosures in July, according to RealtyTrac. A record 2,467 foreclosures filed during July in the county, which is more than seven times the national average.”

“Florida single-family homes were off 16 percent in price from $241,200 to $203,000 while sales were off 6 percent from 37,407 to 35,178. Condominiums were off 16 percent from $215,300 to $181,100 while sales fell 10 percent from 12,585 to 11,343, according to the state report.”

“Raul Gramajo of Lehigh Acres, has been living in the United States for 14 years and in Lehigh Acres for the last three years. He has been unemployed for six months and it is beginning to affect his home payments.”

“‘We’ve called the bank, but they don’t want to help us. I was a construction worker and the type of work I did is long gone,’ said Gramajo.”

“After 17 years working for the Lee County Sheriff’s Office, Donna Tomassoni of Lehigh Acres, has worked about three jobs and began a professional organizing business, but has been unemployed since the beginning of the year.”

“‘I have sent about 250 resumes since January or February,’ she said. ‘It is very frustrating. It seems like there are a lot of jobs out there that I am qualified for, but I don’t get any answers back.’”

“Tomassoni, who owns a home, said she has run out of savings money, retirement money, and has managed to pay her home, but is not on time on credit card bills, had to seek help to pay her electric bill, and is now getting food through the SHARE program, which gives food to low-income families.”

“She is getting some unemployment money, and also just got on food stamps.”

“‘This is so hard. I have always been self supportive and I have never been in this kind of debt,’ she said. ‘What worries me is can I gain all that back and do I have enough years for that earning power? Will I be able to live to do the things I wanted to do?’”

“She is starting to look for jobs in other states, but worries about having to sell her home, which has been on the market for six months and no one has come to see it.”

“‘I’m not even looking here anymore,’ she said. ‘It is so frustrating to know that you are doing the right things and not getting any response.’”

The Herald Tribune. “Could the new $3.15 million special assessment at the Renaissance in downtown Sarasota be a case of ‘no pain, no gain?’ The special assessment approved by the Renaissance’s condo board aims to fix once and for all the water intrusion problems at the building.”

“About $2.7 million will go for the repair costs and the balance for legal and engineering fees associated with the continuing lawsuit against the developer, contractor and a host of subcontractors over who is to blame for the leaks.”

“The average assessment, based on square footage, is nearly $13,000 — payable in six monthly installments beginning July 15. ‘We’re not happy about spending the money, that’s for sure,’ said Terry Owen, who has owned a one-bedroom condo at the Renaissance since early 2002. ‘But we’re excited that we’re going to finally get it done.’”

“Of course, for those who are indeed forced to sell, the assessment is not a welcome development. As of last week, there were about 40 units listed for sale in the Renaissance, according to the Sarasota MLS. They ranged in price from the $200,000s all the way up to the $900,000s.”

“One center bayfront unit on the fourth floor had just been put on the market, listed for barely a week — and already the asking price had dropped from $549,000 to $509,000.”

“On the opposite end of the spectrum, one of the Renaissance’s penthouse units has been sitting on the market for more than 560 days, according to the MLS. The asking price is currently $799,000, down about $200,000 from where it started.”

“The residents really in a pickle are those who cannot afford to pay the special assessment charges to begin with. ‘When you’re talking $13,000, or even nine or ten thousand dollars, that’s a lot of money to come up with, especially if you’re younger and don’t have a large bank account,’ said Matt Orr, an agent who specializes in downtown Sarasota.”

“‘If they are already underwater, or struggling to pay the mortgage, this might be something that puts them over the edge,’ Orr said.”

“He said one resident had already called him after receiving her assessment letter. She wanted to put her condo on the market, looking to get out. ‘She said she just couldn’t afford that kind of assessment, that it didn’t make sense financially for her to stay,’ Orr said.”

“A wave of residents putting their condos on the market — likely at reduced prices to attract buyers quickly — is the last thing the Renaissance condo association, or the owners intending to wait this out, want to see happen.”

“‘We’re going to organize people and tell those looking to sell, don’t just give it away,’ Owen said.”

“The number of foreclosure filings spiked in Manatee and Charlotte counties in July. Manatee filings rose 74 percent from June, while Charlotte County filings rose 59 percent. Sarasota County had almost no increase — just three more filings than in the month before.”

“‘Sarasota had been a foreclosure leader, mostly because of North Port,’ said Dennis Black, a Port Charlotte real estate consultant. ‘Those people were the first to walk away from their homes when the market blew up. Now the numbers seem to indicate that the wave is moving into secondary counties.’”

“‘What we’re seeing is the housing bubble moving through the court system,’ said Sarasota banking consultant Tramm Hudson. ‘It’s a natural progression. When borrowers are not able to get current, banks have no choice but to foreclose. We may see a few more quarters of this before banks are able to work through it all.’”

The Palm Beach Post. “During the region’s historic housing boom, home ownership was a can’t-miss way to build wealth. How quickly things have changed. Most area homeowners who jumped on the housing bandwagon during 2005, 2006 and 2007 owe more than their homes are worth, according to Zillow.”

