The Housing Bubble

KGO-TV reports from California. “We continue to feel the effects of the mortgage meltdown; Fannie Mae, the government backed home loan lender, Monday asked for another $8.5 billion dollars to cover its losses. And the mortgage crisis is shaping the California Senate race. Republicans say the two mortgage giants drove the country into financial crisis. Democrats say it was Wall Street’s fault. Monday morning, Sen. Barbara Boxer, D-Calif., pointed to the headlines of the financial collapse and told reporters it was the excesses of Wall Street. ‘We know this all started because of what happened on Wall Street; it’s clear, you can just track it, the whole entire thing,’ she said.”

“‘”It was entirely due to government distortions of the marketplace, specifically Fannie Mae and Freddie Mac,’ GOP Senate candidate Chuck DeVore said. ‘The failure was when Congress told Fannie Mae and Freddie Mac, and I remember this statement from Barney Frank, ‘Roll the dice,’ GOP Senate candidate Tom Campbell said. ‘We had 20 plus regulatory agencies that were not doing their job and, as I mentioned, Fannie and Freddie were a huge part of this problem,’ GOP Senate candidate Carly Fiorina said.”

“In the Senate Monday, Republicans pushed for an amendment to sever the government’s backing of Fannie and Freddie. But the Democratic chair of the banking committee warns if it were to cut the government backing to Fannie and Freddie credit would dry up and housing prices would plummet. ‘You can say a lot of things, but if you don’t have stability in the housing market this recovery will not occur,’ Sen. Chris Dodd, D-Conn., said.”

The Ventura County Star. “A report by the Brookings Institution asserts wage inequality in Ventura County is the fifth-highest among the nation’s 100 largest metropolitan areas. The gap between high and low reflects a county work force that includes about 15,000 to 25,000 low-income farm workers depending on the time of the year, said Bill Watkins, director of an economic research center at California Lutheran University in Thousand Oaks.”

“If farmworkers are one face of the Census preview, Elizabeth Hartung is another. She’s a sociology professor who moved from Fresno County to Camarillo five years ago. She and her husband bought a house for twice what it would have cost in the Central Valley. The housing crash has flipped them. ‘I am, like so many other people, an upside-down homeowner,’ she said.”

From KGET. “It could take 30 years to get housing prices back to where they were in 2006 in Bakersfield. Real estate experts say the local housing market is in an ‘epic hangover,’ and that is forcing some homeowners out of state. ‘I’ve been doing it for 48 years, and I’ve never seen a market such as this,’ appraiser Gary Crabtree explained. ‘And in my career, I’ve been through four recessions.’”

“Bob Beadling bought his Bakersfield home ten years ago, and is moving to Idaho because he feels the California market is too volatile. Beadling remodeled his home before putting it on the market, but he still says he will lose about $160,000. ‘Economically, there is such failure,’ Beadling said. ‘And there’s no control over it, and there’s no control over anything. Basically you can’t afford to retire here. If you want to stay here the rest of your life and work until you’re 90 years old, you can do that.’”

“Donna Moe is helping friends who bought a home at the height of the market. Moe says her friends are taking the loss and moving to Texas where they see a lot more potential in the housing market. ‘They paid over $750,000. It’s listed now for $515,000,’ Moe said. ‘(They bought) about three years ago right before things tipped.’”

“However, a lot of Bakersfield residents who are upside on their homes don’t have that option.”

“Crabtree says there are indications a second wave of foreclosures are on the way, and although housing prices are up 20% from last year at this time, he says there is a reputable study that predicts it will take much longer to see median housing prices around $300,000 again. ‘They estimate that it’s going to take unit 2039 for the Bakersfield market or Central Valley market to reach its peak of 2006 of $300,000,’ Crabtree said.”

The Bakersfield Californian. “The median home price for existing homes in the Bakersfield area rose 21 percent over last April to $138,665 according to the Preliminary Crabtree Report by Gary Crabtree of Affiliated Appraisers. But the possibility of a long-dreaded second wave of foreclosures cast a shadow over the good news. ‘There now are preliminary indications that a second wave of foreclosures are on the way,’ Crabtree said.”

From CNN Money. “Despite the housing bust and high foreclosure rates, in some areas real estate agents are complaining that they don’t have enough homes to sell. In California, almost all cities have a short supply of single-family homes. That’s especially true in the lower-priced categories, according to Leslie Appleton-Young, chief economist for the California Association of Realtors.’

“Ordinarily, rising prices are an indication of shrinking inventory. But these are far from ordinary times. Never have there been so many properties that could be for sale — but aren’t. This so-called ’shadow inventory’ comes from two main sources: properties lenders have not yet repossessed or have not yet put back on the market; and homeowners who want to sell but who have refrained because of low prices.”

“Lenders are also holding back on foreclosing at all, either because they’re having trouble handling the volume of repossessions or because they want to sell off some of the inventory they already have. ‘Notices of default are filed, but they’re not taking the properties back,’ said Appleton-Young.”

