A False Reality That Stimulated Incredible Growth
The Post Independent reports from Colorado. “In recent months, tightening credit markets have stalled many projects, particularly the so-called luxury spec homes built by developers, said Ryan Grobler, owner of Carbondale-based Oracle Building Group. ‘The whole valley has been hammered,’ Grobler said. ‘If you look at any projects up and down the valley, the foundation is poured and they’ve stopped.’”
“But even when building ramps back up, would-be buyers may find that tightening credit has narrowed the range of homes they can afford, said Adam Roy, a land-use planner at David Johnston Architects. He said the days of putting 5 percent or less down on an expensive home have been rapidly replaced by an era in which banks require 20 percent down and mortgage payments don’t exceed 30 percent of the buyer’s income — which changes the price of a home a consumer can buy.”
“Even consumers who may not need loans may curb their spending, said T. Michael Manchester, principal of Manchester Architects in Snowmass Village and Carbondale. ‘It was a false reality, in my opinion, that stimulated an incredible growth,’ he said.”
“Roy saw an entirely new, less-expensive home sector emerging, particularly downvalley, where consumers getting into the market will likely need cheaper homes than those previously available. ‘There’s going to have to be a product that’s more affordable,’ Roy said, citing the new credit environment.”
The Citizen Telegram from Colorado. “If you didn’t get in on Rifle’s Workforce Housing lottery last year, you’ll have a second chance this summer, when two single family homes and one tri-plex will be sold. The Workforce Housing program began in July with two single family homes in the North Pastures subdivision, constructed by Savage Land Co. of Rifle, who were instrumental in getting the program in place to promote ‘attainable’ housing in the city.”
“‘(The houses) are definitely below market value,’ Sally Brands of Savage Land Co. said while building the first two workforce homes last year. ‘But the bottom line is that we’re not doing this for free. Any builder can do this. But by deed-restricting, you know they’re going to be lived in by people who live here in Rifle. The idea is that you should be able to buy a house here if you work here.’”
The Arizona Republic. “Paradise Valley’s housing market didn’t do as well as the area’s 2008 median price might indicate. The Valley Home Values’ analysis of home prices tracked by ZIP codes showed the median home price only fell about 1 percent in 85253, which spans all the upscale neighborhoods of Paradise Valley. That small price decline looks pretty good compared with those in many parts of metropolitan Phoenix, where prices plummeted more than 20 percent last year.”
“But several Paradise Valley real-estate agents say the median home price doesn’t tell the real story for the high-priced home area. Average list price per square foot for roughly the first quarter of this year is $371. That compares with $544 during the same period in 2008. Average sale price per square foot for this year is $323. Last year, it was $490.”
“Real-estate agent Walt Danley, who has been selling homes in Paradise Valley for more than 30 years, estimates the area’s prices are down about 30 percent from the peak in 2005-06. He said foreclosure properties owned by lenders have hurt Paradise Valley’s housing market. But now, as in many other parts of the Valley, activity and buyer interest is picking up in Paradise Valley. ‘We are at the bottom or very close,’ he said.”
“Former Housing Secretary Henry Cisneros says he is more optimistic than most observers in predicting that the collapsed housing market will show signs of a recovery by year’s end. ‘But we still have more setbacks to work through,’ said Cisneros, U.S. Housing and Urban Development secretary under President Bill Clinton. ‘That includes commercial real estate, which looks grim right now.’”
“Cisneros is chairman of Los Angeles-based CityView, which invests institutional capital in affordable, urban housing. CityView invested in the 168-unit Terra Vista complex in 2007 when the P.B. Bell Cos. started to convert the apartments to condos just as the market cooled for condo conversions. It has sold 86 condos and is leasing the other units.”
“Terra Vista, built in 2000, is priced starting at $139,900 and includes a lease-purchase program that helps turns renters into buyers. That includes Julie Russell, a swimming instructor and golf-course worker, who is in a lease-purchase condo at Terra Vista that the former housing secretary visited. ‘I feel like my money is staying with me at the end of the day,’ Russell said of her lease payments.”
“Cisneros said Terra Vista is offering the kind of program that is helping working families and people like Russell build equity in their homes. He defended the Clinton administration’s efforts to loosen credit requirements to make ownership accessible for more Americans. That led to the home ownership rate growing from about 64 percent in 1993 to 69 percent by the end of Clinton’s second term, Cisneros said.”
“‘Those efforts we hijacked by unscrupulous companies that had no goal of creating ownership or equity for buyers,’ he said. ‘They were all about ambition and greed, and perverted the system.’”
The Arizona Daily Star. “Way down at the bottom of the MLS listings where few home buyers dare to look is a foreclosed town home going for $30,700. There are a handful of properties listed for less — a few trailers and a dilapidated foreclosed home that has an offer pending, for example — but for all intents and purposes this foreclosed town home is the cheapest thing going on the Tucson Association of Realtors Multiple Listing Service.”
“Hard as it might be to believe, not long ago this two-bedroom 904-square-foot town home near South Sixth and Irvington was flipped three times during Tucson’s ‘hot’ housing market. It was sold in 2002 for $58,900, Pima County Assessor’s records show. The home was flipped in August 2004 for $69,900 and then flipped again in September 2005 for $95,000. Now it’s on the market for $30,700.”
