The Housing Bubble

The San Francisco Chronicle reports from California. “The percentage of households able to buy an entry-level residence in the state reached 48 percent during the second quarter, double the level from a year ago, according to the California Association of Realtors. The Bay Area remains the least affordable part of the state, but 32 percent of its households can now afford a first home, up from 18 percent during the second quarter of 2007, the report said.”

“The minimum income required to purchase an entry-level home, estimated at $582,130, is $111,210.”

“Andrew LePage, an MDA DataQuick analyst, said he thinks the bottom is not imminent - and is unlikely to usher in a quick turnaround. ‘Recent history suggests you could be looking at at least two or three years of price stagnation,’ he said. ‘It’s looking like the bottom will feel more like a bog than something you just bounce off of.’”

“‘People are off the sidelines, stepping in, trying to gauge the bottom of the market and feeling that, even if this isn’t quite the bottom, it’s looking great,’ said the group’s chief economist Leslie Appleton-Young. ‘They’re able to get into something they never thought was possible a year or two ago.’”

“Cut-rate foreclosed homes being unloaded by banks wreaked havoc on the Bay Area’s median price in July, sending it down nearly 30 percent to a level not seen in more than four years.”

“A third of all existing homes sold in the nine-county region in July were foreclosed properties, DataQuick of San Diego reported Tuesday. A year earlier, just 4.2 percent of existing-home sales were foreclosed properties.”

“Beth Huizenga and Rich Murillo have been trying to sell their Alameda house since early April. They want to move to Marin County to be closer to Murillo’s job.”

“They started listing the house at $599,000 and after two price drops it’s now at $575,000. ‘Everyone thought it would go quickly; it’s so cute and it’s a starter home,’ Huizenga said. ‘We’re not trying to be greedy (on the price); we’re relying on our Realtor’s expertise.’”

The Marin Independent Journal. “Marin home sales continued to decline last month as discounted foreclosure properties propped up sales elsewhere in the Bay Area. The median price of a single-family home in Marin last month was $875,000, down from $950,000 a year earlier, DataQuick reported. In June, the median single-family home price in Marin was $1 million.”

“In Marin, foreclosure resales were 11 percent of total sales. Valerie Castellana, an agent in Greenbrae and past president of the Marin Association of Realtors, said sellers need to be ‘really astute in their pricing strategy these days.’”

“Buyers remain anxious. ‘They want to make sure they’re not overpaying,’ she said. ‘Many of them are holding off because of that anxiety level.’”

“‘A lot of people are out looking for a bargain right now,’ said Paul Hickman, president of California Land Title of Marin in San Rafael. Buyers ‘are looking at foreclosure properties and those are the ones we need to get past for the market to turn around again.’”

“He said such buyers are facing a more restricted market for home loans. ‘We’re in a knee-jerk reaction from where we were before,’ Hickman said. ‘The pendulum has gone back 180 degrees. It’s extremely difficult to get money right now.’”

The Contra Costa Times. “Jeff Jaye, a mortgage broker in Northern California, used to rely on homeowners looking to refinance their loans for more than two-thirds of his business. Today, he rarely bothers with those applications because he knows most homeowners can’t qualify for a new loan.”

“‘The lenders are making it so difficult to qualify,’ said Jaye, who now mainly works with homebuyers snapping up foreclosed properties and homes selling for deep discounts. ‘I know everybody’s scared right now, but It’s just so over-the top.’”

“Cathi Parson is facing the prospect of asking her mother for help with a down payment. She plans to sell her home in Texas and move back to her native California later this year. She wants to buy a house for up to $400,000 and expects to bring a down payment of around $50,000, or about 12 percent.”

“‘Probably about a year ago, that would have been fine,’ Parson said.”

The Mercury News. “A drastic change in ‘market mix’ has exacerbated the plunge. ‘All the cheap stuff out there is getting scooped up by people,’ said John Karevoll of DataQuick. Generally speaking, ‘the expensive stuff is on hold.’”

“In July 2007, the opposite was true. Easy financing for no-money-down buyers had already dried up, so most sales that occurred were of more expensive homes, which drove the median price up.”

“Software architect Yang Tang, a Santa Clara County resident who is relocating to San Francisco for a new job, just bought a one-bedroom condo in the Mission District after four months of looking with his agent, Hsin Feng in Cupertino.”

