Chain Of Fools
The Denver Post reports from Colorado. “Mike Kraft, a Realtor in Loveland, said first-time buyers have an edge in the current marketplace. The property they buy won’t have inflated equity, Kraft said, and many sellers are willing to help with closing costs. ‘It’s a buyer’s market. There’s a lot of inventory out there,’ he said.”
“George Todd, co-owner of Todd Realty Group, said house hunters need to keep the resale value of properties in mind as they shop around. It might sound counter-intuitive to be thinking about selling a home you haven’t even bid on, but it’s a reality homebuyers need to face, Todd said. ‘You want a house that will appeal to the most amount of buyers on the market at any given time,’ Todd said.”
“That doesn’t mean you should forget the home of your dreams, but understand it could take longer to sell when the time comes, he said. So consider a home’s location, asking price and floor plan carefully before placing a bid. Beyond that, first-timers need to be as patient as feasible during their first home-shopping trips. ‘I would be loathe to let (clients) write an offer until they’ve seen 20-25 houses. . . . If you need to see 50 houses to find the right one, that’s what you have to do, he said.”
The Rocky Mountain News from Colorado. “Several sectors of the Colorado economy are struggling and bracing for a tough 2009, but none is in worse shape than construction. After an expected drop of more than 4 percent in 2008, construction employment across the state could fall by another 7 percent in 2009, according to a forecast by the University of Colorado’s Leeds School of Business. That’s a loss of more than 18,000 construction jobs over a two-year period.”
“‘People are worried about their jobs, and what has happened to the rest of the country is happening here,’ said Mike Rinner, executive VP of the Genesis Group, who was part of the group that made the projections. ‘Companies are having trouble financing new growth opportunities, and that has an impact on outlook and expectations, and to some degree Coloradans are overleveraged and carrying too much debt.’”
The Arizona Republic. “Home builders face a struggle of Darwinian proportions in 2009 that experts say will shape the industry into a smaller, but smarter, animal. The pool of Valley home builders is expected to shrink considerably this year, as the prolonged flood of foreclosures pushes even more builders out of the business. ‘We’re going to see natural selection of the building industry,’ Fulton Homes President Doug Fulton said.”
“The Tempe-based builder recently formed a team of ‘Fulton Foreclosure Specialists,’ whose job is to talk prospective customers out of buying a foreclosed home, and if that doesn’t work, to sell them a foreclosed home. The idea is to get banks to appoint Fulton’s team members as listing agents for bank-owned homes that meet a certain standard of quality, Fulton said.”
“He’d still prefer customers to buy one of his new homes, but Fulton said he realizes that’s not always going to happen. ‘These homes are selling for less than we can build them for,’ he said.”
“The median new-home price has fallen much further - 10 percent further - than the median price for an existing home, said analyst Jim Belfiore of Phoenix. But it’s one specific category of resale homes that has presented builders with nearly unbeatable competition: so-called distress sales. Distress sales are those involving what Belfiore calls ‘upside-down parties.’”
“One former builder said the supply-side problem began more than a year ago, as the loan-to-value ratio fell on land slated for development, and banks required builders to inject more capital into the projects or face foreclosure. For some, that added pressure was too much to bear. The Arizona Department of Real Estate maintains a list of struggling and failed home-builder and developer projects that currently includes 38 bankruptcies and 85 ‘projects in financial trouble’ due to foreclosure, bankruptcy, contractor lawsuits and other concerns.”
“T2 Homes President Reed Porter said he remains optimistic about 2009, but it’s not the five-years-ago sort of optimism. ‘We all have a different outlook than we did in the roaring 2000s,’ he said.”
The Daily Courier from Arizona. “Caught up in the housing market crash, local governments rushed to cut everything from employees to electricity use as revenues plummeted in 2008. Prescott Valley was issuing as many as 143 single-family home building permits per month this century, but in 2008 the monthly count never even hit 20. Chino Valley cut this year’s budget a whopping 69 percent and laid off 13 employees in April.”
“City Budget and Finance Director Mark Woodfill said the economic slowdown began in about the first quarter of 2006, and basically has been on a downward trend ever since. Norwood projects a turnaround by about summer 2010 - still more than a year away. And even then, he said he doesn’t expect dramatic changes, because ‘people’s behaviors have changed.’”
