The Housing Bubble

A report from the Salinas Californian. “Laura Beltran, 22, said she wasn’t surprised to learn that the house she rents from her mother in-law is up for auction: She’s only one of many in her east Salinas neighborhood who have lost their homes to foreclosure. ‘There’s like 10 signs around the corner,’ Beltran said, ‘and three or four houses were left empty.’”

“The rate of local foreclosures continues to climb, said firm owner Bob Thompson, who prepared the report for county assessors. ‘It’s a very significant increase,’ Thompson said, ‘And the rate is picking up. There is acceleration going on.’”

“‘Basically, we’re running way over last year,’ said County Assessor Steve Vagnini. In the first nine months of 2008, he said, more than 2,500 homes in the county were foreclosed, compared to fewer than 900 for all of 2007.”

“For some families, even the help of a housing counselor isn’t enough, Beltran said. After the value of their house dropped sharply and the monthly payments skyrocketed, the family couldn’t make it work. Originally worth $480,000, the house is now valued at $230,000, she said. At the same time, the monthly payment rose from $2,000 eight months ago to more than $4,000 now. ‘We just don’t have the money,’ she said. ‘It’s too much.’”

“Homeowner Esperanza Certa, who has lived in the 93905 ZIP code for the past five years, said she has noticed a big change in her neighborhood. After four nearby houses were abandoned to foreclosure, Certa said she worries that the value of her own home has dropped. She’s also concerned about crime. ‘People do things they shouldn’t; they hide in the yard,’ she said in Spanish. ‘It’s bad.’”

The San Francisco Chronicle. “Home prices have declined in more than 90 percent of Bay Area ZIP codes over the past year, often by more than double digits, according to a Chronicle analysis. ‘Prices are off virtually everywhere,’ said Andrew LePage, an analyst with MDA DataQuick. ‘The vast majority of Bay Area neighborhoods, even along the coast, have seen prices come down 10 to 20 percent from peak levels, and in many cases from year-ago levels.’”

“More than 70 percent of Bay Area ZIPs saw prices fall by more than 10 percent - often by considerably more than that. The mid-range price decline on a per-square-foot basis around the nine counties was 17 percent.

“‘No ZIP code is an island,’ said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. ‘These markets are linked. Of course the chaos on one end is going to affect somewhere else.’”

“Randall Kostick, general manager of Zephyr Real Estate, one of the largest brokerages in San Francisco, agreed. ‘There is no housing market that is immune from economic forces,’ he said.”

The Mercury News. “Memo to Bay Area home buyers and owners: Your days to buy or refinance homes using big loans set at low interest rates are numbered. In the Bay Area, the maximum for these ‘agency jumbo’ or ‘high-balance conforming’ loans was temporarily increased to its current level of $729,750. But the expanded loan limits expire Dec. 31.”

“Of course, with home prices dropping, the rollback in the loan limits is less of a big deal in the Bay Area now than it would have been a year ago, said Todd Flesner of Stern Mortgage in Palo Alto. ‘The $625,500 will allow you to get into a home of $780,000-and-change, with 20 percent down,’ he said. ‘And if you look at median prices in the Santa Clara Valley, that works fine for folks.’”

The Manteca Bulletin. “Dori Beck was singing the praises of the City of Manteca’s first-time homebuyers program. The city has drastically cut down the loan processing time, which is critical in a competitive buyers market. ‘For some families who are lower income and working, this could be the last time they can ever afford to own their own home in Manteca,’ Beck said of home prices that have dropped off as much as 50 percent in some segments of the local market.”

“But as the mortgage planner with Guild Mortgage Co. was talking Friday in the conference room at EXIT Aragon Realtors, a young woman walked into the office. Both her and her husband had lost their jobs and they were looking for help so they could figure a way to keep their house.”

The Sacramento Bee. “In a vivid example of the Wall Street financial crisis hitting home, development plans for a Placer County golf course community called Bickford Ranch crashed Friday in federal bankruptcy court. SunCal spokesman David Soyka said Friday that without Lehman’s money, SunCal Bickford Ranch LLC can’t finish infrastructure work or even maintain the property.”

