The Housing Bubble

The Glendale News Press reports fromCalifornia. “Beset by a distressed economy and a soaring number of city inspections, the FourOneSix mixed-use condominium project on Broadway Avenue has pushed back its opening to January and will wait until its debut to push ahead with unit sales, officials said. Sales have been slow at the FourOneSix project. This month, 21 condominiums were sold in Glendale, the same amount as September 2007 — though average square-foot values for those units have dropped 27% since last year, said Keith Sorem, a Realtor with Keller Williams.”

“‘The bottom line is, we’ve seen a decline in value,’ he said. ‘Buyers are obviously concerned about a decline in value . . . and don’t want to buy something for more than what it’s worth. Why would you put money down on a project you can’t see, can’t touch and can’t feel? Most people are aware of the overall decline in value. Buyers are skeptical.’”

The Mercury News. “Laura Meneses made the same fateful choice that thousands of local home buyers have made since 2004: She decided to spend most of her family’s income on housing. ‘We’re barely making it now,’ said Meneses, who estimates that 80 percent of her family’s income goes to housing costs. ‘It’s been very, very stressful.’”

“Taking on a huge mortgage made more sense when Silicon Valley real estate seemed only to climb in value. Meneses, a part-time cook at a San Jose senior center, and her husband Juan, a construction worker, never planned to get rich on the $465,000 house they bought in 2004. They just hoped it would help finance college for their three kids.”

“Even with a refinanced, fixed-rate mortgage, Meneses estimates she and her husband spend 80 cents of every dollar they earn on the mortgage payments, utilities and real estate taxes for their San Jose home. Her mother has moved in, partly to help pay the mortgage, and partly to save on her own rent. She shops at the dollar store and has served potato soup for meals.”

“‘It was my dream to buy a house,’ Meneses said this week, ‘and wow, the dream has kind of turned into a nightmare.’”

“Meneses said the $7,000 annual tax bill she and her husband owe to Santa Clara County is a big part of her family’s housing burden. She estimates that the family’s total housing costs are roughly $6,000 a month. Does she regret her decision to buy?”

“‘That’s hard to say. I don’t, because I wanted the stability of not moving my family around every few years. But we’re paying about $6,000 a month. I mean, sure we could have more money and go on vacation, but it’s hard to say. The stability of being in one place with your children and not having to move means a lot to me. I didn’t buy my house to make a huge profit. I bought it so if my children wanted to go to college, we’d be able to pull money out later on,’ she said.”

“Bernie Kellman says he can swing the two-story Richmond house where he raises 3-year-old Frances on an $80,000 salary working as a psychiatric social worker for Alameda County. But he got nowhere over countless calls pleading to rework a bum loan after it was sold and a new lender bumped his monthly payments by more than $700, to $2,700, citing a tax error.”

“‘I’ve never gotten past the first level of customer service,’ said Kellman, who faces a November foreclosure date and receives stacks of postcards from lawyers and shills with sketchy offers of salvation. ‘I can afford a home. I want someone to look at my loan. But I’m scrap metal.’”

“Kellman still hopes for a taste of good fortune. He now owes $470,000 on a home worth less than $300,000. Kellman kept paying the original amount, hoping to show good faith and get the lender’s attention. Before long, he was two months behind and getting electronic recordings when he picked up the phone. Last month, with notice of a foreclosure date, he finally stopped paying. Now he’s tracking rentals online, in case his home gets sold.”

“‘I’ve got a good job. I’d be a good person to loan money to. Someone could make a few pennies taking my $2,000 a month. This is not an investment. This is a home for me and my kid,’ he said. ‘At the end, I will have to say, get your … house. I’m letting the kid crayon the living room.’”

The Santa Cruz Sentinel. “I should probably have seen this coming … moved my average-guy retirement accounts to something safer, protected my family from any dependence on strange Wall Street accounting schemes. Come to think of it, should probably not have refinanced our home a few years ago, either.”

