The Housing Bubble

It’s Friday desk clearing time for this blogger. “Seven people were arrested Thursday and charged with operating a $142 million mortgage and security fraud that pushed 201 Riverside County homes into foreclosure and harmed hundreds of investors in California and Arizona, driving many to financial ruin. In their wake were dozens of homeowners and investors hopeful for prosperous lives but instead, in some cases, impoverished by their losses. Deborah Weber has gone through foreclosure and bankruptcy and was forced to move with her husband from what she called their ‘dream house’ in Rialto to a mobile home in Riverside.”

“She said she has little hope that the money she and her fellow investors lost will be recovered from the defendants and returned to them. ‘I really don’t foresee any money,’ she said. ‘The most we will get is the satisfaction of them going to jail.’”

“The scheme was orchestrated, District Attorney Rod Pacheco said, by James Benjamin Duncan, of La Cresta, who billed himself ‘James the Cash King’ in Internet videos. Also in connection with the case, plea agreements on federal charges were filed in U.S. District Court in Los Angeles, said U.S. Attorney George S. Cardona. Cardona said Duncan was able to take advantage of people because home values were exploding and people thought they would continue to climb.”

“In a telephone interview Thursday, one of the alleged California victims expressed delight that charges were finally filed. ‘Yes, yes,’ said Anna Richter, who moved to Houston after being coaxed into buying three Murrieta homes and later losing them. ‘That’s where they should have been for the last three years. I can’t even describe how happy I am to finally see some movement.’”

“The slump in the US housing market may not be over, but for buyers like Daniel and Robin Akerman, for sale signs equal dollar signs. For US$150,000 - the Akermans are buying a three bedroom house in Pensacola, Florida which sold for US$225,000 at the peak of the market. ‘We’re getting a lot of house. We looked at a lot of houses before this one, and they were good prices but not as much house. Definitely excellent house for the price that we’re paying,’ says Daniel Akerman.”

“Short sales like this are increasingly popular in Pensacola, Florida. Short sales aren’t an option for everyone though. Mitchell Perry, a member of the US Navy stationed in Pensacola, bought his home at the peak of the market for $115,000. The house is now worth US$90,000 and Perry is being transferred to a new base. Compounding matters, Perry refinanced his house, without realising that his mortgage would rise to US$125,000.”

“‘There’s no selling right now, it’s either going to be rent or it’s going to be vacant and I’m going to be paying on it,’ says Mitchell Perry, US Navy hospital corpsman.”

“In 2005, the bankruptcy law was changed to make it harder to file bankruptcy. After it took effect, filings dramatically dropped. But this year, filings are climbing and are expected to total 1.5 million, the level they were at before the tighter law took effect. These days, it’s ordinary middle-class Americans, not a marginalized underclass or high-stakes gamblers, who are most apt to experience financial failure.”

“During the boom years, many middle-class Americans lived beyond their means. Middle-class families were encouraged to spend. But that often turned into a disaster when their bills increased and wages dwindled. ‘My wife and I were great at lubricating the economy,’ says Rock Macke, who lives with his wife and two children in Rancho Santa Margarita, Calif. ‘We loved to spend money, as is the middle-class thing to do.’”

“They filed for Chapter 7 bankruptcy in March. Since then, they’ve gotten rid of their expensive cars and downgraded. Macke takes care of the yard instead of paying for a gardener. ‘I got wrapped up in materialism. But in a painful way, this reminded me of important things, like a healthy family, that you lose perspective on when you’re trying to chase the American dream,’ he says.”

“As unemployed homeowners struggled to pay their mortgages, the percentage of New Jersey loans in foreclosure or at least a month behind on payments hit 14.5 percent in the third quarter, the Mortgage Bankers Association said Thursday. The rise in unemployment is the main driver behind the rise in foreclosures, according to Jay Brinkmann, the mortgage bankers’ chief economist.”

“Phyllis Salowe-Kaye, head of New Jersey Citizen Action, said that while the economy is partly to blame for the rise in mortgage delinquencies, lenders also bear some responsibility because of the exotic loans they made during the housing boom. She pointed to one type of loan popular in those days, the option ARM — an adjustable-rate mortgage where the homeowner had the option to pay less than the amount needed to fully amortize the mortgage. In those cases, the unpaid balance was added to the loan amount. But eventually, the payments rise.”

“‘We’re seeing people with exploding mortgages that have just started to explode,’ Salowe-Kaye said.”

“She watched her rewarding job in the mortgage industry disappear and her financial security dissolve in a $3 million bankruptcy. Then she embraced a total career change — only to have her first steps toward the health care industry interrupted by a frightening turn as a patient. Somehow, 47-year-old Diane Simon smiles brightly beneath a still-short shock of regrown hair, at ease in her new life entwined with two major crises of the times.”

“‘I’m more comfortable in health care than the finance industry,’ she says of her fledgling career. ‘For one thing, you don’t have to rely on the goobers on Wall Street.’”

“‘I saw an explosion of business,’ she said. ‘What I didn’t see, at that point, was the issue of value. We were seeing how values were increasing, but we weren’t seeing the trouble ahead.’”

“By 2007, houses in which she had invested — two in California, two in Hawaii — had begun the slide toward foreclosure. The rental market dried up and, with no tenants to cover her costs, she saw four mortgages and other debt snowball into a $3 million bankruptcy. And then, in late November 2008, she felt a lump in her breast. Within three weeks she had her diagnosis: Stage 3 breast cancer that had metastasized to the lymph nodes.”

“And that’s when she remarked to her husband: ‘Apparently the mortgage industry gives you cancer.’”

“The coroner’s report left no doubt as to the cause of death: toxic loans. That was the conclusion of a financial autopsy that federal officials performed on Haven Trust Bank, a small bank in Duluth, Ga., that collapsed last December.”

“At bank after bank, the examiners are discovering that state and federal regulators knew lenders were engaging in hazardous business practices but failed to act until it was too late. ‘We all could have done a better job,’ said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation.”

“Many bank examiners acknowledge they were lulled into believing the good times for banks would last. They also concede that they were sometimes reluctant to act when troubles surfaced, for fear of unsettling the housing market and the economy. Then as now, banking lobbyists vigorously opposed attempts to rein in the banks, like the 2006 guidelines that discouraged banks from holding big commercial real estate positions.”

“‘Hindsight is a wonderful thing,’ said Timothy W. Long, the chief bank examiner for the Office of the Comptroller of the Currency. ‘At the height of the economic boom, to take an aggressive supervisory approach and tell people to stop lending is hard to do.’”

“Experts outlined how the government saved the U.S. economy from collapsing and predicted its path of recovery at the University of Redlands’ Inland Empire Economic Update Wednesday. UR president Stuart Dorsey, former chief economist for the Senate Finance Committee and a self-described ‘recovering economist,’ addressed ‘FAQs’ about the recession and recovery. The debate over whether government intervention helps the economy has been raging a long time, he said.”

“‘We’re still debating whether fiscal policy had anything to do with getting us out of the Great Depression,’ he said.”

“What the government’s recent actions have done is boost consumer confidence, he said. But for the economy to recover and stabilize long term, people need to drop the mentality that spending money is the answer. ‘Perhaps it’s not a bad thing for consumption to lag behind and saving (to increase),’ he said.”

“Los Angeles-based Beacon Economics founder Christopher Thornberg’s presentation was abbreviated because of bad phone connection. He said the good news is the recession is over - the bad news is the problems are not being fixed. ‘We’re in a very weird place where government policy is the primary driver of economic activity,’ he said.”

