Back On The Bandwagon And Hoping For More Of The Same
The Billings Gazette reports from Montana. “Subprime loans were invented for people with bad credit by people who needed a supposedly safe haven for a worldwide glut of investment dollars. When the ‘no credit, no job, no problem’ housing scheme inevitably collapsed, Montana largely escaped the fallout, but not completely. Dean Luptak, president of Coldwell Banker The Brokers in Billings and Red Lodge, said anyone with a heartbeat could get a home loan during the bubble days. ‘You were afraid to let your dog out in the morning. He might come back with a mortgage,’ he said, repeating a popular joke from Phoenix.”
“The gap between income and housing costs here remains relatively large. Montanans earned $34,644 per capita income last year, the 39th lowest in the country. This market has a 48-month supply of homes $600,000 and higher, so the ‘ladder up’ tax credit is needed to move some of the more expensive homes, Luptak said. But that benefit seems illusive.”
“‘So far, the sellers either bought in the same price range, a lateral move, or they are still sitting on the sidelines. Rentals are tight because there are people who can’t afford housing or decide not to buy,’ he said.”
The Associated Press . “For Dallas retiree Richard Snyder, the thrill of his central Idaho getaway is gone. Snyder built his 3,500-square-foot vacation retreat at Tamarack Resort four years ago, in an era marked by frenetic construction and new lifts whisking skiers to the 7,660-foot summit. This week, he learned the lifts will be idle this winter - another casualty of the deepest recession since the Great Depression.”
“‘It’s gone from, ‘I can’t wait to get out there, it’s so great,’ to ‘Why go?’ Snyder said.”
“In a sign of just how far it’s fallen, Tamarack has become a target for bargain hunters. One chalet that sold for $900,000 in 2005 recently changed hands for just $200,000. David Bell, from suburban Chicago…bought his Tamarack townhome in 2006. Bell mothballed his place when skiing ended last March; he won’t return this winter, not without the lifts running.”
“‘There are not enough amenities to make it worthwhile,’ he said. ‘We’re fundamentally hunkering down.’”
From Time Magazine. “The Obama Administration is gearing up to play hardball with mortgage companies that only temporarily lower struggling homeowners’ monthly payments. The problem the Administration is out to tackle is related to the structure of the Home Affordable Modification Program (HAMP). The first three months of a mortgage rewrite are something of a probation period— and very few homeowners are making it out of that trial. More than 650,000 borrowers have been placed in trial modifications, but as of September, fewer than 2,000 had become permanent.”
“According to a recent analysis by the credit bureau Experian and the consultancy Oliver Wyman, nearly 600,000 borrowers might have intentionally defaulted on their mortgages in 2008, twice as many as the year before. The other big gap in HAMP is the way it deals with— or fails to deal with — people who wouldn’t be in a position to keep their houses even with a modification. Emily Jones, a manager at Neighborhood Housing Services in Boise, Idaho, says about half of all people who walk into her housing-counseling agency fall into that camp.”
“‘The goal isn’t to keep the home in every situation,’ she says. ‘The goal is to avoid foreclosure, and in a lot of situations, it’s not in the client’s best interest to try to keep the home and only postpone the inevitable.’”
The Bend Bulletin in Oregon. “Reflecting sour labor market data and the sluggish pace of residential housing construction, the Central Oregon Business Index declined to 110.3 in the third quarter that ended Sept. 30. It’s the 12th consecutive quarterly decline for the index. The index peaked at 175.3 in third quarter 2006. University of Oregon economist Timothy Duy, who authors the index for The Bulletin, said Central Oregon is potentially faced with the prospect of a weak recovery as it recalibrates its economy, one that is less dependent on housing. High unemployment rates could continue as a result, he said.”
“Duy cautions that despite the region’s attractiveness, any notion that the region can return to its pre-bubble growth is misplaced. ‘To re-create the same kind of economic environment seen in the middle of this decade requires a set of conditions that I don’t think are going to return, and consequently, you can’t base your identity and plan your economy off of that dynamic,’ Duy said. ‘It’s likely gone and not going to come back, so you have to get back to how you see the economy transition to some other dynamic, and take a different view of what kind of economy can we support.’”
“‘(Central Oregon) has gone through this massive psychological blow, and the challenge is to reconnect people’s reality with expectations,’ Duy said. ‘For a town in the middle of nowhere with no transportation hubs, it’s done remarkably well … but the growth path of this decade was not sustainable.’”
The Oregonian. “One year ago, Portland real estate consultant Jerry Johnson stood before a room of home builders anxious to know when housing prices would strike bottom. About September, he had predicted, a median price of $261,000 would be the market’s bottom. That would have been 14 percent off the boom-time peak of $302,000.”