“Seemed like a good idea at the time, what with the insane cost of living for ‘average’ families these days, especially in a place like Santa Cruz County.”

“Here’s an e-mail I received this week from a local reader at the writer’s request, and for obvious reasons, I’m not printing his or her name. ‘Back in 2005 my husband and I refinanced our home of 35 years. It was the only money we could get hold of to pay off medical and other obligations. Our payments went up by over $2,500 per month. The loan amount went from 560k to 725k.’”

“‘Because of lost wages/income we started getting behind on the payments to WaMu about a year later. We called them to advise that we were having problems and asked for their assistance in getting over the hump. They would not accept partial payments as the monthly, so every partial we sent went to the principle — that didn’t help resolve the issue though.’”

“‘Our pleas were met with aggressive, non-cooperative responses. We clearly told them that we could make the payments from the earlier amount and if they would just work with us we would be able to catch up within about six months — no deal. We tried to get help from many including HUD … what a joke.’”

“‘In November of 2007 our home was foreclosed. We owed 725k. As we all know, the market declined and our family home was sold for less than 300k. Why would the bank be willing to take a loss from someone else and not from those who had worked so many years to keep this home? Not only did we suffer that loss but now we can’t even get a bank to talk to us about any amount of credit. A foreclosure is a huge bad mark on your credit rating.’”

“‘The foreclosure created a domino effect for us and we are about to lose our business because our personal credit has spilled over into that arena. We are also facing a possibility of being homeless. Now that so many are suffering financial chaos, funds for assistance to renters are also not readily available. We had never asked for any public assistance while raising our very large family and now that we need help it’s not available to us.’”

“‘Pardon me if my bitterness is showing when I hear all this talk about bailing the fat cats out of their messes. What about those of us who have worked hard all our lives and can’t catch a break.’”

The San Bernardino County Sun. “The Sun: Some people believe banks were using the bailout proposal as a scare tactic and that lenders could ultimately tap into other sources of credit and liquidity instead of borrowing from taxpayers. Is there any truth to that?”

“Jeff Burum, who is co-principal of Rancho Cucamonga-based home builder Diversified Pacific: ‘Anyone who floats that rumor should call up the former CEO of Washington Mutual or Merrill Lynch. These organizations no longer exist because of the (dried-up) financial markets. You can’t even get an acquisition and development loan in the Inland Empire today - it doesn’t exist.’”

“The Sun: The two-county region is suffering from its highest job loss ever, and thousands of former and current homeowners are struggling through debt and bankruptcy. How much worse can things get?”

“Burum: ‘You’re starting to see major home builders like D.R. Horton sell assets for 10 cents on the dollar. They’re dumping assets in California, Nevada and elsewhere. Those values haven’t even hit the marketplace yet. They’ll continue driving down values in the Inland Empire’s real-estate market.’”

The Desert Sun. “The stock market was unimpressed with the $700 billion bailout passed Friday in Congress, a Coachella Valley commentator on the economy said. ‘It’s almost like a negative catharsis,’ agreed Bob Marra, president and publisher of Wheeler’s Market Intelligence. ‘Now, it’s back to reality, and reality right now is not all that great.’”

“Christopher Thornberg, a principal with Beacon Economics, was one who viewed Wells Fargo’s move as a sign that Congress should have stepped back. ‘The rhetoric has been, ‘wow,’ the credit crisis is causing America to go to hell in a handbasket,’ Thornberg said. ‘But the truth is, the consumer is overloaded with debt. They’ve been spending way too much on the basis of falsely inflated values in homes and portfolios.’”

“‘This will not make it all go away,’ he said.”

The Press Democrat. “Peter Inglis of Petaluma dreamed of retiring in his 50s, following a 30-year career as a painting contractor. But the turbulence on Wall Street and a slowing economy has forced a change in his plans. ‘I’m not going to be retiring anytime soon,’ said Inglis, who turned 58 last week. ‘My nest egg is half of what it was two years ago.’”

