From A Buyer’s Perspective, The World Is Their Oyster
The Denver Post reports from Colorado. “While there are plenty of resale and foreclosure options out there, homebuilders are enticing buyers with brand-new smaller and less expensive homes. Floor-plan sizes and home prices have dropped since the beginning of the year. The resale and foreclosure markets present strong competition to new-home builders. ‘Our pricing and product offerings need to be competitive with those markets,’ said Rusty Crandall, division president of KB Home Colorado.”
“In response, the 50-year-old company, one of the nation’s largest homebuilders, is downsizing floor plans to 900 to 1,400 square feet, starting in the low to mid-$100,000s, in several of its communities.”
The Steamboat Pilot from Colorado. “Besides the obvious, there’s a very practical reason independent building contractors in Steamboat Springs aren’t in the planning stages for new spec homes to launch in 2009. ‘We’ve made every (spec house) loan request we’ve had in the last four months, which is none,’ banker Paul Clavadetscher told a local audience of real estate and development professionals.”
“Most construction loans for spec houses are for 24 months, he said. That allows 18 months for construction and a six-month selling period. With robust inventory in most housing categories on the local market, as well as a slow pace of sales, there isn’t much room to think a spec house will be sold within that timeframe, he said.”
“Realtor Shelley Stanford asked Tom Ernst, of Catamount Mortgage, to describe how the current real estate environment is affecting lending. Ernst responded that it might be more appropriate to examine the way loan underwriters are impacting appraisers.”
“‘The appraiser community is under much more scrutiny,’ Ernst said. In particular, Ernst said, appraisals in mountain communities are leading underwrites to ask specific questions about local markets. ‘Underwriters want to know much more about our town,’ Ernst said.”
The Arizona Daily Star. “One in four Tucson homeowners who bought during the last five years now owe more on their mortgages than their homes are worth. A large chunk of those homeowners who are ‘underwater’ on their mortgages bought between 2005 and 2007, says a third-quarter report. In the last year 28 percent of Tucson homes sold at a loss, about 20 percent of transactions involved homes in some state of foreclosure and roughly 83 percent of Tucson’s homes have lost value.”
“Tucsonan Mikka Cady, for example, says she probably owes $177,000 and change on the Southwest Side home she bought last year, but added that someone ‘would be insane’ to pay that much for it today.”
“Veronica Contreras, 26, bought her home south of Reid Park at the height of the housing bubble for $132,000 with only about $2,000 down. She owes about $127,000 — far more than the 750-square-foot home is now worth. To make matters worse, her first mortgage is an interest-only loan, and the rate, which is adjustable, is at 9 percent. She has a second, smaller mortgage for about 5 percent of her loan that has an interest rate of 13 percent.”
“In many ways Contreras is a poster child for the housing crisis. She bought her two-bedroom home at the peak of the run-up, thinking she could sell the house for a profit after a few years. ‘We bought the house before everything got super-bad, thinking we were doing a good investment,’ she said. ‘If we do sell it, we are going to have to pay to sell it, and we don’t have the money to pay to sell the house.’”
“Cady bought her three-bedroom home in January 2007. She thought the market had bottomed out and saw a chance at the American dream. She liked the neighborhood, close to her mom’s home, and she was sick of renting. She put no money down on the $179,000 home. Now she says she could probably sell the home for $145,000, and she’s worried about losing it.”
“‘It is so stressful,’ she said. ‘And everybody you ask for help, they say, ‘No.’”
“When told about Contreras’ situation, Long Realty CEO Rosey Koberlein, said steps need to be taken to keep Contreras and others in their homes until the housing market rebounds. ‘Society needs her to be a homeowner,’ Koberlein said. ‘Because what will happen is, if she has to let go of her house, then all of a sudden she pushes the neighborhood down.’”
“Koberlein said the solution may be as simple as changing the terms of loans like Contreras’ to 40-year fixed rates, or at least lowering interest rates on 30-year loans just to keep people in homes until values work their way back up and they are able to sell for something other than a loss. More broadly, Koberlein said, there needs to be some kind of bailout for homeowners and stimulus for buyers.”
“‘I personally believe that we are at the bottom, and I think we have been bumping along this bottom here for the last few months,’ she said. ‘The future, I think, is dependent on what government does to put a safety net on this slippery slope that’s going on here for people who are facing foreclosures.’”