“‘The Lehman Brothers bankruptcy has created a situation that stands in the way of any new capital coming into the project,’ Soyka said in a statement.”

The Fresno Bee. “Some of the streets are in, but there isn’t much else at Tierra Vista, an idle 44-lot subdivision in Dinuba that is a casualty of Estate Financial Inc.’s downfall. The Paso Robles company is in bankruptcy, and its principals have been arrested. ‘They put in some of the streets but haven’t completed all the street work,’ said Jayne Anderson, city development director. ‘It is sitting there dead in the water.’”

“Richard Alvarez and his wife invested up to $2 million with Estate Financial over six years. The money was loaned to developers who paid the Alvarezes monthly interest rates of 12% until the property was sold. Then, they were repaid in full. ‘I had other investments [with Estate Financial], and it worked out. It paid off really well,’ said Alvarez. ‘They would build a house for $100,000 and sell it for $300,000, and everyone would make money.’”

“Alvarez said the Villa Mira house he invested in was built and now houses a renter, but the rent payments are going to Estate Financial.”

The Press Enterprise. “The third quarter of 2008 was not kind to most Inland-headquartered financial institutions, and local banking experts say tight lending standards and diminished earnings will likely persist well into 2009. ‘This year is the first year in 16 years that 1st Centennial has sustained any losses whatsoever,’ company Chief Financial Officer Beth Sanders said via e-mail. ‘As you know, our losses stem solely from lending to local merchant builders who are unable to meet their commitments due to the unprecedented decline in the housing market.’”

The Orange County Business Journal. “The median price of an existing home in the county has dropped nearly 38% from the height of the market in 2006. Santa Ana, Anaheim and Garden Grove are seeing larger declines in prices, while coastal communities have fared much better. Three of the county’s top five performing ZIP codes since 2006 are in Newport Beach and Newport Coast, with price appreciation in those areas ranging from 11% to 73%. Four of the five worst-performing ZIP codes are in Santa Ana.”

“Homeowners in Santa Ana have seen home values cut in half since the market peak. Likewise, a single-family home in Anaheim lost $243,000 on average since 2006, representing a 71% drop in value, Meyers Builders reports.”

“Among areas that have seen large amounts of development recently, Irvine prices have dropped 17% to 20%, while Ladera Ranch home values are down 25% from the peak of the market. Expect more declines in these two areas during the next few years as many homes there were bought with adjustable mortgages that are due to reset soon, Meyers Builders said.”

“Highpointe Communities Inc., an Aliso Viejo-based housing developer, bought 212 finished lots in an under-construction gated community called Spanish Walk. The 80-acre development, which will total 400 homes at completion, is next to the California State University, San Bernardino, Palm Desert campus.”

“‘Many companies in the real estate industry are talking about buying land, but few are actually doing it,’ said Steve Vliss, Highpointe chief executive, in a statement.”

The Orange County Register. “Tamra Barney, one of the stars of Bravo’s ‘The Real Housewives of Orange County,’ has listed her home in Ladera Ranch for $1.6 million. ‘We’ve been wanting to sell, but watching prices going down,’ said Barney. ‘So we’ve decided we’ll bite the bullet.’”

“Part of last season’s story line on the reality show included discussion about Barney’s work in real estate. She says that won’t happen in the upcoming season because (1) she was unhappy about how her business acumen was portrayed; and (2) she’s taking a break from real estate as the market stays chilled. (Barney is listed as the agent for her home.)”

“Barney said they would probably try to buy a distressed house in a gated community such as Coto de Caza or in Newport Beach closer to where her husband now works. ‘We’d (like to) pick up a foreclosure, or a vacant lot – where ever. We know we can get a hell of a deal.’”

From Broker News. “According to San Diego-based broker coach and former mortgage banker, Dave Agena, the situation in the US is ‘bad - very bad, really, really bad.’ ‘The biggest challenge for brokers is there is no demand for housing - we have overbuilt. There’s 11 months of inventory sitting out there,’ he told AB.”