“Baby boomers are rethinking retirement as they watch their investments dwindle. Plummeting home values, fading 401(k) accounts, shrinking interest on CDs and worries about their own jobs are driving the trend. Fears about the future of Social Security and defined-benefit pensions only add to anxiety for the over-50 set.”

“‘Even people who are five years away from retirement are nervous,’ said Rick Duarte, financial advisor in Rohnert Park.”

“‘It’s a scary time,’ Inglis said. ‘You go into a paint store, and it’s real quiet.’ The sour economy ‘has made everything more difficult,’ he said. ‘Now, I won’t be retiring at least until I qualify for Social Security.’”

“‘I’m going to be working forever,’ said Sarah Jaeschke, who recently left her job as a part-time math instructor at College of Marin in Kentfield.”

“‘I couldn’t afford to live in the Bay Area,’ said Jaeschke, 58, who moved from Petaluma to Kona on the island of Hawaii two weeks ago.”

The Manteca Bulletin. “The foreclosure whirlpool powered by overpriced properties not in tip-top shape to begin with when they were bought three years ago at the height of the inflated housing price bubble are now effectively acting as an albatross around the neck of the median selling price of previously owned homes in Manteca.”

“And until those homes clear the market, the median price in Manteca will continue taking a nosedive toward 2002 levels when the median selling price of an existing home was $237,892. The median price now sits at $246,343. Prices have been steadily plunging since the week of July 21 when the median had slipped to $262,766.”

“Three years ago not a single existing home that closed escrow in Manteca sold for under $320,000 in September. This September is a drastically different story. Of the 118 homes to close escrow in Manteca all (but) about 10 ended up changing hands for less than $320,000.”

“That $320,000 home three years ago had 896 square feet, two bedrooms, one bathroom, no garage and a lot barely bigger than the house. The highest priced house closing escrow so far this month for under $320,000 in Manteca - $310,000 - was for 3,200 square feet with three bedrooms and three bathrooms.”

“Consider a home on Trinity Avenue sandwiched between Manteca High and Spreckels Park. The home with just over 1,200 square feet that sold four years ago for over $240,000. It was vacant for months - probably close to a year. The bank put it up for auction but got no takers with a starting bid at $120,000. The three bedroom two bathroom home - that had remodeling done inside and outside before it was sold four years ago - closed escrow this month for $101,000.”

“The buyer is already in a position to rent it even on the low end of today’s market and still show a positive cash flow out of the gate. People have to live somewhere and there are a lot more renters today mainly because there are a lot of people who lost their homes to foreclosure who aren’t in a position to buy.”

“A spot check with real estate offices across Manteca shows well over 90 percent of their clientele are from the valley - 100 percent in some cases. Plus the vast majority are Manteca residents who are either current renters or else investors.”

“One glaring difference in the buyers between 2006 and today are that over 90 percent are local while two years ago it was the other way around.”

“That is a reality that Coldwell Banker Crossroads Real Estate agent Wendy Audet and Sue Teunissen, among others, said is a silver lining to the foreclosure mess. ‘We have Manteca residents buying who never could afford to buy a home before,’ Teunissen said.”

The Associated Press reports on Virginia. “More than half of people surveyed in an Associated Press-GfK poll released Wednesday said they worry that they will have to work longer because the value of their retirement savings has declined. Denise Edwards, 62, now expects to work for at least another decade selling condominiums because of the damage to her and her husband John’s retirement savings. In the last four years, Edward’s IRA has hovered at about the same level, and the couple’s other savings of less than $1 million have taken a double-digit hit this fall. They also still owe $425,000 on a house with a market value of $650,000.”

“‘We just have to work for as long as possible. And we’re going to have to count on our (two) daughters,’ said Edwards, who lives in a Virginia suburb of Washington.”

