The Housing Bubble

The LA Daily News reports from California. “San Fernando Valley homeowners saw property values plunge 35 percent - a quarter-million dollars on a median-price home. The median price of a previously owned house tumbled from $650,000 in August 2007 to $420,000 last month, said a new report from the San Fernando Economic Research Center at California State University, Northridge.”

“The median price in August matched levels last seen in January 2004.”

“‘It’s stunning. That’s a huge amount,’ said Daniel Blake, the center’s director. ‘Next month we’ll be back at 2003 prices.’”

“During August, foreclosures soared 219 percent as 923 families lost their homes. And Blake said foreclosures in the third quarter - to be reported in late October - will likely break the record of 2,084 homes seized during the April-through-June period.”

The Claremont Courier. “According to real estate data on Trulia, the median price of homes sold in Claremont between June and August of 2008 was $520,000, down from around $600,000 during the same period in 2007, a drop of 13.3 percent.”

“Yahoo! Real Estate shows that there are 102 foreclosures in Claremont. But Geoff Hamill, a senior real estate agent with Prudential Wheeler Steffen, believes there could be many more approaching the point of foreclosure that are not yet listed.”

“While market conditions are scaring off many potential homebuyers, some housing experts think that now is the time to buy. Local mortgage banker Tim Harrison believes that fear is stopping people from entering the market despite clear incentives and an excess of housing options.”

“‘They see that their friend has just lost $100,000 on their home, and they think the same will happen to them,’ Mr. Harrison said.”

The Press Telegram. “How much would you pay for a luxury home whose amenities include stainless steel gourmet kitchens and master suites with walk-in closets? Buyers on Oct. 19 will get to have a say on the market prices of 25 houses on about 3.5 acres at Studebaker Road and Del Amo Boulevard in the city’s last ‘new construction community,’ named Lakewood Estates at Gordon Ranch.”

“And they’re expected to go fast, in a transaction estimated to last about 31/2 minutes, said Ken Stevens, who will be conducting the auction. ‘There’s not going to be an opportunity like this,’ he said. ‘This is a one-time opportunity in Lakewood.’”

“Construction for Lakewood Estates began in early 2007 and wrapped up in the first quarter of this year. The city was chosen as a project site because of its schools and its proximity to downtown Los Angeles and the beach, said Tony Weeda, a partner of Lakewood Estates LLC. Weeda declined to disclose how much money was invested in the project.”

“But at the time of the project’s completion, the real estate market and consumer confidence had been bitten hard by the credit crunch. Sales fell through, Stevens said.”

“‘We just feel that with the current conditions in the housing market, strategically this is the first course of action to take at the time,’ Weeda said. ‘This gives the buyer the comfort of knowing that they are taking part in establishing the price.’”

“Of the 25 houses up for auction, six are 2,267-square-foot homes with three bedrooms and 11/2 bathrooms. Asking prices for these homes were originally listed at $776,080, but the minimum bids will begin at $445,000.”

“The remaining 19 are four-bedroom, three-bathroom homes whose dimensions range from 2,513 to 2,580 square feet. The minimum bid for homes whose initial asking prices reached $829,530: $495,000.”

The Orange County Register. “Hard times have hit Aliso Meadows hard. The Laguna Hills condo complex had at least 23 foreclosures in the past six months, resulting in months of unpaid homeowner association dues.”

“Now, Aliso Meadows is so short on cash that it has deferred roof and termite repairs, can’t fix rotten wood siding and must wait to fix potholes ‘big enough for your families to make Jacuzzi’s of,’ association officials said.”

“Aliso Meadows is one of many HOAs in Orange County and around the state that are having trouble coming up with the money they need for maintenance and services because of rising foreclosures.”

“At the Cinnamon Tree condos in Placentia, more than 30 foreclosures and mortgage defaults have aggravated the complex’s existing financial troubles and disputes.”

“Foreclosures, and HOA delinquencies, mushroomed after prices there fell from around $300,000 a unit to as low as $150,000, helping to push the board into raising fees and levying a $1,000 special assessment, property owners there said.”