“California is worse off than the nation as a whole, he said. But the residential market - including in the Inland Empire - is improving. He cautioned against getting caught up in enthusiasm over the market’s revival. There will be more foreclosures in the region in the coming year and unemployment is still high, he said. ‘The housing market is being rallied by mortgage rates - that can’t go on forever,’ he said.”

“Thornberg predicted slow growth in 2010 and a mild recession in 2011. ‘We have to let the economy heal,’ he said. ‘The process is painful but it has to occur.’”

“‘Clearly, things are worse than most of us would have anticipated,’ said Stephen Cauley, director of research at the UCLA Ziman Center for Real Estate. ‘And lower income homeowners are not the only ones hurting. The value of upper-income homes have gone down about as much, and in some cases it can make a lot of sense for people to walk away from the mortgage. If a homeowner owes $80,000 on a house that’s worth only $60,000, it might make sense to give it back to the bank.’”

“‘On the flipside, if you’re thinking about giving the home back to the lender, you also have to consider where you’re going to live,’ he said.”

“The number of delinquent prime loans in Minnesota climbed 5.17 percent in the third quarter compared with the second quarter and the percentage of prime loans in foreclosure grew 2.41 percent. ‘They’re terrible numbers and they just keep getting worse,’ said Scott Anderson, a senior economist for Wells Fargo.”

“‘We’re talking about people who really, truly want to pay their bills on time and are having trouble,’ said Tim Swierczek, president of the Minnesota Mortgage Association. Swierzcek’s also heard of a small number of cases where homeowners who can afford to pay their loans are choosing not to because they paid far more for the home than it’s worth in today’s market.”

“The common practice during the housing boom of stretching to afford a home is another contributor to these higher numbers, experts say. ‘People stretched to buy housing and took on more debt than they should have,’ Anderson said.”

“Sacramento-area home prices are still falling compared to a year ago, but for the first time in almost 2 1/2 years, their decline can be measured in single digits. In some parts of the state, including the Bay Area, prices are even starting to creep up again. Michael Lyon, head of Sacramento’s Lyon Real Estate, said, ‘If anything, we’ll see appreciation in the first quarter, especially in the lower end.’”

“Home affordability has hit another all-time high in Stanislaus County, putting homeownership in reach for more first-time buyers. Sales prices, meanwhile, held steady in October, with the county’s median-priced home selling for $140,000. But foreclosures continue creeping up. Modesto kindergarten teacher Andrew Sirogiannis carefully tracks all those housing statistics as he hunts for his first home.”

“‘I’ve been waiting for what I think is the bottom of the market before I buy,’ said Sirogiannis, 31. ‘I’m looking for a good, safe neighborhood and a good price (under $300,000). If I buy something, it probably will be between Thanksgiving and New Year’s when the market slows down and not so many people are bidding for houses.’”

“Sirogiannis has been financially ready to buy a home for about five years, but he thought purchasing would be foolish ‘during the real estate boom because houses were overpriced.’”

“Using her good credit rating and her income from managing a Ceres insurance office, Twenty-year-old Diana Aguilar purchased a $115,000 house in Livingston. ‘It was super simple. I was actually amazed,’ Aguilar said. The foreclosed four-bedroom house previously had sold for more than twice what she paid, so she is confident she got a good deal.”

“Aguilar’s home payment now is less than $900 a month, compared with the $800 monthly rent she had been paying. She got a Federal Housing Administration-backed mortgage that only required a few thousand dollars for a down payment. She also qualified for the $8,000 federal tax credit. Although finding the right house can be difficult, Aguilar offered this advice to other first-time buyers: ‘Don’t give up. Just keep looking. You can do it. Everybody can these days.’”

“For the first time in nearly two years, the median price of Santa Clara County houses is higher than a year ago. The median price of houses in the county that changed hands last month increased to $550,000, up 6.7 percent from October 2008. The last time the median price increased from its year-ago level was in December 2007, when the price of $739,000 was 4.6 percent more than in December 2006.”

“‘With the homebuyer tax credit, and with the lower prices compared to ‘06 and ‘07, and with lending institutions keeping homes off the foreclosure inventory … we’ve stabilized,’ said Stephen Levy of the Center for Continuing Study of the California Economy, in Palo Alto. ‘But that’s a lot of conditions. It doesn’t mean we’re not in danger of another round of foreclosures.’”

“Homebuyer Eddie Espitia, 31, was spurred to action by the federal government’s tax credit of up to $8,000 for first-time buyers. Espitia started looking about six months ago, eventually touring more than two dozen homes from Brentwood to Gilroy to Hollister. He and his mother are combining forces on the purchase, and they searched for a quiet neighborhood and a house priced from about $300,000 to $325,000.”

“After losing out on two houses, one in Brentwood and one in Hollister, he finally had an offer accepted on a four-bedroom house in Hollister. It’s a short sale, meaning the owner is selling for less than he or she owes on the mortgage, but is able to avoid foreclosure. The trek toward home- ownership has been more competitive than he had thought based on media reports, said Espitia, who manages two Starbucks stores in San Jose and Morgan Hill.”

“‘It reads as if it’s plentiful out there and quite simple, but it’s not,’ he said. ‘The amount of inventory in our price range seemed to diminish over time, and the houses were being picked off by people who were quicker and more savvy than we were.’”

“Since 1997, Chicago has added almost 150,000 condos to its housing stock. The people who bought those units maybe didn’t fully realize it at the time, but they’re taking part in a big experiment in communal living. Everyone has to pool their money to fix the roof or keep the elevator working. And if your neighbors stop ponying up, you’re on the hook. Now the foreclosure crisis is pushing many condo buildings to the verge of collapse.”

“When Dee Hutchinson bought her condo, let’s just say this was not part of the plan. This 27-unit condo building in Chicago’s Washington Park neighborhood is almost completely empty. Most of the units are foreclosed or abandoned, some inhabited by squatters. For months, only Hutchinson and a few other owners have been paying assessments. They’ve had no heat or hot water since April when the gas was shut off.”

“Hutchinson loves her unit and wants to protect her credit, but even she had started packing to leave for good. She says she was tired of crashing at her brother’s place. HUTCHINSON: ‘And I was just paying mortgage and struggling paying this mortgage and not living here and I was just going to walk away and foreclose like everybody else.’”

“Angela Maurello of the non-profit Community Investment Corporation has been working on this for years. Her program acts as a receiver on behalf of the city for distressed condo buildings. I asked her how many she thinks there are in Chicago. MAURELLO: ‘Oh there’s hundreds because we already have 200 of the ones we have, so I’d say there’s got to be 400, 500 of these buildings in the city. This is a serious problem.’”

“And that means lots more condo owners like Hutchinson trying to shoulder the expense of a whole building without help from their neighbors. Turning this building around won’t be easy. Investors are now buying units there for as low as $14,000. Hutchinson says some of the new people have as little commitment to the building as the previous owners.”

“HUTCHINSON: ‘It’s been a struggle, because we have no control of the people moving out and going foreclose, but then we have these knuckleheads coming in buying these units short sale – that’s fine, but you still have to pay assessments. So we have new people coming in now that we’re fighting with.’”

“Hutchinson sinks back into her couch, exasperated. She says she misses the days when she was a renter. And she says if she ever buys another home, it won’t be a condo.”