The East Valley Tribune from Arizona. “Existing home sales across the Valley fell slightly in October compared with the month before and so did prices on non-foreclosure properties, according to the latest report from Arizona State University’s Realty Studies Department. Through October, the 2008 year-to-date resale total includes 39,055 traditional sales and 28,755 foreclosure sales.In every East Valley city, foreclosures made up a significant portion of overall sales last month.”
“From a buyer’s perspective, ‘the world is their oyster, they have lots of different choices in areas all over the Valley,’ said Dee Kepp, associate broker in Tempe and president-elect of the Southeast Valley Association of Realtors.”
“Kepp expects another round of foreclosures will hit the market as interest rates reset on more adjustable rate mortgages in the next few months. ‘So if people cannot afford those payments after the reset, then those possibly will become additional inventory because they won’t be able to afford the jump in their payment,’ she said.”
The Arizona Daily Sun. “It’s been said that location is everything in real estate. But in recent months, local Realtors contend it’s been price — and the lower the better. In October, the median price was $328,000, down $58,000 from the same month the year before. But that price remains at least $75,000 more than what a median-income family in Flagstaff can afford.”
“33 of the 56 homes sold were priced below $350,000, even though homes in that price range account for just 31 percent of the 867 homes currently listed on the Northern Arizona Association of Realtors’ MLS. There is nearly a 15-month supply of homes listed between $350,000 and $500,000.”
“The news is even grimmer for sellers of homes priced above $500,000, with an average of 11 homes sold per month..(and) 349 homes currently listed at that price range.”
“Realtor Hal Stern said many buyers are waiting until they see signs that the local housing market has bottomed out. He said some sellers must consider price reductions in order to get skittish buyers interested. ‘The question is how do we motivate buyers and the only way to do that is to bring the prices down, in many cases significantly, to create the motivation to buy these homes,’ Stern said. ‘Would you buy a home knowing full-well that the home could drop another 5 or 10 percent over the winter months?’”
“Stern said second-home owners are playing a role in the decline in sales of more expensive homes on the market, especially during the winter months. ‘They say, ‘Hey, I’m going to wait. What do I need (a second home) for now when I live in Scottsdale and I’m enjoying playing golf right now,’ Stern said.”
“One bank-owned property Stern is selling, built less than two years ago, could sell for less than the amount owed on the house. He said pricing needs to be aggressive to give buyers an incentive over other similar properties. ‘The bank wants to sell it, they need to get it off their inventory list and they are willing to dump it for maybe $120,000 less than the indebtedness,’ Stern said.”
The Mojave Daily News from the Arizona/Nevada/California border. “It’s a good news-bad news situation for the Tri-state’s real estate market. Home sales are picking up, but most of those transactions are foreclosure or short sales. Bob and Sandy Port operate SB Port Investments, which markets Laughlin Ranch Properties at the master planned community and golf course on the Bullhead Parkway. ‘It is, of course, a buyer’s market, so there are buyers coming in the door,’ said Sandy Port. ‘They’re all looking for the foreclosures and short sales.”
“To illustrate how much prices have fallen, Bob Porter said houses that sold for $650,000 in 2005 now are going for $400,000. The Ports reach out to people who may have originally intended to buy homes in the Palm Springs, Calif., area. ‘The difference is, we have a lake and a river,’ he said. ‘We have 11 casinos. When you throw that in the mix, we’re a jewel sitting here in the desert.’”
“‘Our demand is starting to rise, but it’s for the foreclosures and the short sales,’ said Alysia Dewar of Keller Williams Realty River Cities Specialists. She’s also noticing more interest from investors. ‘I’m getting a lot of people who have homes in California and back east … and they’ve got some money and I’m telling them, now is the time to buy,’ Dewar said, ‘because if they don’t buy now, it is going to level out. But the interest rates are going to jump. If you can find a house that you can buy and you’ve got a great interest rate you can get right now, you better jump on it.’”
The Las Vegas Business Press from Nevada. “Southern Nevada third quarter vacant land prices have plummeted nearly 74 percent since last year, Applied Analysis, a local business advisory firm, reports. Median vacant raw land prices were $524,725 per acre at the end of September, or $1,487,932 less than 12 months earlier.”
“‘Fundamentals within the residential, commercial and resort markets have slowed, resulting in elevated vacancies, less consumer demand, and more tentativeness,’ Applied Analysis principal Brian Gordon said. ‘The new realities of the market have price points resetting and those who purchased property during the past two years trying to make financial sense of their investments.’”
“‘”We are starting to see increased incidents of foreclosures, and many of those highly-leveraged properties are now entering the market again,’ he added. ‘Volumes are still down significantly from where there were two or three years ago.’”