“He’s paying about $450,000 for the 700-square-foot home, which was previously foreclosed upon. As recently as April, ‘I think the same kind of places would have been right around $600,000 for one-bedroom, one-bath loft condos,’ he said. ‘It was a waiting game for those to come down to my price range.’”

The Modesto Bee. “Northern San Joaquin Valley home sales prices plunged to a six-year low in July. Buyers are thrilled. The downside is that home prices keep declining: July’s median sales price plummeted to $190,000 in Stanislaus County. That’s less than half what houses were selling for in December 2005, when prices peaked at $396,000.”

“The last time Stanislaus homes were this cheap was in June 2002, according to DataQuick. San Joaquin’s median sales price fell to $220,500 in July. Merced’s median fell to $155,000.”

“Paying a mortgage now can be cheaper than renting. That’s what Christen and Phillip Sterling discovered two months ago when they bought a two-bedroom Modesto condo. They paid about $97,500 for the place, which had sold for $220,000 in 2005.”

“‘We were paying more in rent than we’re paying now for both our mortgage and our homeowners association dues,’ said Christen Sterling, 25. She’s taking college courses and plans to become a nurse. When that happens, the Sterlings may try to buy a larger home.”

“‘Then we’ll be able to rent out this place for more than the cost of our payments,’ she said. ‘So it’s a good investment.’”

“Marlissa and Nick Martell bid on five homes before they were able to buy their Manteca house this month.”

“‘We’re ecstatic!” said Marlissa Martell. The 31-year-old mother of three and her husband have been renting for more than a decade. Home prices were beyond their reach until recently. She said they’re so happy finally to be paying down a mortgage rather than paying rent. ‘It’s like we’re paying ourselves,’ she said.”

The Fresno Bee. “With the price of food, gasoline, medical care and almost everything else on the rise, seniors are getting serious about finding ways to save. Seniors who own their own homes have another worry, said Jack Christy, public policy director for the nonprofit Aging Services of California.”

“Falling home prices have left many of them without the ability to cash in the home equity that is often their primary asset. ‘We’re finding that the rate of people coming into continuing care retirement communities has slowed dramatically, mainly because of their inability to sell their houses,’ he said.”

The Union Tribune. “The National Association of Home Builders yesterday ranked San Diego County as the nation’s 20th least affordable metro area, a major improvement from four years ago, when the region was ranked the most unaffordable market in the nation.”

“‘This is very positive news for people that have been unable to afford housing,’ said Kelly Cunningham, economist at the San Diego Institute for Policy Research. ‘It’s certainly hard for the people who got in over their heads over the past couple years, but the fact is that these prices had to come back to reality so that people could afford them based on their incomes and not on risky financing.’”

“Some local experts say the rise in affordability may be temporary because it’s being driven by low-priced foreclosure sales.”

“‘This is never going to be a truly affordable place to live,’ said Sylvia Starbird, co-owner of Century 21 Carole Realty in Mission Valley, noting that San Diego’s affordability level is still far below the national average. ‘Here we are, in the midst of one of the worst price drop-offs I’ve known, and it is still not an affordable place to live.’”

“Gary London, a San Diego real estate consultant, said as many as 90 percent of the homes on the market are in distress. ‘Why would someone sell their house today if they didn’t have to?’ London asked.”

From CNBC. “Kim and Scott Fisher have been trying to sell their home in LA’s San Fernando Valley since March, after Scott’s textile industry job was transferred to Alabama. Like a lot of homeowners, they were having trouble making mortgage payments, and then had trouble selling the house. But, they say, they were working with lenders to resolve the situation.”

“The Fishers owed $1,050,000 in mortgages, with a $568,000 first mortgage to Washington Mutual, and a $500,000 second mortgage to Wells Fargo. They originally asked $1,399,000 for the home in March, then reduced it to $1,299,000, then to $1,175,000 million, and finally to $1,139,000.”

“They got seven offers on the home, all in the $1,050,000 range…They were even discussing the possibility of a short sale, where you sell the home for less than the mortgage(s) owed. This, as the Fishers started falling behind on payments.”

“But then things suddenly looked up. They got an offer for $1,130,000, and went into escrow the beginning of July. Escrow is set to close tomorrow. Success! Not quite.”

“This week, they say they received notice from Washington Mutual that the bank is foreclosing on the home. What’s more, closing costs are going to leave them $35,000 out of pocket — money they say they don’t have.”