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The Star Tribune reports from Wyoming. “For the past few years Rebecca Thomas has struggled to find affordable, quality housing to rent. A single parent to 6-year-old Jordyn, Thomas lived in low-income housing in 2007, but earned too much money during her first year living there to qualify to stay. A small business owner, Thomas has worked two jobs in addition to her massage therapy business just to keep up with bills. Thomas is living with her boyfriend’s family while trying to save enough to buy a house in the next six months. Tired of renting, Thomas said buying a house with her boyfriend seems more sensible than throwing money away on rent.”

“‘We’re trying to save for a house,’ Thomas said. ‘We just think we’ll be financially stable to buy then.’”

“Hoping to take advantage of the tax credit now available to first-time home buyers, Thomas is just one of many Gillette residents helping keep the community’s housing market stable. After a slow second quarter, real estate sales are picking up again, Re/Max broker/owner Ryan Conklin said.”

“Also the owner of three rentals, Conklin said the rental market has loosened up in the last few months compared to the last three years, when the vacancy rate hovered around zero percent. ‘It’s taking a little longer to rent something out, and rents have come down a little,’ Conklin said.”

“The vacancy rate is now 6.1 percent. Gillette Public Information Officer Joe Lunne said new apartments and the first-time home buyer tax credit are helping to ease the rental market that for the past two years has seen a .1 percent vacancy rate.In 2006 there were just 1,351 apartments in the community, and today there are about 1,800. ‘It’s easier for the young people trying to find a place to live,’ Lunne said. ‘It takes some of the stress off.’”

“The lack of affordable housing, often cited as a negative factor in enticing new workers into Campbell County, is now slowly easing. Now, the recruitment efforts are being hampered by other issues, including the difficulty people are having in selling homes in other states so they can relocate to Wyoming. ‘They can’t sell their house in other states,’ Lunne said. ‘That’s really the struggle for us now.’”

“While the Campbell County housing market continues to stay clear of many of the struggles plaguing the rest of the nation, the number of new housing permits issued in 2009 stayed steady. By the end of October, 434 permits had been issued in Gillette, while by the end of November 2008 only 372 permits had been issued. ‘It doesn’t look to me like anyone is slowing up,’ Lunne said.”

The Spokesman Review. “Greenstone’s acquisition of Kendall Yards revives a project expected to model New Urbanism just across the Monroe Street Bridge from the old. In 15 years, its 78 acres will be covered with housing clusters, commercial centers and parks within easy walking distance of downtown. That’s the plan, anyway. But plans go awry, as former owner Marshall Chesrown knows too well.”

“Chesrown envisioned a $1 billion urban version of the luxury developments he was creating in Idaho when be bought the property in 2004. A mini-core of high-end shops and residential towers would fill the space between Monroe and Maple streets. More housing – for a total 2,600 units – would extend the project west of Maple.”

“At a festive groundbreaking, complete with balloons, refreshments and song, officials manned the traditional golden shovels. Chesrown likened the work done and the work ahead to swimming the English Channel. That was May 17, 2007. He did not make it.”

“The financial tides were turning, inundating upscale developments such as the Yellowstone Club in Montana, the Tamarack Resort in Idaho, and Kendall Yards. After a multimillion-dollar environmental cleanup of the former railroad yard, the bulldozers left. The corner of West Ide Avenue and North Monroe Street at the bridge’s north end has become a shabby parking lot, not a showpiece.”

“Greenstone will move forward with a more modest project that is still expected to take a decade-plus. The vision may be less grandiose, but it may be one that better suits the adjacent West Central neighborhood and a city that has difficulty digesting $1 million homes and $500,000 condominiums. It was going to take a horde of ‘equity refugees’ from California to fill those boxes. Many of those potential buyers are now equity inmates trapped in homes they cannot sell.”

“Wheaton says there may eventually be pricey abodes at Kendall Yards. Greenstone has succeeded because its developments in Liberty Lake and Coeur d’Alene offer homes at all price points, he says. But Spokane-area residents can more easily live with, and in, the $175,000 to $250,000 townhouses that will start going up late next year.”

The Bonner County Daily Bee in Idaho. “Bonner County’s homeless and hungry come from a cross-section of circumstances. And in many cases, the situation they find themselves in is through no fault of their own, according to Blue Haven program manager Tammie Martison. Many of those who are now in need have not previously needed help. Blue Haven is receiving telephone calls from people ‘who have never found themselves in this position before.’”

“Calls are coming from professional people who want advice because they face losing their homes after a job loss. ‘It’s across the board now, it’s not just low-wage earners,’ Martinson said.”

Oregon Public Broadcasting. “Oregon’s unemployment rate held steady at 11.3 percent in October – one of the highest in the country. And in a report released Monday by the U.S. Department of Agriculture, Oregon ranked as one of the worst states in terms of food security – or, in simple terms, households that go hungry.”

“The stats show that over the past three years, more than 6 percent of Oregonians reported that they ate less for financial reasons. And Oregon State University research says the real number is actually worse. And yet, according to federal officials and the state, Oregon has one of the most-effective food stamp programs in the country. So, why does the state rank second-worst, behind only Mississippi, in terms of ‘very low food security’?”

“Researchers say while unemployment is a factor, the state has had high hunger rates even during boom times. Mark Edwards is a sociology professor at OSU. Edwards: ‘Even ten years ago, we found that Oregon had high hunger rates, even among people who were working – and had full-time, year-round jobs. So there’s something else going on in Oregon that I suspect has to do with the cost of housing compared to the income people are bringing in.’”

The Mail Tribune in Oregon. “A federal program designed to stabilize communities hit hard by foreclosures has left one Medford couple at their wits’ end trying to find a lender so they can buy a house. ‘It is a very unstable program,’ said Jaymi Bowers, a 26-year-old mother of two. ‘I want the public who is trying to use this program to know what they are in for.’”

“The Bowerses discovered that lenders are reluctant to loan through this program because it has changed frequently, it requires more paperwork and the federal government pays a substantial amount of the down payment. Her husband said the program is great for people to get into if they’ve got the patience. He said they will have to come up with $2,800 to qualify with the federal program kicking in about $38,000. ‘It’s a program that’s really good, but it’s not working,’ he said.”

“Karen Cooper, who is a broker for American Pacific Mortgage Banker and represents the Bowerses, said the program is frustrating for her clients and everyone else involved. ‘They’ve felt like they’ve been stuck through a ringer, and so have I,’ she said. ‘There have been so many changes that I don’t think the underwriter knows what is up.’”

‘In February, the program allowed for the paying of repairs on a foreclosed house before the sale was concluded. ‘That’s gone now,’ she said.”

“To qualify for the program, a family of four would have to earn a maximum of 120 percent of the Jackson County median income, or $66,500, she said. Lenders are wary of families that earn about $50,000 because they may be at risk of defaulting on their mortgages if one of the wage earners is laid off.”

“As he drove through downtown Medford this past weekend, Duane Hill saw signs of trouble that were hard to miss. ‘There was a ‘Space for rent’ sign just about every block,’ observed Hill, the former owner of KRWQ radio who now lives in Sunriver, near Bend.”

“For Hill, it was a reminder of his own status as the owner of a half-rented, three-story office building in northeast Medford near Costco. ‘Lots of space and no prospects,’ said Hill, summing up the picture for many Rogue Valley commercial building owners.”

“It doesn’t stop with retail and office space. Manufacturing has fallen off as well, creating vacancies at the industrial level. ‘Without a doubt, orders aren’t what they used to be,’ said Tom Fischer, one of the owners of Coldwell Banker Commercial NW Real Estate. ‘We have an oversupply of manufacturing capacity. The only places I’ve heard where there is increasing business and more employees is in Internet sales and fulfillment offices — bicycle parts, motorcycle parts, things like that.’”