“Fully 76.2 percent of homes bought in 2006 in Palm Beach, Broward and Miami-Dade counties are now worth less than the balance on the mortgages, the study says. In the Treasure Coast, a whopping 80.5 percent of borrowers who bought homes in 2006 are upside down.”

“‘It’s pretty startling,’ Zillow spokeswoman Amy Bohutinsky said. ‘This is what leads to foreclosures.’”

“Selling now nearly guarantees a loss for those who bought during the boom. In South Florida, 29.2 percent of homes sold during the second quarter of this year fetched less than the seller had paid, Zillow found. In the Treasure Coast, 36.2 percent of homes sold in April, May and June created a loss for the seller.”

“‘I’m not surprised by that,’ Neal Taslitz, a foreclosure attorney in West Palm Beach, said of Zillow’s numbers. ‘This is a tsunami, and it’s getting worse.’”

“Even cautious borrowers are feeling the squeeze, said mortgage banker Bill Davis, head of Private Funding Specialists in Palm Beach Gardens. ‘This has gone from subprime to prime,’ Davis said. ‘People with 700 credit scores are getting crushed. Those are the ones who break your heart, because they’ve done everything right.’”

“Davis offers this example: Say you paid $400,000 for a home in 2006 and made a down payment of 10 percent - a hefty sum in those days of loose lending standards. Today, though, the home might be worth only $325,000 - significantly less than your $360,000 mortgage.”

“If you want to sell your home, you’ll have to write a check to the lender. Many homeowners have little choice but to go into foreclosure, Davis said.”

“Scott Agran, president of Lang Realty of Boca Raton, agreed that the market has been in a deep downturn, but he predicted that home values will come back strong.”

“‘We’ve been in free-fall since 2005,’ Agran said. ‘We’re back to 2002 pricing. This is a tremendous buying opportunity.’”

“Unemployment stats released today by the Florida Agency for Workforce Innovation show the jobless rate in Palm Beach County has doubled since the boom.”

“‘The nucleus of all this is housing,’ said Sean Snaith, an economist at the University of Central Florida. ‘It was the thing that was driving the economy to huge heights when the market was raging. Now, it’s the flip side. The thing that was powering the economy is now pulling it down.’”

“Many workers who were making good money in real estate and lending have taken lower-paying jobs in other industries, said Tom Capolino of staffing firm Today’s Office Professionals in West Palm Beach.”

“Real estate agents and loan officers who were making $80,000 to $90,000 during the boom now are accepting office jobs for $45,000 to $50,000.”

“‘They’re settling for administrative assistant positions and clerical positions,’ Capolino said. ‘They understand that they have to accept less.’”

From TC Palm. “Foreclosure rates continued to escalate across the Treasure Coast in July, according to a RealtyTrac report. ‘I think more properties will be hitting the market at discounted prices because there’s a lot more (foreclosures) in the pipeline at the banks,’ said Brad Hunter, director of West Palm Beach-based Metrostudy. ‘The trend still seems to be going upward, there’s little evidence that one can point to that this is a high point.’”

The News Journal. “Court filings related to foreclosures totaled 1,524 in Volusia and Flagler counties in July, more than double filings in July 2007.”

“‘Wow,’ said Nancy Dance, president of the Daytona Beach Area Association of Realtors. ‘A high number of foreclosures bring down home prices. When there are many bank-owned homes in an area, that usually brings down the value of all the homes and lowers what buyers are willing to pay.’”

The Daily Breeze. “The Cape Coral-Fort Myers metro area had a higher foreclosure rate than any other U.S. metro area during the month of July, according to Realty Trac.”

“‘I think it’s a dire result of the speculators market we went through in ‘03 and ‘04 and the refinancing that a lot of people did in ‘05,’ Gloria Tate of Raso Realty said.”

‘Tate, a former Cape Coral city council member, said many speculators in the local real estate market were caught by a rapid decline in property values. ‘There were a lot of investors that bought lots to build a spec house and thought it would be sold before it was finished,’ she said.”

“Gary Tasman, executive director of the real estate company Cushman & Wakefield’s Southwest Florida office, blamed the high foreclosure rate on loose credit in the subprime mortgage market in addition to speculators.”

“‘We knew there were excesses in the market over the last couple of years. This is the end product of lending money to people who weren’t properly qualified,’ Tasman said.”

“Speculators and other homebuyers now find themselves ‘upside-down’ in their homes, thanks to the fall out from the subprime mortgage crisis and sluggish economy. Many of those people are walking away from the house rather than sticking with it through what Tate calls a ‘market correction.’”

“Despite the foreclosure rate, Cape Coral homes are still selling, but at much lower prices than during the housing boom in the middle of the decade, Tate said.”

“‘They are selling, but for much less. The $100,000 home was selling at $200,000 to $250,000 before. But that’s OK, it’s a market correction,’ Tate said.”

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