The Housing Bubble

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KFSN reports from California. “California homebuyers who make a deal by midnight can save a lot of money. In order to get the federal credits, a deal must be in place by midnight April 30 and finalized by the end of June. The State Credits start May 1, but there’s enough overlap for double dipping. The combined tax credits sparked a surge in sales. The incentives were enough for Harpit Gill to sign on the dotted line. ‘I was like, I better hurry up for the deal so I can take advantage of those credits,’ Gill said.”

The Daily Breeze. “On Friday, after months of trying to buy their first house, newlyweds Terry and Ebony Jackson had finally reached their boiling point. About an hour after the Jacksons cooled down, their real estate agent called with the good news. Their offer on a foreclosed house in Carson was accepted. The Jacksons hope to move into their new house by June 1. The four-bedroom residence on a cul-de-sac was listed for $375,000 and received multiple offers. The couple’s bid was $2,000 above the asking price.”

“The couple was worried about missing Friday’s deadline. ‘We haven’t been sleeping the past couple of weeks,’ said Ebony Jackson, a child social worker who lives with her husband and his two young sons in a one-bedroom apartment in Hawthorne.”

The North County Times. “Chill out, California homebuyers: The federal tax credit for new homebuyers may have ended Friday, but on Saturday the state of California’s tax credit begins, and hey, it’s even bigger than the one the feds were giving. Critics, like economist Chris Thornberg of Beacon Economics, have attacked the tax credit as a waste of taxpayer dollars because the home sales would have happened regardless. Supporters, like the National Association of Realtors, have declared it a great way to goose the value of existing homes.”

“There may still be some reason to hurry, though: Robert Kleinhenz, an economist with the California Association of Realtors, calculated that the $100 million California has allocated for the new homebuyer portion of the credit probably won’t last till the end of May.”

The Union Tribune. “San Diego County’s housing market was the strongest in the nation in February, the Standard & Poor’s/Case-Shiller Home Price Index reported. Analysts attributed the overall annual increase partly to the federal homebuyer tax credit that expires Friday. Alan Gin, an economist at the University of San Diego, was at a loss to explain San Diego’s Case-Shiller numbers.”

“‘It’s very unusual that every other market is down,’ Gin said, noting that the unemployment rate of 11 percent here is worse than the national average.”

“Mark Zandi, chief economist at Moody’s Economy.com, said the credits ‘helped staunch the price declines.’ ‘The home is still the largest asset on most people’s balance sheet, so when prices are falling, nothing works for most families,’ Zandi said. ‘But now people can take a deep breath and think clearly again.’”

ABC News Money. “Debbie is one of California’s many homeowners who have found they can no longer afford the house of their dreams. Although she stopped paying her mortgage last year, she has found a way to avoid foreclosure: a ’short sell’ of the house for less than she owes on it. But even though she has found a qualified buyer, she can’t get the bank to approve the sale.”

“‘Why are they sitting on this so long?’ says Debbie, who bought her two-bedroom cabin in Modesto two years ago for $250,000. She can no longer afford the mortgage after she lost her job as a financial officer, even as the house has lost half its value in the economic downturn. Debbie says she’s surprised that her buyer has been willing to stick around for so long.”

“‘This whole situation has been very emotional for us,’ she says. ‘We’re just trying to do this the right way.’”

The Contra Costa Times. “A Brentwood councilman’s contracting firm has collapsed under the weight of impending lawsuits over home inspections gone awry. Now Robert Brockman, who lost his own home to foreclosure, is trying to pick up the pieces and start over. Brockman rejects the homeowner claims, even though he did not appear in court to defend himself against one. Homeowners always sue when the housing market declines, he said, to recover their lost equity. ‘Everybody sues a foundation guy,’ he said.”

“As the lawsuits mounted and the housing downturn soured business, Brockman cashed out $500,000 in retirement and 401(k) savings to keep BEC afloat. He had outlasted downturns before, and he said he thought he could persevere. Last May, he lost his Brentwood residence, and is in danger of losing a handful of East Contra Costa investment properties that have all gone underwater. He said he likely would lose a Brentwood industrial park complex assessed in 2009 at $4.7 million. ‘I was broke,’ the 55-year-old councilman said.”

