The Housing Bubble

Post off-topic ideas, links, and Craigslist finds here.

The Marin Independent Journal reports from California. “The number of Marin foreclosures in the first quarter of this year spiked 28.1 percent compared with the same period last year, by far the biggest increase in the Bay Area. The number of additional homeowners who fell behind on their mortgage also edged up in Marin, the only county in the region to see such an increase. The figures, released by San Diego-based DataQuick, came as a surprise to some observers in Marin, where the rate of foreclosures still remains one of the lowest in California despite the recent increases.”

“‘Who knows what’s going on out there?’ said George DeSalvo, a broker who specializes in bank-owned properties. ‘I’ve never seen anything like this in my entire life…We’re starting to see more foreclosures in cites like Tiburon, Mill Valley, Corte Madera, where we almost never saw foreclosures.’”

“Many properties have only recently been placed on the market months after the lender foreclosed, said Robert Bradley, president of Bradley Real Estate in San Rafael and a specialist in bank-owned properties. ‘What you’re going to see in the next couple of months is a ton of foreclosures coming out and being put on the market,’ Bradley said.”

The Press Democrat. “Sonoma County has entered the fifth year of the nation’s foreclosure debacle, and each week about 40 borrowers here continue to lose their homes. Lenders foreclosed on 519 county homes in the year’s first quarter, according to San Diego-based DataQuick. That represented an increase of 17 percent from the previous quarter and 5 percent from a year ago.”

“With so many homeowners still at risk of losing their homes, ‘it’s going to be a two- to five-year process to bleed all these properties into the market,’ said John Duran, president of the North Bay Association of Realtor’s Santa Rosa Chapter.”

The Willits News. “The number of foreclosures in Mendocino County is setting new pace in 2011 with an average of 34 per month. This is the largest number of foreclosure sales in a quarter since the recession began. The inventory of bank owned property sitting empty is up to an estimated 260 county properties. This, even as the timeframes between issuing a notice of default and final sales lengthens to 263 days, according to ForeclosureRadar.”

“The pace of sales shows little sign of reaching an end as a substantial inventory of past issued notices of default remains even while new issuances have averaged 59 properties a month so far in 2011. This compares to an average of 51 notices of default in 2010. County properties in default had loans which originated from 2004 through 2008 with most originating in 2006 and 2007.”

“Within California the worst hit area is Madera County with one in 123 homes involved in foreclosure. Los Angeles leads the state with 12,172 properties in foreclosure.”

The Merced Sun Star. “Foreclosures in Stanislaus, Merced and San Joaquin counties dropped to levels not seen since 2007, according to just-released statistics from DataQuick, a real estate data provider. The region’s foreclosure rate has fallen to about half what it was during the 2008 peak of the mortgage mess.”

“That doesn’t mean times are good. Just better. Since the foreclosure crisis began four years ago, about 66,500 Northern San Joaquin Valley homes’ mortgages have defaulted and lenders have taken them back. In Merced County, lenders repossessed 607 homes, which was 5.2 percent more than during the same months last year. Since mid-2006, 12,680 Merced homes have been foreclosed. That’s about 18 percent of the homes and condos in the county.”

The Bakersfield Californian. “The personal income of Kern County residents is just 70 percent of the state’s average income and is declining, according to new federal data, The decline in personal income late in the decade coincides almost perfectly with the collapse of the residential real estate market and the banking crisis that followed. That probably accounts for some of the drop, said Louis Medina, homeless project manager for United Way of Kern County.”

“‘Certainly the people who were using their home equity as banks weren’t able to do that anymore,’ he said.”

“McAllister Ranch has a buyer. The unfinished 6,000-home golf course community in far southwest Bakersfield has been stuck in bankruptcy limbo since September 2008. But an investment affiliate of the original master developer, Irvine-based SunCal Cos., earlier this month won a competitive auction in bankruptcy court.”

“McAllister Ranch became an international symbol for what went wrong at Lehman Brothers, the now-bankrupt New York investment bank, after a $235 million loan from Lehman Commercial Paper Inc. defaulted in spring 2008. That summer, Fortune magazine ran a feature highlighting the unfinished project and its Greg Norman-designed golf course going to weeds. Other media outlets, including the BBC, latched onto the Bakersfield site, where billboards boasting the upscale community long loomed over a barren, dusty patch surrounded by nodding oil rigs.”

“The affiliate, PVCO Land Holdings LLC, paid $71 million in all for three projects: McAllister Ranch and two developments in Riverside County. In all, Lehman loaned more than $300 million to McAllister Ranch and the two Riverside projects.”

