The Housing Bubble

The Sacramento Bee reports from California. “California’s free-falling home prices sparked a fourth straight month of year-over-year sales gains during July, the California Association of Realtors reported Monday. Median sales prices were down a record 40.3 percent from July 2007, CAR reported. ‘Deeply discounted, distressed sales continue to drive volume in many regions of the state,’ CAR President William E. Brown said in a statement.”

“C.C. Myers couldn’t fix this one. The legendary highway contractor, has filed for personal bankruptcy. Myers is being sued for $40 million by Wachovia Bank over Winchester Country Club, an Auburn golf and luxury housing development that he personally developed.”

“‘There are some very unhappy people around here,’ said Richard Shepherd, a Bay Area transplant who retired to Winchester with his wife four years ago.”

“He said many homeowners were worried about declining equity in their homes. They’re also fretting that their club and golf memberships, for which they’ve spent tens of thousands of dollars, could decline in value. ‘We love it here,’ he said. ‘We just feel sorry for the people who’ve lost their equity, the money they pumped into being a member. It’s a mess.’”

“Kathryn Boyce, an analyst in Sacramento for consultant Hanley Wood Market Intelligence…said none of the project’s 24 custom-built luxury homes has been built or sold. Those homes, which Myers expected to sell for more than $2 million each, were supposed to snare wealthy Bay Area and Los Angeles buyers.”

“‘We’re talking about highly wealthy people who mostly travel on private planes,’ said Myers’ son, Clint W., president of the Myers’ firm’s home building division.”

“‘That’s our target. You can fly into Auburn with a Learjet,’ the younger Myers told The Bee in 2006.”

The San Francisco Chronicle. “In the Bay Area, sales increased 6.7 percent, and the median sank 21.2 percent to $663,190. ‘We are seeing a robust response to improved affordability,’ the Realtors’ Chief Economist Leslie Appleton-Young said. ‘But obviously the $64,000 question is when will we be at the bottom? I don’t think we’ll see that this year.’”

“Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, had a more bearish take on Monday’s numbers.”

“‘It doesn’t reflect a recovering housing market; it reflects a broken housing market,’ he said. ‘It’s a reflection of the fact that foreclosed homes are being liquidated at very low prices.’”

The Contra Costa Times. “Contra Costa cities hardest hit by the foreclosure crisis say the county assessor has made their fiscal situations worse with wholesale downgrades of property values. Just doing my job, says Gus Kramer.”

“The county is not alone - assessed values dropped in almost every Contra Costa city. ‘You wouldn’t believe some of the conversations I’ve had and with who I’ve had them,’ said Kramer last week. ‘They’ve been ugly, very ugly.’”

“Kramer also acknowledges using foreclosures as comparisons in certain instances. Foreclosures used to be considered anomalies, Kramer said, and would not be considered in assessments.”

“‘Today, with 50 percent of properties on the market being foreclosures, they are the market. It’s like trying to ignore the 800-pound gorilla in the room,’ said Kramer, whose office is across the street from a Martinez subdivision he reassessed. Those homes were selling in the low $600,000s, and now peak in the high $400,000s, he said.”

“‘Look, everybody wants to blame somebody, but that’s OK. I’ve got broad shoulders. They can blame me until the cows come home. They know the truth and, more importantly, the homeowners know the truth,’ he said.”

The Merced Sun Star. “The New York Times, in recapping Merced’s housing market climb and crash, drew an obvious conclusion: No one planned ahead. And numbers from July — showing more foreclosures than sales — demonstrated the continuing toll from that lack of foresight.”

“Some residents genuinely can’t afford their payment, he said. Yet other owners see abandoning their home as a wise long-term financial move. So they accept about five year’s worth of bad credit and walk away from the house, real estate agent Andy Krotik explained.”

“It makes little sense for them to pay off a $300,000 investment that’s depreciated by half. ‘Is it better to have bad credit for five years or live up to your obligation?’ Krotik asked. ‘There are true sad stories, but there are a lot of business decisions out there.’”

The Ventura County Star. “Ventura County sales for existing homes last month rose 20.6 percent from a year ago and 25.6 percent from June, California Association of Realtors reported Monday. The median was $475,000, down from $480,340, or 1.1 percent, from June and from $682,930, or 30.4 percent, from July 2007.”