“Whether retail or industrial, Fischer said, falling consumer demand is draining cash flow and forcing business owners to make tough calls. ‘The reality is that people are not going out to lunch and dinner like they used to and not buying consumer goods — from radios to cars. Go down Riverside Avenue and you will see a half-dozen restaurants with two or three cars in the parking lot instead of a dozen at dinner time.’”

The World in Oregon. “A visitor’s comment while passing down Central Avenue last month epitomizes the challenge that Melvin Lesher says face business owners in downtown Coos Bay. The 73-year-old owner of Little Coyote Cafe watched as the woman pointed to the plywood-covered windows on the Chandler Hotel across the street. She told her companion they must be in the bad part of town.”

“He quickly corralled her and invited her into his cafe. He wanted to explain. Yes, the building is in need of structural repairs, but the area is generally good, he told her. She left satisfied with her meal and a better appreciation for downtown, Lesher said. But some business owners feel like the cards are stacked against them, when they have to woo customers in the shadow of empty buildings and deteriorating exteriors.”

“‘This business cannot survive without investing money into the appearance of the general area,’ Lesher said.”

The Gresham Outlook in Oregon. “The ‘Come Home to Gresham’ home loan program, implemented by Community Vision Inc., helps qualified buyers purchase foreclosed homes in certain parts of the city, said Michael Parkhurst, an associate planner with the city of Gresham. Gresham’s program gives out $10,000 loans instead of $50,000 loans to get more families into more foreclosed houses, said Mayor Shane Bemis. With roughly $400,000 available for the Gresham program, the city could award 40 loans, versus about eight if the cap was $50,000.”

“But not all foreclosed houses in Gresham are the byproduct of lost jobs, questionable loans or household budgets being stretched to the breaking point. ‘Many are new townhouses that were built right before the bubble burst,’ Parkhurst said.”

The News Review in Oregon. “Home sales in Douglas County increased slightly in September, with the 102 pending sales during the month representing 14 percent of the total for the year. ‘Obviously, the $8,000 tax credit for first-time home buyers and low interest rates have helped considerably,’ said Neil Hummel, owner of Century 21-The Neil Company Real Estate in Roseburg.”

“The average price for a home sold in September was $147,000, down $32,000 from a year earlier. The decrease was even more dramatic compared with August, when the average sales price was $195,900. The median price, where half sold for more and half sold for less, was $130,000 in September. For the same month a year earlier, it was $170,000. The median price was $162,500 in August.”

“‘I advise my sellers to take a look at the comparable sales in their neighborhood and price their home 15 percent to 20 percent below the competition and they will more than likely generate an offer sooner than if they price it with the competition,’ Hummel said.”

“New listings fell nearly 14 percent in September. However, the total was 12 more than what was added to the market in September 2008. At September’s rate of sales, the 1,240 active residential listings would last about 15.3 months. That’s down nearly 50 percent from the 30.3-month inventory in January.”

“‘That is good news: Either sellers are deciding to rent their properties or they are taking them off the market waiting for things to improve,’ Hummel said.”

The Juneau Empire in Alaska. “Local builders say their business is in a downturn, but not the depression that has hit their counterparts in the building industry elsewhere in the nation. ‘We’re on the way up out of the bottom of the recession, but we didn’t hit rock bottom like they did elsewhere,’ said Russ McDougal, past president of the Alaska State Home Building Association.”

“Builder Alan Wilson said in contrast to some other places, Southeast’s bankers have been lending responsibly and have money available. ‘If you are a solid borrower, you aren’t having any problems,’ he said.”

“Wilson said the only people he’s heard of having difficulty are those seeking second mortgages and 100-percent equity mortgages. ‘We can use our homes as credit cards any more, but that may not be a bad thing,’ he said.”

The Vancouver Sun in Canada. “In aggregate, British Columbians racked up the highest number of home sales for the month of October since 2003, the B.C. Real Estate Association reported Tuesday, but in the details it still looks more like a South Coast story. ‘Certainly the recession is impacting the resource-oriented communities much harder than the large urban centres that have a much larger service component [to their economies],’ Cameron Muir, the B.C. Real Estate Association’s chief economist, said in an interview.”

“However, Muir said many of B.C.’s interior markets rely heavily on the activity of recreational-property purchasers, most of whom stayed out of the market during last winter’s collapse in sales and have yet to return.”

“Muir said he expects that South Coast markets will not maintain the pace of sales they’ve seen over the past several months. Sales in those markets — Metro Vancouver, the Fraser Valley and Victoria — are largely driven by the ‘pent-up’ demand of buyers who sat out last fall and are now being drawn in by current low interest rates. Muir said that demand that built up is quickly being satisfied, and as prices in the Lower Mainland and Victoria rise, that will help to squeeze more buyers out of the market later in 2010 and act to slow sales.”

“On a provincial basis, the average MLS home price was $493,328 in October, up 17 per cent from the same month a year ago. In Metro Vancouver, the average MLS home price was up 15 per cent to $638,948 compared with October 2008. In the Fraser Valley, average prices are up almost eight per cent to $445,637 compared with the same month a year ago.”

“‘If you look at sales-to-active-listing ratios we see in the Fraser Valley, Greater Vancouver and Victoria, they’re all over 20 per cent,’ Muir said. That is typically ‘buyer’s-market’ territory, ‘which indicates some upward pressure on prices.’”

The Vancouver Observer. “Everyone in Vancouver is by now aware that the real estate market has bounced back. We can see it in the hard, cold numbers produced by the REBGV every month. Prices are up, sales are up and inventory is down. We can also see evidence of the rebound in the media. It’s hard to find a newspaper article that is pessimistic about the future of Vancouver real estate these days.”

“One more sign indicating that Vancouver real estate is once again hot is the return of the Vancouver condo development presale. As the real estate market spiraled downwards in early 2008, one Vancouver condo development after another was put on hold. Now that the market, and public confidence has returned these projects (Cosmo, V6A, Richards) and many new ones (The Mark, District, Social) have been coming back online.”

The Georgia Straight in Canada. “Even though he had never purchased real estate before, Alym Abdulla could sense that the market was heating up as he began looking at downtown condos last spring. The 24-year-old pharmacist started seeing suites in late March, and before long he realized that some of the units were receiving multiple offers from prospective buyers.”

“‘I must have looked at close to 50 places,’ Abdulla told the Georgia Straight in a recent interview in his living room. ‘I put in offers on two other places that didn’t go through because the market started to pick up.’”

“He said he was getting discouraged and was ready to quit when his real-estate agent, Stu Bell, recommended that he check out a home in a Bosa-developed building near the corner of Hornby and Smithe streets. When Abdulla entered the suite in the middle of May, he was immediately impressed by the layout, which featured two full bedrooms, each with an en suite bathroom, on either side of the living room. ‘The thing that really sold me on this place was the balcony,’ he said. ‘It’s quite large. It makes you feel like you’re not trapped in your little shoebox downtown.’”

“Bob Rennie’s company Rennie Marketing Systems has sold billions of dollars of real estate in Vancouver. Rennie also told the Straight by phone that he always thought the effect of the Games would be felt in future years. ‘It’s after the Olympics that we’re going to see the impact on real estate,’ he said, noting that Vancouver has a much higher profile than other recent Winter Games host cities. ‘I don’t believe that anyone ran back to Turin or Lillehammer or Salt Lake City…to buy a secondary residence or to move the family to safety or to move some money to safety. Vancouver is on the map. We’re a world city. We’re a brand.’”