The Voice of San Diego. “At a time when normal real estate deals are muddled with extra negotiations and delays, there’s something striking about the unadorned procedure underway every day at the courthouse steps in downtown San Diego, El Cajon and Oceanside. Sometimes homeowners show up that day to present valid bankruptcy papers, a last-minute trump card to save a home from auction. Otherwise, the bidders at the steps don’t know the faces behind the address. The address could be home to victims or loafers, those with lost jobs and hospital bills or those simply giving up on the mortgage payments.”

“They range from a lot in Rancho Santa Fe for more than $1 million to a spot near Chollas Creek for $85,000. Also up for bid: homes in Santee, Ramona, El Cajon, Oceanside, Escondido, Chula Vista and several neighborhoods of San Diego. These daily trustee’s sales are the official format for disposing of foreclosed homes. Notices of these auctions have been flooding the county’s mailboxes increasingly in recent years, with more than 2,400 sent out in March, according to ForeclosureRadar. In the vast majority of cases, no one bids.”

“Home prices are rising in the county, especially in some lower-priced pockets like Lemon Grove or parts of Chula Vista. Prices there are going up, making them especially attractive on the courthouse steps. Many investors are buying with the intent to rehab and sell the homes on the regular retail market as soon as possible. Not that the rising prices actually make sense to many of these long-term investors, who think the market still has a ways to fall.”

“‘They look at it and look at each other and we’re shaking our heads, but you just deal with what it is,’ said Ward Hannigan, a mainstay in the local foreclosure scene since 1982 . ‘If there’s a pocket over here that’s booming, for whatever reason, even if it doesn’t make sense, then let’s take advantage of it.’”

“There’s been a growing number of auctioned homes selling at these auctions on the courthouse steps, rather than just going back to the bank. In March there were 397 such sales, the highest number recorded since January 2007, according to ForeclosureRadar. But there’s also been an increase in the number of sales that banks have canceled. In March, the most recent data available, 961 properties went back to the bank in the auction, and 1,263 others were cancelled.”

“On a recent morning on the courthouse steps downtown, a crowd of close to 50 stretches from the sidewalk, up the stairs, and all the way to the courthouse building. Jay Gafner starts reading a long list of addresses — these are properties for which the banks have postponed or canceled the sale today. The borrowers may have declared bankruptcy, or they’ve worked out a loan modification or a short sale, where the bank has agreed to let the borrowers sell for less than they owe. By 1:10 p.m., Gafner has sold 12 properties, sent 22 back to the bank, announced 12 cancelled sales and called out about 200 cancellations.”

The Daily Journal. “Mendocino County District Attorney Meredith Lintott confirmed Saturday that she and her husband filed for bankruptcy, a move she said became necessary when her Fort Bragg home of 15 years wouldn’t sell. She and her husband bought a home in Ukiah when Lintott was elected district attorney in 2007 and rented out the Fort Bragg home until Lintott and other elected officials took a 10 percent pay cut last year. ‘I knew that meant I had to sell the house,’ she said, noting that she’s not complaining about her pay.”

‘The tenants moved out when the couple decided to sell the Fort Bragg home, and Lintott said she couldn’t afford to wait out the depressed housing market after she lowered the price of the home and there were still no buyers. The Fort Bragg home is now in default. ‘I think I’m in the same boat as many other people,’ Lintott said. ‘This is a reflection of what is happening to the economy right now.’”

“Adding to her financial woes, Lintott notes she had debt from three campaigns and two children in college. ‘We did everything we could to sell the house,’ Lintott said. ‘It’s heartbreaking; we raised our children there and put our time and money into it.’”

The Fresno Bee. “For many families whose homes are worth far less than what they owe, financial and emotional stress is changing the ’stay-at-all-costs’ mindset. In areas hardest hit by plunging real-estate values — including the San Joaquin Valley — some people who can afford their mortgage are opting to walk away from their loan. ‘It’s very stressful to get to that point,’ said James Graham, a 48-year-old power-plant worker who walked away from his home in Bakersfield last fall. ‘You’re raised up to do the right thing and pay your mortgage, pay your bills. But when you get to that point where it’s time to walk, it’s time.’”

“‘If you’ve got a mortgage that’s $400,000 and the homes around you are selling for $150,000 … it doesn’t take a rocket scientist to figure out there’s a compelling reason to walk,’ said Robin Kane of RCK Organization, a Fresno property broker. ‘Especially when you find out the guy across the street is renting for $1,200 a month and your mortgage payment is $3,600 a month.’”

“‘People are walking away from homes in every county in California,’ said Walter Dees, the Los Angeles-based lead housing counselor. ‘They don’t see the value of continuing to pay for a house that will take 10 years or more to regain the value it had before.’”

“Graham bought his three-bedroom, two-bathroom Bakersfield home for about $162,000 in 2003. As property values roared upward in 2005 and 2006, lenders inundated Graham with offers to refinance against the rising value the house. ‘People were just dying to give me money and I was just dying to take it,’ said Graham, who eventually refinanced for $320,000 to consolidate some other debt. ‘I thought I’d always have my house to back me, that it would keep going up in value.’ But when the market collapsed, ‘my house was worth 60% of what I owed…My life has improved greatly since I walked away from that mess’”