The Housing Bubble

The Mercury News reports from California. “With local foreclosures at record highs, and mortgage availability continually changing, it’s hardly been a conventional year for home buyers and sellers. What will happen this fall is still anyone’s guess. It’s clear that with prices declining in many parts of Santa Clara County, sales generally accelerated this summer, especially among less expensive homes.”

“Many bank-owned foreclosures are selling quickly, and James Nichols, a manager with Prudential California realty brokerage firm in San Jose seen a small flurry of lower-priced condos sell lately. ‘Some are under $250,000. There are great opportunities out there,’ he said.”

“Jeffrey Lo and his wife, Patty, illustrate that the year-end market could go either way in Silicon Valley. ‘We’re still very interested in buying, but we’re still also interested in waiting and seeing,’ Lo said.”

“He knows a few people who have lost their jobs recently and wonders whether Silicon Valley can stay insulated from the faltering national economy much longer. Though he wants to buy, ‘I’m going to step back and not get overly emotional about the purchase.’”

“So far this year, June posted the year’s best sales volume for single-family houses, with 966 changing hands in the county, according to MLS data.”

“But other agents, including Jason Chan Lee of brokerage Silicon Valley REO, said pending sales figures are unreliable. Lately, he said, many pending transactions fall apart, either because the buyers’ loans don’t come through, or because buyers who need bank approval for their ’short sale’ purchases get tired of waiting and move on to other properties.”

The Press Democrat. “Moving to get more affordable housing built, the city of Santa Rosa is taking a major loan from Exchange Bank to help developers buy land and build apartments and homes. The timing is critical, because the housing slump has created opportunities for nonprofit housing developers to rapidly expand their efforts by purchasing land at favorable prices.”

“Just two weeks ago, Burbank purchased a 4-acre site in southwest Santa Rosa from Cobblestone Homes. Burbank plans a 96-unit affordable apartment complex for the site.”

“‘It was an opportunity,’ said John Lowry, executive director of Burbank Housing. ‘There was a sense that there was a scarcity of land. Now there are many parcels available that developers are willing to sell.’”

The Recordnet. “Jose A. Nuno and his wife are first-time home buyers who spent six months working the busy market for a foreclosure house to fit their budget. They didn’t buy a foreclosure, though. They ended up buying a new house.”

“Just in case, they took a look at some new homes, not expecting to find anything that would change their minds. ‘That’s when I started realizing there was not much of a (cost) difference between new and (a foreclosure),’ Jose said.”

“They backed out of the foreclosure purchase and bought a new 3-bedroom, 2.5-bath two-story house in a Manteca subdivision of Florsheim Homes.”

“Models start at about $250,000, and the Nunos bought their 1,500-square-foot Florsheim house for $285,000. The monthly payments are higher than those for the foreclosure would have been, but not by much, Jose said, and the couple wouldn’t have to struggle to come up with thousands of dollars to make the foreclosure house livable.”

“Although foreclosures are touted ‘as the best price in town - pennies on the dollar - some are gross,’ he said.”

“Los Angeles-based KB Home also is reporting lookers and buyers who are checking out new homes because they were dissatisfied with the foreclosure market. The company has introduced home models as small as 1,300 and 1,400 square feet, with price tags starting at about $222,000 in, say, KB Home’s Riverbend development in Stockton.”

“‘We are very competitive on the price side,’ said Marc Burnstein, VP of sales and marketing for KB Northern California. ‘We’ve gone to smaller plans at a tremendous value relative to a foreclosure with no warranty and perhaps huge fix-up costs.’”

The Modesto Bee. “As the economy shrinks, enrollment at community colleges is expanding. Modesto Junior College’s enrollment ballooned almost 4 percent over last year to 18,474 students. Bob Nadell, VP of student services, figures enrollment will break 20,000 this semester. ‘Basically, we’re slammed here at MJC,’ he said. ‘When the economy is strained, a lot of people go back to school to retool.’”

“Prospective MJC student Monica Perez’s father — who was paying her California State University, Sacramento, tuition — told her last month that she’ll have to finance her own education because he lost his job. She hasn’t saved enough this summer to afford tuition, books and living expenses for the year, she said.”