“At Threewoods, a Fullerton community of $1 million homes, owners abandoned one unit under the threat of foreclosure, leaving the association to water and mow its lawn during the months it sat vacant. The association also was forced to act after a 100-pound beehive was discovered inside the home.”

“Karen Conlon, president of the California Association of Community Managers, noted that her own association in Laguna Hills discovered 14 squatters had taken up residence in one of four foreclosed units.”

“Homeowners facing foreclosure often stop paying dues for a year or more before losing their home, so the unpaid dues mount up.”

“‘When some homeowners aren’t paying their fair share, it puts a burden on the other homeowners,’ said Conlon. ‘It’s going to take us a long time to recover. I think it’s going to take a good two to five years to fully financially recover from all the things happening in the community.’”

The Mercury News. “Measured by new building permits, single-family housing construction fell by 60 percent in the East Bay during August compared with the totals for the same month the year before, the California Building Industry Association reported.

“‘This is the worst since the Great Depression,’ said Michael Ghielmetti, president of Pleasanton-based Signature Properties, and an officer of the Home Building Association of Northern California.”

“The downturn in the East Bay activity was steeper than California, which suffered a statewide decline of 58 percent in new-home building during the 12 months that ended in August. San Joaquin County single-family building fell by 65 percent. The San Mateo-San Francisco-Marin region slumped by 31 percent.”

“‘My dad has been in this business for 42 years and he has never seen it this bad,’ Ghielmetti said. ‘The Hoffmans of the world have been building homes since the 1940s, and they say they haven’t seen anything like this.’”

“The nose-dive in new-home building was more severe than anticipated by a statewide group.”

“‘We have been taken aback by the dramatic cutback in single-family home production in California,’ said Alan Nevin, chief economist with the California Building Industry Association.”

“The largest decline during the 12 months that ended in August occurred in the Yuba County-Sutter County area, which was hammered by a 93 percent drop in single-family home construction.”

“‘Most metropolitan areas have seen their single-family permit activity decline by half in the past year, with little indication of improvement in the last third of the year,’ Nevin said.”

The Sacramento Bee. “For most of 2008, it has seemed that California’s home building industry could hardly scale back its expectations further. But it did just that on Wednesday.”

“The Construction Industry Research Board has downsized estimated home starts in California this year to 70,000. A month ago, it estimated construction would begin on 75,000 homes this year. The board now predicts California builders will start only 74,000 residences in 2009.”

“Housing permits peaked at 212,960 in 2004 before the real estate market began a decline. Builders say this will be their least productive year since the state began keeping records in 1954.”

“‘In essence, the industry has come to a standstill, with minimal indication of improvement during the balance of the year,’ said Alan Nevin, chief economist for the California Building Industry Association, in a statement.’

“Early this year, Nevin predicted builders would take out permits for 128,400 single-family homes, apartments and condominiums in 2008. Acknowledging that he was being more optimistic than most economic thinkers, Nevin predicted a slight rebound during the second half of 2008 and a ‘modest recovery.’”

“The numbers show that builders in Yuba and Sutter counties started only eight homes in August, down almost 94 percent from the same month last year. The tally was down 62 percent from July.”

From News 10. “If you knew you could stop making house payments and remain in your home for up to a year or even longer, would you continue paying the mortgage? A southern California company is selling a system that helps distressed homeowners take advantage of foreclosure laws.”

“Real estate professionals who were directed to the Web site by News10 were unimpressed. ‘I’ll tell you (how to do it) right now for free,’ said Alexis McGee of a Web site aimed at foreclosure investors. ‘If you don’t pay your mortgage the bank’s going to take awhile before they foreclose,’ she said.”

“McGee and others said there are other less destructive ways to leave your home that won’t so seriously impact your ability to buy another home in the future.”

“‘(Foreclosure) is the kiss of death for most lenders today, especially in the tightening market we’re in,’ said mortgage broker Pat Mackin. ‘You’re consigning yourself to be a renter for a period of up to seven years.’”

