The Bigger They Are, The Harder They Fall
The Rocky Mountain News reports from Colorado. “It looks like the mountain community of Edwards won’t be getting a luxury condominium tower with cutting-edge urban design by architect Daniel Libeskind after all. The developer has pulled the plug on the $125 million, 140,000-square-foot tower 15 miles west of Vail. Matt Fitzgerald, a broker with Slifer Smith and Frampton Real Estate, said he believes the project was first slowed by ’strong neighborhood opposition.’ ‘Then the market may have ultimately killed it,’ he said.”
The East Valley Tribune from Arizona. “Sales at Fulton Homes’ Freeman Farms project, at Ocotillo and Greenfield roads, have ground to a halt as buyers find credit has dried up for the $400,000-plus homes that the builder has been trying to sell there since 2006.”
“Forty of the 761 lots in the development have been sold, Fulton Homes president Norm Nichols said Friday, and he’ll be lucky to break even on it in the end. ‘Right now Freeman Farms is a loss, and it’s getting worse every month,’ he said.”
“His solution, in the works since January, is to get town approval to build lower-priced models on the empty lots, a possibility homebuyers who closed on their homes this year say they wish they’d known about. ‘It would have been a dealbreaker for us,’ said Megan Foster, who moved with her fiance into Freeman Farms this summer. ‘We were sold on this property because of the way it looked, being a part of the neighborhood, the whole look, and it’s all changing.’”
“She and many other Freeman Farms residents would be next door or across the street from the cheaper homes, where vacant lots now sit. They aren’t little houses - they have four to eight bedrooms and three-car garages. They also have features and architectural details which may not appear in the next houses to go in. Ceilings will be lower, windows will be smaller, and other features that were standard will be optional on the new houses, factors some fear will adversely affect already depressed home values in the neighborhood.”
“Nichols said that new models have the same square footage as homes already built in Freeman Farms, with four to eight bedrooms and three-car garages. They will have lower ceilings, and many of the features that were standard will become options, to keep the base price down. ‘We’re starting to find the price point where people are starting to buy again, and that’s about $100,000 less than what (recent buyers) paid,’ he said.”
“Nichols said he’s trying to protect home values in Freeman Farms and other partially built Fulton communities across the Valley, along with the company’s own investment, by getting the lots filled, somehow. He said Fulton Homes can’t just ride the market out a few years and hope the market for $400,000 homes will come back.”
“‘We’re looking for the light at the end of the tunnel, but we haven’t seen it yet,’ he said.”
The Arizona Republic. “Combined, there were 2,195 foreclosures in Avondale, Buckeye, Goodyear, Litchfield Park and Tolleson during the first half of 2008. That’s up from 413 during the same period last year. ‘We think of low-income people as those hit by foreclosures, but it’s really all people who extended their income, people who stretched themselves too heavily,’ said Jay Butler, director of realty studies at Arizona State University.”
“An Arizona Republic analysis shows that Tolleson and Litchfield Park led the Valley in percentage increase in home foreclosures - 665 percent and 563 percent, respectively. The demographics of the two neighboring cities differ a great deal. In Tolleson, the median-home price was $230,000 in 2007; in Litchfield Park, it was $360,740, a Republic analysis shows.”
“Meanwhile, the median household income in Tolleson was $41,600 in 2005; in Litchfield Park it was $77,200, according to a private consulting firm.”
“Larger, higher-end homes also have fallen into foreclosure as families can no longer pay their loans. Greg Marthaler, a Goodyear real-estate agent for Coldwell Banker, said the biggest factor affecting foreclosure rates in the southwest Valley is investors who bought homes in hopes of turning a quick profit.”
“‘Tolleson, especially, was very susceptible to investors coming in. They were banking on the appreciation of homes,’ Marthaler said. ‘But when the markets fell apart, a lot of them got caught holding homes that had a lot less market value than when they purchased them.’”
“Avondale and Buckeye also had foreclosure increases higher than the Maricopa County average, a combined result of investor and individual loan defaults. ‘In Goodyear, 60 to 70 percent of homes are bank-owned,’ Marthaler said. ‘I also know that, based on statistics from Coldwell Banker, close to 75 percent of the homes we sold last month - and we had a good month - were bank-owned properties. Sales are up, sure, but prices are way down.’”
The Salt Lake Tribune from Utah. “The two luxury homes that sit side by side in this neighborhood of massive ramblers aren’t supposed to be on the brink of foreclosure. But these days, they have plenty of company. As a recent tour of the Salt Lake Valley revealed, foreclosed homes are on the market all along the Wasatch Front, in all price ranges - all the way up to multimillion-dollar mansions.”