“‘I’m stuck. I don’t know what I’m going to do,’ said Perez. ‘I had a plan. I never thought something like this would happen.’”

“MJC counselor Kim Bailey has heard those words countless times. Often they accompany stories of personal job loss. ‘They’re living in a different day and time financially. I don’t think I’ve ever talked to so many people who have lost everything,’ Bailey said.”

“The Northern San Joaquin Valley’s jobless rate hit 11.3 percent in July. At the same time, the region lost 3,000 homes to foreclosure. Many of those seeking Bailey’s help were in their 30s, 40s and 50s, and thought they’d established their careers.”

“‘Then it’s like, ‘I got laid off yesterday and here I am. I don’t know what I’m going to do,’ she said. ‘Most are feeling desperate. They want some marketable skills fast.’”

“People such as Jerry King toiled every day throughout the construction boom. Even when others around him were laid off, King hoped he would be unscathed.”

“‘Our company held on to people for as long as they could and laid me off last. By the time I was on the job market, everyone was already looking,’ said the former Beck Properties home warranty representative, while standing in line at a job fair last week. ‘First, I was looking for the same pay. Now, I’m looking for anything. I just need to make a living.’”

The Press Enterprise. “Business is brisk for repossession companies throughout the Inland area and nationwide that recover vehicles for lienholders after buyers default on their loans, industry officials say. Ray Radford, chief financial officer for Cal Recoveries Co., which has offices in the city of Riverside and in Orange and San Diego counties…would not say how many cars, trucks and other vehicles his company recovers daily. But he estimates that business is up as much as 400 percent, compared with the past few years.”

“And most of the rides his repossessors are bringing in are sport-utility vehicles and big, gas-guzzling trucks. ‘These are the vehicles that are being picked up, because people can’t afford to drive them. They can’t afford to put gas in them,’ Radford said.”

“The number of automobile-loan defaults is up 15 percent to 20 percent over the same period last year, said Tom Kontos, chief economist with ADESA Inc. The business runs about 60 vehicle auctions throughout North America.”

“Kontos attributes that increase to the growing number of Americans unable to keep pace with their adjustable-rate home mortgages. ‘All of a sudden you’ve got a decision to make,’ Kontos said. ‘Can I make my payment on both my home and my vehicle, or do I need to make a choice?’”

“That is an easy decision for most people, said Gary Headland, owner of Bank Vehicle Locators & Recovery Service in Corona. More and more often, those who have fallen behind on their car payments are happy to hand over the keys, he said.”

“‘It’s not dangerous, because they know you’re coming,’ Headland said. ‘A lot of times they say, ‘We expected you to be here earlier.’”

“Headland figures his business has increased about 80 percent over last year. He gets 25 to 30 orders for repossession a day from lienholders. Headland, a former car dealer who has been in the repossession business for a decade, says lenders are to blame for the rise in auto-loan defaults.”

“‘Banks have allowed people to go out there and (borrow) more money than the car’s worth,’ he said.”

“Still, the recovery orders from lienholders keep whirring through the fax machine in the mobile home that serves as Headland’s office. ‘It’s that way all day long,’ he said.”

The Desert Sun. “Bed tax revenues collected across the Coachella Valley ran flat through May, but plummeted in June for all but two cities by as much as 27 percent. Aftab Dada, general manager of Palm Springs Hilton, sees no sign of real improvement until the housing market gets settled.”

“‘Its the echo we hear all over the country,’ he said. ‘Until the economy gets settled, people are being cautious.’”

The Press Telegram. “Long Beach resident Jackie Richardson is one of more than a million Californians looking for work this summer. The search hasn’t been easy. Richardson left her job and moved to Lancaster with her husband last year in search of cheaper housing. But the area was hot and more expensive than she had anticipated. The couple moved back to Long Beach in January.”

“Her husband, Johnny, a cross-country truck driver, found work quickly, but Richardson has had little luck in the last eight months. Richardson said she’s considering waiting tables.”

“‘I feel kind of hopeless,’ Richardson said. ‘I never thought it would take this long. I went from expecting to make $18 to now $7.50 (an hour). At this point, I’ll take what I can get.’”

