The Biggest Bubble Of All Bubbles
It’s Friday desk clearing time for this blogger. “This city in Oregon’s scenic high desert once had one of the nation’s hottest economies. Resort developers, bankers, construction workers and luxury car dealers rushed for a piece of the action. In Deschutes, many high-end homes were built on speculation during better times but not sold. In Bend, local officials are dealing with what the bust left: once-pricey lots left vacant, overbuilt and unsold subdivisions, jobless construction workers. Land values have fallen by more than half, housing prices and office rents by maybe 30 percent. On some residential streets where buyers once rushed to submit bids above the asking price for new homes, nearly as many are for sale as not. Some are foreclosures.”
“Michael Hollern, chairman of the region’s largest developer, said the Bend boom coincided with the one in the Sun Belt. The building boom began gradually in the 1960s and took off seriously a few years ago. ‘We thought we were different, special, with real jobs and real people. It turns out we weren’t that different. And we realized prices were out of touch with reality. Now we need to work off our excesses,’ he said.”
“San Joaquin County’s rate of foreclosure notices - at 5.6 percent, or roughly one filing for every 18 properties in the county - is third highest in California. It’s behind only drought-stricken Merced County at 6.9 percent and Riverside County at 6 percent, where the real estate collapse has triggered massive, ongoing layoffs. ‘That will have to come down 90 percent before we’re in any kind of normal situation,’ said Jeff Michael, director of the Business Forecasting Center at University of the Pacific, of the foreclosure rate.”
“‘Arguably, we had the biggest bubble of all the bubbles, and we were certainly the area first to hit the very high foreclosure rates. The other places are catching up to where we’re at,’ Michael said of San Joaquin County.”
“The number of Utah households in danger of losing their homes almost doubled in the first half of the year as more people lost their jobs and were struggling or unable to pay their monthly mortgage bills. On a state-by-state basis, Utah had the nation’s fifth-highest rate of filings in the January-through-June period, according to RealtyTrac Inc. Filings in the state soared 87.65 percent during the six-month period.”
“‘It’s getting worse,’ said Tara Rollins, executive director of the Utah Housing Coalition. ‘We saw it in two different ways, one, when mortgages were readjusting we saw a wave. Then all of a sudden people started losing their jobs, and that was another wave.’”
“The number of foreclosures in Frederick County may have dropped in June, but that doesn’t mean the housing crisis is over. ‘The subprime mess is on its way out. Now we are starting to see the unemployment impact,’ said Stephen ‘Buzz’ Mackintosh of Mackintosh Inc. Realtors.”
“It is no longer the creative loans faltering, Mackintosh said, but consumers who had been paying their mortgages on time now faced with losing their house. ‘Fifty-six percent of foreclosures are now on fixed-rate mortgages,’ Mackintosh said. ‘That is the effect of people losing their jobs.’”
“Construction jobs account for only about 10 percent of Lee County’s work force in 2009, the lowest figure in the past decade. The loss of construction jobs and the subsequent loss of jobs related to construction - Realtors, mortgage brokers, even furniture sales associates - has driven Lee County’s unemployment as high as 12.4 percent in May.”
“Robert Towns Jr. of Fort Myers, said he worked in construction for more than 20 years before losing his job installing tile about 18 months ago. He worked for a retail store, but is now unemployed again. ‘We were busy for seven or eight years, working seven days a week or as much as we wanted,’ Towns said. ‘And then it just stopped.’”
“Bay Area home prices rose month-over-month for the third straight time as sales reached their highest level in three years in June, fueling hopes that the limping real estate market is slowly beginning to heal. Whether the nascent recovery gathers strength or sputters in the months ahead will depend on the broader economy, the job market and foreclosure levels, economists say.”
“Meanwhile, California’s unemployment rate leaped to 11.5 percent in May as employers cut 68,900 jobs, according to the state’s Employment Development Department. Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange, said home prices could bottom out by the end of the year, but an actual rebound won’t occur until companies feel confident enough to begin hiring again, a mood unlikely to prevail before mid-2010 at the earliest. ”
“‘What trumps all these variables is jobs,’ he said.”
“Home sales in Santa Clara County jumped to their highest level in three years last month. But the market still has a long way to go to recover the ground it has lost in this recession. At the housing bubble’s peak, in July 2007, the county’s median price was $805,500. In June 2008, it was still $670,000, but it bottomed out at $420,000 in January.”
“Rick Weinberg, spokesman for Auction.com in Irvine, which handles foreclosure sales, said ‘the pipeline is still packed. The foreclosures are trickling out slowly, but by the time October comes they’ll be gushing.’”
“‘The housing market is not operating independently of the overall economy,’ said Leslie Appleton-Young, chief economist with the California Association of Realtors. ‘It really depends on whether this economy slips back into a deeper recession or we get more momentum.’”