“Abdulla ended up paying the $508,000 list price. He said he bought then because he wanted to take advantage of the low interest rates. With a smile, he acknowledged that some of his friends look at him differently now that he’s a homeowner: ‘One of my friends who I used to live with in university, he’s like, ‘I feel since you bought your place, you’ve matured. You’ve completely changed in the way that you are. Before, we used to live the student lifestyle. Now, you’re always cleaning your place. You have plants. You look after them. You’ve even got a cat now. It’s like you’re an adult.’”

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This weekend I finished winterizing the homestead. In a flurry of activity, I turned off the irrigation and drained the pipes, hauled myself up onto the roof to clean out the chimney and service the swamp cooler, tucked some extra insulation into the chicken coop where a brood of seasonally-confused chicks is fledging. Then I harvested the last of my pumpkins and tomatoes, and left some little strychnine treats for the gophers who are trying to set up a new household under my artichokes. It all felt so tidy when I had finished that I couldn’t help congratulating myself. I may not be set to weather the financial storms of this coming winter, but at least I’m reasonably certain of getting through the next few months without starving or freezing to death.

I was enjoying a cozy fire and a glass of cabernet when I got a call from my buddy Arla. Several years ago Arla’s husband died and left her a nice life insurance policy and a stack of hospital bills. She jokes that his untimely demise was the most productive thing he’d done in his working life, because after probate she sold their large Bakersfield home at the top of the market, moved into a rented condo, and invested the proceeds in a small strip mall—which quickly filled with tenants. Anchored by a franchise take-out, the rents made her, if not a wealthy woman, at long-last a fairly comfortable one.

But now there’s trouble brewing. Despite her seven-figure down payment, the interest-only loan that financed the place is resetting in March and a balloon payment of nearly a million more is looming. Two of her five tenants have given notice as of December 31, and a third is a month behind on their lease. Knowing I was “somewhat bearish,” as she put it, on the whole real-estate-as-investment thing, she called to tell me that in spite of her 50% equity position in the property, (good,) the lender (first the defunct GMAC, now the soon-to-be-defunct Capmark,) has refused to either refinance or re-negotiate the loan (bad,) and is demanding payment in full when the note comes due after next quarter (very bad.)

Although she’s tried to short sell, no one else seems to want to touch her little empire because of the location, (Bakersfield, one of the underwater capitals of the world,) and the fact that its future occupancy is now in question. The gift shop and the salon will soon stand empty, and the clothing boutique is obviously on its last legs. The food joint is hanging on, but doesn’t have the cash flow to justify taking over the loan. Apparently a medical supply concern expressed interest in leasing one of the spots, but because of her uncertain financial status the partners decided to pass on the location.

She owns no other substantial property she can use to secure the loan, so it’s not looking cheery for her on that end either. Even the city council has turned their backs on her, and she’s thinking about withholding the first installation of her ’09-’10 property tax unless they grant her some relief –even temporarily.

Alva confessed to me that she’s seriously considering a walk-away. On a million dollar investment—her only hope for retiring with more than her survivor’s social security stipend to keep her going. So, what did I think?

Well, I think she’s not alone. According to Moody’s Investors Service, commercial real estate prices have fallen 41% in the last two years alone, and American banks are now on the hook for nearly 1.7T in US loans secured by these properties. It is estimated that in the next three years, $1.5T in loans are coming due, and if Arla’s story is any indication, a lot of these loans are going to default.

Which begs the question. Is a bailout likely for the lending banks holding commercial real estate as collateral?

Let’s ask our old friend, the Fed.

In a policy announcement released 10.30.09, the Fed got downright cagey, even coy.

Of particular interest is the following:

“…(we will)…support prudent and pragmatic credit and business decision making within the framework of financial accuracy, transparency, and timely loss recognition…(emphasis mine.)”

“Timely loss recognition,” eh? That’s a good start. Then it goes on to say,

“…Financial institutions that implement prudent loan workout arrangements …will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications…”

“Prudent loan workout arrangements,” eh? “Will not be subject to criticism?” This is staggering stuff. It would appear that the Fedsters are both acknowledging that there is big trouble looming for banks with CRE holdings, and is telling them that they’ll “not be subject to criticism” (!) for write-downs; in essence handing them the legalese version of “you’re on your own, suckers.”

As Arla has discovered in her search for refinancing, there is no Fannie Mae or Freddie Mac equivalent for strip malls. And without a GSE conservatorship for commercial real estate, it would appear that the government largesse that residential loan-owners have come to rely upon will not be forthcoming for holders of CRE-backed loans.

The implications here are pretty clear. It the FED is unwilling to quantitatively ease commercial real estate exposure, as it has for residential mortgages, the economy is in for a bumpy ride. Those banks that have not used the ongoing rally to dump their commercial mortgage backed securities or CRE holdings might want to do so as quickly as possible and as quietly as possible if they intend to remain solvent.

No bailouts for commercial real estate implies no bailouts for commercial real estate builders either. The upside of this for the likes of us is that maybe at long last Washington will get the idea that housing prices are going to fall eventually—their best intentions to stave off the carnage notwithstanding. And those of us who have so patiently bided our time waiting for this to happen may now have some real hope of it occurring within our lifetimes.

It makes sense from a political standpoint, of course. While individual homemoaners can vote, (and there are millions of homes in foreclosure right now, with many more expected before the 2010 elections.) Builders (and their in-house lending arms) can only lobby and give money– and builders are running out of money these days. And they’re giving their unfinished projects back to the lenders. Who in turn give them back to the banks that the Fed says it isn’t going to bail out of their gone-bad portfolios. Who sell them to the hedge funds that…aHA!

So what happens to all the actual commercial property secured by these non-performing loans?

It would seem that vulture hedge funds are “snapping them up”—with a little help from the FED, as evidenced by the aforementioned policy announcement. Why not buy defaulted commercial property at pennies on the dollar when the government is not only encouraging you to do so, but de facto financing the whole operation by infusing investment banks with TARP funds to facilitate the deal?

Indeed such a seemingly far-fetched assumption would tend to be supported by recent announcements like this one, brought to our attention by Ben Jones:

“…SunCal Cos. bought 1,072 finished and partially finished residential lots spread across 11 Kimball Hill Homes’ communities throughout Las Vegas and Henderson for $20 million, or an average of $18,727 (emphasis mine,) per lot, from KHI Post Consummation Trust. It was an all-cash deal financed through D.E. Shaw Group….”

(D.E. Shaw Group, by the way, is the firm Larry Summers managed between his dismissal, er, resignation as president of Harvard and his appointment as Director of Obama’s National Economic Council.)

Taking it a step further, what happens when these closely-aligned-with-PPIP equity firms own a substantial portion of America’s commercial real estate a few years hence? Do they turn it over to the government to pay back the taxpayers who funded TARP? If Chris Dodd’s 1000-page giveaway to hedge funds like D. E. Shaw is enacted, it’s not likely. Check out this excerpt from page 438 of this Senate discussion draft. (Warning: PDF)

‘‘(ii) EXEMPTION.—The Financial In
stitutions Regulatory Administration by
 rule or order, as FIRA deems necessary or
appropriate in the public interest, may conditionally or unconditionally exempt a swap dealer or major swap participant (emphasis mine,) for which FIRA is the primary financial regu
latory agency from the requirements of
 this subsection and the rules issued under
 this subsection with regard to any swap in
 which 1 of the counterparties is—”



So, all those CRE-backed CDO’s and credit swaps are going to be exempted from regulation and oversight in the “public interest?” How very convenient.