“‘The thing sold for 95, and now it’s worth a third of that,’ said Dustin York, an agent who is marketing the town home. ‘What the heck happened in a four-year period?’”
“I found myself wondering how an appraiser could ever have approved such a sale. ‘There weren’t as many properties available to buy under $100,000,’ said Tom Reeb, an appraiser who was speaking in general about Tucson’s market and not about the town home, which he did not appraise. ‘At that time, the supply was way down and demand was way up. So you had a shortage, which is one of the reasons that prices increased.”‘
“5151 S. Montana Place has been beat to hell. It needs a new roof and probably new wiring and plumbing, too. A violent sadness hangs around the house like a closet door on its last hinge. ‘We need someone in there,’ said neighbor César Martinez. ‘It hurts the value of my house.’”
The East Valley Tribune from Arizona. “With a rash of foreclosures, homeowners struggling with bills and builders filing for bankruptcy, homeowner associations in Queen Creek are feeling the economic pinch as much as their residents. ‘The traditional model of collections isn’t working anymore,’ said Chris Clark, a resident who organized a recent HOA summit. ‘You can’t just put a lien on a house or get a judgment on a person and expect money.’”
“When it’s a limited liability company or corporation that owns a house, things can get tougher. Many investors set up limited liability corporations with the house as the main asset, so the company ceases to exist when the bank takes over a company, said attorney Penny Keopke, who also participated in a summit. In other cases, the company will own multiple properties. Then, a judgment can prevent any of those other homes from being sold until the debt is paid, Keopke said. Once a bank takes ownership, the debt will be paid before the home is sold, Keopke said.”
“Gilbert’s Higley Park was in a different situation. A builder left the community with only 141 of the expected 608 homes built, said community manager Sandra Carlson. That also left the HOA with 23 percent of its expected budget.”
“If an individual owns the home and can be located, Keopke said some of her clients have set up payment plans that let debtors pay low amounts for the first six months and then increase the monthly payments. ‘Most people want to pay their debts because that’s just the right thing to do,’ Keopke said. ‘We are getting contacted by a lot of them and the typical response is ‘we know we owe the money, we just can’t pay it.’”
The Daily Herald from Utah. “Not surprising that as the spring home-buying season nears, more builders and Realtors are seeing higher foot traffic. Inquiries have also grown for a state program designed to entice fence-sitters into new homes and stabilize the home-building industry. Under the ‘Home Run’ program, anyone buying a newly built home may be eligible for a $6,000 grant, unlike an $8,000 federal tax credit, which applies only to first-time home buyers — or those who haven’t owned a home in three years.”
“Already, 78 home buyers, who will be closing on the purchase of their homes in the next 30 days. ‘There are first-time home buyers with income who are waiting for home prices to come down further. This is an incentive to get them into the market now,’ said Jim Wood, director of the University of Utah’s Bureau of Economic and Business Research.”
“More home builders, especially smaller ones in Utah, are in financial difficulties. Many have paid top dollar to buy land two years ago, and now find it challenging to sell homes at a profit in today’s market. ,’Enough builders are in trouble that banks are more cautious now,’ said Nate Packer, project manager with Ivory Homes. ‘Some of the smaller builders have left the market because they built the wrong product type, in the wrong location.’”
“As of the fourth quarter, there are 889 speculation homes in Utah County, according to Newreach. About 25 percent, or 222, are selling for under $300,000, and the remainder over $350,000. There were 997 speculation homes in the fourth quarter of 2007, compared with 1,937 in the third quarter of 2007 when the subprime market collapsed in Utah.”
The Las Vegas Sun from Nevada. “The drop in home prices has opened the door to more Canadians buying vacation homes and investment property in Las Vegas, and some builders and developers are trying to take advantage of it. Builders and Realtors are reporting that more Canadians have been shopping for real estate in Las Vegas as a second home, said Dennis Smith, the president of Home Builders Research.”
“‘I think we are getting more Canadians than in the past simply because of the affordability,’ Smith said.”
“The median price of resale homes in Las Vegas in February was $145,000, which by Smith’s numbers is down $10,000 from January and $90,000 from February 2008. That contrasts with the $120,000 median resale price in Phoenix. In the new-home market, the median price was $210,000 in Phoenix and $219,000 in Las Vegas, where the price fell $14,273 or 6 percent from January.”
“When Canadians see a home that once sold for $400,000 and now goes for $200,000, they know it’s the time to buy, said Dennis Duling, director of investor relations with a California real estate investment firm that matches builders and developers with buyers. ‘A lot of people believe we are at or near the bottom,’ Duling said. ‘They have been waiting to see where that bottom is.’”
“Tom Deinet, a Realtor with Century 21 Barrett, said he’s seeing Canadians hitting the market hard with interest in buying investment properties to rent out. When they are earning 3 or 4 percent interest on their bank accounts, the investors are attracted to buying rental properties with an 8 percent to 18 percent return, he said.”