“Many, like these spacious two-story mini-mansions in Draper, were purchased at the height of the housing market boom. Their owners had built not only a dream home but a second, slightly smaller one, next door as an investment. And why not? For more than three years, homes, especially expensive ones, were flying off the listings at inflated prices, aided by a steady stream of exotic loans and too-loose lending standards. But then last summer, all that came to a screeching halt.”
“‘If the market would have just kept going up, these people would have done great,’ said Randall Wall, broker with Equity Real Estate in Salt Lake City as he walked through an unlandscaped yard littered with weeds and kids’ toys.”
“But the market locally did just the opposite, and to make matters worse for the owners of the mini-mansions in Draper, both spouses worked in the housing industry and were separating. As listing agent, Wall is trying to help the owners of the Draper homes arrange for short sales on both properties. The loan on the larger of the two homes is for more than $900,000. The property probably will sell for at least $100,000 less than that; one cash offer came in at $400,000. The second home has a $650,000 loan; it probably will sell in the $500,000 range.”
“Built in 2004, a newer two-story home in West Jordan tells the story of the Wasatch Front’s housing boom and recent fall. In July 2005, the home sold for $224,500, Wall said. In January 2006, it sold again, this time for $249,000. Yet another owner bought the home in May 2007 for $290,000. As is the case with many foreclosures, the last owner eventually ended up ‘upside down’ in the property.”
“Today, the house is listed by the bank for $269,000. ‘They’ll be lucky to get $225,000,’ Wall said. ‘There’s just a lot of properties like this for sale right now. And buyers aren’t stupid. They want a deal.’”
“On to Sandy, to a foreclosure listed for $495,000. The expansive vistas out large windows don’t disappoint. But the house is not in move-in condition by any measure. It looks as if someone bought the 3,300-square-foot, 1960s-era structure, started to gut it and walked away. There are dangling electrical wires and piping, and some walls and stairwells have been partially ripped out. The lone outbuilding next to the house - a garage? - is crumbling.”
“Wall estimates any buyer would have to put in at least $150,000 on pricey renovations. ‘This could be really nice,’ he said as he looked around. ‘You could always offer $200,000 and see what happens.’”
The Review Journal from Nevada. “The upper echelon of income earners, once regarded as somewhat immune to general economic woes, is starting to feel the pain of living in a city with the nation’s highest foreclosure rate, local luxury home brokers said. Banks and lenders bought back 87 properties valued at $1 million or more this year in Las Vegas, with 17 bank-owned homes in that price range on the current MLS, Tom Love of The Tom Love Group reported.”
“Last year there were only 18 bank repossessions of homes over $1 million. The MLS also shows 29 short sales.”
“‘We definitely see it’s spiraling into the high end of the market,’ Love said. ‘There’s some big-name people in town with (foreclosure) homes on the market. People that were not expected to be affected have been. Like they say, the bigger they are, the harder they fall.’”
“Ken Lowman, owner and broker of Luxury Homes of Las Vegas, said he’s seeing a few luxury home foreclosures, primarily homes that were purchased at the peak of the market in 2005 and 2006 and usually in the older luxury communities. In many cases they were semicustom homes that sold for $800,000 and $900,000 and then appreciated to $1.1 million and $1.2 million. Now they’ve gone back under $1 million.”
“Lowman said there were a few speculative builders who didn’t have ’staying power’ when the market shifted, leaving brand new luxury homes in foreclosure. ‘I believe the credit crunch has taken many of our luxury buyers out of the market because they can no longer get financing,’ Lowman said. ‘We also see move-up buyers out of the market because they cannot sell their present home.’”
“A custom home lot in the master-planned Southern Highlands community was recently foreclosed upon by Wells Fargo bank for $486,777, which could be an indicator of foreclosures coming in the luxury market, said housing analyst Larry Murphy.”
“He counted 2,839 new foreclosures in August, nearly triple the number from the same month a year ago.”
“Bob Reeve of Realty One Group said he doesn’t see stability until the economy absorbs the adjustable-rate mortgages that are due to reset in the next two years. ‘Owners suck up the higher payments or they walk,’ he said.”
“Outstanding adjustable-rate mortgages total about $500 billion in the United States, with about 60 percent of them in California, a recent Credit Suisse report shows. Monthly option recasts are expected to accelerate starting in April from $5 billion to a peak of about $10 billion in January 2010.”
“Bank-owned properties, or real-estate owned, are continuing to set the pace in sales as well as leading the way to the bottom in prices, Frank Nason of Residential Resources said. As of Sept. 14, REOs comprised 32 percent of total listings in Las Vegas and account for 2,200 pending sales.”
“‘It’s got to be hitting everybody,’ Nason said. ‘If they bought in ‘04, ‘05 and ‘06, they’re wondering how long it’s going to be, if it’s going to be decades before they get back to the price they paid.’”
