The Housing Bubble

The Chicago Tribune reports from Illinois. “At best, Chicago-area home prices are bouncing along the bottom or getting less bad as the depreciation rate slows. At worst, they continue in a free fall. ‘I’m not seeing price increases but I am seeing stability on the lower end,’ said Gary Christensen, an agent in Elk Grove Village. ‘If the home is nice, it does move if the seller isn’t greedy,’ Christensen said. ‘If we can price it based on where the market is, we’re OK. If we have to price it because we need a (certain) number, those don’t move.’”

“In Homer Glen, Steve Brown is waiting for that one special buyer to emerge from his or her bunker. Brown tried to sell his custom-built home last fall, but the only offer he was received was for $370,000, more than $70,000 less than his listing price for the well-appointed home with its own private pond. Now he’s trying again, dropping the price by $6,000, to $436,500. ‘People are starting to inquire again,’ Brown said. ‘I know I can sell it easily if I reduce the price to $400,000. My gut reaction is we’ve hit bottom, but I’m not willing to give it away.’”

The Austin Daily Herald in Minnesota. “Brian Blecker of Blecker Realty said the housing market has been stable, but sales aren’t necessarily balanced. Sales of high end homes have been slow, while homes marked at $150,000 or less have been selling more, he noted. Blecker frequently works with foreclosed homes, and he said that market has remained steady. ‘We have our fair share of the foreclosures,’ Blecker said. ‘I’m a very busy person right now,’ he added.”

“Numbers comparing 2010 and 2011 don’t show the whole picture, according to Blecker, because the home buyer credit drove sales last spring. Despite positive showings this year, it may be difficult to truly compare 2011 and 2010. Real estate agent Joe Fuhrman described last year’s numbers as ‘artificial’ because of the home buyers’ credit, even though it did encourage sales.”

The Star Tribune in Minnesota. “With plenty of developable land and easy highway access 30 miles west of the Twin Cities, Otsego became one of the metro’s fastest-growing suburbs in the housing boom. It also became a hotbed for the froth and fraud that helped fuel the greatest housing downturn since the Great Depression. Now, word that one of the biggest developers in the country has bought 72 lots in a financially troubled development is raising hopes for a rebound.”

“‘The market has been slow to realize how quickly the [housing] market is actually improving,’ said Bill Burgess, Minnesota division president for Lennar Corp.”

“Up until the early 2000s, Otsego was a sleepy rural community dominated by family farms. But the town had the advantage of a location along Interstate 94 just west of Maple Grove, where development — and home prices — were skyrocketing as supplies of developable land dwindled. As development pushed farther beyond second-ring suburbs, developers pounced on Otsego, where land prices were still cheap.”

“But not for long. As developers and speculators stocked up on huge parcels of land, including big parcels that some planned to hold in inventory for the next decade, prices started to skyrocket. Then the housing market crashed, forcing several projects into foreclosure and leaving some developments looking more like ghost towns than the bucolic neighborhoods developers had envisioned.”

“One of the casualties of the downturn was Martin Farms, where Insignia Development had already built expensive infrastructure, including quiet cul-de-sacs and a pool and gazebo. The buyers never came, and all that remained were empty houses and undeveloped lots filled with weeds and weather-worn for sale signs.”

“Richard Palmiter, a vice president with CB Richard Ellis who handled the transaction and is marketing the remaining lots, isn’t declaring an all-out victory. There’s still plenty of inventory to burn through before there will be significant upward pressure on prices, especially in projects that are inferior in quality and amenities to Martin Farms. ‘In 2005 it tended to be the place where people wanted to be, and now we’re getting the sense that it is coming back,’ he said. ‘But it’s going to be a slow comeback.’”

The Journal Sentinel in Wisconsin. “Milwaukee property values have flattened out after two years of declines, but city officials say the echoes of recession and the shadow of foreclosures continue to stymie economic growth. Yet in the wake of the recession, homeowners appear to be more cautious about putting their houses and condominiums on the market, said Chief Assessor Peter Weissenfluh. Condos led the residential decline, falling 2.3% to $1.98 billion.”

“‘They still are selling, just a lot slower than they had been,’ Weissenfluh said. Would-be condo sellers are finding they have to lower their asking prices, keep their units on the market longer or rent out their condos, he and City Assessment Commissioner Mary Reavey said.”