“Even in more prominent areas such as Thousand Oaks and Westlake Village, short sales and foreclosures are a problem, said Bob Merritt, a yacht broker who has been trying to sell his Thousand Oaks home for the past year and a half.”

“‘It’s everywhere,’ he said. ‘I don’t think there’s one area that’s immune to it.’”

“In order to compete with the distressed property selling for so much less, Merritt lowered his original asking price for his 2,653-square-foot, 4-bedroom, 2.5-bath home with a pool and spa from $969,000 to $799,900. But he won’t go any lower.”

The San Gabriel Valley Tribune. “Home prices in Los Angeles County dropped 3.6 percent in July compared with June, and they were down 27.3 percent from a year ago, according to a report released Monday by the California Association of Realtors.”

“Statewide, the median home price dipped 40.3 percent from 2007 prices, which was the largest decline ever recorded.”

“‘Once again, the 40.3 percent year-to-year decrease in the median price of a home was an all-time record, surpassing the previous record set in June with a 37.9 percent decrease,’ said CAR Chief Economist Leslie Appleton-Young in a statement.”

“Hacienda Heights’ median home price in July was $345,000, down 43 percent compared with July 2007. Last year, ‘the prices were just way too high, way too overpriced,’ said real estate broker Ann Ellis-Hall, who works in the area.”

“Houses down near the 60 Freeway have quickly lost value. ‘Those houses never should have been sold so high,’ she said.”

“A few years ago, said Realtor Martha Calder in Hacienda Heights, people illogically assumed that home prices would keep rising. ‘It didn’t take a genius to see these home prices were going to fall,’ she said.”

The Daily Breeze. “The South Bay’s median home price fell 13.4 percent in July to $597,250, compared with the same month a year ago. Local real estate broker Mercedes Santacruz said Lawndale is seeing numerous foreclosures and short sales. ‘There are quite a few that have gone to short sales and foreclosures. Prices are down,’ said Santacruz.”

“Lawndale’s median home price fell 20 percent in July, to $380,000, compared with July of last year. ‘Carson is terrible right now,’ she said. ‘The east side of Hawthorne is really bad because of defaults.’”

“Carson’s median for July was $357,500, down 30.6 percent from a year earlier. Hawthorne’s median was $480,000, down 16.3 percent. More upscale areas of the South Bay also were down. Torrance saw a median drop of 13.2 percent to $564,000. The median in Redondo Beach fell 10.5 percent to $752,000.”

The North County Times. “A North County real estate company has sued a lender for a failed short sale, a transaction that has become increasingly popular while home prices tumble.”

“‘To me, in general, (the lawsuit) speaks to the level of frustration people have in dealing with short sales,’ said John Woodall, a Vista real estate agent who specializes in foreclosures. He said about 50 percent of all short sale deals fail. ‘Most everyone is on edge in this market,’ he said. ‘There’s a lot of skittish, nervous and occasionally angry people in the real estate market. And justifiably so, it’s a tough market.’”

“A spokesman for Aurora Loan Services, a division of investment bank Lehman Brothers, declined to comment. Aurora holds a $587,000 loan on the Tucson, Ariz., home and accepted the short sale offer of $158,000, a 73 percent drop in value, according to the lawsuit.”

The Desert Sun. “The Coachella Valley’s median price dipped to its lowest levels since January 2004, helping boost July’s housing sales. July’s $274,000 median price is down 8.7 percent from June and down 28.8 percent from July 2007, according to new figures from DataQuick.”

“New construction continued to struggle. In July, 93 new homes were sold, which is down 53.5 percent from 2007.”

“A significant number of bargains are out there, too, said Sam Schenkl, executive officer with the Palm Springs Regional Association of Realtors. He mentioned Palm Springs condos that were in the $100,000-range and a listing that was priced in the $1 million range is now drawing multiple offers at $599,000.”

“The latest numbers show nearly half of the Coachella Valley could afford an entry-level home during the second quarter, a record rate. ‘Buyers are in the best place they’ve been in years,’ said Greg Berkemer, executive VP of California Desert Association of Realtors.”

The Press Enterprise. “Some of the people who used to build housing tracts in Inland Southern California thought the boom would provide them with a living for the rest of their working lives.”