Is Professor Bear’s “Megabank, Inc.” destined to become commercial American real estate’s Fannie Mae and Freddie Mac? That’s a lot of unoccupied commercial property to landlord and manage; they can’t just let it sit around gathering termites and amassing delinquent property tax bills. At some point, someone is going to have to collateralize it, or sell it or lease it, and not incidentally, make someone—presumably someone aligned with Megabank, Inc.,—a whole lot of money. My bet it isn’t going to be Arla.

In the coming weeks it will be interesting to watch the turf war between Sheila Bair’s FDIC and the more populist Elizabeth Warren’s Congressional Oversight Committee as they battle it out for consolidation and regulatory reform of America’s financial services industry. Whether we end up with a post-Soviet style giveaway to favored cronies, or a marginally more equitable and democratic redistribution of these properties remains to be seen, but unless Congress declares a jubilee, or passes a 0% interest, 99-year repayment plan for small business owners seeking to refinance their interest-only loans, the whole economic stew may soon be burning out the bottom of the pot. And guess who gets to scrub up the mess?

by ahansen

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Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

The Sun Times reports from Illinois. “Foreclosure is not a pretty word. And the process can be downright ugly. But some hope was available for the taking when the Mortgage Relief Project came to town. ‘Aurora is one of the hard-hit areas,’ said Brent Adams, secretary of the Illinois Department of Financial and Professional Regulation. ‘To come here today shows courage on your part. We’ll do everything we can to make things right,’ he told the group sitting before him.”

“Evelyn and Barry Walker said their mortgage is also becoming unmanageable. Evelyn, a home day care provider, and Barry, a restaurant manager, said they aren’t bringing in as much money lately and their house payment keeps going up. Evelyn’s brother, David Sanders, joined them. Sanders is in the same boat and was told he needs to leave his home by Dec. 22.”

“The Walkers, of Yorkville, said their experience dealing with two banks so far has been unpleasant. Their current mortgage holder is either unresponsive or says they don’t qualify for current programs that might help them. ‘There is always some criteria we didn’t meet,’ Barry Walker said. ‘If we don’t qualify, who does?’ he wondered.”

From WKYC. “The housing slump has hit Northeast Ohio harder then many places throughout the country. If you’re about to be foreclosed on, there are ways to ease the pain. If you’re looking for a deal, there are places to find it. Laura Fulton makes a living buying, rehabbing and flipping houses. ‘It’s a great time to buy right now. We have never seen these prices or these interest rates,’ Fulton said.”

“Sheriff sales are usually sight unseen. Fulton once got burned. ‘They sawed off the mantel of the fireplace. They tore off cabinet doors, trashed the yard and turfed it. Then left dogs in the house for a long time, unattended,’ Fulton said.”

“In a short sale, the seller can also benefit, so personal trainer Kathy Scharam discovered. Despite working two jobs, Kathy could not keep up with her house payments. She chose a short sale over foreclosure and was forgiven a good chunk of what she owed. ‘Their credit is damaged but not to the degree a sheriff’s sale would be,’ Schram said.”

“Kathy is starting over. She is feeling better about herself and her future. ‘Somebody is going to be very happy with this house, that it was left in good condition. The relief was not making the mortgage payment and wondering how to make ends meet,’ Schram said.”

The News Journal in Ohio. “When city officials explained plans to speed up demolition of blighted housing in Mansfield with $1.6 million in grant funds, few questions were asked. But there was a quiet buzz of frustration from several people as Thursday night’s meeting ended and they filed out of council chambers.”

“Police Chief Phil Messer said his department has worked closely with building and codes inspectors to ensure vacant houses are secured, then repaired or razed. If a house sits empty for two or three years, can’t be permanently secured and hasn’t been restored, ‘then at some point I think you have to let it go,’ he said.”

The Columbus Dispatch in Ohio. “Central Ohio home values appreciated nearly 2 percent in the past year, but not in the areas that residents might expect, a national report released this week indicates. Although home values rose in some out-of-the-way places such as Groveport, Hebron and Johnstown, they dropped in traditionally affluent communities such as Dublin, Upper Arlington and Worthington, according to Zillow.”

“The Federal Housing Finance Agency found that central Ohio home prices dropped 1.4 percent from the second quarter of last year to the second quarter of this year. (Third-quarter figures are not yet available.) Because of those figures, some central Ohio real-estate agents said they were surprised that Zillow found any price gains in the area.”

“‘I don’t know how they can say they’ve seen an increase because I haven’t seen it anywhere,’ said Jerry White, executive vice president of Coldwell Banker King Thompson. ‘I would not feel confident telling anyone that home prices are appreciating. I don’t think we’ve bottomed out yet.’”

“The market is very weak for expensive homes, which are especially abundant in Upper Arlington and Dublin. ‘We have years and years of supply in that million-and-above range,’ said Chris Pedon, who with a partner runs the Bexley Real Living HER office.”

“Ohio might be heading into a new round of foreclosures. Foreclosure filings in the state rose 6.5 percent from September to October, according to RealtyTrac. During the month, 11,646 foreclosure notices were filed in the state. But that figure includes a more ominous one: a big leap in lawsuits filed by lenders against homeowners, the first step in the foreclosure process. During October, 4,628 suits were filed against homeowners, 16 percent more than during September.”

“‘My overall take on this is that no matter what the monthly foreclosure filing is, we’re still not at the peak of this mess,’ said Paul Bellamy, director of the Cuyahoga County Foreclosure Prevention Program.”

“Bellamy noted that there’s been no decline in the first warning sign of foreclosure: the number of loans that are more than 90 days delinquent. ‘That 90-day bucket is really growing, and it has been since the middle of 2008,’ Bellamy said.”

The Green Bay Press Gazette in Wisconsin. “Green Bay-area homebuilder Scott Puyleart says the potential benefits of tax credits for first-time homebuyers and those looking to move on from their current house go beyond just the builder. ‘We’re going to see that second- and third-time homebuyer market take off,’ said Puyleart who is vice president of the Brown County Home Builders Association. ‘There are a lot of people that are in the position where they want to do something and this is going to help … them.’”

“He said there are only so many first-time homebuyers. ‘When you have five to 15 guys on a job site, that’s a paycheck and that’s groceries, that’s entertainment and that’s a car payment and it’s going to trickle down through the economy two or three times over,’ Pulyeart said.”

“Christine Shaefer, executive vice president of the Valley Home Builders Association in Appleton, said the realistic expectation is the credit will help stem the decline and then stabilize the number of new-home starts in 2010, with the hope of seeing a 5 percent increase.”

“‘Realistic is the key because housing starts were at a very unsustainable level in 2004 and 2005,’ she said.”

The Liberty Tribune. “Facing a continued wobbly housing market, local developers and real estate professionals are lobbying Congress to help prop up sales by extending and expanding a homebuyers tax credit. Jason Klindt, a spokesman for Congressman Sam Graves, who represents Northwest Missouri, including Clay and Platte counties, said by e-mail: ‘Sam is talking with realtors, builders and home buyers to determine if the current tax credit is working and to determine whether to extend or expand it.’”