The Los Angeles Times. “Growth has altered the skyline of downtown Long Beach over the last decade. New high-rise condo towers dot Ocean Boulevard. Older buildings have been converted into lofts, and a new shopping center and entertainment complex rose on the site of the long-shuttered Pike amusement park. But when the U.S. Census Bureau released population data earlier this year, some in Long Beach were shocked to learn that between 2000 and 2010, the state’s seventh-largest city added only 735 residents — a growth rate of 0.2% and far below the national average of 9.7%.”

“Long Beach is one of several large cities in Southern California to see growth plateau — or in some cases decline — in the last decade. Long Beach Councilman Robert Garcia said his city’s numbers merely reflected the trend of Californians moving farther inland, away from coastal cities, and he advised against any assessment of Long Beach’s future based on the count. ‘If I was walking through downtown and I saw decay, empty buildings, half-built condos, parks that were unfinished, then I’d be worried,’ he said. ‘But the reality is that crime is at a 30-year low, development is happening, we’re still building workforce housing, and I think we’ve got a bright future.’”

LA Downtown News. “MPG Office Trust, the commercial real estate giant that once dominated the Downtown office building scene, is staring at a mountain of debt that it can’t afford to pay and is at risk of defaulting on several of its most prominent buildings. The situation has some wondering if the company that played a key role in shaping the Downtown Los Angeles skyline is built for the future.”

“‘It’s the end of the era for [MPG],’ said Steve Marcussen, executive director of commercial real estate firm Cushman and Wakefield, who believes that lenders on MPG’s core properties will have little incentive to renegotiate their loans to keep MPG in its assets.”

The Orange County Register. “We at this blog have decided to start tracking Orange County’s most exclusive listings. Nah, just homes formally listed for $20 million or more. What did we learn in April’s review of Redfin‘s search of brokers’ most-pricey MLS listings? Still, 10 homes in this club. One significant change this month: The Corona del Mar estate at 169 Shorecliff has had its price cut by $5.445 million in $22.5 million. So it’s now tied for 9th priciest.”

“3 of top 5 are in Laguna Beach. That means that 5 of the 10 now show price reductions, price cuts that total $38 million!”

The San Gabriel Valley Tribune. “Distressed properties accounted for more than half of the homes sold in Los Angeles County in March, down from 55 percent in February but up from 49 percent a year earlier, the California Association of Realtors reported. L.A. County’s 51 percent might seem high, but other regions posted percentages that were far higher. The Inland Empire - which many consider to be ground zero for the housing meltdown - ranked among the worst. In San Bernardino County, 71 percent of the region’s March sales were distressed properties. That was down from 76 percent the previous month and 75 percent in March 2010, CAR reported.”

“Riverside County’s rate of 67 percent for March was down from February’s 71 percent and the year-ago rate of 73 percent. ‘Consistent with the state as a whole, nearly all the counties for which we have data also experienced an improvement in distressed sales,’ CAR President Beth L. Peerce said in a statement. ‘However, distressed sales in most of the counties were higher than a year ago, as the market continues to work through large numbers of troubled mortgages.’”

“Solano County had the highest percentage of distressed property sales for March (76 percent), while Kern County tied with San Bernardino County at 71 percent.”

The Inland Valley Daily Bulletin. “City officials believe construction of the Colonies development has been beneficial to the city overall, despite years and millions of dollars spent on litigation surrounding the project. A document dated in June 2002 estimated the project would generate about $4.3 million for the city annually by 2011 - about twice the actual tax receipts. However, the estimates were based on a complete build-out of the development, and the economic downturn has had an effect on all city revenues, said acting City Manager Steven Dunn.”

“Mary Wright of Upland believes the Colonies residential and commercial developments have done nothing for the city. ‘It’s overcrowded our schools, especially Pioneer Junior High School,’ Wright said. ‘In Upland it’s all about the tax revenue.’”

“Wright said she had attended all the open houses for the development. ‘Half the houses over there are in foreclosure, and there’s a big battle over the water,’ she said.”

The Desert Sun. “A miserable winter, the soaring Canadian dollar and bargain prices are among the reasons snowbirds have embarked on a home-buying spree that has made the Coachella Valley one of the few places in Southern California where sales are rising. Many Canadians are paying cash. And unlike in the U.S., the housing market in most Canadian provinces has remained strong, enabling buyers to set up a line of credit against current real estate assets to finance property purchases in the valley.”

“That’s especially true in western Canada, where real estate values have soared in a region with an oil-based economy. The Canadian Real Estate Association reported the average house price in February was $792,000 in Vancouver, $588,000 in British Columbia and $454,000 in Toronto.”