The Washington Post. “Shirley McCoy stopped paying her homeowners association fee six months ago. She figured she was doing the job the association should be — filing complaints against neighbors who violated the rules, cutting the lawn of the foreclosed house next door and picking up litter in common areas — so why bother paying dues?”

“Ten percent of her neighbors in the Dale City subdivision are delinquent on dues, according to Carlos Labiosa, the resident manager of the neighborhood association. ‘It doesn’t look good when you are trying to maintain your property and you look across the street and there’s trash out front, the screen door is falling off, and the shutter is off the hinges. That’s devaluing our property. I’m pretty sure I’m not the only one who isn’t paying it,’ McCoy said.”

“Trisha Bayles, who has been saving for years to buy her first home, got flustered when bidding started on the house she wanted in Laurel. In a matter of minutes, the 34-year-old had agreed to buy a two-story red brick home for less than half of the $465,000 price it sold for about a year ago.”

“‘This guy in front of me said it was going for $210,000 and next thing I know the auctioneer is in the aisle saying: ‘You want it for $200,000?’ Bayles said. ‘I’m like: ‘Okay, sure.’ Then I was like: ‘Did I get the house?’ And then it was like: ‘Yes, yes. I got it!’”

From Reuters on Maryland. “Coldwell Banker Real Estate said some 25,000 sellers listing homes with its brokers will cut prices during its first national, 10-day sales event starting on Friday. A recent Coldwell Banker survey found that more than half of the real estate agents said listing prices in their market are too high to attract qualified buyers. Brokers, however, believe that, depending on the market, a price cut of up to 10 percent will be enough to stoke sales.”

“Kathryn Taylor is one seller who hopes that’s the case. ‘The economy. No movement for our home, or even any interest, just because people are scared,’ she said, explaining her decision to cut the asking price on her parents’ home in Silver Spring, Maryland, by 10 percent for 10 days.”

“The two master-bedroom, two-bathroom home in an over-55 community was listed in May at $458,000, undercutting several nearby sellers of the same model. ‘This is the first time we’re lowering it, and we really didn’t want to do that because we listed it to sell,’ she said. ‘We knew things were tough, but the home is a really desirable unit in a neighborhood that rarely has anything come open so we didn’t think it would have any problems selling.’”

“Taylor is getting ‘more antsy’ about selling. Her father passed away last year and her mother is moving to a nursing home that costs $9,000 each month. With stock wealth being roiled, ‘it’s getting more and more important to keep her afloat by selling this house,’ she said of her mother.”

The Maryland Daily Record. “The meltdown in the real estate and financial markets is accomplishing what the passage of time has failed to do: giving bankruptcy lawyers more work than they can handle. Filings this year are on track to surpass 2007. Statistics from the federal court system show that as of the end of September, all bankruptcy filings in Maryland were up more than 32 percent from the same time in 2007, for a total so far this year of 12,598.”

“Maryland Chapter 7 bankruptcies have increased the most. As of the end of August, they were up close to 64 percent from that time last year, to 6,965.”

“Chapter 13 filings, by contrast, are almost flat compared to last year. One of the big problems with Chapter 13 is something that would be an advantage in a better real estate market: It lets a debtor save his home from foreclosure by permitting him to make up his missed mortgage payments.

But that option makes little sense for a homeowner whose house has so depreciated in value that he owes much more in missed mortgage payments than the house is worth. People who a few years ago might have filed Chapter 13 to save the house are filing Chapter 7 and walking away, said Brett Weiss, a solo bankruptcy lawyer in Olney.”

“‘So many properties are underwater that people look at this and they say it’s not worth it,’ he said.”

The Morning Call from Pennsylvania. “In Lehigh County, foreclosure filings this year have already exceeded those of 2007. In Northampton County, they’re on track to dwarf last year’s mammoth number. Local officials were hoping the $700 billion bailout by Congress would offer more help. ‘We’re kind of waiting with bated breath on this new thing,’ said Lori Sywensky, Northampton County community development administrator. ‘Like everywhere else, we have the same issue. People bought homes for more than they are worth.’”