“On Tuesday, many of them started learning about some of the alternatives. The Riverside County Economic Development Agency brought out-of-work construction workers together with job-training officials and union leaders for the start of a process to determine how the workers’ skills might match up with the current economy’s needs.”

“Jerry Carroll spent 11 years laying tile at high-end homes in the Coachella Valley. Carroll, like several other construction workers, never expected the residential construction industry to dry up to the degree that it has.”

“‘It’s in your mind it’s a bubble. We knew the bubble would burst but not this bad,’ said Bryan Ricks, 38, of Riverside, who owned a flooring company that employed 12 people. ‘It was perfect, smooth — and then it just dropped off to nothing.’”

The Bakersfield Californian. “Call it the last gasp of no-money-down. In recent weeks, homebuilders have loudly advertised zero-down options at entry-level tracts around Bakersfield. That’s because a seller-funded program - one widely used during the recent boom - is slated to end Oct. 1.”

“Bakersfield homebuilder John Balfanz said losing the program is going to hurt. ‘It’s been a good thing, so I hate to see it go,’ Balfanz said.”

“His company builds houses in a half-dozen communities around metropolitan Bakersfield with prices ranging from $1.6 million down to $200,000-plus units in Bella Vista, an entry-level tract south of Hosking Road on the west side of Highway 99.”

“Ads for Bella Vista currently tout the zero-down option, something Balfanz said will continue as long as loans continue to close before the Oct. 1 deadline.”

“‘I think people who buy right now are going to be smiling in three to five years,’ he said. ‘It’s a fantastic time to buy.’”

“Like many others involved in real estate, Balfanz thinks no-money-down loans are part of ‘what got us in this trouble in the first place.’ ‘Why not walk?’ he wondered, if your own money isn’t at risk.”

“The market could be healthier if buyers have to ’scratch and claw to put money together’ for a down payment, he said.”

“John Lara, broker of San Joaquin Realty in Delano, said about 80 percent of homebuyers his company works with make use of seller assistance. The coming change could ultimately nudge folks back to piggy banks.”

“‘If they want to buy a home, they have to start saving money,’ Lara said.”

The News Journal reports from Florida. “Bob Staake inherited a modest Port Orange home from his parents in April 2007, but he lives in Michigan. So, he put it on the market — 399 days ago. After steadily dropping the price from $208,000 to $156,000, it finally sold last month. ‘We knew a home across the street sold for $250,000 a few years ago. So we thought ‘drop it another 20 percent and it should sell,’ he said. I must have come down six or seven times to do things regarding the house. It was not fun. It was a risk us being here and the home there.’”

‘After a year on the market, Staake changed real estate agents. ‘He knew the market better and showed me the real value of the home,’ Saake said. ‘It wasn’t like I was looking at a loss on the home, it’s paid for. But, it was a relief to finally sell it.’”

From Florida Today. “Sales of existing homes in Brevard County increased 4 percent in July. The rise wasn’t large — it represented just five more homes sold than in June — and it was coupled with a decline in median home price.”

“Brenda Muh, owner of Space Coast Realty Corp. in Palm Bay, said foreclosure sales are changing the dynamics of the Brevard market. Purchasing a foreclosed home is a great deal for buyers. For the seller?”

“‘It’s not so good for the seller,’ Muh said. ‘I tell them if you can hold on for a year or two it will be better.’”

The Palm Beach Post. “Palm Beach County home prices plunged to a four-year low in July, raising new questions about just how far property values can fall. The median price of an existing single-family home fell to $291,300 in July, the Florida Association of Realtors said Monday. That’s down 22 percent from July 2007 and off 13 percent from June 2008.”

“Since late 2005, home prices have dropped 30 percent. ‘It’s a massive dip over the past couple years, there’s no two ways about it,’ said John Mike, president of the Realtors Association of the Palm Beaches.”

“For months, Realtors have promised that the bottom is in sight and that their phones are beginning to ring with calls from eager buyers. But more skeptical observers say prices have further to fall before they’re affordable to middle-income buyers.”

“‘We’ve been saying prices were going to go back to 2003 levels,’ said Jack McCabe, a housing analyst based in Deerfield Beach. ‘Now, I’m starting to think it may be even worse than that. We’ve probably seen only 30 percent of the foreclosures we’re going to see over the next few years.’”