“Overall, the city found just 1,800 arm’s-length real estate transactions last year, or 1.3% of the market, Reavey said. That’s down from 2,216 sales in 2009 and 3,015 the year before. In a normal year, 4% to 5% of city properties change hands, she said. By law, those figures exclude foreclosures, Reavey and Weissenfluh said.”

“Because foreclosures account for most if not all of the housing transactions in the central city, assessors personally inspected thousands of central-city properties, roughly doubling the number of inspections…Reavey said.”

The Wisconsin State Journal. “Existing home sales and median price continued to sink in Wisconsin in March, even as housing industry advocates continued to blame the lack of federal incentives for the year-over-year slump. Home sales were stimulated in the first half of last year at least in part by a federal tax credit that expired for most in June. That makes comparisons with this year’s sales through June suspect, according to John Horning, chairman of the WRA’s board of directors.”

“‘We expect to return to a more reliable apples-to-apples comparison around the fourth quarter of this year,’ Horning said in a statement , noting the statewide housing market has ‘fallen sharply’ in February and March.”

The Gazette Xtra in Wisconsin. “Jerry Morse did something in February that he hadn’t done since the 1970s. Morse assisted with the sale of a Janesville house for $19,000. ‘It needed some work, but it was probably worth $50,000,’ said Morse, an owner of The Morse Co. in Janesville and the president-elect of the Rock-Green Realtors Association. ‘Five years earlier, it sold for $82,000.’”

“While Morse’s experience might be uncharacteristic, it’s indicative of the state of the local housing market. A continued rash of short sales and foreclosures pushed the average sales price for residential properties in Rock County to $95,976 for the first three months of the year, according to the South Central Wisconsin Multiple Listing Service. That’s a 12 percent drop from the first quarter of 2010. And it’s the first quarterly dip below the $100,000 mark in several years.”

“‘The problem is that our shadow inventory is too high,’ Morse said. ‘These places are being sold for very low prices.’”

“He said he’s seeing pockets in the community where inventory is needed. ‘I’ve got a buyer who wants a three-bedroom ranch on the east side of Janesville,’ Morse said. ‘There are seven available, and he looked at all of them. There’s a need for nondistressed, move-in-ready homes in the $100,000 to $150,000 range. If you’ve got that, you’ll get a reasonable price. Not what you would have got four or five years ago, but a reasonable price in this market.’”

“Morse said the bottom line is that there are opportunities for both buyers and sellers. ‘Buyers can take advantage of lower prices and low interest rates,’ he said. ‘Sellers, if they need to make a move, might not get the price they want, but if they are going to be purchasing another home can save on the price of the new home and enjoy still low interest rates. Once the shadow inventory gets sold, buyers will probably face higher prices and higher interest rates, so the next 12 to 21 months will be the time to buy.’”

The Detroit Free Press in Michigan. “John Scribner is upset about his property tax assessment — it’s gone up. He wonders how can the majority of homes in Grosse Ile where he lives be assessed lower this year with the township’s overall home value dropping 8.6%, but his went up. Scribner bought his 2,600-square-foot home on Chatham in 2001 for $380,000. In 2009, it was assessed at $173,200. Then last year, his assessment dropped to $160,200. Now this year, it went up to $164,500. Assessments are roughly half the home’s market value.”

“Scribner says he’s suspicious. ‘I want my property taxes to reflect what my property is worth,’ Scribner said. ‘We’re being taxed unfairly because what they say these places are worth, they are not worth that.’”

The Dayton Daily News in Ohio. “The majority of residential and commercial property owners in Montgomery County will see their property values fall as part of a 2011 update, including some double digit declines. ‘This is something we couldn’t have imagined 10 years ago,’ County Auditor Karl Keith said. ‘It’s eating into home equity.’”

“Keith said overall valuation loss in the county could be as much as $3 billion.”

The Canton Rep in Ohio. “In November, Brock Bennington signed a contract for Regal Construction to build a condo unit for him at Meyers Lake. He wasn’t afraid of taking a 10 percent loss on the sale of his old condo. He wasn’t afraid the value of his new home could drop. And he was willing to forego the chance to buy an existing home at a substantial discount. All were worth risking to move into his dream home and away from his upstairs neighbor’s noisy 100-pound dog.”