The Tribune. “First American Title Co.’s San Luis Obispo County division will close its Cambria and Los Osos branches next week, ending a decade-long presence in both coastal communities. Kevin Irot, VP and county manager, said the closures are a reflection of the downturn in the real estate market, which has resulted in a marked decline in business.”

“‘Our business is off more than 60 percent from last year,’ Irot said. ‘And last year it was probably off by about the same from the year before.’”

“Irot added: ‘We were the last title company to keep an office open in those communities. Other companies closed them long ago.’ First American Title, which has 29 employees, has operated in the county since 1960.”

The Pasadena Star News. “DeeDee Akins could see it coming. As an operations manager in the wholesale division of IndyMac Bank, she knew the Pasadena-based mortgage lender was getting hammered by defaults associated with its Alt-A mortgage loans.”

“The hammer fell on July 7 when 3,800 IndyMac employees and contract workers companywide were given pink slips, 400 of whom had worked in Pasadena. Four days later, the bank was seized by federal regulators and put under control of the Federal Deposit Insurance Corp.”

“‘IndyMac had become very aggressive with the types of programs it was offering to borrowers,’ the Altadena resident said. ‘But the bank was following all the guidelines, policies and procedures the government would accept.’”

A report from Florida Today. “Recent statistics compiled by the current president of the Melbourne Area Association of Realtors show that about 28 percent of the single-family homes for sale in Brevard County are foreclosed properties or involve short-sale agreements between the lender and the seller. That’s a sizeable number, real estate representatives say, but hardly atypical in communities where in the heyday of an overheated market a person could buy a house one day, sell it a few hours later and make a quick $70,000 profit.”

“Foreclosure and short sales are a big part of the market, Dale Young, president of the Melbourne Area Association of Realtors, said.”

“‘I would say a good 70 percent of the activity right now is people who are looking for bargains and at short sales. Whether it’s for their own residence or an investment, those seem to be the people that are out there,’ Young added.”

“Locally, Palm Bay leads Brevard, where 46 percent of 1,515 homes on the local Multiple Listing Service are foreclosed or short-sale properties, according to figures compiled by Young at FLORIDA TODAY’s request.”

“Thomas Stewart had been trying to sell his Palm Bay home on Appleby Street for nearly 13 months. Before he moved to South Florida, Stewart invested thousands of dollars in upgrades. He had the 1,270-square-foot, two-bedroom home on the market for $139,900. Unfortunately for him, he was forced to drop the asking price.”

“He sold it last month to Jody Ballard for $99,900. Stewart declined to comment on the sale. Ballard was thrilled to buy his first home.”

“‘I knew there was no way I could have afforded a home at the prices like they were three years ago,’ said Ballard. ‘This one kind of fit just right. He put a lot of money into the house and I took advantage of that.’”

The Palm Beach Post. “Lower property values mean lower taxes, and that’s something of interest to everyone. Given the precipitous decline of the real estate market, many people will be pleased to see the market and assessed values of their property decline.”

“But others will conclude their property value should be lower than the numbers determined by the country’s property appraiser. Experts predict a wave of property value changes by homeowners hoping to cut their taxes.”

“‘The economy is so bad, everybody is counting their dollars,’ said Jason Sharff, who has started a business to help homeowners challenge their property values.”

“Rebel Cook, of Rebel Cook Real Estate in Palm Beach Gardens, said she’s noticed ‘dramatic’ decreases in property values among residences she’s checked. For instance, a West Palm Beach home in a 55-and-over community was valued at $73,000 this year, down from $103,000 last year, she said.”

The Miami Herald. “Alfonso Llanes of Palmetto Bay, is one of more than 400,000 South Florida homeowners who are discovering that taxes are going down — but not by much, and not nearly as much as the dramatic dives in real market values over the past two years. ‘I was expecting a lot more than this,’ said Llanes.”

“Llanes is facing a scenario that will be quite common across Florida during this fall’s budget season. The market value of the 2,800-square-foot home that Llanes acquired when his wife died four years ago plummeted by $157,000 between last year and this year. Yet, the taxable value increased by $15,000.”