“‘Properties are selling for half what it would cost to build them,’ Deinet said. ‘You will never see this again.’”
The Review Journal from Nevada. “Skip Jourdan looks forward to the day he props his grandchildren upon his knee and tells them about the depression of 2009 and how folks were so willing to reach out and help one another. Like the Desert Shores Community homeowners association he belonged to at Mar-A-Lago condos in northwest Las Vegas. When he was about to drown, the HOA was there to throw him an anchor.”
“Jourdan bought a three-bedroom condo at Mar-A-Lago for $194,000 in 2006 for his daughter to live in while she was attending University of Nevada, Las Vegas. He said he wasn’t looking to make a quick buck by ‘flipping’ the unit.”
“When his daughter transferred to a college in the East, Jourdan decided he’d be better off renting the unit than selling it for around $85,000, its value today. Therein lies the catch. The codes, covenants and restrictions, or CC and R’s, stipulate that anyone who bought at Mar-A-Lago in 2006 or later isn’t allowed to rent. Jourdan has to evict his renters and is now forced to pay $1,500 a month for empty space or sell it as a short sale.”
“Jourdan said he’s not disputing the stipulation that his condo be owner-occupied, and he understands why owners want to keep it that way. He just thinks there should be some sort of hardship contingency that allows him to rent until he can sell. ‘When I do have to short-sell, they’re just locking in comps (comparable sales) at $80,000. It’s ridiculous. All I want to do is keep a cash flow until I sell,’ Jourdan said.”
“Kristin Remhoff, VP of operations and community services for TerraWest Property Management in Las Vegas, said condo communities started capping rentals in 2005 and 2006 because of the difficulty in getting loans for buyers.”
“‘If there was more than ‘x’ percentage of rentals, the banks and mortgage companies weren’t giving loans out,’ she said. ‘Now, because of investors, builders and HOAs had to put deed restrictions on the titles. I have one community where one-third is deed-restricted and the other two-thirds can rent. I need a color-coordinated map to keep it straight.’”
The Reno Gazette Journal from Nevada. “Second homes accounted for 30 percent of all U.S. home sales in 2008, down from 33 percent in 2007, according to a report released Monday by the National Association of Realtors. Investment and vacation properties accounted for 40 percent of housing market sales during the height of the housing bubble in 2005.”
“Lake Tahoe, which has a significant second-home market, was not exempt from the sector’s woes last year. A sizzling high-end market initially helped Tahoe shake off the housing downturn even as the Reno-Sparks market started its decline after the housing bubble’s collapse. But Tahoe’s high-end properties ultimately succumbed to the difficulties that beset the housing sector.”
“‘The Tahoe second-home market has definitely had some serious depreciation on the least year or two,’ said Sue Lowe, corporate broker for Chase International. ‘We’re seeing short sales and even a few bank foreclosures in the higher end, which we didn’t see before. We just recently closed a $3.6 million short sale in Incline, so (the downturn) is hitting every sector now.’”
“The median price for a vacation property in 2008 dropped 23.1 percent to $150,000. Investment properties also saw values drop, down 28 percent to $108,000. Plummeting median prices coupled with the stock market’s own troubles likely played a role in the more upbeat outlook for investment properties, Lowe said.”
“‘Anyone who bought a house at the height of the market certainly has lost value in their home, but they still had a house,’ Lowe said. ‘If you had Lehman Brothers stock, then you had nothing. Home owners can hold on to their investment and ride this cycle out. Housing will definitely go back; it always has and always will. The biggest difference now is that people will be a lot more careful and do a tremendous amount of due diligence when purchasing a home.’”
The Record Courier in Nevada. “Unemployment in Douglas County reached 11.4 percent in the month of February. More than 2,600 people are out of work, according to the Nevada Department of Unemployment, Training and Rehabilitation. Perhaps no other industry has felt the effects of the housing slump more than the real estate industry. Realtors across the Valley have had to reinvent the way they do business.”
“‘I’ve been looking at expenses and looking at all we don’t need,’ said Marsha Tomerlin, owner of Coldwell Banker Itildo in Minden. ‘I used to want to throw money at problems to solve them. Now, I’ve become extremely practical.’”
“Tomerlin has decided to reduce advertising. ‘We kind of had a big ego, like everyone needed to be on a magazine cover,’ she said. ‘Now, we’re working with buyers and sellers through networking, staying in contact with the people you know, those you’ve done business with and have already established relationships with.’”
“Tomerlin said the economy has motivated her and other real estate agents to improve their customer service skills. ‘It’s called working with your sphere of influence — from the gal bagging groceries, to the dentist, to whoever might be a buyer or seller,’ she said.”
“Tomerlin believes the worst of the crisis has already passed. ‘I think we’ve hit the bottom,’ she said. ‘If anybody is thinking about waiting another month or two to buy a dream house, think twice, because people are looking and buying.’”
“Although sales may be picking up, Tomerlin said the market is still far from where it needs to be. ‘There are three major companies in town that are hoping business increases, that have tremendous overheads,’ she said. ‘I remain an eternal optimist, as any person in sales must. I’m looking for the rainbow, and that’s my focus.’”
