A Different Problem, But The Same Kind Of Bubble
The Flathead Beacon reports from Montana. “In the current national housing slowdown, real estate auctions have gained popularity as a way to speed sales in a sluggish or paralyzed market. Now, the trend has made its way to the Flathead Valley where next month 14 Whitefish condominiums will go to the highest bidder. Originally called The Views at Whitefish, the first phase, which includes 29 units, is all that’s been constructed so far. Fourteen of those 29 are currently unoccupied.”
“In an effort to speed up sales, the developers have hired a Newport Beach, Calif.-based real estate auctioneer, to sell the condos through its online division.”
“‘These are the last units and, rather than hang on to them in this market where who knows how long it will take to move them, the developers have decided they’d really like to see a complete community,’ Kelly Lovegrove, the company’s director of operations and marketing, said. ‘Things were easier a few years ago when homes were flying like hot cakes, but there’s more uncertainty now.’”
“Previously priced around $320,000, minimum bids for many of the units are now about $150,000. Bidding for one furnished unit starts at $99,000.”
“Home sales in Flathead County were down 28.4 percent in the first half of 2008 from last year at the same time. ‘I think probably once we’re done with this auction and people see how it works and the results, I wouldn’t be too surprised if we’re not back in Montana again soon,’ she said.”
The Yakima Herald Republic from Washington. “The Vineyards Resort, touted during groundbreaking just a week ago as a major springboard for development in the Yakima Valley, is fighting foreclosure. The loan for the Vineyards is among 10 now in dispute…that total more than $217 million for golf-course developments in six states: California, Texas, Oklahoma, Florida, Massachusetts and Washington.”
“It’s unclear what foreclosure would mean for the estimated 30 investors who have committed $250,000 each to reserve a home site.”
“Paul Larson, the Yakima attorney for the Vineyards developers, said Monday the development finds itself caught up the crisis in the financial sector that has seen traditional sources of capital dry up and loan requirements tightened.”
“‘This is a very difficult time, no matter how good your project looks,’ Larson said. ‘Stark doesn’t want to own a golf course and housing development. We don’t have the money to pay for it until we get financing. It is a problem with everything in the equity mortgage crises we are having.’”
The Kitsap Sun from Washington. “Bremerton’s community renewal agency has been granted more time to pay off a construction loan for the Harborside Condominiums. The remaining $4.9 million on a $25 million loan was due in July. Bank of America recently gave the Kitsap County Consolidated Housing Authority an extra six months to pay the first $1 million and a year for the remainder, Sarah Lee, the housing group’s deputy executive director, said.”
“‘This is not that unusual,’ Lee said. ‘You figure out when you think a construction loan is going to be paid off and sometimes you miss that guess.’”
“Thirty-four of the 78 units along the Bremerton waterfront were sold, with the proceeds satisfying most of the loan, before a souring economy stifled offers. At the neighboring condominium complex that was built at the same time, The 400, 28 units in the 70-unit facility were offered but no offers met the reserve bid at the May auction. Owners did enter negotiations on 18 of those offers.”
“To revive interest in the Harborside, now the housing authority has lowered condo prices and is offering incentive packages, Lee said.”
“The list price on the smallest home - a one-bedroom, one-bathroom, 800-square-foot unit - was cut from $345,000 in early August to $310,500 today. A 2,642-square-foot unit with three bedrooms and 2 ½ baths dropped from $1.6 million to $1.15 million. Incentives now include such amenities as boat moorage and YMCA memberships, Lee said.”
“Should the housing authority default on the debt, Kitsap County would be responsible for it because in 2005 it agreed to be in a junior position on the loan. The county is also backing up $22.2 million in bonds that were issued to pay for the project, which will come due next fall.”
“‘We’re spending a lot of time on this issue right now because I think we’re concerned that it will ripple down to the county if it isn’t managed at the housing authority level,’ county Commissioner Steve Bauer said during a candidate forum.”
The Olympian from Washington. “A slower housing market and higher fuel prices were on the minds of vendors and visitors on the first day of the Olympia Master Builders 2008 Big Home and Garden Show.”
“Adair Homes, a longtime home builder in Tumwater, had no trouble selling homes in the red-hot real estate market of 2005 and 2006, construction superintendent Terry Hayes said. In the past, Adair Homes received much of its business through referrals, but it now finds itself increasing its marketing efforts, Hayes said.”
“When the Thurston County housing market was stronger, Adair sold about 120 homes annually, but it now builds about half that amount, he said.”
