The Housing Bubble

The News & Observer reports from North Carolina. “Danny Creech took the call last August. It was his bank, SunTrust. He owed the Atlanta lender $1.5 million, but the debt wasn’t a worry. Creech, president of Landon Homes in Raleigh, routinely borrowed to buy and build homes. When homes lingered on the market, getting an extension on the loan typically required only a two-minute call and a $150 fee. But this was no two-minute call. SunTrust wouldn’t be extending the loan terms. The bank wanted to be paid back. In 60 days.”

“Now Creech, who says he ‘never missed an interest payment, never been late on one, always lived up to my part of the obligation,’ is in default, facing foreclosure and fearing his future.”

“When SunTrust called his loans, he had to scramble. He sold two houses at a loss of $105,000. He persuaded smaller lenders to take on portions of the debt. After 60 days, Creech still owed SunTrust about $560,000. The loan officer told him that SunTrust could refinance the balance, but only if he paid $55,000 and agreed to pay a monthly interest rate of 8.5 percent on the balance. ‘I could get money from the mob for cheaper,’ Creech said.”

The Sun News from South Carolina. “Ever thought about hopping on a bus to go house shopping? Sounds odd, but the national trend - dubbed ‘foreclosure bus tours’ - is starting to roll along the Grand Strand. At least two tours are planned here…and experts predict that with the way the market is - buyers looking for deals with lots to choose from - the area is likely to see more.”

“‘I think they will be pretty popular,’ said Tom Maeser, a local housing market analyst. ‘Everybody asks to see short sales and foreclosures first … What it tells me is that we are in a wonderful time for buyers.’”

“‘It’s just like going to see a house,’ said Jarrett Bouchette, president of Bouchette Realty & Investments Inc., ‘there will just be a lot of other people going with you.’”

From Macon.com in Georgia. “Some subdivisions are like neighborhoods for ghosts. You may drive down finished roads beneath street lights, past empty lots. You might even pass a house or two. But nobody’s home. Other subdivisions may be half full of occupied homes with picture-window views of rubble.”

“The economy has taken a heavy, heavy toll on all the new construction in Bibb County,’ said Barbara Woodward, a real estate agent with Connie Ham Middle Georgia Realty. ‘Banks aren’t making construction loans. Buyers can’t get mortgage loans,’ she said. ‘Unless you’re the rare person who’s sitting on a lot of cash, you’re not going to expose yourself any more.’”

“ith the foreclosures on the new construction, banks are willing to take substantial hits to get it off their books, Woodward said. So those that bought their homes at full value, they’re pretty much out of luck.’”

“That’s a fear of Clara Hawthorne, who bought a house at full price in The Highlands off Mumford Road. There, developer Sivica/Highlands Development left houses and town homes half built and acres of red dirt. Residents and county officials say that until recently, erosion threatened to destabilize the streets. Sivica officials did not return repeated phone calls to their offices, homes and attorneys.”

“‘I don’t see us selling our house for what we paid for it in the next three to five years,’ Hawthorne said.”

“‘For the last 10 years. … a developer could get any reasonable cost they wanted. The price matters more today,’ Sean Frith said, adding, ‘It’s a bloodbath.’”

“Home values will rebound, Woodward said. ‘We’ve had a major correction and one that was probably, in some ways, needed,’ she said. ‘But everything converged at one time, so the pain is a lot broader and deeper.’”

The Athens Beacon Herald from Georgia. “Custom home designer Greg Jordan’s workload and professional focus has changed dramatically as the stormy economy has pounded the construction industry. Last July, Jordan, owner of residential architectural company The OldeCQ Homestead in Danielsville, had 140 sets of preliminary house plans set to go on the books. By December, he only had two.”

“‘People backed out or put their plans on hold because banks weren’t lending money so they could build the houses,’ said Jordan, who has been in the business for 12 years.”

“The number of permits to build new homes in Georgia dropped 75 percent since their peak in the first three months of 2006, said University of Georgia Terry College of Business Dean Robert Sumichrast in an economic forecast delivered last week in Athens. ‘That is a free fall,’ Sumichrast said. ‘Georgia’s single-family housing starts (new homes) are at their lowest level since the 1981 recession, when our population was about half of today’s almost 10 million people.’”

National Public Radio on Florida. “Single-family home sales prices in the Fort Myers-Cape Coral area of Florida fell 59 percent between January 2008 and January 2009. In January 2009, the median sales price was $94,900, compared to $234,000 for the prior year.”

“It’s not hard to find neighborhoods that have been devastated. On one block of Northwest Second Avenue, at least half of the houses on the street are vacant. There are a few sale signs. High weeds grow under the palm trees at one house. Others have their windows and doors covered by storm shutters.”

