The Housing Bubble

This thread will be forwarded during my trip through New Mexico and part of Texas, for the purpose of communicating with local bloggers, posting observations and photos. Let’s call this the Shadow Inventory Tour. Pics will be posted on Picasa.

The Austin American Statesman in Texas. “Rooftops could start appearing next year on the long-delayed Flatrock Springs development in Marble Falls, where plans call for more than 2,000 residences. The project was announced four years ago, but the recession and ongoing economic downturn caused managing developer SouthStar Development Partners Inc. to ‘re-evaluate the process,’ said Thad Rutherford , SouthStar’s vice president of project management.”

“The relaunched Flatrock Springs will be a “true mixed-use community,” ranging from $90,000 townhomes to 2-acre ranchettes for $600,000, Rutherford said. He declined to put a dollar amount on the current value of the project, which was reported in 2006 to be about $850 million. The relauching of Flatrock is another sign that development is picking up in the wake of the recession. ‘It’s a different world we live in, but activity is increasing,’ Rutherford said. ‘It never came to a halt like other places in the country, which is a positive thing.’”

“Austin voters would be asked to approve $16 million for a boardwalk along Lady Bird Lake’s south shore, closing a gap in the hike-and-bike trail, under the draft version of an $84.8 million transportation bond proposal for the November election. The boardwalk concept has run into opposition from some lakeside residents. The boardwalk would bring thousands of people each week by the back doors of condominiums, including one owned by entertainment publicist Jill McGuckin. Aside from privacy and security concerns, McGuckin said she is concerned about graffiti and general maintenance.”

“‘Why would you spend $16 million for 1.1 miles to nowhere?’ McGuckin said.”

KVUE in Texas. “You might just call it the life styles of the rich and famous in Austin. Two luxury condos are opening this month and a third by the end of the year. These high rise projects have already changed the face of Austin’s skyline and are revolutionizing Austin’s urban lifestyle. They are some of the most expensive residential housing developed in downtown Austin.”

“The Austonian is the tallest residential building in Austin and the Western United States. It too boasts of its elegant life style and unprecedented views of the City and surrounding Hill Country. To live here, it will cost you between $586,000 to $7.2 million.”

“Arnold and Candy Lipp closed Friday morning on their second home at the Four Seasons Residences. ‘Location was everything for us. We just love the grounds of the Four Seasons, with all the tradition and the amenities,’ said Arnold Lipp. Their two bedroom/two-and-a-half bath condo is on the fifteenth floor with a view of Lady Bird Lake. ‘What can be better than this view,’ said Lipp. ‘It is magnificent.”

“The 32-story high-rise building features 148 condominiums and…range in size from 880 square feet to 5,500 square feet and are priced between $400,000 and $4 million.”

The Star Local News in Texas. “A disturbing trend has developed among foreclosed homes in Collin County. The total number of ‘upside-down’ residential foreclosures for the first half of 2010 increased across the Dallas-Fort Worth area and other parts of the state including Collin County where the rate jumped by 41 percent, according to data tabulated by the Foreclosure Listing Service (FLS) of Fort Worth.”

“Dallas County had the highest increase in the Dallas-Fort Worth area with 56 percent followed by Denton County with 51 percent, according to FLS data.”

“‘Both the homeowners and the lenders of these upside-down homes are in a no win situation,FLS President George Roddy said. ‘Generally, the homeowner cannot sell the home for what they owe on the mortgage and most often, the lender cannot sell the home after repossessing it for the amount that they have invested in the mortgage and other costs that the lender has incurred.’”

“‘Upside-down postings have risen at a much higher pace than overall residential foreclosure posting activity,’ Roddy said. ‘Compared to one year ago, the number of postings filed on homes in an upside-down position climbed 39 percent in the 19-county area; whereas, total residential posting activity increased just 10 percent.’”