The Sun Sentinel. “Sales of existing homes increased in Broward County last month, but don’t call the moving company just yet. Responding to deep price cuts, buyers scooped up 581 houses in July, up 4 percent from 559 a year ago, the Florida Association of Realtors said Monday. The median price of $303,600 decreased 19 percent from $373,700 a year ago.”

“During the first half of this year, 23 percent of Broward sellers unloaded their homes at a loss, up from 2 percent in 2006, according to sales data reviewedby the Sun Sentinel. The analysis did not include foreclosure sales.”

“Jeff Levine, a South Florida agent, agrees that it’s a good time to look for homes, as long as potential buyers aren’t skittish about the nation’s economy or Florida’s worsening job market. ‘A lot of what’s selling is half the price of what it was at the peak,’ Levine said. ‘But if you’re buying, you’ve got to be certain of your job or have a lot of money in the bank.’”

The Naples News. “Existing single-family home sales - or resales - grew by 80 percent from a year ago, in the Fort Myers/Cape Coral market. Meanwhile, the median price for a single-family home in Fort Myers-Cape Coral dropped 37 percent to $154,900, from $246,100 a year ago.”

“Prices continue to get more affordable in the Naples area too. The median sales price for all homes fell 29 percent to $275,000, from $385,000 a year ago, according to NABOR.”

The News Press. “Lee County home sales increased while prices fell, according to statistics. The median price of an existing home sold with the help of a Realtor in July was $154,900, down 10 percent from $172,400 in June. The median price was down 37 percent from a year ago, when it was $246,100.”

The Herald Tribune. “Home prices in Sarasota-Bradenton pushed back into March 2004 territory last month. The July median sales price was $230,100, down $5,000 from the previous post-boom low set in June and 17 percent lower than this time last year.”

“Charlotte County-North Port, meanwhile, saw a July median of $141,800, 21 percent lower than a year ago. The July price matched levels last seen in November 2003.”

“The median is being driven down by banks dumping unwanted foreclosure properties at reduced prices, said Stacy Haas, a Realtor who works in Lakewood Ranch.”

“Dave Jarvis, owner of Realty Concepts in Port Charlotte, said that when he does find a buyer, declining sale prices make it difficult to get an appraisal that will satisfy a lender, often resulting in a deal gone bust.”

“‘Everyone is upside down in their homes and the appraisals come in too low,’ Jarvis said. ‘The values just aren’t there. It is going to turn around. It is just a question of when.’”

“As prices continue to drop, some owners who do not have to sell right now are looking at other options, said Jack Geldi, part of The Geldi Team at Ilene Mirman Realty in Sarasota.”

“‘Those that aren’t in trouble and don’t absolutely have to sell are looking to where they’d consider a lease option, or a long-term lease,’ said Geldi, who is active in Manatee and Sarasota counties. ‘We have a number of properties now where the owners have said, ‘I can’t afford to drop my price any further, but if you can find a good tenant, that’s what I’m going to do until things improve.’”

The Tampa Tribune. “Here - finally - may be some good news for those awaiting evidence of a housing turnaround. But the gleam of hope is coming at the expense of homeowners who can’t afford to hang on to their houses. Sales of existing homes bounced a surprising 5 percent in the Tampa Bay area in July compared with the same month a year ago.”

“The median sales price, a point at which half the homes sold for more and half for less, fell 18 percent to $176,500. It was $215,600 in July 2007. Compare that to $239,600 in June 2006, when prices peaked locally.”

“The uptick is a result of prices falling deep enough to draw bargain hunters, said Chris Lafakis, who covers the state for Moody’s. Distressed properties, Lafakis said, make up 40 percent of all sales nationally. ‘I expect that number to be much higher in Florida.’”

The St Petersburg Times. “Maria Juhasz, 46, is selling her garden, plant by plant, before the bank forecloses on her home. She bought the 756-square-foot home in 2006 for $153,000. A bank appraiser values it at $113,000.”

“The appraisal that she says puts no value on the thousands of dollars and hundreds of hours she has put into landscaping. The appraisal that counts only bricks, mortar and comparable sales.”