“Craig Porter, a real estate developer from Kansas City North, said he is among those who had spoken to Graves about the matter. Porter said any hopes for an economic recovery were tied to success of the housing industry. ‘There’s never been an economic recovery that didn’t coincide with a robust housing market,’ Porter said. ‘The tax credit needs to be extended and expanded to include not only the first-time home buyers.’”

“Porter said builders in Lake Meadows, a subdivision he is developing in Smithville, had witnessed the success of the $8,000 tax credit for first-time buyers. ‘We’ve sold five out of eight houses we started,’ Porter said. ‘We’re going to start four more and I think we have buyers for two of them.’”

“Porter said the houses ranged in price from approximately $140,000 to $180,000, lower than they might be in a better market. ‘This is a great time to buy,’ Porter said. ‘Interest rates are low and the cost of building has gone down. People are getting good deals.’”

The DesMoines Register. “Experts say it will boost prices and will not benefit the economy. Congress’ decision 10 days ago to extend and expand the first-time homebuyers’ tax credit is one of the worst economic policy decisions since President Jimmy Carter decided to embargo U.S. grain sales to the Soviet Union, several specialists say. Carter’s 1980 embargo had absolutely no effect on the Soviet decision to invade Afghanistan, although it hurt a lot of Iowa farmers for a long time.”

“Extending and expanding the homebuyers’ tax credit now will help a handful of homebuyers, most of whom, experts say, would have bought without the credit, while prolonging the real estate downturn. ‘It’s a gimmick,’ said Iowa State University economist David Swenson. ‘It’s really not changing the demand for housing at a time when we have an excess of supply. It’s interfering with the need to get prices down to where people could afford them.’”

“Most economists agree that the extension and expansion will do two things: It will increase housing prices, and it will move future sales into the present, thereby extending the pain. Neither of those things benefit the long-term economy. The logic is similar to what put two of the big three automakers in bankruptcy. Remember zero percent financing and car loans that lasted longer than cars?”

“It didn’t make sense that the car companies could make money on those terms. And they didn’t.”

“Des Moines accountant Joe Kristan said, ‘A lot of people are just capturing that money by being able to raise their prices’ on homes they want to sell. The credit is ‘temporarily inflating home prices,’ he said.”

“Lower prices will do more to get rid of excess supply than anything the government can do, Swenson said. The credit is ‘artificially propping up prices,’ he said, and encouraging people to buy more house than they can afford.”

“That’s what got us into this mess.”

“The problem now, said Kristan, is that once the homebuyers’ tax credit has been extended, ‘there’s going to be pressure every time it expires to extend it, just like they did this time.’”

“‘We’re living in strange times,’ Kristan said. ‘It reminds me of the 1970s; there’s so much lunacy. The next thing we’re going to see will be bell-bottoms.’”

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The Santa Fe Reporter from New Mexico. “Kaziah Mraz, 34, has done everything society expects of a responsible citizen. She works full time, while attending college, raising two children, paying off a mortgage and trying to maintain her credit score. And yet when she hit a rough spot, society—represented by the New Mexico Human Services Department—told her it couldn’t help. When she broke into tears, society had a security guard escort her away.”

“Gross pay: $2,300 a month. Take-home pay: $1,800 a month. Mortgage payment: $1,480. That leaves $340 a month to feed herself, two kids and a Chihuahua, gas up her ’94 Toyota and keep the lights on.”

“‘I pretty much hit my breaking point,’ Mraz says. ‘I’m not trying to take advantage of the system; I just want some help while I get through this situation. At this point, if I was 30 pounds skinnier, I would go to Albuquerque and strip.’”

The Denver Post in Colorado. “The Residences at the Ritz-Carlton downtown are in foreclosure after the developer sold only one of the 25 units in the luxury condo community. A team led by Charlie Biederman oversaw the $75 million redevelopment of the property, which opened with fanfare early last year. But only one of the condos sold since presales started three years ago, forcing the property, including its gym, into foreclosure.”

“The lender on the residences, Goldman Sachs, is taking the property back and is attempting to reposition the condominiums. Goldman Sachs has upgraded the interiors of the units. It has also reduced prices on the units, which range from 1,140 to 5,550 square feet. Initially priced from $800,000 to $4 million, the units now are priced from $500,000 to $3 million.”

“A questionable location across from the Greyhound Bus station and the lack of balconies made it difficult to sell the condos, said Dee Chirafisi, a broker who had the units listed for about a year. ‘There’s a lot of competition in the luxury market,’ Chirafisi said. ‘People for 2 1/2 years have been extremely picky. Even with the quality and luxurious finishes and the Ritz-Carlton brand, if something’s missing, it doesn’t sell.’”

The Aspen Times in Colorado. “Workers looking to gain a foothold in Aspen are helping keep one piece of the local real estate market booming — affordable housing. Prospective buyers include individuals who own free-market housing downvalley, but are employed in Pitkin County and looking to move to Aspen, according to Cindy Christensen, housing operations manager. The hurdle for them is selling their free-market home in a depressed market — they have six months after they close on their worker unit to do so.”

“‘There are people out there who want our housing so bad, they price their free-market [place] to sell it,’ Christensen said.”

“Even though the housing authority essentially guarantees the loan on a worker unit — the agency has the right of first refusal to buy a unit in foreclosure and must do so to keep the deed restriction on the unit in place — lenders are skittish, she said. ‘The biggest problem is all the banks have to work with underwriters outside of Colorado, and they don’t get it,’ Christensen said.”

The Post Independent in Colorado. “A proposed development in Spring Valley, which has been on the local governmental radar screen for decades, is expected to go before Garfield County in December to file the final, formal documents for Phase I of the multi-phase project. Some version of the Spring Valley Ranch development has been in the works for three decades.”

“According to county records, Spring Valley Ranch saw its first attempts at development in 1977, by a partnership of local investors and one in Chicago. The next formal applications were filed in 1984 for Chenoa, an upscale housing development of 2,750 homes, a 150,000-square-foot ‘village center,’ and two 18-hole golf courses.”

“By 2003 the project was again known as Spring Valley Ranch, and by 2005 it had been downsized to 577 homes and 20,000 square feet of commercial space anchored by the two golf courses. It has been through a series of ownership changes over the years, that have included at different times a group of Saudi Arabian investors and, more recently, the Lehman Brothers investment banking firm, which went bankrupt last year.”

The Grand Junction Free Press. “A steep hike in the regional unemployment rate helped push apartment vacancies to the highest level in more than four years, state housing data showed Thursday. The vacancy rate for multifamily units in the Grand Junction market skyrocketed to 7.5 percent in third quarter ending Sept. 30. That was up from 2.4 percent in the same three months of 2008, the Colorado Division of Housing reported.”

“The regional jobless rate was up more than 4 percent in the same one-year period. ‘For the last several years the vacancy rate and the unemployment rate are tracking very similarly,’ said Gordon E. Von Stroh of the University of Denver, who authored and researched the report. ‘When unemployment goes up, vacancies go up. That is what happened in Grand Junction and in the Grand Valley.’”

The Arizona Daily Sun. “Local homebuyers last month found bargains in foreclosed and other types of distressed property. The median price among distressed homes was $35,000 less than among non-distressed properties — yet the former was 5 percent larger in square footage. For all homes sold in Flagstaff in October — distressed and non-distressed — the median price was $300,000, about equal to last month but down $32,000 from the same month a year ago.”

“Steve Brighton, a Realtor with Century 21 Flagstaff Realty, said the deals on distressed homes boosted overall sales in October to 87, the highest number for the month since 2005, when 94 single-family homes were sold. ‘That is what moving the market right now,’ Brighton said. ‘There are fire-sale prices out there right now.’”