The Sacramento Bee. “The new Ritz-Carlton luxury hotel at Lake Tahoe has gone into default, the latest sign of trouble for the lake economy and one of its top developers. The manager of the hotel, which charges anywhere from $249 to $4,000 a night, says business has been strong. But East West Resort Development of Avon, Colo, which has built hundreds of condominiums and town homes in the area clustered around the Northstar-at-Tahoe ski resort, is suffering from the collapse in the real estate market.”

“Even as the economy starts to recover, consumers are wary about spending money on goodies such as luxury timeshares. ‘Resort real estate and vacations fall into the category of discretionary spending,’ said Ralf Garrison, a consultant in the mountain resort business. The luxury resort real estate market remains in deep trouble, with the Northstar region among the hardest hit, said Garrison, who analyzes mountain resort travel.”

“In its bankruptcy papers, East West said the recession ‘took its toll on demand for luxury real estate, causing property values to fall markedly, particularly in Lake Tahoe.’”

The Desert Sun. “Keller Williams Realty Inc., led by operating principal Michael Hilgenberg…opened an elegant, new Legacy Division at 50-981 Washington St., in one of the hottest, million-dollar-plus sales areas of the Coachella Valley: La Quinta, where 32 luxury sales were recorded in the first three months of the year.”

“‘We think the baby-boom generation, which has been holding off on where to put its money, is going to come off the fence, and pick real estate for their investment,” he said. ‘What’s exciting about this is we’re the test case to this whole concept of an exclusive office specific to luxury homes.’”

“Valery Neuman, a luxury residential real estate broker for Windermere Real Estate who was a top sales agent in the Coachella Valley in 2009, described this period as one laced with opportunity in all price ranges. Action comes with a catch. ‘If it’s priced to sell, it’ll sell,’ Neuman said. ‘This is not a speculator’s market.’”

“Prices are down roughly 40 percent from 2006 levels, Neuman said, and the $6 million homes of 2007 are in some cases fetching $4 million, or 33 percent less than they did three years ago. Mike Smith, of Classic Living Realty, is advertising a short sale in The Vintage on an $8 million home that’s now going for $4.3 million. And the former estate of Liberace just sold in Palm Springs for roughly half of its former $2.8 million list price.”

The Santa Barbara Independent. “A 65-year-old Texas billionaire has agreed to buy 91 percent of the struggling parent of Santa Barbara Bank & Trust, which posted a $79.9 million first-quarter loss. Gerald J. Ford’s $500 million investment in parent Pacific Capital Bancorp (PCBC) gives the 50-year-old bank the capital boost it desperately needs to help weather the financial storms that have engulfed it since 2007, the last year it posted a profit.”

“Pacific Capital has been hit hard by toxic real estate loans for large out-of-state residential projects. After posting a stunning $431 million loss in 2009, the bank went on a cost-slashing campaign, including eliminating dividends, which badly hurt its retirees. Some in the market hoped that the bank would show a first quarter profit this year, but that didn’t happen.”

“As of March 31, the bank had a Tier 1 total risk-based capital ratio of 10.2 percent, which meant it was not in compliance with ratios set by federal regulators in order to be considered ‘well-capitalized,’ the bank said.’ ‘As a result of the most recent examination of the bank (by regulators) we expect that the bank and the company will be subject to further supervisory action. Any such supervisory action could have a material adverse effect on the results of operations, financial condition and business of the company and bank.’”

“It still has not repaid its $180 million federal TARP (Troubled Asset Relief Program) loan. Not only is the fate of the once-beloved local institution, operating from its longtime red-tile roofed headquarters at Anacapa and Carrillo streets, bemoaned in Santa Barbara today as the news sinks in, but the pain of recent cost-cutting has caused much bitterness among longtime employees and retirees. Dividends they had counted on for their ‘golden years’ have been eliminated, and medical benefits have also been slashed or, in the case of those 65 years old, eliminated.”

The Glendale News Press. “The California Assn. of Realtors reported that the median sale price for homes in Glendale fell 20.8% in March compared with the same period last year, although the median rose 3.3% in Burbank and 8.3% in Los Angeles County. The mixed regional results likely reflect a trend toward recent sales of more lower-priced homes, experts said. The sales mix in Glendale may have included more expensive homes in the past than are on the market and selling today, which likely pushed down the median sales figure, they said.”