The San Francisco Chronicle. “The Federal Deposit Insurance Corp. seized IndyMac in July, and Chairwoman Sheila Bair immediately halted foreclosures on its home loans. Of the 742,000 mortgages that IndyMac owned or serviced, more than 60,000 are 60 days or more in arrears.”

“‘We can freeze the interest rate cap for the life of the loan at the Freddie Mac survey rate (about 6.5 percent),’ said Michael Krimminger, special adviser for policy to Bair. The rate can go as low as 3 percent initially.”

“‘If we have to, we can put in a 40-year amortization,’ Krimminger said. ‘Say you were two years into a 30-year mortgage, we’d essentially add on another 10 years, so it would be 38 years.’”

“The final option would be to calculate payments based on a reduced principal. For example, the borrower might owe $400,000 but the payments could be calculated based on principal of $250,000. However, the deferred $150,000 would still be due when the home is sold or the loan matures.”

“Doesn’t that mean borrowers would have to come up with large amounts of money if they want to sell within a few years?”

“‘In many cases, forbearance is not really the best option,’ Krimminger said. ‘It’s not an investment decision for the borrowers. If they want to keep their home, we can do a lot to make their mortgage affordable. If their mortgage is heavily underwater and they don’t want to stay there for that reason, that’s their decision.’”

“‘Our obligation is to maximize the value of the assets of a failed bank,’ Krimminger said. ‘All the options to modify a loan are checked against … what we would recoup in a foreclosure. If (a loan modification) doesn’t give more money than a foreclosure, then we have to look at a foreclosure as being the best option.’”

“If the borrower has owned the house for long enough that it contains significant equity, IndyMac might be ‘obligated on behalf of investors and insurance’ to foreclose for better returns, he said.”

“And some borrowers simply cannot afford payments, even at lower rates. ‘That is troubling, but is (true) in a not-insignificant number of cases,’ Krimminger said. ‘We want to make sure if we do a modification, it’s one that the borrower can afford to repay.’”

“IndyMac FSB will work to verify borrowers’ incomes as part of the loan modification process. Krimminger said IndyMac made a lot of loans that were low-doc or no-doc, meaning it did not verify borrowers’ incomes.”

“‘Let’s face it,’ he said. ‘IndyMac failed for a reason.’”

From CNN Money. “When Sarah Lavely gets angry, she likes to break things. Not all the time, but on days when everything seems to be going wrong, she has been known to throw some plates against a wall. Fortunately, she has an easy outlet: Lavely is the founder of a San Diego shop where customers pay to smash tableware like dinner plates, wine glasses, intricately lined sashimi plates, brightly colored vases and goblets.”

“Since the shop opened business has been steadily increasing, with each night, on average, busier than the last. Despite consumers’ tendency to be budget conscious in a down economy, Lavely is getting calls from groups of people who want to come to her shop from as far away as Los Angeles.”

“Economic uncertainty might actually be driving business, as customers smash their way through the frustrations of high gas prices, a slumping housing market and rising unemployment.”

“‘We leave Sharpies in the break rooms and people will write on a plate before they throw it. I don’t read what they write, but when those customers are finished you can see they feel pretty emotional,’ Lavely says. ‘But that’s why they came, to throw their frustrations against a wall and walk out the door feeling good.’”

The Sun Sentinel reports from Florida. “Statewide, existing-home sales fell 4 percent from last year, and the median price sank 20 percent to $186,900. South Florida condominium buyers in August responded to price declines. There were 550 sales last month, compared with 551 a year ago. The median price plummeted 25 percent, to $133,300 from $178,800 last year.”

“The housing slump is testing Patti Hall and legions of other South Florida sellers. Hall’s three-bedroom home has been on the market for about six months. After two price reductions, she’s asking $309,000 and may go even lower.”

“‘I’m getting all emotional about it because it’s so frustrating,’ Hall said this week.”