“‘There was an over correction on the way down, just like there was when prices were going up,’ said Craig Lewis, president of Prudential California Realty. ‘We’ve hit the bottom. I don’t think prices will move up rapidly, but they’ll rise slow and steady now. There are plenty of buyers at these prices, but not enough homes.’”
“But there’s a long way to go before most current homeowners will be happy. The median price paid for a Stanislaus home was $396,000 in December 2005. Virtually every home purchased in the last eight years is worth less now that it was then.”
“The number of homes sold in the Victor Valley has doubled from a year ago and the inventory has fallen by half, according to June housing figures. The reason is simple: a glut of foreclosures. Ninety percent of homes sold in June were bank owned, according to Victor Valley MLS data prepared by Larry Trombley with Century 21 Rose Realty.”
“‘What’s having an impact on the market right now and reducing the number of foreclosed homes for sale is the California moratorium on foreclosures,’ Trombley said.”
“The good news: The Portland-area housing market didn’t get worse in June. The rest of the news: It didn’t get much better. ‘There’s likely an enormous amount of hidden inventory in the market,’ said Tim Duy, a University of Oregon economist. ‘The market is so relatively weak to what people’s expectations are.’”
“Many of those potential sellers are waiting to list their homes until they think they’ll get a higher price, according to real estate brokers. Once the sellers plant their ‘For Sale’ sign, the supply will expand again and could put pressure on prices to fall again.”
“For evidence of a ’shadow inventory,’ Duy points to the slower than normal growth in listings this summer. The real estate market is cyclical, with slow winter months followed by spring thaw and a hot summer. During that cycle, the number of homes listed typically expands steadily from January to July. In 2008, listings grew from January to June by 28 percent. In 2007, it was 40 percent, and in 2006, 52 percent. This year, the rise is just 3 percent.”
“Clark County’s supply of new and preowned homes for sale dropped dramatically last month, as more houses sold and fewer properties came on the market. ‘A lot of people who have been sitting on the fence are starting to come out,’ said Paula Standfill, a sales agent in Vancouver.”
“Other buyers are rushing to make purchases before the tax credit deadline of Nov. 30, said Tracie DeMars, an agent with Re/Max Equity Group Inc. ‘People realize there’s only a few more months left, so it’s now or never. When the federal government gives you $8,000 to buy a home, that goes a long way,’ DeMars said. ‘They have to close by Nov. 30 or they’re not going to get it.’”
“Rising home sales aren’t the only contributing factor to Clark County’s shrinking inventory of homes listed for sale, said Sue Pauley, a Realtor with Windermere Real Estate/Stellar Group and treasurer of the Washington Realtors Association. Pauley said some homeowners have canceled their for-sale listings, especially sellers of higher-priced houses $400,000 and up that were purchased at the peak of the market. The upper-end homes now appear to be languishing.”
“‘Some people have taken homes off the market if they’re going to take too big of a loss because of the competition with short sales, foreclosures and REOs (real estate owned, or bank-owned properties),’ Pauley said.”
“Chico Real Estate expert Debbie Brodie says locally it is all about supply and demand. ‘We’re seeing a definite pick-up in the market. A year ago we had 371 houses on the market in Chico, at this time we have 279,’ said Brodie.”
“Brodie believes past decreases in home values, coupled with the new influx of stimulus money, is making it easier for new home buyers to get into the market. ‘If they can get the $8,000 fed tax credit, and they can also get a Chico City subsidy possibly, it makes it so families can afford their first home.’”
“Woodland trimmed some of its builder fees earlier this year. Talks continue now between home building industry representatives and development department officials in Sacramento County and the cities of Lincoln, Rancho Cordova and Folsom. The cuts in Woodland and Elk Grove followed negotiations with builders who say fees once raised to boomtime highs no longer reflect the new reality of land values. Talks continue now between home building industry representatives and development department officials in Sacramento County and the cities of Lincoln, Rancho Cordova and Folsom. The cuts in Woodland and Elk Grove followed negotiations with builders who say fees once raised to boomtime highs no longer reflect the new reality of land values.”
“Capital-area real estate agents say they’re seeing more parents bailing children out of real estate investments that have put them ‘under water.’ Agents say it’s increasingly common to see parents buy their children another house similar to the one they bought at the height of the market or too early as the market cooled.”
“In many of these cases, the house has lost up to $200,000 in value. So the parents’ rescue mission moves their children into another house where lower payments are aligned with today’s lower values. Then the children do the best they can to unload the old house. That causes less damage to their credit than walking away.”
“If society just followed the advice of its grandparents, there wouldn’t be an ongoing crisis with foreclosures that helped trigger the nation’s economic woes, according to the author of a new book. Shari Olefson, a Tampa, Fla., attorney…says simply blaming Wall Street, government regulations or predatory lenders — all who share culpability — is just shifting responsibility away from those who bought the homes.”