“And that is not all. According to Agena, new underwriting guidelines are so overreavtive, brokers are struggling to bail out borrowers in trouble. Further exacerbating the problem is the fact that 30% of properties being sold are bank owned. ‘Banks don’t know how to sell property. They sell it at basement prices to cover the loan balance this cascades the problem because it pulls down all the property values,’ he said.”

The Union Tribune. “With unemployment rising and credit drying up, more Americans are struggling to stay afloat – and are looking to their closets and garages for help. Pamela Nuccio lost her Oceanside home to foreclosure in September and has until today to move out of the bank-owned property. She is trying to clear out before she has to face a locksmith and San Diego County sheriff’s deputies sent by the courts to remove evicted homeowners. Eviction orders are up 15 percent this year, said Cmdr. Glenn Revell of the Sheriff’s Department Court Services Bureau. Revell estimates deputies will serve 8,625 eviction orders this year, compared with 7,500 in 2007.”

“‘I keep telling myself it’s just stuff,’ said Nucci. ‘I had things before. I’ll make money and have things again.’”

“‘Foreclosure/moving sale EVERYTHING MUST GO!!!!’ read an ad by Kelley Donnelly, who took out a nearly $250,000 mortgage on the College Area house that her mother left to her free and clear. Donnelly, who had little income, ended up using the money from the loan to make her monthly payments, a plan that had long-term flaws. Her foreclosed home sold at auction last month.”

“‘I’m not letting my son play in the yard,’ Donnelly said. ‘I’m afraid sheriff’s deputies are going to show up.’”

“Nuccio is determined to avoid that. Long divorced, she bought her two-bedroom house for about $270,000 in 2006. Soon after, she lost her job selling condominium conversions. Jobs selling land in Mexico and time shares were a bust. ‘I had always been able to find a job really easily and I didn’t think it was going to be a problem,’ Nuccio said.”

The Voice of San Diego. “Plans to help distressed homeowners have been floated at various levels of government, and there are a few major ones being discussed currently at the national level. For homeowners who’ve been helped by loan modification programs, any drawbacks seem vastly outweighed by their benefit.”

“Kathy Flickinger had been calling her bank early in the morning and late at night for a year and a half when she realized her payments would become unaffordable, trying to work out a modification to her loan. Until she found Community HousingWorks, she couldn’t get a lender to take her call. Finally she obtained a modification to her interest rate, making her mortgage payments affordable. She said she dislikes the sentiment from people who would punish everyone with an unaffordable mortgage payment, and who would allow the economy to slide further rather than create more programs to help homeowners like her.”

“‘The people who aren’t in the situation, they’re lumping everybody into a similar group,’ she said. ‘Sure there were people who were fraudulent and bankers who pushed people into loans, but they want to punish the entire country when they’re worried that somebody’s going to benefit from something that they’re not going to benefit from?’”

“Gabe del Rio, president of a local consortium of nonprofits dealing with the foreclosure fallout, said an attitude of resentment toward distressed homeowners is ill-placed. Del Rio said the fixed lower payment for five or 10 years, as bandied about as part of various rescue plans, also might give the housing market a chance to turn around. If it doesn’t, he said, the homeowners will still have options to avoid foreclosure.”

“‘We’re hoping that people can refinance and that the market bounces back in a decade,’ he said.”

The Bakersfield Californian. “Oildale homeowners Owen Hawks and his wife had a very specific goal in mind when they showed up to a live home auction Tuesday night at the Rabobank Arena. With a budget of $70,000, the couple was hoping to place a successful bid on a two-bedroom home on an acre of land in the Lake Isabella area so they could get away whenever Oildale fogs over.”

“By the end of the night, Real Estate Disposition Corp’s sharp-dressed auction team and lender representatives had sold 45 of the 57 homes on the block for a combined value of $3.5 million. Twelve of the homes didn’t sell because the highest bidder did not qualify for a loan, an REDC spokesman said.”