“‘I’ve got a lot of friends who are really interested in purchasing a home because our dollar is cookin’ right now,’ said Liz Malinka, a Vancouver resident who bought a home in Palm Springs. ‘We come down here and go, ‘Wow,’ Malinka said of valley home prices.”

The Gazette reports from Colorado. “From Colorado Springs’ swankiest neighborhoods to its middle-class subdivisions to El Paso County’s rural areas, 2010 was a tough year for home prices in the Pikes Peak region. Bill Hurt, broker in Colorado Springs, thinks the housing market has about hit bottom. But any recovery won’t necessarily be a quick one, he said. He expects prices to be flat in 2011, as distressed properties continue to take a toll on the market. ‘The foreclosures aren’t going to go away tomorrow,’ Hurt said. ‘We still have a pretty substantial inventory of foreclosures to work through.’”

The Greeley Tribune in Colorado. “Greeley businessman Seth Ward has filed bankruptcy with debts exceeding $43 million, according to documents in U.S. Bankruptcy Court in Denver. Ward’s debt primarily stems from his partnerships in multiple real estate limited liability companies, including in Greeley, Windsor, Berthoud and Loveland. He has filed Chapter 11, meaning he will attempt to reorganize the claims and pay them back.”

“Keith Abbott, a bankruptcy attorney in Greeley, said it’s not surprising an area businessman who had many real estate dealings is struggling. ‘The last three years at least (real estate values) have gone down probably by a third across the board,’ Abbott said. ‘ … I know a lot of (attorneys) in Denver, and that’s all they did was real estate, and they’re hurting like everyone else. Times are tough. I talk to a half dozen people a day and do a lot of bankruptcy work. I’ve never seen it this bad.’”

“Bankruptcies such as Ward’s are part of the overall contraction of the real estate sector in the wake of the housing crisis, said John Green, a regional economist. ‘This is part of the shrinking process,’ he said. ‘It had to happen. You can’t take a big hit to the housing sector like that without ripple effects taking somebody down.’”

The Arizona Republic. “New-home sales in Maricopa County were down significantly from a year earlier during the first quarter, according to The Arizona Republic’s latest quarterly housing snapshot, based on numbers from realty studies at Arizona State University and Mesa-based Ion Data. Realty-studies professor Jay Butler said he was concerned that the continued decline in median home prices would push some homeowners who are upside-down on their mortgages to give up and walk away, particularly those who were exhausting all other financial resources to make the mortgage payments.”

“There were 11,425 foreclosures in the first quarter of 2011, up slightly from 11,190 foreclosures during the same period a year earlier. However, pre-foreclosure notices were down considerably, from 18,245 notices issued in the first quarter of 2010 to 15,232 notices issued during the same period a year later. Butler said the decrease in new notices seemed logical after four years of heavy foreclosure activity.”

“‘First of all, you’ve foreclosed on 11 percent of the homes in the Valley, so you’ve got to be running out of properties to foreclose on,’ he said.”

The Salt Lake Tribune in Utah. “With Utah facing the possibility of 40,000 foreclosures this year, speakers at an event designed to draw attention to the ‘crisis’ said Wednesday that the effects of so many empty homes will ripple across neighborhoods and communities. Billed as a rally at the state Capitol Rotunda, the event was more of a news conference that drew activists, community groups and a few officials who warned of the consequences of the wave of foreclosures hitting Utah. ‘Utah is on track for more than 40,000 foreclosure notices in 2011,’ said Marco Fields, founder of a homeowner advocacy group called TEEMS Utah and one of the event organizers.”

“Layton Mayor Steve Curtis choked up while describing his own experiences of losing his job, then having his home go into foreclosure despite ongoing negotiations to modify his loan.”

“Greg Sexton said he was forced to file a lawsuit to halt foreclosure of his Draper house after months of fruitless negotiations with Bank of America representatives to qualify for a federal short-sale program. He cites phone call after phone call to the bank and a company hired by it in which false criteria were used to block his participation. He said the various entities were not communicating with each other and turnover is such that he constantly has to talk to new people unfamiliar with his case.”

“‘They purposefully are booting me out of this program so they can foreclose on me,’ Sexton said.”

The Deseret News in Utah. “Utah is fourth in the nation in home foreclosures, and it’s mostly the mortgage industry’s fault. That was the message voiced by politicians and activists Wednesday at a rally on Capitol Hill organized by the Utah Foreclosure Crisis Coalition. ‘They are not perpetrators,’ said Sen. Ben McAdams, D-Salt Lake, of the thousands of Utah homeowners who have recently gone through foreclosure. ‘They are victims.’”