“Kim Fisher says when her husband called both banks, he was told, ‘We cannot help you.’”

“We’ve called both banks. Stay tuned. Sure, it looks like the Fishers bit off more than they could chew, but with a decent resolution so close, why play hardball now?”

“In Los Angeles County, for the first time, the number of homes in trouble over a 12-month period topped 100,000. San Francisco has weathered the storm pretty well — although Default Research says that ‘even in San Francisco…median home prices have declined.’”

“These figures don’t include the short sales.”

“‘Many areas (in Southern California) have seen home values fall over 30 percent since the middle of 2006 during the housing boom.’ says Default Research founder Serdar Bankaci. ‘Without a short sale or a few other options, it is nearly impossible to sell a home that was overly leveraged.’”

The Sacramento Bee. “The cosmetic surgery industry is in need of a lift. Soaring unemployment, high gas prices and the mortgage crisis have left consumers with less discretionary income. For plastic surgeons, that means fewer patients are coming in for elective procedures.”

“‘I think that people are scared. Everything’s going up. Costs are going up. People are watching their pennies,’ says Dr. William Rassman, a surgeon for the New Hair Institute in San Jose and Los Angeles. Business is down 30 percent to 40 percent, Rassman says.”

“This year, many plastic surgeons say they are booking fewer surgical procedures, such as face-lifts and breast augmentations. At the same time, nonsurgical procedures - which are less expensive - are gaining in popularity, including microdermabrasion and injectable toxins such as Botox.”

“While a face-lift can cost $6,000 to $15,000, a single shot of Botox costs $125 to $400 and doesn’t require the patient to take time off from work to recover.”

“‘You see it in the number of patients scheduled in advance. It’s the difference between being scheduled one month instead of three months in advance,’ said Dr. Shahriar Mabourakh of the Folsom Plastic Surgery & Laser Center.”

“The Aesthetic Facial Plastic Surgery Medical Clinic in Oakland began offering financing to its patients for the first time in May. The clinic says surgeries have decreased 20 percent compared with this time last year.”

“‘It’s the economy. The number of patients who had scheduled for a while ago say they can’t afford it now and want to defer for the future,’ said the clinic’s Dr. Sheldon Kabaker.”

“Although most plastic surgeons offer financing options, the housing bust has meant that patients often no longer have the equity to justify a loan. ‘Now financing (companies) are becoming more difficult in who they approve,’ said Mabourakh.”

The Columbus Dispatch reports from Ohio. “Last week, Patricia Ryan told the Franklin County Board of Revision that her house near Canal Winchester is worth less than the auditor’s $139,800 value. The county should cut the property taxes on the Pompano Street house she bought new for $112,643 two years ago, she said. Ryan pointed out a neighboring house also built by Dominion Homes that has been vacant for a year. ‘Can’t sell it. Can’t rent it,’ she said.”

“‘And they’re still building more new homes?’ asked Kimbol B. Stroud, a board member who represents Auditor Joseph W. Testa. Ryan nodded: ‘Doesn’t make sense, does it?’”

“‘The market being as slow as it is, that’s cash builders are holding onto to get through,’ said James B. Hilz, executive director of the Building Industry Association of Central Ohio. Asked how widespread the problem is, Hilz replied: ‘I could just send you our roster.’”

“‘I can’t afford to pay any more than I should be paying,” Ryan said. ‘When I bought, I thought ‘I live in it a couple of years, then dump it.’ But then they built these other, less- expensive homes, and the economy has done what it’s done. Oh, I am stuck.’”

“The Franklin County auditor’s office recorded only 780 ‘valid’ condo sales — the regular, nonforeclosure-related transactions — in the first half of this year, the lowest sales volume since 1991, records show. The median sales price of those condos fell 9.3 percent, to $117,000. Add in the foreclosures and auctions, and the picture worsens for condos as it did for single-family houses.”

“A three-bedroom condo near Reynoldsburg is still on the market after nearly a year, despite dropping its asking price from $133,900 to $119,900, said Sandra Boden, the realtor trying to sell the unit . Another condo in the area that was purchased for $127,900 in August 2007 just sold for $99,000, she said.”

“‘This is the worst I’ve ever seen it in Columbus,’ said Boden, who has been in the business 29 years. ‘It’s become such a ridiculous buyers’ market that people are almost demanding a fantastic deal.’”