“The South Sound housing market has considerably cooled since more than 4,000 homes sold here in 2006. Last month, home sales fell 31 percent in the year-over-year period ending in August, and prices dropped nearly 8 percent, according to Northwest MLS data.”
“Al Lucas of Lacey said he frequently comes to the show to get tips and ideas for the home he wants to buy or build someday. Lucas owns a manufactured home but would like to own property with more privacy on a larger lot, he said. Still, he has some concerns about the economy.”
“‘The way (house) prices are dropping, I don’t want to wait six months and find out I could’ve got it for less,’ he said.”
The Seattle PI from Washington. “Washington’s unemployment rate last month reached its highest level in nearly four years, and the number of people looking for jobs is only expected to grow. More than 200,000 people unsuccessfully sought work in August, as the jobless rate reached 6 percent.”
“The last time Washington’s unemployment rate was this high was in October 2004, according to the state Employment Security Department.”
“‘It’s a little scary, and it’s a little sad to see people with 10 years under their belt get laid off,” said Karen Ford, a branch manager for the AppleOne employment agency in Seattle. She’s seen an increase in clients looking for work. ‘A lot of companies here are shrinking their overhead. A lot of companies are cutting down to a four-day week or asking people to go part time,’ she said.”
“Washington economists had said at the beginning of the year that the Puget Sound region was buffered from the nation’s woes because of successful companies such as Microsoft and Boeing, and because this region heavily trades with booming economies in Asia.”
“‘That was true for a while,’ said Dick Conway, economist and co-publisher of The Puget Sound Economic Forecaster. ‘But everything fell apart with the collapse of the credit and housing markets. We have been surprised at how quickly the economy has changed. It’s just incredible. It’s very reminiscent of the dot-com bust, which was a different kind of problem, but the same kind of economic bubble.’”
The Statesman Journal from Oregon. “At 5:30 a.m. Tuesday, James Stanley was in line, looking for a job. And he wasn’t first. Last month, there were more than 120,000 workers like Stanley who were unemployed in Oregon. The state’s jobless rate rose to 6.5 percent, its highest level in three years, according to Oregon Employment Department.”
“The greatest losses were in logging, construction and manufacturing, affecting mostly blue-collar workers, said Art Ayre, a state employment economist. The downturn in the financial activities sector primarily was felt by mortgage brokers and real estate agents, he said.”
“Experts blame the continuing problems in housing, credit and financial areas that have created unease on Wall Street. ‘We’ve seen this before, but now it’s a bit more intensified,’ said Oregon state economist Tom Potiowsky.”
The Oregonian. “Clark County, once a land of construction plenty, is looking a tad thin these days. Home sales are down 30 percent compared with last year. Pending sales, new listings, average sale price, median sale price: all down.”
“The only thing that remains up is the amount of time it takes to sell a house — on average, a grueling 12.7 months, according to the Regional MLS.”
“On top of that, the 8.2 percent August unemployment rate in Clark County reported Tuesday is the highest in about four years. Not surprisingly, the downturn in construction jobs was the main culprit for August’s higher rate.”
“Nearly 18,000 people are out of work in the county, according to state Employment Security Department data released Tuesday. ‘That’s a lot of people,’ said Bart Phillips, president of the Columbia River Economic Development Council, noting that it was the largest number he could recall in his eight years on the job.”
“Any one of nearly a half dozen large house builders in the county — each of which invested heavily in building homes of $300,000 to $500,000 — is believed to be teetering.”
“‘We’re not at the bottom yet,’ said Troy Hershey, a Clark County real estate broker.”
“Even David Roewe, head of the Building Industry Association of Clark County, a cheerleader for the industry, acknowledged of higher prices houses: ‘You can’t give those away right now.’”
“RMLS reported that the Portland region’s median home price in August was down 7.3 percent compared to August 2007, the biggest decline since record keeping began in 1992.”
“Wells Fargo economist Ed Kashmarek points out that, according to the Case-Shiller index, Portland’s home price declines aren’t as bad as the rest of the nation. But he added: ‘The fact that Portland home prices rose more and peaked later than national prices suggests steeper declines likely lie ahead.’”
“Single-family housing starts were down 47 percent in the second quarter. The Portland market had 13,700 starts in 2002 before the boom. But Kashmarek forecasts just 8,400 starts in 2008 and 7,900 in 2009. The second quarter foreclosure rate was 1.1 percent compared to .4 percent in the second quarter of 2007.”
“Kashmarek suggests in his latest Portland report that condo prices ‘may have to come down 10 to 15 percent more, maybe even up to 40 percent, in order to move inventory.’”