“The Hawkses, who ended up getting the Lake Isabella-area place for $55,000 (it had gone earlier for about $196,000).”

“By Friday Owen Hawks, a retired crane operator, still hadn’t checked out the property’s water well, but he had begun lining up contractors to put up a fence and remodel the kitchen. He was already looking forward to relaxing in the 700-square-foot, knotty-pine-walled living room, among other benefits.”

“‘I won’t have to haul my boat so far,’ he said.”

The Eagle Tribune reports from Massachusetts. “The number of new homes being built in Salem has hit a 30-year low. In Rockingham County, building permits dropped from 2,071 in 2003 to 749 in 2007, a 64 percent decline, according to statistics recently released by the state. Derry has issued just four permits for new homes in the past four months, Building Inspector Bob Mackey said. Mackey said developers are sitting on dozens of empty lots ready for new houses, waiting for the housing market to improve. ‘They’re waiting until the demand for new houses picks up,’ Mackey said.”

“The bad economy has put plans on hold for 288 upscale condominiums next to Atkinson Resort & Country Club in Atkinson, said Harold Morse, general manager of Lewis Builders. ‘Everybody is having trouble selling,’ Morse said. ‘Even though we’re outperforming a lot of other builders, there’s very little traffic right now. We need some consumer confidence back.’”

“Ed Humunick of Salem, a real estate professional for 30 years, said he believes the housing market will continue to plummet, especially in New Hampshire and the rest of New England. ‘It’s clear that the market was overbuilt,’ he said. ‘Easy credit has been available everywhere, whether people could qualify for a mortgage or not. Builders should have seen it coming, but they continued building every year, and the bubble has burst.’”

The New York Times. “Even though the average price for a Manhattan apartment, at $1.5 million, is higher than it was a year ago, some New York neighborhoods have already started to feel the downward tug that has wrenched the housing market elsewhere in the nation. Median prices in Harlem and East Harlem were down nearly 20 percent, to $440,000 at the end of this year’s third quarter, from $549,000 at the same time last year, according to Miller Samuel Inc., a real estate appraisal and consulting firm.”

“Similarly, condominiums in Midtown East and Turtle Bay dropped 18.6 percent, to $1.197 million from $1.47 million; and condos in Midtown West and Hell’s Kitchen dropped 8 percent, to $1.01 million from $1.099 million.”

“The credit crisis and the volatility on Wall Street will probably spur a continuation of these trends and lead to a universal drop in housing prices, said Michael Signet, the executive director of sales at Bond New York, a real estate agency. ‘From everything we’re seeing out on the street, the fourth quarter report will slow prices down across the board in every neighborhood,’ Mr. Signet said. ‘There’s a lot of nervousness out there.’”

The Philly Metro from Pennsylvania. “For many African Americans in Philadelphia, Barack Obamas election as the nation’s first black president is a symbol of hope. But will his presidency translate to better conditions for blacks in Philadelphia – and across the country? Local political consultant Maurice Floyd weighed in.”

“Floyd: ‘I think one of the other things he was talking about is affordable housing for people to not only dream the ‘American Dream,’ but live it in providing them with equal opportunities for first-time homebuyers to buy those homes. I think those homes before this drop were unreachable – even unthinkable – to people in our community…I think where he will come in to help with the housing is to get these banks and lending institutions to open credit so that people can buy some of these houses at affordable prices.’”

The Star Ledger from New Jersey. “It’s not impossible to get a mortgage — even if you don’t have a 20 percent down payment lying around and an 800 credit score. Surprised? So was 23-year-old Kerri Kushner who along with her boyfriend, 27-year-old Erik Richardson, bought a two-bedroom home in Old Bridge a few months ago.”

“‘I was quite frank with the mortgage guy. I told him upfront I didn’t think we would be approved for a mortgage because I don’t have 750 credit,’ Kushner said. On top of that, she had just financed a new Nissan Altima and had co-signed another auto loan to help her boyfriend.”