‘Pamela Orr of Balistreri Realty in Lighthouse Point said sellers shouldn’t take the market personally. ‘Forget about what you could have gotten for the home in 2005 because that’s never going to happen,’ Orr said. ‘Be realistic.’”

From Florida Today. “In August 2005, in the frenzy of an overheated real estate market that swept the country, the median selling price of a single-family home in Brevard County swelled to $248,700. On Wednesday, the Florida Association of Realtors reported the median price in Brevard was $155,500, a 37 percent drop from its peak and more than 23 percent less than in August 2007.”

“‘It’s not an era that I’d like to see again,’ said Dale Young, president of the Melbourne Area Association of Realtors, who said greed seemed to overtake common sense in too many cases.”

“Young, like others, called for lawmakers to pass tighter lending regulations to stop some of the abuses that led to the current economic problems.”

“Michael Pruitt, president and broker/owner of Pruitt Real Estate in Melbourne, called the period of 2005 a ‘feeding frenzy’ that was ‘fueled by opportunity or greed, which ever you choose.’”

“David Denslow, a professor and research economist at the University of Florida, said government regulators could have intervened to ensure property appraisals were more accurate and not artificially inflating values.”

“Instead, agencies such as the Federal Reserve took a hands-off approach in not recognizing or interfering with market ‘bubbles,’ Denslow said.”

“The Fed also could have signaled its concern about fast-rising housing prices by raising interest rates to slow down the supply of various financing vehicles for homebuyers. Instead, Wall Street got heavily involved in mortgage investments, Denslow said.”

“‘The financial gurus on Wall Street created various mortgage and investment vehicles,’ he added. ‘They were going to play (the housing market) while it was there.’”

The Miami Herald. “Numbers released Wednesday by the Florida Association of Realtors showed existing single-family home sales in Miami-Dade County increased 22 percent and Broward sales increased 12 percent compared to the same period a year ago. The market still has a long way to go: The inventory of homes for sale actually rose in Miami-Dade County compared to a year earlier.”

“Prices were at least 20 percent lower in August than a year ago for single-family homes and condos in Miami-Dade and Broward. The median price for a Miami-Dade single-family home was $276,000 in August, a 30 percent drop from last year. For Broward single-family homes, the median price was $269,800, down 27 percent.”

“The median condo price in Miami-Dade was $210,400, a 20 percent decline; it was $133,300 in Broward, off 25 percent from last year.”

“Adam and Jennifer Clarin purchased a four-bedroom Palmetto Bay home in July for $405,000 from a seller who bought the home two years earlier for $670,000.”

“‘People are saying the market is horrible,’ said Jennifer Clarin, 26, who moved from Plantation to the Miami-Dade city because her husband took an optometry job there. ‘But the market is not horrible if you are a buyer right now.’”

“Retirees who depend on investment income to help buy groceries and pay the bills, are among the most vulnerable groups scrambling for cover in the current market upheaval. South Florida, with its wealth of retirees, may suffer disproportionately because of its large number of older souls whose financial well being is closely tied to Wall Street.”

“Gene Jencarelli, 72, of Miami, who invests in securities through his IRA, had to get a part-time job taking bets at Calder Race Course. Jencarelli follows the markets closely but was caught off guard by the sudden failure of mortgage lender IndyMac in July and the recent problems at AIG, which cost him several thousand dollars.”

“While he has fared OK so far and decided to ride out the storm, when the market rebounds his gambling is over, he says. ‘If the thing goes up again, I’m just going to withdraw it all and just get the heck out,’ Jencarelli said.”

“Ruth Schwartz of Hollywood, who was waiting for a bus outside a senior center Wednesday to return to her Hillcrest condo, said she has not invested in stocks but is coping with rising expenses.”

“Still, she remembers the Great Depression, when her mother used to put on a pot of boiling water to pretend she was cooking because there was nothing to eat. ‘But we managed,’ said Schwartz, who has ‘two lovely daughters,’ one of whom is 62, the other 71. ‘I’m happy to be alive at 96,’ she said.”

The Herald Tribune. “Looking for any way to help the city’s stagnant home building industry, North Port is freezing impact fees, postponing increases that would have added about $3,000 to the cost of a new home.”