“Greg Fister, manager of economic development for the Town of Prescott Valley, says the economic downturn is unlike anything he has experienced. ‘I’ve never seen the number of projects that have been postponed or cancelled in the past year,’ he said.”
“Prescott Valley collected $4.1 million in sales tax revenues from July through October, down 9 percent from $4.5 million during the same period in 2007-08, said Economic Development Manager Greg Fister. The direst news came on the home front. The town issued only one permit for single-family homes in September.”
The Spectrum from Utah. “The Washington County housing market continues to strain the local economy. Washington County witnessed a job contraction of 6.1 percent in November when compared with the same month last year, said Department of Workforce Services Chief Economist Mark Knold.”
“‘I’ve never seen anything like this in (Washington) County,’ Knold said. ‘Unprecedented is probably a good way to describe it.’”
“Following the national trend, Carol Sapp, executive officer of the Southern Utah Home Builders Association, said many builders are struggling through the recession. ‘There is no doubt at all that there are companies in the housing industry that are experiencing extreme hardships,’ Sapp said. ‘We are feeling pain.’”
“She said the problem is not diminished demand, but recently imposed lending restrictions from banks and a wealth of bank-owned properties competing with new home sales. ‘It has tightened up in the finance industry,’ she said. ‘That is really where we have the issue. Without the finance, you are not able to sell these homes.’”
The Salt Lake Tribune from Utah. “Is the economy in Utah going to get better anytime soon? Probably not quickly enough to suit most folks. In Utah, in 2009, ‘We’re still going to have more layoffs and more home price depreciation,’ said Mark Knold, chief economist with the Utah Department of Workforce Services.”
“Much of his prediction stems from timing. Utah’s once-red-hot real estate market started to cool in summer 2007, about two years after other states’ markets faltered. And Utah’s economy didn’t really fall into recession territory until a couple of months ago.”
“There probably will be more declines in the values of homes priced above $400,000, said Wells Fargo & Co. economist Kelly Matthews. If mortgage rates remain below 5 percent, values of homes priced at under $400,000 — especially those below $300,000 — may stabilize this year, he said.”
“But there’s no guarantee. Salt Lake City real estate agent Randall Wall said that in recent weeks he has seen price concessions being made all the way down to the $150,000 range, although the lower the asking price, the less likely sellers are to take a hit to get their property sold.”
The Pahrump Valley Times from Nevada. “Developers announced ambitious projects in 2008 to build hotels, casinos, shopping malls, restaurants and housing developments. Many have fallen short. Focus Property Group announced it was restructuring its debt and reassessing the timing of the Pahrump project back in February. The county commission approved a development agreement allowing Focus to build up to 5,800 homes in September 2006. At that time, company President John Ritter expected home construction to begin in 2009.”
“‘All our projects in Pahrump are essentially on hold. We’re still a very big believer in Pahrump, and as soon as the market comes back we want to be part of it,’ said Mark Fiorentino, Focus senior vice-president of governmental affairs.”
The Reno Gazette Journal from Nevada. “Sales of existing single-family homes in Washoe County in November saw a significant jump over last year, but new home sales saw a steep drop as falling median prices and a glut in inventory continue to put pressure on the homebuilding industry.”
“Although Washoe County’s $220,000 median price for existing homes in November was relatively flat compared with the previous month, it represents a 30.2 percent decrease from last year. Prices still have a way to fall and are clearly not bottomed out yet, said Brian Kaiser, a housing and real estate analyst with the Center for Regional Studies, who expects some additional price decreases in 2009 coupled with stagnant new construction.”
“Existing condominiums fared even worse in terms of price, down 50 percent from last year with a median price of $100,000. Existing condo sales volume is also down 31.6 percent month-over-month and 13.3 percent year-over-year.”
“New-home sales also continue to struggle, with only 25 sales reported in Washoe County in November. The sales represent a 53.7 percent decline from the previous month and a ’staggering’ 82.9 percent drop from November 2007, Kaiser said. One bright spot for new homes is median sales price, which was at $351,958. The price is up 26.8 percent from September and 4.3 percent from the same period last year. But the jury is still out on what those numbers exactly mean, experts said.”
“‘I think the small sample size has more to do with (the median price increase) than any inherent strength that it might imply in new homes,’ Kaiser said. ‘It’s worth watching, though, to see if the new homes in the coming months can continue holding their own on price. I don’t expect there to be much of a positive change in the direction of the market in early 2009. Foreclosures are still increasing and flooding the market with bargain-priced homes, and I believe that it will be extremely difficult for new home builders to compete with that market.’”