“On Wednesday, Johnson revised his view in a speech to the same home builders. Just slightly. Home prices, he now believes, will tumble to about $230,000 — down 24 percent from their peak — before climbing out of the recession. ‘We didn’t expect it would be as bad as it got,’ Johnson said after his annual presentation to the Home Builders Association of Metropolitan Portland.”
“What changed in a year? Job losses and depressed consumer confidence, Johnson said. The region lost 60,000 jobs in just one year. Based on Portland’s historic trends, Johnson said homes are about 6 percent overpriced and he expects those losses to wash through the market quickly. But he cautioned that could change if banks flood the for-sale market with bargain-priced foreclosured homes and the unemployment rate pushes yet higher.”
“With most of his audience worried about the suburbs, Johnson gave a blunt and brief overview of the condo market (the all caps are his): ‘CONDO MARKET DEAD UNTIL FURTHER NOTICE.’”
The Daily Journal of Commerce in Oregon. “Gerding Edlen’s creed of 20-minute living was exemplified in Cyan/PDX. The building, which offers modest-sized apartments near Portland State University and alternative transportation, was designed to show that people can live small and sustainably, while enjoying the perks of an urban setting. Developer Mark Edlen still believes in the 20-minute neighborhood, but his dream of replicating multifamily, urban infill projects within Portland is on hold.”
“‘We saw a downturn coming (before the recession),’ Edlen says. ‘We just didn’t see how deep it would be and how large an impact it would have across our economy. I don’t think I’m the only one surprised by the depth and breadth of this downturn.’”
“When it became apparent in 2008 that condos weren’t selling, Gerding Edlen decided to convert Cyan/PDX from condos to apartments. On Nov. 20, Behringer Harvard Multifamily OP I LP entered into an agreement to purchase the 352-unit apartment building for $65 million, according to documents filed with the U.S. Securities and Exchange Commission.”
“The potential sale was a surprise to Cyan resident Nyco Herzog, but she said she has seen signs over the last year that Gerding Edlen’s vision for the project wasn’t going to develop. ‘It feels like any other apartment building,’ Herzog said. ‘They used to have movies on Friday nights, and they stopped doing those. The only people in the common areas are college kids. The staff does a great job, but I don’t think it has become a community.’”
“The slow trickle of incoming tenants, Herzog said, could have something to do with a lack of tenant participation in her community. When she and her husband moved into the building in May, Herzog said it was ‘dark and depressing’ and mostly empty. ‘There are more people on the floors now and the garage is full of cars,’ Herzog said. ‘But I think because they had such a hard time leasing it, the ideal hasn’t realized itself.’”
The Olympian in Washington. “The median sales price of a Thurston County home fell to the lowest point of the year in November, down 6.23 percent since January 2009 and down 8.87 percent since November 2008, according to Northwest MLS data. Real-estate agent Mark Kitabayashi thinks there won’t be price appreciation until the foreclosure problem bottoms out, and another wave of foreclosures could be on the way, he said. Thurston County Realtors Association president Mark Steves agreed Thursday, saying another batch of adjustable-rate mortgages, in which mortgage interest rates adjust higher, could come in 2010 or 2011.”
“It’s going to take a while,’ Steves said about a return to price appreciation.”
Tacoma Weekly in Washington. “Drastic changes in the housing market have caused Real Estate Investment Services (REIS) to alter some of its business practices, while also opening up opportunities to expand. Husband and wife team Greg and Darcy Dullum manage the Gig Harbor office, which opened in August. The Dullums were investors, operating their own real estate company for about seven years. They closed it down and opened the new REIS branch in the same office.”
“They were buying houses and selling them at a profit until the market took a downturn. They found themselves having to rent houses they owned from Bremerton to Chehalis. ‘Things have worked out good,’ Darcy said. ‘Debbi has helped us learn property management.’”
From Bloomberg. “Bank of Canada Governor Mark Carney’s pledge to freeze record-low borrowing costs through June may be raising the chances of a bubble in home prices even as it helps the economy recover from its first recession in 17 years. Sales of existing houses rose 74 percent in October from the January low, with prices up 21 percent from a year ago to a record C$341,079 ($323,203), partly because of Carney’s promise.”
“Carney’s situation reflects the conundrum faced by policy makers who must weigh the trade-off between stimulating their economies now with ultra-low rates and dealing later with the fallout from unintended consequences. ‘It is time to break the daisy chain of asset and credit bubbles and the global imbalances they spawn,’ Morgan Stanley Asia Chairman Stephen Roach told a conference in Vancouver Dec. 1. ‘If we fail, there may not be another chance.’”
“‘I don’t believe that there’s a bubble,’ said Peter Aceto, CEO of Toronto-based ING Direct Canada. ‘Most stories I hear are just typical Canadians trying to buy their first home or move up.’”