“‘Every day my neighbor left, the thing went berserk across the ceiling,’ said Bennington, 29, who stomped his feet to demonstrate. ‘The money means nothing if you’re not happy, and I wasn’t happy.’”

“Three years after the housing market crashed, local home builders are hoping 2011 is the year they will be seeing more buyers like Bennington. ‘It’s been devastating the last four or five years actually,’ said Regal’s president, Bob Leach.”

“Leach said that in 2005 Regal was building about 70 homes a year that sold for $150,000 to $300,000. And it was easy to find a bank willing to provide financing to build 10 homes at a time. Then the market collapsed in 2008. ‘There’s a lot of builders that didn’t make it through,’ Leach said.”

“Building Industry Association of Stark County executive director Joe Race, said one stumbling block is that prospective new home buyers have problems selling their current homes. But, he noted, ‘whatever they stand to lose on a home sale on an existing home, they can make up on building a new home right now.’”

“Bennington was willing to take that loss. After buying a 1,500-square-foot condo at the Fountains at Meyers Lake in 2008 for $142,000, Bennington sold it in November for $128,000. He then signed papers to buy a 1,700-square-foot, two-bedroom Regal condo in the same neighborhood for about $170,000. This time, the home, which is in a two-unit building, would come with soundproof walls and other amenities.”

“Bennington is not perturbed that the value of his new home could drop. ‘I don’t treat my home as an investment. It’s an investment in myself.’”

The Herald Tribune reports from Florida. “Sarasota real estate agent Gerard Pirot was not the only person who broke the county’s ordinance against short-term rentals last year, but he was the only one who got punished. In May, he was cited by the county’s code enforcement department for renting a house on Siesta Key for less than the 30-day increments allowed by law. Then, in September, he was fined $250 per day for repeating the offense, court records show.”

“John Lally, a code enforcement officer for Sarasota County, is the first to acknowledge that Pirot is just one of an increasing number of landlords who have been renting properties illegally throughout Florida since the onset of the Great Recession. ‘It’s a problem,’ Lally said. ‘People are trying to get money to pay mortgages on houses they may have bought at the height of the market in any way they can.’”

The News Press. “The ACLU’s lawsuit challenging Lee County’s ‘rocket docket’ may be about one person facing foreclosure, but it has implications for anyone who has stood before a judge and had only seconds to argue to try to keep his or her home. Whether this lawsuit succeeds, it should move courts, the state, federal government and lenders to take a bolder, more comprehensive approach toward solving the foreclosure crisis — the epicenter of which is Lee County.”

“The ‘rocket docket’ was implemented in the 20th Judicial Circuit — Lee, Collier, Charlotte, Glades and Hendry counties— specifically to handle foreclosure cases as expeditiously as possible. Hundreds of cases might be handled in a single day.”

“Eddie Felton, executive director of the Home Ownership Resource Center, who has helped borrowers resolve their issues, sees the situation getting worse. A combination of lender intransigence, poorly funded homeowner counseling programs, and soon-to-balloon variable interest rate loans will add fuel to the fire. ‘The economy hasn’t gotten any better — it’s gotten worse,’ he said. ‘If people had jobs, we would not be in the predicament we’re in.’”

The Palm Beach Post. “Nearly 9,500 homeowners applied for Florida’s Hardest Hit foreclosure prevention program during its statewide debut last week, only a quarter of the estimated 40,000 borrowers the $1 billion plan is intended to reach. With 5 percent of Florida’s 3.2 million home loans between 30 and 60 days delinquent, foreclosure defense attorney Ron Kaniuk said the initial turnout for the program was ‘pathetically low.’”

“A year-end Mortgage Bankers Association report found nearly 20 percent of the state’s home loans were in foreclosure or at least 90 days late. Kaniuk, who is based in Boca Raton, said there is a lack of awareness and understanding of the Hardest Hit plan. ‘Also, those who are hardest hit are worn out,’ he said. ‘They’ve been so jerked around by the banks with HAMP and HAFA and a dozen other acronyms that they don’t want to apply for anything else.’”