The Review Journal from Nevada. “Local housing statistics released by the Greater Las Vegas Association of Realtors show local home sales more than doubling compared to the same time last year. In November, GLVAR reported sales increasing 125.5 percent for homes and 142.0 percent for condominiums and town homes, compared to November 2007. This follows even greater year-over-year sales increases in September and October.”
“Two out of every three homes being sold in Southern Nevada are owned by lenders.”
“The median price of a single-family home sold in the Las Vegas area decreased by 2.1 percent in November, from $190,000 in October to $186,000 in November. That’s down 32.0 percent from November of 2007. For condos and town homes, the median sales price decreased 17.2 percent from $109,575 in October to $90,750 in November. That’s down 49.6 percent from November 2007.”
“Las Vegas is not just a place where people are born and live. It is an enterprise. It is a deal people enter, a set of givens agreed upon: More is better. Biggest is best. To live in Las Vegas is to stake your future on this enterprise — for better or worse. For the past 20 years, it has been for better.”
“It was a place that not only believed its own hype, but depended on it. And so, it has been a shock as, quietly and slowly, everything has changed. Like many U.S. cities, Las Vegas is watching its economy reel. Home values have plummeted. Foreclosures have exploded. Unemployment is the highest it’s been in at least 20 years.”
“For the first time in decades, the population has stopped growing. Casino projects are on hold. Planes full of free-spending tourists are landing with less frequency. Long the embodiment of American confidence, the city is now in limbo.”
“‘Jackpot Town!’ the headline read. And above it was the smiling face of Jesse Grice. He was just 27, six years into his career as an Elvis impersonator. A young Elvis Presley. A fit, fresh, gold lame Elvis, on the cover of Time Magazine. As he tells it now, even then in November 1998, he could not believe his luck.”
“After years of seeing his home’s value soar, Grice took a gamble, using equity in his house to invest in a downtown bar, hoping for long-term security. As the bar’s business slowed and he started to fall behind on mortgage payments, his Graceland began losing value. The bank took it back in October. Grice sold his collection of memorabilia on the front lawn. He put the Graceland gates in storage and moved away. ‘Look how many years we were up, up, up, and the ride had to end at some point. Well, it just ended,’ he said.”
“Donald Youshaw and his girlfriend, Bernie Jones, heard the call. ‘Come out West. Get a job. They’re booming. They’re hiring,’ they remember being told. ‘Casinos are going up. The housing market is going up.’”
“In 2002, the couple drove across the country. Youshaw, along with his mother, a retired nurse, bought a three-bedroom stucco home. His neighbor was gobbling up investment properties as home values headed north. Youshaw imagined he might try his hand at real estate, but first he needed money to spruce up the home he already owned.”
“His mother saw an ad on television for a refinancing program. She called the number and got a new loan with ease and little clear explanation. But the loan came with hidden fees and higher monthly payments, and Youshaw fell $25,000 in arrears before the bank foreclosed.”
“Today he and Jones spend their days in a home they rent just blocks from the one he lost. Youshaw has pawned jewelry and even took out a payday loan at 200 percent interest to pay the gas bill. Stunned at how quickly his fortunes turned, Youshaw says, ‘I’m living like I did when I was 19.’”
“Terry Jicinsky, (is) the senior VP of marketing for the Las Vegas Convention and Visitors Authority. As smaller numbers of visitors come, off 10 percent in October from a year earlier, the marketers keep adjusting their pitch: casting Las Vegas as an easy last-minute destination, then as affordable, then as an escape for ‘crazy times.’”
“But bad times? No one here planned for that. ‘Because our growth cycle has been going on for 20 years, you know, for many people, myself included, that’s a career. That is the entire length of your experience,’ Jicinsky says. ‘We have casino executives that started working in their 20s and 30s that are now in their 40s and 50s, where all they knew was double-digit growth year after year after year.’”
“As Jicinsky speaks, the bustle of the convention floor floats into his office. Today’s convention, a gambling industry summit, has been full of glum news of frugal gamblers and tightfisted lenders. Just now, aspiring bar bands are auditioning for club owners below. A woman’s voice intrudes on Jicinsky’s thoughts. ‘Chain, chain, chain … chain of fools,’ she sings.”