“Attitudes are changing during this crisis, but not always in a good way, Olefson says. There are people who can afford their homes who are walking away or talking about walking away because they are so far underwater, she says. ‘With those attitudes right now, I don’t know what the result will be in the next five to 10 years,’ Olefson says. ‘We are heading farther down the path of a lack of personal (responsibility).’”
“Greed is a big factor, of course, especially on Wall Street because many assumed that prices would keep going up and that mortgage money would be available, Olefson says.”
“Olefson says she knows people who earn more than $500,000 a year who are talking about walking away from a $2 million home because its value has dropped so sharply. They are angry because they look at their neighbors defaulting on their homes and driving down the property values in the neighborhood, she says. A lot of people made flawed decisions, she says. But despite all that, it comes down to homebuyers, Olefson says.”
“‘None of this could have happened without our participation,’ Olefson says.”
“Bidding wars are returning to South Florida’s housing market, as investors and first-time buyers compete for homes and condominiums listed at $200,000 or less. The race for properties is reminiscent of the boom years from 2000 to 2005, when multiple offers on all types of dwellings helped push prices to record highs.”
“Investor Greg Bales bought a three-bedroom home in Lauderdale Lakes three months ago for $65,000 — $1,900 less than what it sold for in 1985. Bales beefed up the curb appeal with a new paint job, trees and other landscaping. Inside, he installed laminate floors, granite countertops, new kitchen appliances and an alarm system. He put the home back on the market July 10 for $139,900 and fielded 10 offers, three for more than the asking price. He selected a bid from a first-time buyer for $145,000, and the deal is expected to be complete next month.”
“‘We would have had a bunch more offers, but my real estate agent told the people it really wasn’t worth their time if they weren’t submitting a full-price offer,’ Bales said.”
“Meanwhile, some real estate agents are creating ‘drama pricing’ — listing properties for far less than the market value to attract bidders and drive up the eventual selling price. ‘It’s like ‘Ta-da’ said Douglas Rill, an agent for in West Palm Beach. ‘It creates so much of a buzz that it results in a bidding war.’”
“Tony Thomas is looking for a home in the $200,000 range in central Palm Beach County. He made three offers, only to be told each time that another buyer out-bid him. His agent, Liz Golub, told him to ‘run like a bunny’ to make strong offers as soon as properties come on the market. The strategy paid off recently when the owner of a home near Lantana accepted his offer. But because it’s a short sale, the bank must approve the deal, and that could take months.”
“‘It’s frustrating,’ Thomas said. ‘I have not seen the benefits of this buyer’s market right now.’”
“They just keep piling up. Despite heavy government intervention and moratoriums aimed at stemming the flow of faltering home loans, forclosures continue to ramp up. On Thursday, RealtyTrac Inc. reported that the foreclosure crisis affected more than 1.5 million homes in the first six months of the year.”
“Marty Rodriguez, owner of Century 21 Marty Rodriguez in Glendora, said most of the transactions her office handles are bank-owned properties or short sales. And Rodriguez figures there are plenty more in the pipeline. ‘They’ve been on hold and now we have another 90-day (state-imposed) moratorium,’ she said. ‘But that’s up on Sept. 1. We’ve only hit bottom now because there is a lack of inventory until the next wave of foreclosures hits … and that’s coming.’”
‘Steve Johnson, director of the Southern California office office of Metrostudy, agreed that more misery is on the way. ‘I think we’re presently preparing for a second wave that will be coming into the Southern California marketplace,’ he said. ‘It’s being caused by continual job losses throughout the state and a continued weakening of the economy by people falling behind on their payments.’”
“Sen. Christopher Dodd., D-Conn., chairman of the Senate Banking Committee, called the overall lack of progress by the government ‘disgraceful.’ He noted that borrowers are facing long delays as they try to get help. ‘We’re being asked every day by our constituents and others: What’s going on?’ Dodd said at a committee hearing.”
“Close-in Dallas-area neighborhoods that had dodged the worst of the housing recession are now getting clobbered. Park Cities home sales plunged 37 percent in the first half of 2009. In North Dallas, sales were down 19 percent from the same period last year, and median prices are off 17 percent.”
“Real-estate agents blame the in-town slowdown on a number of factors. ‘It seems that the overall Dallas market was immune to the housing downturn for a while,’ said Barry Hoffer, an agent with Ebby Halliday Realtors. ‘Now the softening market has finally caught up with us.’”
“The sagging economy and consumer confidence are the top obstacles, said Veteran Dallas appraiser D.W. Skelton. ‘It’s buyers sitting on the fence that is the biggest problem,’ he said. ‘No one is going to start buying new homes when the job numbers continue to drop.’”
“Skelton thinks the bottom of the market is still at least a year away. ‘I’m still telling my clients to sell now and not risk further loss in value.’”