“The housing bubble may have burst for many in recent years, but not every segment of the market is suffering. According to the Salt Lake Board of Realtors, 91 homes valued at more than $1 million sold along the Wasatch Front last year, up 12 percent from 2009. And so far this year, 15 seven-figure homes have already sold. Deanna Dipo, president of the Salt Lake Board of Realtors, said that of the million-dollar homes sold in the past year, 38 were cash purchases. Approximately 18 percent of the upscale homes sold were short sales or bank-owned properties, meaning that despite the seven-figure price tag, they were still priced much lower than originally listed, she explained.”

“Sandy resident Jesse Riddle. He and his wife Lisa have put their 11,600-square-foot Pepperwood home on the market for $2 million. The house sits on nearly two acres and includes a swimming pool, sport court, trampoline and a lighted mini-football field in the backyard. ‘We built this home about 14 years ago as our dream home,’ he said. But his four children are grown now, and the Riddles are ready to downsize.”

“Shelly Tripp, a Realtor with Coldwell Banker Residential Brokerage, said prices have dropped 30-50 percent from just a few years ago at the height of the housing boom, making high-priced, custom homes a bargain even at the million dollar mark. ‘You get a lot for your money,’ Tripp said.”

“Architect Jory Walker recently put his nearly 9,000-square-foot Draper home on the market for $1.3 million. When his family initially purchased it 15 years ago, they had four young children. Now with only one son left in high school, he and his wife feel like they will be left with ‘too much house.’ ‘The thought was to scale down and get a smaller house,’ he said. ‘We want something that is a little less square footage for the two of us.’”

“He said he hopes to break even on the sale of the current property, and can afford to be patient since the sale is not a necessity. ‘Luckily, we’re in a place where we don’t have to sell,’ Walker explained. ‘If we don’t get the price we’re asking for, then we’re not going to sell because we don’t have to.’”

From Vegas Inc. in Nevada. “The Las Vegas new-home market remains weak and could hit its low during the downturn with fewer than 5,000 homes built. But with homebuilders controlling 83 percent of the 19,250 finished lots and 10,528 partially finished lots in the valley, some wonder how long it will be before builders go after raw land.”

“The problem is that land owners right now aren’t willing to come down on their price and make it work for builders, said Dennis Smith, president of Home Builders Research. Many of the finished lots and partially finished lots builders obtained from banks and other builders allowed them to construct homes at reduced prices to be more competitive with existing homes, Smith said.”

“Anything priced at $200,000 an acre is too high, Smith said. The price of finished lots continues to rise because builders have sought them out, he said. Two years ago, it was $30,000 a lot on the low end and $50,000 a lot but that has increased to as much as $75,000 a lot in many places, he said. ‘Builders are running out of land to build homes at today’s prices,’ Smith said. ‘If they can’t build a house for $150,000, they aren’t going to buy the land. That’s why the idea of anybody thinking we’re going to overbuild is simply ridiculous.’”

“Homebuyers don’t want to pay higher prices and even if they did, banks wouldn’t lend them money to buy them, Smith said.”

“Many had expected it to be the crowning achievement on the Vegas Strip that would reset the center of one of the most famous streets in the world. It was called a sign of what’s to come and the cherry on top of Las Vegas’ sundae in a community that thought the good times would never end. More than two years later, as spectacular as CityCenter is, it has become Las Vegas’ Tower of Babel—serving as a symbol of what could go wrong.”

“‘It still amazes me the intensity of the hubris that took hold in between 2000 and 2006 when many believed that we’d really Manhattanize Las Vegas,’ says John Restrepo, a principal at Restrepo Consulting. ‘I assume if MGM could go back in time, knowing what it knows today, it wouldn’t have made the high-rise residential component such a major part of CityCenter.’”

“With the condominium market in the tank, MGM in 2009 discounted its high-rise units by 30 percent and even then could only close on about 450 of the 2,387 it had on the market or one third of the 1,300 it had under contract. In a city with an abundance of hotel rooms, the desire for condominium living hasn’t panned out.”

“So, has Las Vegas learned anything in this recession? Is hubris still in vogue? ‘Often times it takes going through a trauma to take you to the next level,’ Restrepo says. ‘Pittsburgh went through it with the steel industry and it happened to the textile industry in the South. New York City went bankrupt in the 1970s and even Boston redid itself with high technology. It takes a crisis to rethink the future and lose some of that hubris.’”

Post off-topic ideas, links, and Craigslist finds here.