The Dallas Morning News in Texas. “In the four-county D-FW area, more than 6,700 foreclosure postings in the first half of 2010 involved homes on which the debt owed was higher than the tax appraisal. During the same time, total foreclosure postings in Dallas County rose only 7 percent. Recent studies estimate about 15 percent of all Dallas-area homeowners with mortgages owe more than their house is worth. They either paid too much for the property or, more likely, values have fallen in their neighborhoods due to distressed property sales and high inventories of unsold homes.”

“Homeowners who are underwater in their mortgages are considered much more likely to default on their loans.”

“Condo and townhouse sales in North Texas have jumped 24 percent in the first five months of 2010 from a year ago. Sales are still below where they were in 2008, according to statistics from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems Inc. And there’s no sign that prices are bouncing back. Median sales prices for condos were down 17 percent in May from a year ago. There’s about an 11-month supply of condos and townhouses for sale in North Texas.”

“At the high end, some potential buyers have run into difficulties obtaining mortgages, said Jeff Updike, who owns Dallas’ Remax Urban. ‘You can get way down the road with a deal before you figure out there is just no financing,’ he said.”

“Analyst Mike Puls of Foley & Puls said some buyers of high-end units have had difficulty getting the homes to appraise for what the sellers are asking. ‘That really hurt the ability to sell some of the units,’ he said.”

“One condo high-rise, the House at Victory Park, has been advertising that it provides 100 percent financing for qualified buyers. About a dozen of the 150 units in the 28-story condo tower, which opened a year ago, have been deeded to buyers, tax records show. Condos at the House range from under $400,000 to more than $2 million. Unlike some markets in Florida, Nevada and California, Dallas did not see a condo building boom that left the area with thousands of unsold units when the recession hit. Several proposed Dallas condo projects, such as the Maple Terrace tower, were canceled.”

“‘We came late to that market, so we wound up with fewer units – about 1,000,’ Puls said. ‘We have closed about 60 percent of the high-rise units built that were for sale.’”

The Star Telegram in Texas. “The Parthenon Greek restaurant was torn down to make room for a matching condo building to the adjacent Versailles condos on Henderson Street in 2007, but now it appears those condos won’t be built. Borodino Land, an investor group headed by Fort Worth neurosurgeon Gregory Smith, in April deeded the property back to its lender, Southwest Securities Bank in Arlington, deed records show.”

“Smith said he negotiated the settlement with the bank after it wanted to restructure the loan, which would have made it impossible for the group to move forward with the project in today’s economy. The group had obtained building permits but then held off starting construction just as the financial crunch took its grip on the local markets, he said.”

“The group previously announced plans for a seven-unit building in hope that it would be sold out by June 2008. The property remains vacant.”

New Mexico Business Weekly. “Albuquerque and New Mexico’s foreclosure rates rose in April over March and are substantially higher compared to April 2009, according to CoreLogic. Statewide, however, New Mexico’s foreclosure rate of 2.11 percent was well below the national rate of 3.20 percent in April.’

“The most significant statistic from the CoreLogic report indicates that 6.7 percent of Albuquerque area mortgages were 90 days delinquent in April compared to 3.9 percent last year. Statewide that rate hit 5.84 percent. For the U.S., the 90 day delinquency rate stood at 8.9 percent at the end of April.”

“Although the report didn’t give reasons for the gains, the continuing recession and its job losses, coupled with the resetting of adjustable rate mortgages, are among the most likely causes.”

The Four Corners Business Journal in New Mexico. “As the weak economy has driven down employment rates and hurt the housing markets of Four Corners communities, housing rentals in Durango and Farmington have become increasingly available. The challenge, many area property managers say, is finding tenants willing or capable of renting houses and town homes commanding monthly rental fees higher than $1,000.”

“Adding to the challenge is an increasing supply of rental homes in that price range coming available in Durango and Farmington. As homeowners are struggling to sell their houses on the open market, many are choosing to seek renters and wait for the area real estate markets to improve. ‘In the over $1,000 a month (range), we’re not seeing more people coming into town. That’s been the hardest-hit market,’ said Caroni Adams, owner of The Property Manager in Durango. ‘You have to have a fairly good income to afford it. People don’t have the income, they’re just not coming.’”