“The New Jersey Housing and Mortgage Finance Agency provides a variety of programs for prospective buyers, including Smart Start, which is designed to help first-time home buyers scraping together a down payment. The program offers a buyer the chance to get a second mortgage to cover down payment and closing costs worth up to 4 percent of the home’s purchase price. For Kushner, that translated into $6,000 toward the cost of buying her $170,000 home.”

“Another perk: If buyers keep the home as their primary residence for seven years, that second mortgage is forgiven. ‘We’re trying to save to buy a house, but we were just starting out so we didn’t have any money put away for it,’ Kushner said.”

The Daily Journal from New Jersey. “Area banks and lending companies say they remain ready, willing and able to make residential mortgages, despite the general fiscal crisis in their industry. ‘We would have no trouble lending a billion dollars tomorrow — if people would qualify,’ said Marc Goldberg, manager of Gateway Funding’s office in Vineland. ‘Qualifying has changed very dramatically.’”

“Goldberg said the secondary mortgage markets, like Fannie Mae and Freddie Mac, require the oversight. ‘It’s very unfortunate that they got pushed into taking the type of mortgages they never used to,’ he said. ‘The effect has been two things — No. 1 is to make sure the property we’re evaluating is actually worth what we’re saying it is. And the other is to make sure the buyer is capable of making the payment — and willing.’”

The Record on New Jersey. “The case was severe, but the storyline as told by real estate agent Karim Dawli is all too common in some areas: A bus driver with a modest income got a mortgage three years ago to buy a $420,000 house in Passaic, N.J. Today, with payments on her adjustable loan soaring, she is months behind on her mortgage, facing possible foreclosure and desperate for a solution. Dawli is working with her to arrange a deal that may bring in a far lower price than she paid but get her out from under her mortgage.”

“‘This case is extreme,’ said Dawli, an agent in Tenafly, N.J. But, he said, ‘there are a lot of cases out there like that.’”

The Observer Tribune from New Jersey. “Valerie and Gary Sylvester and their five children don’t want to become another casualty in the subprime mortgage scandal. But unless the Sylvesters get some last-minute help, they will find themselves homeless when their $1.2 million Birch Street home goes up for sheriff’s sale next Thursday, Nov. 13.”

“The Sylvesters’ story is all too familiar. They bought their 1,800 square foot split level in Mendham in 1989 for $197,000. In the ensuing years, Mr. Sylvester, who is a contractor, expanded and improved the home. By 2006, it was assessed at $1.2 million. Two years ago, they went the route of many people when they applied for a refinancing of their home mortgage, hoping for a lower interest rate and to gain some cash to pay off business bills. The refinancing was approved and a monthly mortgage payment was set at $5,100.”

“Their troubles began when the mortgage company boosted the monthly payments to $7,100. The family couldn’t afford the bills and the mortgage company moved for foreclosure. The Sylvesters have spent thousands in legal costs to no avail. They have lost in court and an appeal would cost at least another $7,000, money they don’t have. The mortgage company, meanwhile, is demanding payment of $200,000 in legal and other fees and repayment of the second mortgage, totaling $850,000.”

“They have pleaded to no avail for help from everyone from Gov. Jon Corzine and Sen. Frank Lautenberg, D-N.J. to Rep. Rodney Frelinghuysen, R-11, and the Morris County Prosecutor. ‘I have five children,’ Mrs. Sylvester said. ‘I can’t be put out on the street. Someone has to step up to the plate.’”

The Washington Post. “Michael Glosserman, managing member of JBG Holding, which is one of Washington’s most prominent private-equity real estate firms, and others have amassed hundreds of millions of dollars that they plan to use to troll the area’s commercial and housing real estate market over the next year in search of bargains.”

“Another prominent businessman who handles investments on behalf of a wealthy local family…talked to me under the condition that I not print his name because the family patriarch doesn’t want the attention. My friend said there is lots of money on the sidelines waiting for an attractive opening.”

“‘The deep discounted values have not materialized,’ said the investor, whose client is listed in the Forbes 400 of richest Americans. ‘The wait continues…What we haven’t seen is the current owner who has come to the point where they are willing to dispose of that asset at the bargain-basement price.’”