The Arizona Republic. “Home-resale figures for October in the Valley show unseasonably high sales volume, but most of the activity was driven by foreclosures and distress sales, according to a report from Arizona State University. ‘Between foreclosures and resales of recently foreclosed homes in October, ‘foreclosure-related activity represented 66 percent of the recorded activity,’ said ASU realty-studies director Jay Butler.”

“The median price for a single-family Valley home in October was $140,000, down 20 percent from the October 2008 median price of $175,000. Butler said significant recovery in the housing market still appears to be some distance away despite the federal government’s recent decision to extend the first-time homebuyers’ income-tax credit.”

“Usually, housing recovery happens in conjunction with a growing economy and declining interest rates, Butler said. ‘However, the current economic recovery is limited with the possibility of higher rates and a continuing weak job market,’ he said.”

“Real estate used to be all about location. Now it’s all about jobs. ‘The 800-pound gorilla is job creation,’ said Steven Tanger, president and chief executive office of Tanger Factory Outlet Centers, speaking at a conference of the National Association of Real Estate Investment Trusts.”

“Jerry Davis, UDR’s senior vice president of property operations…described metro Phoenix as the weakest of the 20 metro areas where UDR has apartments. He predicts Southern California will be weakest next year. UDR’s Valley apartment complexes are relatively upscale, especially its new Stadium Village complex in Surprise, and higher-end apartments are faring better, Davis said. Soft housing prices have discouraged apartment dwellers from leaving to buy homes.”

“‘A lot of people want to make sure prices have bottomed,’ Davis said. ‘Nobody wants to catch a falling knife.’”

From AZ Biz. “Considering the state of the economy in general and real estate in particular, 2010 might not seem to be the optimal year to become president of the National Association of Realtors. But that’s not the way Tucson Realtor Vicki Cox Golder sees it. Which is good because she was installed Nov. 12 as the new president.”

“‘When a market is strong, anybody can be a leader then. But when it is not strong, you have to develop creative solutions and programs,’ Golder said prior to leaving for her installation in San Diego. ‘I’m on the street and see it every day, that gives me excellent insight. I bring in a perspective others don’t have. I understand the market stress and strains and that will help me educate and move members along.’”

“One of her priorities is to increase political influence of the National Association of Realtors — the nation’s largest trade association — at the federal, state and local levels through lobbying. Embracing an ‘On the Rise’ theme, Golder is upbeat about leading the 1.2 million member organization.”

“‘On the Rise’ is more than just a theme. It’s an attitude, a positive outlook, a belief that we can strengthen our markets, our industry and our businesses,’ Golder said in her speech to inagural attendees. ‘It is a statement that real estate is moving, accelerating toward a prosperous time.’”

The Las Vegas Sun in Nevada. “The 30 percent drop in condo prices at CityCenter is going to cost Realtors in commissions. Bob Hamrick, CityCenter’s broker, met with about 70 preferred agents (those who have had a sale) Nov. 6 at the development to inform them about the new commission strategy and give them a tour.”

“When CityCenter cut its prices by a half-billion dollars to help buyers close on the condos, Hamrick says it was only natural that commissions be cut as well. So far, 95 percent of the 227 units at Mandarin Oriental have been sold. Two-thirds of the 670 units at Veer have been sold and just under 50 percent of the 1,543 units at Vdara have been sold, Hamrick says. Closings tentatively start Jan. 1 at Mandarin Oriental, Feb. 1 at Veer and March 1 at Vdara.”

“Despite the price drop, an attorney representing some prospective buyers says the cuts don’t ‘reflect market realities,’ and they are unwilling to accept that offer and want even more cuts. He also says CityCenter is requiring buyers to give up legal rights despite the construction problems that plagued the project.”

“‘Given the realities of the market, and issues with this project specifically,’ MGM’s offer to reduce prices by 30 percent is woefully inadequate,’ says Mark Cannot, an attorney with Hutchison & Steffen. ‘MGM has recently taken a write-down of well over 30 percent of the value of its interest in CityCenter, yet has only offered a 30 percent reductions to purchasers of condos in CityCenter.’”

“Homebuilders and Realtors are counting (on) an extension and expansion of a homebuyer tax credit to boost to the housing market through mid-2010. ‘The credit has definitely impacted positively our home sales in Southern Nevada,’ said Monica Caruso, Southern Nevada Home Builders Association spokeswoman. ‘We are usually not amenable to government intervention. However, in this case it has worked, and for an industry devastated by the economic conditions, it is a short-term boost for the industry. But what we really need to see are some long-term improvements.’”

“Dennis Smith, Home Builders Research president…won’t call the continuation of the tax credits a cure-all for the housing market. The best cure is jobs, he said. ‘We still have problems with foreclosures,’ Smith said. ‘How does this help people stay out of foreclosure? It doesn’t do anything for that.’”

“In October, the Realtors group reported 3,535 single-family home sales, a 5.3 percent increase over September when 3,358 homes sold. Median prices rose 1 percent to $139,100, the highest since July’s $138,800. Sales of condos and town houses fell 1 percent in October to 850, but median prices rose 6.5 percent from $65,720 to $70,000, the group reported.”

“It credits investors and first-time buyers for boosting demand for homes. Cash buyers accounted for 42 percent of home sales in October. The sales of foreclosed homes declined in October, falling to 64.5 percent of the total. It was 67 percent in September. The Realtors’ group tracks sales only on the MLS. It reported 20,998 homes are listed at the end of October, about 1 percent higher than September. It said 8,075 homes are listed without offers, a 2 percent increase over September.”

“In October 5,482 homes were new listings, an 11 percent increase over September.”

The Las Vegas Review Journal in Nevada. “The Altos Research 10-City Price Composite Index was down 0.4 percent in October and 0.9 percent for the last three months. The San Francisco-based research firm showed Las Vegas asking prices at $169,958 in October, a 2.4 percent drop from $174,183 in August. That contrasts against recent data released by the Greater Las Vegas Association of Realtors that showed the median price of a single-family home climbing to $139,100 in October, compared with $135,500 in August.”

“The largest monthly drop in asking prices, according to the Altos Research study, occurred in Salt Lake City, where prices fell 3.3 percent to $382,970 in October. Phoenix was second with a 2.1 percent decline to $311,050. Las Vegas prices were down 1.2 percent. ‘The rate of decline has slowed in Las Vegas, but that market continues to show the largest decline during the downturn,’ Altos Research CEO Michael Simonsen said in his housing-market update.”

“In October 2007, the median asking price in Las Vegas was $354,347, plunging 52 percent to $169,958 this October.”

“Frank Nason of Residential Resources in Las Vegas said statistics are ‘kind of funny the way they’re released.’ For example, Realtors statistics only include homes sold from the Multiple Listing Service, not all closings recorded by the county assessor’s office. He’s showing a median price of $140,000 in October, up from $138,000 in September.”

“‘I think they’re bouncing along the bottom,’ Nason said. ‘Foreclosures have moved from lower-priced homes to all the higher-priced homes. The reason is people in higher-priced properties had more resources. They’re running out. A lot of people are doing strategic defaults. Why become a debt slave?’”

“‘Have we seen the bottom in prices as some of the pundits have recently predicted? No one knows since none of us who follow the market have crystal balls,’ Nason said. ‘Is the so-called ’shadow inventory’ of foreclosed properties going to flood the market or will the financial institutions be able to manage a measured release of properties to prop up prices?’”

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