“‘My market value is down almost 30 percent. Thirty percent! I have more exemptions than I did last year because I’m a senior now and they passed the tax reform. But I’m paying almost the same in taxes. How can that be?,’ he said.”

“Coky Michel is struggling to pay the taxes and upkeep on a South Miami rental property that she and her husband inherited when her mother died six years ago. Appraisers pegged her house’s market value at $408,000, Michel said. ‘I guarantee you I can’t sell that house for $408,000. My point is: If prices have been going down for more than a year, why isn’t my tax bill showing it?’”

“‘There’s a lot of confusion out there,’ said Broward Appraiser Lori Parrish, who is answering 300 e-mails a day from angry taxpayers. ‘There usually is this time of year, but it’s gotten worse.’”

“In recent months, several South Florida agents have started offering bus tours as a way to dispel myths about buying foreclosures while capitalizing on consumer interest in bank-owned property.”

“‘Five years ago, we took orders: It was ‘Which one do you want and when do you want to close?’ That’s all we did. But now, in order to be successful you have to be different from every other agent out there,’ said Kimberly Castellotti, a Wellington-based real estate broker.”

“Broker Roy La Fontaine said he scheduled and advertised a bus tour. The tour required buyers to pay $25 to get preapproved for a loan. He abandoned the idea. ‘I thought we would be overwhelmed with calls on it and the response was anything but,’ La Fontaine said.”

“Julio Sanchez, who, with a partner, launched Miami Home Tours in March, hopes to schedule another tour this month in the Brickell area. ‘Basically, it’s just, ‘Get on the bus so you can get a deal.’ And they take a look at property that is 60 percent off,’ Sanchez said. ”

The New York Times. “For sale: one newly constructed three-bedroom, four-bathroom home near the University of Miami, with South African wood in the kitchen, marble from India, Egypt and Spain, and a $4,500 top-of-the-line garage door.”

“Listing price two years ago: $979,000. Listing price now: $599,000.”

“‘I always figured the market trend wouldn’t catch me,’ said Rafael Diaz, the owner and builder. He turned down $770,000 more than a year ago, he said, and has come to accept that he will never get the $700,000 he said he needed to break even. ‘By the end of the year,’ he said, ‘I might just turn it over to the bank.’”

“Robert Falor is down on his luck. Although this real estate developer is hardly a household name, he cut deals with plenty of people who were. Deftly working the celebrity circuit, while claiming to be developing more than $1 billion worth of properties around Miami and Chicago, a newspaper called him the ‘condo-hotel king.’ Today, the king’s realm is nearly bankrupt.”

“His lawyer, Ariel Weissberg said Falor’s woes and those of his business partners are a reflection of a flawed business strategy and nothing more.”

“‘He got caught in a bad concept — which is the hotel-condo concept,’ he said. ‘That’s a failed concept. With a failed concept, he was swept along. That was a bitter lesson, and he is trying to learn how to deal with all that financial distress.’”

The St Petersburg Times. “The full extent of the financial carnage left behind by bankrupt Smith Family Homes was revealed in a court filing showing the Tampa builder stiffing lenders nearly $50-million.”

“What could be bad news for homeowners is that Smith is delinquent paying back $3.3-million in Community Development District bonds used to finance Hillsborough’s Panther Trace and Pasco’s Seven Oaks neighborhoods…In other neighborhoods, such large delinquencies have left homeowners on the hook for the debt.”

From Highlands Today. “Are deeply discounted home prices finally lifting Highlands County’s beleaguered real-estate market? Yes and no - depending on who you speak with - although some do say their phones have finally started ringing.”

“If 2007 was bad, 2008 was worse, according to statistics on residential property sales compiled by Steve Fruit, Realtor with RE-MAX Realty Plus. Fruit said that from January to July, only 591 residential properties were sold compared to 744 for the same period last year. That represents a 20-percent drop in sales compared to last year and the slowest sales in a seven-year period, according to Fruit’s numbers.”

“The highest sales are being seen in properties below $100,000 and the second-highest between $100,000 and $150,000. Fruit said that home prices have declined from 15 to 30 percent since their peak of 2005, although some areas have weathered the price drop better.”