“During the peak of the real-estate boom, Boden would sell 20 to 25 homes a year. This year she has sold one and is about to close on her second, she said. ‘Buyers are looking for the right deal,’ she said, adding that if they don’t get it, they’re walking away.”

The Dayton Daily News from Ohio. “Every day, free advertising leaflets are dropped off on the driveway of the vacant house next to Bob Johnson’s home. The realtor rarely comes by so trash duty has fallen into the hands of the neighbors.”

“‘The place has been empty for a year,’ Johnson said. ‘It was originally worth $170,000 plus and now it’s selling for $139,000.’”

The Lansing State Journal from Michigan. “While sales are up, the average sales price this year through July was $112,319, a 22 percent drop from the $145,081 average sales price for the same period in 2007. And foreclosures remain a problem. There were 496 properties in Clinton, Eaton and Ingham counties with foreclosure-related filings last month, according to RealtyTrac.”

“‘On houses that are not foreclosures, people are not getting the price that they want,’ said Kathy Birchen, an associate broker in Okemos.”

“That’s creating opportunities for bargain hunters and investors, agents say. The deal was so good on the house Natalie and Larry Sachs bought last week near Owosso that the couple were willing to deal with having two mortgages until their Eaton Rapids-area home sells.”

“The Sachses bought the 3,500-square-foot house on 27 acres for $285,000. ‘It was more land than we ever thought we’d be able to get, and the house was almost 100 percent of what we really wanted in a house,’ Natalie Sachs said.”

The Detroit Free Press from Michigan. “It’s a sign of the times when real estate offices have For Sale signs posted out front. Many real estate agents who left the business say they don’t want to talk about it.”

“Flo Abke, owner-broker of Realty Executives in St. Clair Shores, said she knows a talented agent who had to leave for a job at Starbucks. Abke, who was with Century 21 in Eastpointe for 20 years before the office closed in 2006, opened her own office two years ago and has found it to be a challenge.”

“‘I go home every night thinking of how I can get my houses sold and make sure everyone in my office is OK,’ she said.”

The Post Tribune from Indiana. “A decade-long housing boom in Northwest Indiana has been reduced to a thud. ‘For a while there, it was a total zoo,’ said Crown Point Building Administrator Bill Kozlowski, who had contractors standing two- and three-deep in front of his office in 2004, when his department issued a record 479 permits for new homes.”

“‘Right now, builders are telling me the money is available, but it’s hard to qualify for a mortgage anymore,’ he said.”

“‘This is no surprise at all, given the trends nationally and in the Chicago marketplace,’ said Carol Rogers of the Indiana Business Research Institute, noting Census data showed a 20 percent drop in permit requests nationally and a 50 percent decline in the Chicago area.”

The Chicago Sun Times from Illinois. “Just how goofy is the Chicago condo market? Some would say it has been goofy for years, but now that credit is constricted and speculators have left the market, consider this statistic from the Appraisal Research Counselors Ltd. report on downtown condos.”

“It said that in the second quarter, 466 condo sales contracts were signed downtown, but 358 were attributed to the 150-story Chicago Spire. The spire developers reported their initial sales in the 1,200-unit building in one swoop, so they skewed the results. Without the Spire, the downtown market had only 108 sales in the second quarter, an extremely low figure.”

“Appraisal Research said buyers are on the sidelines and developers are resorting to incentives, many of which are not advertised and are offered only when the sales center has a live prospect. Appraisal Research found that the market still has an unsold inventory of about 7,300 units.”

The Forest Park Review from Illinois. “Through mid-August, 26 homes have been sold in Forest Park in 2008, according to listings information provided by Gary Mancuso, president of the Oak Park Area Association of Realtors. In 2007, 59 single-family homes changed hands.”

“Forest Park, however, remains saturated with available properties. Sixty-nine single-family homes in this small community are being actively marketed. In neighboring Oak Park and River Forest, home values have declined much more sharply in the last year than in Forest Park. The average single-family home in Oak Park is selling for $41,000 less. In River Forest, properties are fetching $91,000 less, a drop of about 10.5 percent.”

“As for the overall stability in the local real estate market, local Realtor Jerry Jacknow said buyers’ fears are only being spurred by media reports. ‘To be honest, it seems the media is scaring people because they print a lot more negative than they do positive,’ Jacknow said.”