“John Rossi, an accounting professor at Moravian College, said he believes the bailout was ill considered. He expects foreclosures to continue to rise next year as the value of housing continues to fall, leaving some owners’ debts greater than the value of their homes.”

”’People are doing something very logical,’ Rossi said. ‘They’re saying, ‘Hey, I owe more money on my house than it is worth. I’m going to quit making payments.”’

The Post Standard from New York. “Central New York’s housing market could only stay in its protected bubble for so long. Agents say central New York may have become caught in the national undertow. After a tour of open houses in Onondaga County Sunday, most of the real estate agents and homeowners - especially in higher-priced homes in the suburbs - said few potential buyers were coming through the doors and very few were getting offers.”

“Dawn Moyer, an agent with Gallinger Realty USA, said 3267 Greenleafe Drive, in Lysander, has been on the market since last winter. The 3,300-square-foot house is priced at $289,900 - $35,000 less than its assessment. Yet she said she has resorted to giving out free strawberry smoothies to lure potential home buyers to tour the property. The owners moved to Georgia and are so eager to get rid of the home they’d consider even low-ball offers, she said.”

“‘Nothing in this price range is moving,’ she said. ‘(Homes priced at) $100,000 or less are moving because the first-time home buyers are still buying. They are not worried about the economy because you can get deals on a house for less than rent, so why not?’”

“Bill Hanlon, who recent bought 479 Brattle Road, in Syracuse, didn’t sell his Court Street house. Instead, he rented it, he said. The asking price on the Brattle Road house was $154,000, but the owner was so desperate to get rid of it, Hanlon was able to purchase it for $112,000, he said.”

“‘It’s always a hunt to try to find a house or someone in that position,’ he said. ‘I looked at it as an investment opportunity.’”

“Steve Engel, a retired dentist, bought a home in Florida and wants to sell his house in Sedgwick. The $319,900 house has been on the market since March and the Engels plan to move to Florida later this fall. His real estate agent, Peggy Fogarty-Cadaret, said Sedgwick is a unique, niche neighborhood that appeals to a certain type of buyer. Those looking for historic upscale homes have few options and, once they decide they want a classic house, will pay to get it. Thus, she said, she is confident Sedgwick will retain its value.”

“Yet Steve Engel continues to wait and may have to postpone his move to Florida. ‘I’m philosophical about it,’ he said. ‘All you can do is make your house as presentable as possible.’”

The Nashua Telegraph from New Hampshire. “Politicians, pundits and economists might be floating different theories for what caused the nation’s economic crisis, but city residents seem to agree where the responsibility lies. The majority of residents said the culprits were banks that irresponsibly extended loans to customers who shouldn’t have received them and the borrowers who took the money and found themselves unable to pay high-rate predatory mortgages.”

“‘I think the banks are responsible for the credit problem because they loaned to people whether you have (good) credit or not,’ said Pat Tyszko, 71, who paused from her part-time job working behind the counter at Crosby Bakery on East Pearl Street.”

“‘We’re all to blame,’ said a man who appeared to be in his 30s. ‘If you’re the bank, you gave me money. If I’m the person borrowing, I borrowed more than I could afford, thinking that the housing market was going to go up.’”

“Denise Beaudet agreed that lenders and borrowers are to blame for the credit crisis. ‘I think the lenders who made those risky mortgages and made those decisions are responsible for the debt and the mortgages that failed,’ said Beaudet.”

“Beaudet said people who borrowed more than they should have also share in the blame. ‘It’s not my responsibility,’ she said. ‘I made sound financial decisions. I’m in good shape. I bought what I could afford. People who overextended themselves – you made your bed, you got to lie in it.’”

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