“To some like broker Greg Karlson, today’s home prices couldn’t get better, and buyers should stop waiting. At some point, sellers will be more picky about their offers and are ‘not going to take (offers on) such home prices any more,’ he added.”

The Destin Log. “It’s been a month since the Housing and Economic Recovery Act of 2008 was passed and The Log questioned whether it would jump start the sluggish real estate market in Destin. In a word - no.”

“‘I wish that were the case, but it’s not the silver bullet some people might think,’ Ed Smith, owner of RE/MAX Coastal Properties, said. ‘The majority of the properties in this market won’t qualify.’”

“In the Destin area, home prices still remain 40 percent lower than they were just two years ago and the supply still far outweighs the demand. Smith said that interest rates are still comparable at about 6.25 percent.”

“‘It’s unprecedented to have a buyer’s market and low interest rates at the same time, but that’s what we have right now,’ Smith said.”

The Herald Tribune. “Sarasota and Manatee counties together now have 23,265 people officially out of work — up 8,400, or 56 percent, from July 2007. Dry statistical facts, unless, like Don Howk, you are one of the ones whose jobs went away.”

“Howk has made an exploratory trip to Elkhart, Ind., where he has family and friends. He may need to move in with them because he is about to lose his Sarasota home. He has owned the home for 17 years, but refinanced during the real estate boom.”

“‘If I hadn’t done that, I would be in good shape now,’ he said.”

The Ledger. “Polk County’s July unemployment rate (the most recent available) of 7.3 percent was the highest in a decade, and there are untold numbers of displaced workers who are more qualified and interview-hardened. Polk, like numerous other communities in Florida, has seen jobs and businesses disappear at an increasing pace as the state limps its way out of the wreckage of a once-booming housing market and economy.”

“‘Certainly, the data we have right now looks worse to me than the 2001 recession. This has hit the financial sector, hit the housing sector,’ said County economist Gordon Kettle.”

“Local population growth is still robust, Kettle said, and businesses will undoubtedly rebound as they have before, though the record performances in housing and job markets in 2005 and 2006 should probably be forgotten for now.”

“‘I think what you’ve seen in the last few years was unsustainable so you knew there was going to be some kind of correction anyway,’ Kettle said.”

The News Press. “Fort Myers resident Brent Edwards has watched the local economy boom and bust, taking his short construction career right along with it. Edwards, 26, said every dollar he has ever earned came through construction. But his days on the job site are over.”

“‘I was working here before the construction boom, when everybody from all over the country came in, built everything in sight and killed this market,’ the third-generation Fort Myers resident said. ‘All they did was ruin it for me. I can’t go through this again.’”

“This Labor Day, Edwards isn’t the only one who doesn’t feel much like celebrating. Across Southwest Florida, more than 44,000 people are out of work - more than half of them in Lee County.”

“Not all of the job losses have come through construction, of course. But the losses in the building trade kicked the foundation out from under much of Lee’s economy. When the supply of homes exceeded demand, real estate agents had listings, but few buyers. Mortgage brokers had few takers. Furniture stores had few customers. Layoffs mounted.”

“James Moore, the interim director of Lee’s Economic Development Office, has said that diversifying the economy must be the No. 1 goal of the office. Moore said his office has long understood that the local economy is ‘way too reliant on two big industries - tourism and what I will call real estate-related industries.’”

“That must change, he said. ‘In the best of all possible worlds, we will never be reliant again on a single industry to have that strong of an economy,’ he said.”

“Sean Snaith, an economist with University of Central Florida, said much of Florida has suffered, but it has been especially pronounced in Southwest Florida.”

“‘When the housing boom was raging and the economy was being fed by construction, you had tremendously low unemployment and good economic growth,’ Snaith said. ‘When the housing market went bust, there was no safety net. Economic diversity is very, very important.’”

“Gladys Pascua, 42, worked for Nestle in New York and thought she could find a similar job easily in Southwest Florida after reading how much the area had been growing. When she and her husband arrived here earlier this year, things were more difficult than they expected.”

“‘I would think that in the 21st century that it would be about time that there would be some major corporations here, but it’s really just lots of mom-and-pop businesses and construction,’ Pascua said. ‘I was surprised by how few large companies there were.’”

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