The News Democrat from Illinois. “Tari Jacobs, who is president of the Realtors Association of Southwestern Illinois and leads agents in St. Clair, Monroe, Randolph and Clinton counties, said she has seen more foreclosures filed at her agency, Concept Real Estate in Columbia.”

“‘I can only speak for my office, but (foreclosures) are up,’ Jacobs said. ‘I have a couple of agents who specialize in foreclosures, and primarily that’s all they do. They are all very busy.’”

“Krista Barron almost lost her Granite City house. Last November, Barron and her husband decided to sell their house, which they had bought four years before. It sat on the market for three months. Fortunately, the couple’s tax refund helped them fend off the bank, and a relative helped pay the mortgage. Barron said she was one day late with her June mortgage, which she paid on July 2. Two weeks later, she faced foreclosure.’

“Between June 12 and July 25, Barron said she paid up on her mortgage and car payments. But two weeks ago, she learned that legal fees for her potential foreclosure had accrued. She owes $1,600.”

“‘I was just shocked,’ Barron said. ‘Now I’m worried about paying the mortgage and making the next car payment. Will there ever be any relief here?’”

The St Joe News from Missouri. “When Kathy Felton bought a duplex 20 years ago, she dreamed it would be a home for life for her and her son. But 20 years later, the bank foreclosed on that dream. And last week, a horse trailer, three sheriff’s cars and a flatbed truck came to carry away her belongings.”

“The St. Joseph woman got evicted. ‘The guy said, ‘We’re taking your stuff. Are you going to cooperate?’ Ms. Felton said. ‘Am I going to cooperate while you’re taking my stuff?’”

“Doug Tschauder, an attorney for Legal Aid of Western Missouri who specializes in foreclosures, said he’s seen a definite increase in people needing help with mortgage problems. ‘Unfortunately, I don’t have any hard numbers, but there’s definitely been an increase here in this office, and from everything I can tell, the number of foreclosures in the area is picking up,’ he said.”

“Marilyn Rajca of Re/Max of St. Joseph is a real-estate agent dealing in foreclosures. She said the number of local foreclosures has increased.”

”Foreclosures over the last three years have been pretty steady here, but I’ve seen it pick up in the last month or so,’ she said. ‘We got five pending orders, and they’re coming in pretty heavy now. These bad loans are finally catching up with everybody.’”

The Star Tribune from Minnesota. “Sheriff’s sales — counties use them as a key indicator of the mortgage crisis — have ballooned more than sixfold since 2003 in 10 metro counties. An analysis by the Federal Reserve Bank of Minneapolis this spring predicted that several suburban cities were bound for a flood of foreclosures because tens of thousands of subprime borrowers will face higher payments on their adjustable-rate mortgages.”

“Cities as geographically diverse as Ham Lake, Apple Valley, Shakopee, Oakdale, Forest Lake, Elk River, Albertville and Plymouth will experience problems, the analysis said, because of concentrations of these types of mortgages.”

“Also projected as a trouble spot is Woodbury, where concern over an 82 percent increase in foreclosures since last year led city leaders to create a task force to ease the pain. ‘We saw the writing on the wall and it didn’t look pretty,’ said city analyst Matt Stemwedel.”

“Hennepin County, for example, has seen a record numbers of sheriff’s sales, with 3,826 in the first six months of 2008. Ramsey County’s sales soared nearly 800 percent, from 393 in all of 2003 to 1,648 through June of this year. Washington County now is averaging about 100 foreclosures a month, up from a total of 147 in 2003.”

“‘It’s ultimately a correction to a market that went crazy too long,’ said Rick Ketterling, who sells houses for Coldwell Banker Burnet in the south metro. ‘During the hot housing market people sold junk for top dollar and people paid top dollar for junk.’”

“‘What’s going on is that a lot of these people are upside down, where what they owe on their mortgages is more than the value of their homes,’ said Mark Ulfers of the Dakota County Community Development Agency.”

“For example, a condo in Burnsville that sold for $405,000 in March 2007 went through foreclosure and now is selling for $182,900, even though the county’s market value is $366,900, said Dan Rogness, an agency analyst. And a single-family house in West St. Paul, purchased in November 2005 for $155,000, now is on the market for $100,000 less.”

“‘Clearly the problem has escalated,’ Ulfers said.”

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