“Aceto said he is seeing some unusual signs, particularly in the Toronto market, where houses are getting as many as five offers at a time and prospective buyers are trying to woo sellers with personal notes or gifts. ‘When Canadians are waiving conditions and paying 10 percent more than asking for a home, it does give you some pause,’ he said.”
“Paul Lai and a dozen other real-estate agents camped out for 10 days along Toronto’s Bloor Street in late November for the chance to buy a home that won’t be completed for four years. ‘Where else is the world do you have agents lining up overnight to buy a condominium?’ said Lai. He was bidding for a client on a condo costing as much as C$500,000. ‘We’re making history here,’ he said.”
The Toronto Sun in Canada. “In a sign pre-construction condo appetites among Canadians are healthier than ever, developers are turning to old tricks to ensure they can meet buyer demand fairly. Sellers for the ‘River City’ project in the West Don Lands neighbourhood of Toronto opted to draw names in a behind-closed-door lottery Tuesday to determine who had first dibs on floor plans. Occupancy isn’t slated until 2011 but still developers anticipated demand for their pre-construction units starting at $179,000 to be considerably higher than supply.”
“‘I haven’t heard of (lotteries) in a long time,’ Georges Pahud, president-elect of the Canadian Real Estate Association, told QMI Wednesday. Lotteries, which were fairly commonplace at the height of the 2007 condo market, died off after the 2008 sub-prime mortgage meltdown.”
“Toronto-based agent Andrew La Fleur of Re/Max Condos Plus said his phone was ringing off the hook after news of the X2 buying frenzy spread. ‘Suddenly someone who has never heard of the project wants to put their life savings into this thing,’ La Fleur recently told QMI.”
“‘Things are back to being as crazy as it ever was,” he said, citing a combination of factors including record low interest rates and a return to the belief that real estate is a safe investment.”
“For the average person, buying a condo is one of the easiest ways to get a foot in the investment door, he said, adding ‘The increase in media coverage of these hysteria-type buying activities fuels the fire a bit.’ Pre-sale condo buyers often hope to turn as much as $50,000 profit flipping a units in the short term. ‘Over the past 10 years, that’s exactly what has happened so people are once again back on the bandwagon and hoping for more of the same,’ La Fleur said.”
“Over the weekend, a horde of home buyers in British Columbia stood in the rain for a chance to purchase condo units in a 26-storey tower to be erected in Vancouver’s trendy Yaletown neighbourhood. The Omni Group’s ‘The Mark’ isn’t scheduled for completion until 2013 and prices range from $320,000 to more than $900,000.”
The Times Colonist in Canada. “Dozens of single-family wood-frame houses are under construction this fall on Bear Mountain in north Langford. Construction of steel-and-concrete condo towers — all that has ground to halt.”
“Nowhere is the contrast more obvious than on Players Drive. Turn off Bear Mountain Parkway onto Players Drive and look to the left where a green giant of a construction crane stands motionless over the silent site of Capella. This $1.4-billion four-tower luxury condo project by Vancouver-based developer Robert Quigg stalled last summer just weeks after the June 27 announcement that work had started.”
“At build-out, Capella is supposed to have 650 homes, in buildings as tall as 44 storeys, set amid a Shangri-La that includes a vineyard, spa and secret woodland. So far, the only hint of those promises is the crane.”
“Quigg…told the Times Colonist in October 2008 that market conditions have to improve before work resumes. ‘The buyers’ psyche has been damaged,’ he said at the time. ‘There’s a fear and there’s a reluctance to make major decisions right now.’”
“Those fears have also haunted Bear Mountain’s condo plans. A tower crane, a white one, also hovers over the concrete skeleton of the first six storeys of the Highlander, not far from where the 18th greens of Bear Mountain’s two Jack and Steve Nicklaus-designed golf courses converge. The Highlander was supposed to be 14 storeys. Now its final shape will depend on how the real estate market unfolds. ‘I don’t know,’ said. ‘We’ll probably look at some sort of redesign.’”
“Another Bear Mountain condo project, the 17-storey Soaring Peaks, never got started. Its future is also uncertain. The crash in the condo market isn’t unique to Bear Mountain. In Colwood, work on the 23-storey Silkwind tower has stopped with only an enormous hole to show for it. Twelve-storey towers have been put on hold at The Aquattro near Esquimalt Lagoon, although smaller condo buildings and townhouse are being developed. And the $1.5 billion Colwood Corners development and its towers are waiting for the market to improve.”
“‘There is really no credit available for development any more,’ Les Bjola of Turner Lane Development Corporation said in September. ‘Of course, the minute I say that, somebody will say, ‘Oh, I can get it.’”