“Still, the March median sale prices — $439,000 in Burbank and $399,000 in Glendale — indicate an increase in activity on the lower end of the price spectrum, most likely because more distressed homes are being sold, real estate experts and agents said. ‘There’s a lot of transactions happening,’ said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. ‘They’re just happening at greatly reduced prices.’”

“Banks are beginning to foreclose on and auction homes with distressed mortgages after months of restraint, said Robert Bridges, professor of real estate finance at the USC Marshall School of Business. ‘This is really a big thing that’s going on right now,’ Bridges said. ‘The fact that all of these auctions are going on, not just in L.A., but kind of around the nation, that is really recognition on the part of the banks that they really do need to get this stuff off of their books.’”

The Voice of San Diego. “It’s full-on spring frenzy in the housing market — bidding wars have erupted between flippers and newlyweds, and builders are taking the tarps down from shuttered projects. But those signs of growth and energy in the local housing market haven’t yet banished the gloom. Other trouble still looms — on the jobs front, in commercial real estate, in impending foreclosures. And with bank strategy difficult to read and government stimulus changing shape or disappearing, the forecast is even trickier.”

“Financial pros and regular Joes are gathering bits of insight where they can to get their bearings on this economic landscape. Buy a refrigerator from a guy on Craigslist, come back with daunting questions about San Diego’s economy. That’s what happened a few weeks ago to Dieter Haschke. The guy selling the fridge had been living in his Mission Valley home without making a mortgage payment since December 2008, Haschke discovered.”

“‘How many more people are out there doing this?’ Haschke wondered.”

“As of Tuesday, there are more than 9,602 properties actively scheduled for foreclosure sale — the second stage of foreclosure — that have not already been sold or had their auction canceled, according to ForeclosureRadar. Lenders have filed another 7,577 default notice within the last four months against San Diego County homeowners that have not yet made it to auction.”

“But it’s hard to tell when those homes will show up in the market. ‘While on the one hand we won’t bail homeowners out, we’re also totally anti-foreclosure,’ said Sean O’Toole, ForeclosureRadar’s CEO. ‘Politicians don’t want to kick people out on the street. And so we have a stalemate.’”

The Orange County Local News Network. “The number of home foreclosures continues to mount in the more-expensive enclaves of Orange County, but is decreasing in less-affluent neighborhoods, it was reported today. The beach cities of Laguna Beach, Newport Beach, San Clemente, Dana Point and Huntington Beach were among towns with the highest percentage increases in foreclosures in the state.”

“The biggest percentage gain in foreclosures occurred in Newport Beach’s 92660 zip code, encompassing the Back Bay and other neighborhoods. Lenders seized eight homes in that area, up from two in the first quarter of 2009. The homes in tony new subdivisions in the Ladera Ranch area had the county’s highest foreclosure rate, as 8.3 foreclosures were in process per thousand homes. Rancho Santa Margarita had a foreclosure rate of 4.4 per 1,000 homes; Aliso Viejo had a rate of 3.8 per 1,000. That compares to a county-wide average of just 2.8 foreclosures per thousand homes.”

“Home foreclosures are ‘definitely a trend that is moving toward the coastline,’ Steve High, a Coldwell Banker luxury-home agent based in Newport Beach. ‘The notice of default list is at the highest rate that I’ve seen in 25 years.’”

‘And the wave of foreclosure filings against pricey homes, generally near the ocean, may not have crested yet, High told the an Orange County newspaper. ‘There are many people out there who haven’t paid their mortgages in months.’”

The Press Democrat. “Home sales in West Petaluma, heart of the city’s turn-of-the-century Victorians, witnessed a significant jump during the first three months of the year. Real estate brokers say the increase in sales volume may be related to more sellers cutting prices and to more buyers wanting to purchase before interest rates rise. ‘We’re getting sellers that are much more realistic’ about the value of their homes, said Steve Crook, a broker associate in Petaluma.”

“Buyers purchased 58 homes in west Petaluma in the first quarter of the year, up 71 percent from the same period a year ago, according to The Press Democrat monthly housing report prepared by Rick Laws of Coldwell Banker. Laws said more sellers in the county appear to be lowering initial asking prices after concluding that they won’t see a big bounce in home values. He suggested some had hoped for a larger rebound after median home prices fell more than 40 percent during the past five years.”

“Waiting for prices to come back to 2006 levels ‘could take the rest of your life,’ Laws said.”