The Review Journal from Nevada. “In Clark County, preforeclosures and REOs have increased 69.2 percent and 157.6 percent, respectively, from the same month a year ago. Tim Kelly Kiernan, REO specialist with the Brodkin Group at ReMax Pros, said prospective buyers of foreclosed homes are making offers on four or five properties at a time to increase their odds of getting one approved by the bank.”
“‘A lot of people are low-balling the banks, which is not very smart,’ he said. ‘They hear everything on TV about foreclosures and they think they can get it for less than it’s listed for. Banks have done their homework. If they list it for $100 a square foot, they’re not going to take $75 a square foot.’”
“Nevada ranked No. 8 in the nation with 3,176 foreclosures, down from 4,020 in September. ‘I still think there’s another 10,000 to 20,000 REOs sitting there waiting to be released on us,’ Kelly Kiernan said.”
“A separate report from Credit Suisse said new foreclosures outpaced sales in Las Vegas, leading to higher inventory and lower prices. Foreclosures continue to drive home prices lower and inventory increased as foreclosure sales slowed, but the pace of new foreclosures didn’t, the report said.”
“You know things are heading south when a 5.44 percent decline in Nevada’s monthly gaming revenues during September isn’t considered a bad performance. ‘While these results are lagging and less significant as gaming operators already reported third-quarter results, we are surprised the decline was not greater based on recent commentary,’ Deutsche Bank gaming analyst Bill Lerner told investors.”
“The taxes collected by the state based on September gaming revenues were $63.5 million, a 14.5 percent decline from the $74.3 million collected a year ago. Each of 2008’s nine months have shown declines, including 15.2 percent in May and nearly 13 percent in July.”
“The news was also bleak in Northern Nevada. Washoe County casinos had gaming revenues of $77 million in September, a 20.5 percent decline from a year ago. Gaming Control Board senior research analyst Frank Streshley said the figure was the largest single month drop by the Northern Nevada county, which includes Reno, since the state began keeping records in 1984.”
In Business Las Vegas from Nevada. “Clark County’s population dropped during the past year after decades as one of America’s fastest growing counties. Clark County’s most recent population estimate in July showed the county lost about 10,000 people since its last estimate in July 2007. Observers, looking back through records for nearly 40 years, said they are not aware of the county having another population loss.”
“‘It is a real important reflection of the breadth and depth of the recession we are seeing today,” said John Restrepo, an economist and principal at Restrepo Consulting Group. ‘Clark County has been one of the fastest-growing counties in the country for 20 years, and now we are not seeing growth.’”
“A reversal of the longtime growth trend is yet another shock to the foundation of the Las Vegas economy, analysts said. Experts have long believed that the lure of jobs fueled by the regular addition of giant Strip resorts and increasingly luxurious casinos in the locals’ market would ensure continuous growth.”
“The belief in the power of the gaming industry’s growth to spark economic expansion isn’t the only myth to be shattered by the economic crisis gripping Las Vegas and the nation. People who believed gaming was immune to recession learned otherwise.”
“And those who believed the rapid appreciation of home prices and demand for new homes would continue indefinitely, boosted by increasing prosperity and rising population, have seen those assumptions crumble. For the number crunchers who have spent years studying the rapid rate of Clark County population growth, the decline is a jolt to the system.”
“‘It shocked me it was so large,’ said Jon Wardlaw, county assistant planning manager. ‘I expected more that we wouldn’t have any growth. It tells us that we are much more connected to the national economy than people have thought in the past.’”
“‘I think given the current situation that it is in the realm of possibility,’ said Jeff Hardcastle, Nevada’s state demographer. ‘Because of the housing market (in Las Vegas), and the current situation on the Strip and the downturn in tourism, it is more than highly possible that (the county) could have lost population.’”
“Experts said the biggest culprit for any drop in population is the loss of construction jobs, which fell about 10,000 in the past year. Casinos have also been trimming jobs as the jobless rate rose to 7.3 percent in September. The emigration of Hispanics is at one of the highest levels ever seen, said Jeremy Aguero, a principal at Applied Analysis. Much of that is attributed to declines in residential construction, he added.”
“‘The economy is down overall, and restaurants and hotels and casinos are laying people off,’ Aguero said. ‘They came here for economic opportunities, and when those opportunities are gone, they are going to search somewhere else.’”
“Clark County calculates its population based on the number of households and their occupancy rate. Wardlaw said the housing vacancy rate rose from 4.5 percent to 7 percent. ‘There are more houses and apartments with nobody in them,’ Wardlaw said.”