“‘Even if I’m selling the plants at 10 or 20 percent of what they cost, I’m getting something back,’ she says. ‘I’ve cried over this, but never out here.’”

“This spring, Wayne Croushorn and Stephen King sold modest-sized investment houses less than 2 miles apart in central St. Petersburg. Despite the proximity, though, you might as well be comparing housing markets in Alaska and Alabama.”

“Croushorn bought a 1,300-square-foot bungalow on 14th Street N in the Euclid-St. Paul neighborhood for $131,000 in 2004. He managed to sell it for $171,500 this April, a gain of 30 percent.”

“King wasn’t so lucky. He snatched up a 900-square-foot concrete block house in June 2007 for the recorded price of $89,900 in southern St. Petersburg’s Bartlett Park area. This spring he let it go for $77,000, a 14 percent price decline in less than a year.”

“‘It was a house we probably shouldn’t have bought,’ King said in hindsight.”

“Low- to moderate-income places like Bartlett Park and Highland Oaks in St. Petersburg and southeast Clearwater recorded home price declines of about 40 percent from the peak.”

“But higher-than-average price declines are also the scourge of upper-income enclaves like Venetian Isles and Snell Isle, where the median home price has dropped from about $1-million to less than $600,000 this year.”

“A spurt of foreclosures can make it seem that prices have slid off the face of the earth. Take Snell Isle, one of St. Petersburg’s oldest and most exclusive enclaves. At the sales peak in late 2004, 45 homes sold during a six-month period. But in the first half of 2008, only eight homes sold, at least a quarter of them foreclosures. Prices suffered accordingly.”

“Many of the worst-hit neighborhoods are in southern St. Petersburg. The low cost of entry - old, small block and wood frame houses could be had for less than $50,000 - brought out the wolves. ‘Wherever speculators were in big time, things are worse,’ said Palm Harbor real estate broker Nikki Ubaldini. ‘You had shacks that were bought and sold in some of these neighborhoods.’”

“Jerry Sigler has seen the meltdown as a Realtor who specializes in selling foreclosure properties seized by the bank. One of his latest cases is a 600-square-foot house built in 1925 in southern St. Petersburg’s 13th Street Heights. It carries a $110,000 mortgage.”

“Sigler gave the beat-up house a once-over and broke the bad news to the bank: It’s worth $35,000. That’s all that the market, absent rampant speculation, can support. ‘It looks like fraud. That house wasn’t worth $110K to begin with,’ Sigler said.”

“Stephen King, an investor who has bought and sold 300 to 400 homes in the past decade, says sales won’t pick up without 20 to 30 percent price declines.”

“‘The rise was totally artificial in many of these neighborhoods,’ King said. ‘The subsequent crash will be even more painful.’”

“In southwest Pasco County’s Beacon Square community, the housing decline is reflected in the roster of recent home sellers dumping properties for as little as $50,000: NovaStar Mortgage, Wachovia Bank, Bank of New York.”

“Since the housing boom ended in 2006, home prices have plunged 45 percent in Beacon Square. In an analysis of 44,000 homes sales in 35 communities since 2005, not one area in Pasco escaped falling prices. From the peak in the first half of 2006 to the first half of 2008, prices fell off 34 percent across the board. Home sales were down 74 percent from the height of the boom.”

“Take Holiday. Energized by furious flipping, the median home sales price peaked at $130,000 in early 2006. By the first half of this year, the median price had hunkered down at $75,000. That’s a drop of 42 percent, one of the county’s worst.”

“‘It became investor heaven. Now it’s turned into investor hell,’ said Greg Armstrong, president of the West Pasco Board of Realtors. ‘People didn’t want to be left out, but they got burned instead.’”

“In Beacon Square, Oldsmar investors Michael and Evelyn Otto recently snagged a 1,152-square-foot, 40-year-old house for $59,000 from Wachovia Bank. This in a community where a typical house sold for $133,400 just two years ago.”

“Michael Otto blames banks for the state of affairs. They should either have held the distressed properties, he said, or else helped owners avoid foreclosure. Huge property insurance premium hikes along the hurricane-prone coast didn’t help the market either.’

“‘They’re selling the houses for $50,000, $60,000 or $70,000,’ Otto said. ‘We think they will go up in value. You just have to wait.’”

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