“But those who follow the real estate market here are starting to see some signs of hope. Brett Ellis, a real estate agent, sums it up: ‘Sales are picking up and the inventory is going down.’”

“A year ago, the median price for a home in Lee County was more than $225,000. Today, it’s less than $100,000. In recent months, prices have begun to flatten out. In some desirable locations, Ellis says, they may even soon begin to rise. Even optimists like Ellis hesitate to make too much of the recent downturn, however, in part because of the large numbers of adjustable-rate mortgages that are due to reset in 2010 and 2011.”

“Matt Zacharias, a general contractor from Lancaster, Pa., had some luck. He recently bought a three-bedroom, two-bath home with a pool and its own boat dock. He paid $182,000. Sixteen months ago, the house sold for more than $500,000. ‘The market down here, the prices are just too good to be true,’ Zacharias says. ‘I had to come down and check it out for myself. One thing led to another and here we are — I’m actually going to look at another property later as another investment property.’”

“Mayor Jim Burch prefers to dwell on the positives. Just a few years ago, he and other elected officials worried about how, with rising costs, housing in the city was being priced beyond the means of teachers and police officers. ‘It’s kind of solved that problem,’ he says. ‘Affordable housing is back. That also attracts business. It also attracts residents to come into our area. We should take advantage of that and we will.’”

“Economist Hank Fishkind, like others who watch the housing market, notes it’s not possible to know you’ve hit the bottom except in hindsight, after prices have begun to rise. He agrees though that Cape Coral is probably close to the bottom.”

“And eventually, Fishkind says, most of the city’s oversupply of houses will be absorbed by the market. ‘I think there’s no doubt about that,’ he says, ‘but it will be the houses that are in the best of locations. There are some houses that are in such far-flung locations in such scattered development patterns, that there may be very little demand for them at any price. Some houses will be abandoned.’”

The Miami Herald. “Florida’s mortgage crisis worsened significantly in the last three months of 2008, with a stunning one in five home loans one month or more past due, the highest delinquency rate among the 50 states, an industry group reported. Of those, 8.95 percent were in foreclosure — representing 320,315 homes.”

“‘The equity theory says that even if you are capable of paying off your mortgage, you might let the loan go into foreclosure if the outstanding balance on the loan is more than what you might think the house is worth,’ said Andrea Heuson, a professor of finance at the University of Miami who researches the real estate market.”

“The being the case, she said, the Making Home Affordable plan would have a limited impact because it does not address the question of principal reductions.”

“Subprime loans, which are no longer available, were given to borrowers who had limited or spotty credit histories and are blamed for sparking events that led to the global financial meltdown and subsequent U.S. recession. ‘We knew Florida had a particular problem with these loans, but only 40 percent are current — that’s six out of 10 that are delinquent. Across the board, Florida has issues,’ MBA chief economist Jay Brinkmann said.”

The Palm Beach Post. “A Delray Beach firm tasked with redeveloping the Heart of Boynton is proposing a scaled-back version of a controversial project that once included a seven-story condominium building and 600 townhouses and condos. Gone is the height. The tallest building will be four stories, according to the proposal. And gone is the size. The plan now includes less than 360 housing units.”

“‘It’s a totally different proposal,’ CRA Executive Director Lisa Bright said.”

“By any measure, retail shops and restaurants should be beating down the doors to take space at the Canyon Town Center. The new palm-tree-lined shopping center west of Boynton Beach is in the midst of thousands of new homes - including homes built by a Canyon affiliate, GL Homes. More important, no other shopping centers are nearby.”

“But since late last year, leasing activity has slowed at the 200,000-square-foot center at Lyons Road and Boynton Beach Boulevard.”

“Caryn DeVincenti, who bought a home three years ago in the Canyon housing development, is one homeowner who can’t wait for the center to fill up. Local, national or regional, she just wants to see stores that will allow her to shop and eat near her home. ‘It’s one of the main reasons why we purchased here,’ DeVincenti said.”

The News Journal. “With the U.S. dealing with an economic slide that has cost millions of jobs, the number of vehicle repossessions is expected to rise 5 percent this year. Joe Taylor, whose Florida-based company insures repossession companies, said licensing and training are the answer to avoiding such violence.”

“‘If a guy is just put right on the street without training, the potential for violence is very, very high,’ said Taylor, who runs Insurance Services USA.”

“A Daytona Beach repo company hasn’t seen the violence in this area. J. Patrick Altes, president of Falcon International Corp., said, ‘We are repossessing vehicles at an unprecedented rate, but we are finding less violence.’”

“He said his repossessors are dealing with more sophisticated people, who are less likely to resort to confrontation and violence. ‘We are dealing with real estate agents, investors, business professionals, builders, concrete guys — not professional con artists,’ Altes said.”