“Staff writer David Nakamura, has documented, sleek new buildings with offices, condos, apartments and retail space have risen around the ballpark, but many remain empty. Glosserman said prices for land near the baseball stadium could drop from $120 a square foot to as low as $30, making it too cheap to pass up.”

“Others are looking at the recently burgeoning condominium market north of Massachusetts Avenue in the District. ‘There are some busted condo deals that are still lurking out there that could be opportunities in the District as well as outside,’ said Esko Korhonen, who has $230 million in investor money that he is looking to put to work.”

The Daily News Record from Virginia. “For first-time homebuyers and real estate investors, foreclosed properties can provide an opportunity to get a jump on property that is priced lower than usual, said Angela Andrews, a Realtor with Century 21 Real Estate Unlimited.”

“‘Unfortunately, and honestly, I feel like [having foreclosure properties on the market] is not good from the standpoint that people are losing their homes,’ she said. ‘That being said, it does provide opportunities for purchasing properties at a lower price and helps to normalize the market because prices had become so overly inflated.’”

“In Rockingham County, 64 properties are listed in the various states of foreclosure, according to RealtyTrac. In Harrisonburg, 33 homes are listed in those various stages.”

“In September, one out of every 505 homes in Virginia was in some stage of foreclosure, statistics from RealtyTrac showed. That ranks Virginia No. 11 in the nation for its rate. Foreclosures that month - 6,397 in total - were up 229 percent from September 2007 and up 20 percent from August 2008.”

The Virginian Pilot. “While the abundant supply of homes in the region has caused prices to fall and encouraged some prospective buyers to wade into a market amid its biggest downturn in a decade, a study by an Old Dominion University economist found that, for many, renting may still be a better value.”

“The median monthly rental price of a three-bedroom house in Hampton Roads is forecast to be $1,287 this year, while the median monthly mortgage payment on a comparable house is $1,441, a premium of about 12 percent, according to the ODU study. The comparison does not take into account annual property taxes or federal income tax breaks for home ownership, both of which would affect the model’s conclusion. Real estate agents argue that including those would make up the difference between renting and buying.”

‘Gilbert Yochum, an economist at the university, said the model was constructed so economists could monitor the baseline measure of what families pay for housing on a month-to-month basis.”

“‘Before the price run-up in housing, it was very much in the interest of households to buy,’ Yochum said. ‘That was true all the way to 2003. Only then did you see the ratio climb so rapidly that by 2005 and 2006, the decision to own or rent was seriously moving back to the rent side.’”

“In 2003, the median rent of a three-bedroom home in Hampton Roads was $1,044, while the median monthly mortgage payment was $809. Despite the continuing rise in rental prices during the following years, the prices of homes went up so dramatically that by 2006, the equation had flipped, with rent prices at $1,164 and mortgage payments of $1,457. Greg Grootendorst, deputy director for economics of the Hampton Roads Planning District Commission, looked at the same figures and came to the same conclusion.”

“‘Even though prices on rentals have increased and housing prices have gone down, those two lines have not crossed back yet,’ he said.”

“There are signs that could change, however. Prices for existing homes fell 5.4 percent in September in South Hampton Roads, according to the region’s local MLS.”

“Barbara Wolcott, president of Prudential Decker Realty, said it is impossible to discount the income tax deductions, which offset much of the difference in the prices. Not to mention, she said, for buyers who wait out the downturn, prices will eventually rebound.”

“‘When you rent, at the end of five or 10 years, you have nothing,’ she said. ‘If you’re buying, you’ve not only built equity in your home, but the home value will have also gone up.’”

“Ron Pearson, a certified financial planner in Virginia Beach, said that for some it could still make financial sense to buy if they know they’ll be in the area for many years and have good job security. Having that long-term commitment is essential to making the math work, Pearson said, because it takes years of mortgage payments to build equity in a home.”

“‘It used to be, if you were going to be here a year, you could flip the house and make money on it,’ he said. ‘Realistically, that’s not the case anymore.’”

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