“Years of overbuilding and inflated prices across the region have left North Port and surrounding areas with a glut of homes and dropping values.”

“‘Right now the economy, no matter where you look, is in the dumper,’ said City Commissioner Fred Tower. ‘And I think if we even made the impact fees zero, right now, you might get two or three homes.’”

The Naples News. “Orion Bank’s leaders are taking the good with the bad when it comes to both the state of the economy and federal regulators’ recent ‘enforcement action’ against the bank. Loans that may have caught the eye of regulators are the 5.25 percent of the bank’s total loans which were 90 days or more past due and non-accrual loans. Since 2007, Orion has filed approximately 40 foreclosures in Lee and Collier counties.”

“Jerry Williams, president, chairman and CEO of Naples-based Orion Bank, provided an example of the types of loan losses the bank is experiencing:”

“‘A wealthy man and his wife invested in excess of $1 million in a project. Their partner, a developer, invested 50 percent in the project. The development is a great place. It looks gorgeous. The problem is it’s too gorgeous, too expensive. They missed the price point in the market, so he didn’t sell. The developer can’t make the payments any longer. The wealthy guy says: ‘We need to do something because I can still make payments. I want my portion of the profit in the end.’ The wealthy person comes to us and says, ‘foreclose and I’ll buy it at the courthouse steps.’”

The News Press. “The developer of half-built Prentiss Pointe at Winkler and Summerlin roads in south Fort Myers wants the 50 condo owners to pay for all the community’s operating expenses. Condo owner Marilyn Boyer - who has the only non-developer seat on the condo association board - said he’s told residents he’s broke and can’t pay.”

“With declining property values and many projects sitting incomplete, conflicts like this are a sign of the times, said attorney Joe Adams. For condo owners, he said, ‘One of the risks is that the developer will run into financial problems.’”

“In a strong housing market, problems like this are usually resolved because ’someone’s willing to come in and buy them out because of increasing values. I don’t think we’ve seen anything like this in the last 15 years,’ Adams said.”

The St Petersburg Times. “The Tampa Bay area’s median home price has returned to what it was in December 2004, but those discounts helped keep home sales from falling further in August. Tampa’s median home price stood at $171,200 in August, 20 percent below the $214,100 median price in August 2007. ”

“‘I looked at 30 properties for a client wanting a house for $150,000, and all but two were short sales or bank-owned properties,’ said St. Petersburg Realtor James Tuten.”

“But the slump seems to be intensifying across Florida Panhandle cities previously buffered from housing pain. Panama City sales were down 29 percent, Pensacola’s were down 31 percent and Tallahassee’s dropped 42 percent.”

“A onetime financial savior of the Trump Tower Tampa project pleaded guilty Tuesday to evading more than $170-million in federal taxes. Frank Amodeo, former head of Mirabilis Ventures Inc., is accused of buying up companies, many in payroll services, and using withheld employee taxes to buy more companies.”

“‘I erroneously believed that we were allowed to defer payment. … That was not the case, and I deeply regret my failure to fully comply with the tax code,’ Amodeo said in a statement after issuing a plea in federal court in Orlando.”

“As part of Amodeo’s defense, witnesses said the former financial wizard suffers from a bipolar illness that has left him with delusions of ruling the world.”

The Tampa Tribune. “When Florida’s housing market was surging a few years ago, city leaders began bracing for the demands that would come with 3,000 new homes. They paid millions to double the size of the wastewater treatment plant and started planning for a new library and fire station.”

“But the homes didn’t come. Now, city leaders are focusing on attracting more industry. Most of the subdivisions approved by the city council in the past few years sit idle.”

“Hidden River, for example, was slotted for 325 homes on 150 acres along the Hillsborough River. The developer installed roads, utilities and streetlights, but hasn’t built a single house.”

“‘They went back and green-belted it,’ said Todd Vande Berge, the city’s director of development services. ‘They’ve got cows grazing on it now.’”

Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.