The Naples News. “Naples City Council last week said it plans to give more than $180,000 to Habitat for Humanity of Collier County. The nonprofit organization will use the money – given to the city in 1994 as part of Coastland Center mall’s development plan – to purchase and renovate foreclosed homes within city limits.”

“Marcy Krumbine, director of Collier County’s housing, human and veteran services division, said Collier County government has been administering a similar foreclosure rehabilitation program since 2009. Krumbine said the county can spend up to $150,000 to purchase a property and $50,000 for renovations. Anything over that amount needs to be approved by county commissioners.”

“‘It’s a smart move to use money this way,’ Krumbine said. ‘There’s a lot of housing out there, and a lot of it is abandoned and foreclosed.’”

The Miami News Times. “Earlier this week, Miami New Times sat down with restaurateur Jonathan Eismann to discuss the disappearance of his restaurant empire and his new pizza venture. At the helm of four successful venues last year, Eismann had seemed like Mister Miami. Then, little by little, the empire crumbled. Bills piled up, restaurants folded, and lawsuits were filed. Even Eismann’s six-bedroom house dropped in value by almost a million.”

“Eismann’s biggest problem might be his enormous waterfront home at on the Venetian Islands. In a filing dated January 22, 2011, mortgage holder BankUnited filed foreclosure proceedings against Eismann and wife to the tune of $1,384,368.89. According to Miami-Dade property records, the 4,900-square-foot residence was purchased in 1999 for $1,150,000. The house and property had a staggering market value of nearly $2.9 million in 2009. That fell to just more than $2.1 million in 2010.”

The Guardian. “The US housing market has been on the slide for five years and there is no sign of an imminent recovery. Home ownership levels are now back at levels seen in 1998. Some economists are even worried that the US’s may have fallen out of love with property ownership. It’s as if the boom years never happened.”

“Estate agent Mark Shore’s British Homes Group, based in Kissimmee, caters specifically for foreign buyers. Shore, a Briton, has been in Florida since 2003 and knows a lot of people who were burnt by the collapse, including himself: ‘A lot of people are very pissed off. A lot of people have just walked away.’ This has been the worst property crisis since the Great Depression, worse than the 1980s, he says. ‘You don’t just bounce back from that.’”

“‘You would have to go back to the Great Depression to find anything similar,’ says Paul Dales, US economist at Capital Economics. ‘It will recover at some point, but we are probably two or three years away.’”

“High unemployment, the tightening of lending criteria by the banks and the fact that so many homeowners are in negative equity have undermined the foundations of the housing market, he says. ‘The top end of the market has done OK, but the bottom end is doing badly and I wouldn’t be surprised if the top end sees a further drop off too.’”

“Perhaps there is something else at work here, a deeper shift in America’s attitude to home ownership. Dales believes there is hard evidence that Americans have fallen out of love with bricks and mortar. Historically Americans have not been as keen on home ownership as the British, he says. ‘In the boom, home ownership looked like a one-way bet – there was a greater incentive to get on the ladder. Now I think attitudes have changed.’”

“He believes the official numbers on the state of the US housing market may be 20% worse than they appear. The National Association of Realtors is currently reassessing its figures and they are not expected to be revised upwards.”

“There is a war of sorts brewing between the National Association of Realtors and housing data provider CoreLogic about the NAR’s reporting of home sales. CoreLogic contends that the NAR inflated sales figures going back to 2000 — and the NAR is not completely disputing the allegation. ‘It’s been widely reported that the National Association of Realtors existing home sales data fell only 5 percent to 4.9 million in 2010, down from 5.2 million in 2009 and flat relative to 2008,’ CoreLogic wrote in its February newsletter. ‘CoreLogic existing home sales data indicates otherwise. Existing home sales data did not experience an increase in 2009 and that sales fell again slightly in 2010.’”

“Drew Peterson, a broker who specializes in selling bank-owned foreclosures, said his guess is the truth probably lies somewhere between the two data sets. ‘I forgot who said it, but the quote, ‘There are lies, damned lies, and statistics’ probably applies here,’ he said. ‘Both NAR and CoreLogic have a heavy interest in how the market numbers appear, so both likely use the market studies and surveys that best support their position, whatever that is.’”