“As BP America slowed its operations in La Plata County, the effect was felt by the rental housing market, said Dawn Wright, owner of Durango Property Management. ‘Even up to last year, before BP started downsizing with their subcontractors, that’s who was renting the higher-end homes, people who were contracting for BP or Conoco,’ Wright said. ‘Now there are fewer of them, so we have more high-end units available and we’re seeing them vacant for longer.’”

“Units priced higher than $1,200 can take as much as three months to get rented, Wright said. As a result, prices are dropping on the higher-cost properties, and renters have become very picky about what they are looking for in a market ripe with supply, she said. ‘We have seen a surge of supply and less demand,’ Wright said.”

The Clovis News Journal in New Mexico. “Officials say Clovis isn’t feeling the mortgage crunch that’s squeezing other areas of the country. However, for those with homes that are in jeopardy, help is available. Hope Now is a free homeowner counseling service designed to help people look at their options, according to Housing and Urban Development spokeswoman Patricia Campbell. Also, for the first time, Federal Housing Administration mortgages are being made available as a refinance option to troubled borrowers, she said.”

“Campbell said borrowers must act quickly, because if they wait until they are going under, it may be too late. ‘There are some people who will not be able to avoid (foreclosure), but there certainly is some help out there. (FHA refinance) is a new product that really is an opportunity for people who are behind or they know their (adjustable rate mortgage) is going to readjust this year,’ Campbell said.”

“Financial Counselor Brenda O’Shea said in the last six months traffic has nearly doubled at the Clovis Consumer Credit Counseling Services branch she manages. Financial strain from rising fuel costs, increased food costs and homes that exceed budgets turn into growing credit card debts and delinquencies, she said. ‘Everyone’s getting overextended on the credit cards and they’re getting to where they can’t afford the minimum payments anymore because everything is going up,’ she said.”

“O’Shea said people who never thought their stability would be in question, find they are having problems. ‘Even someone a year ago that thought they would never have been in a predicament like this are having problems,’ she said. ‘There are those who have said, ‘I should have come a year ago but I was embarrassed.’”

The Las Cruces Sun News in New Mexico. “With the economic downturn the past several years, a society that had increasingly been leaning on credit cards found itself relying on plastic to survive the recession. Las Cruces accountant and financial instructor Vivian Moore teaches classes for people who are going through the foreclosure process. She said that some people have no room to maneuver. ‘They feel like they don’t have a choice but to live on credit cards, but they can’t keep up with them,’ Moore said.”

“‘People leaned on credit cards definitely,’ said Dave Hooker, who owns Shorty’s Food Marts in Las Cruces. ‘Credit and debit card usage is way up. It looks like we’re going to a cash-less society.’”

“Still, it does appear as if one silver lining in the recession is the way it has made Americans more cautious with their finances. The personal savings rate has recovered to 3.6 percent, after falling for two months. But, ultimately, is all this saving a good thing for the economy? Some experts believe that better saving habits might delay economic recovery because, as people save more in a tough economy, they spend less.”

“Economists call it the ‘paradox of thrift.’ What’s good for individuals — spending less, saving more — is bad for the economy when everyone does it. Jim Peach, who teaches economics at New Mexico State University, refers to it as ‘fallacy of composition.’ ‘Saving may be very good for me and you as individuals, but the fallacy of composition is: if everybody does it, then we’re not consuming and incomes may be lower,’ Peach said.”

‘He said that in the years before the recession, U.S. consumers were spending at a pretty fast clip. ‘Now you combine an increase in the savings rate with tighter credit restrictions — plus housing loans and automobile loans are in the same situation — and you have a double hit on consumption,’ Peach said. ‘The question is: ‘How long that will last?’ The honest answer is: ‘No one really knows.’”