It Depends On A Constant Flow Of Imported Money
A report from the Spokane Review. “In 2002, there were four North Idaho homes listed for sale at more than $1 million. Just two sold. By mid-decade, there were dozens of listings, said Coldwell Banker Schneidmiller Realtor Joel Elgee. Major magazines like Outside, Sunset, Forbes and Smart Money were praising Sandpoint and Coeur d’Alene as recreational, retirement and investment meccas. Former Denver-area car dealer Marshall Chesrown returned to Coeur d’Alene and developed The Club at Black Rock, a golf enclave where lots started at $200,000. It was the first of several exclusive projects Chesrown and others undertook in the heat of the greatest real estate bubble in many decades.”
“Now, the listings are still there, but buyers are scarce. There were 199 homes listed on the Coeur d’Alene MLS last week at prices from $1 million to $17.5 million. At last year’s sales rate – 33 of the $1 million-plus listings sold – that’s a six-year supply. Jeff Bond, owner of the Sotheby’s International Realty franchises in Sandpoint and Coeur d’Alene, and his wife own a home in Hope, across Lake Pend Oreille from Sandpoint. They are selling it because they want to eliminate the long commute to Coeur d’Alene. First listed at $4.8 million, they have slashed the price four times, down to $2.9 million.”
“‘Just because I’m a Realtor doesn’t mean I’m immune,’ Bond said. ‘You sell because you want to move on with your life.’”
The Billings Gazette in Montana. “Patrick Barkey hears stories that he doesn’t want to. Construction companies taking jobs that don’t turn a profit simply in an effort to hold onto their best employees during difficult times. More and more Montana construction workers are leaving to seek jobs in the oil fields of North Dakota. ‘The construction industry is feeling a lot of pain,’ said Barkey, director of the University of Montana Bureau of Business and Economic Research.”
“Barkey said low sales, falling prices and foreclosures are both symptoms of, and cause of, poor market conditions. ‘Falling prices knock out any type of spec investment,’ he said. ‘Homebuilding won’t take off until prices stabilize.’”
Oregon Public Broadcasting. “Oregon is seeing an unprecedented jump in the number of homes in foreclosure. John Helmick of Guerilla Capital in Eugene says around the state counties are seeing a doubling or even tripling of notices. He thinks banks that pulled foreclosures because of concerns about robo-signing, are putting properties back on the market.”
“John Helmick: ‘I’m not convinced that what we’re seeing here is new foreclosures. I think what we’re seeing here are to a great extent foreclosures that were filed previously, the files were taken back, reviewed and then re-filed once the bank was confident every aspect of the file was correct.’”
The Seattle Times in Washington. “While the spring housing market in the Seattle area may be showing a little more zip than expected, it doesn’t appear to be going anywhere fast. So local homebuilders are growing more generous with incentives. This year, the market for pre-existing homes is heavily weighed down by foreclosed houses and houses selling for less than the mortgage amount, which together account for about one-third of current sales.”
“‘You really try hard not to reduce the price because [the price of] new product is always compared to last year,’ says George Rolfe, director of The Runstad Center for Real Estate Studies at the University of Washington. So if last year’s home sold for $400,000, the builder can boost the price of the new homes to more than $400,000. But if last year’s model had to be reduced to $375,000, that can drag down prices for the following year’s model.”
The Kitsap Sun in Washington. “At times, the Friday-morning foreclosure auctions outside the Kitsap County Administration Building can take your breath away. That happened to me April 15, when one of the largest foreclosures properties of the year, the aborted Blossom Hill development on Bainbridge Island, went back to the bank on a couple of mortgages totaling $27 million that went bad.”
“This past Friday, I watched a waterfront home on Bainbridge Island auctioned off to an investor for $226,000, less than half its assessed value. I spoke with Steven Hughes of Hughes Construction of Bainbridge Island. He claimed the homeowner owed him $105,000 for a renovation he did a few years back. The problem with the Crystal Springs Drive house, at least according to Hughes, is that it sits at the bottom of a steep bank. He claims the house has foundation cracks. ‘It’s a gorgeous view, but when you have a bank behind the house like that, it’s scary,’ he said.”
The Vancouver Sun in Canada. “Although home prices remain overvalued across Canada, they seem headed for a period of stagnation rather than a sell-off. March data from the Canadian Real Estate Association showed average urban prices up by a modest 4.3 per cent, if you exclude the rocket-propelled Vancouver market (it was up by a remarkable 13.4 per cent from an already very high level).”
“Vancouver is another city that’s had stronger sales and price gains than analysts would have expected, although ’strong’ doesn’t really do justice to this market’s astonishing price gains. ‘It’s a little puzzling,’ acknowledges Royal Bank economist Robert Hogue, who, like others who watch Vancouver real estate, can conclude only that a flood of wealthy Asian buyers continues to support sky-high prices.”
“In a February report on affordability across Canada, Royal Bank economists found a typical two-storey home in Vancouver cost $780,700, double the average Canadian price. By comparison, such a home would have cost $342,600 in Montreal or $570,100 in Toronto. ‘When you look at the local fundamentals, nothing can really explain that,’ says Hogue. ‘I think it does raise some red flags because it depends on a constant flow of imported money. If the flow stops, the locals just can’t pay those prices.’”
The Globe & Mail in Canada. “Vancouver and its unhappy Olympic village condo owners are digging in for a protracted battle, with city manager Penny Ballem saying that the city is prepared to fight the lawsuit they’ve launched vigorously.”
“‘The city’s been very clear that we don’t intend to settle,’ Ms. Ballem said in a statement about the group of condo owners who started a lawsuit last month against the village’s sales companies to get back what they paid for their units so they can move out. ‘This is largely about pre-sale owners trying to pressure us for discounted sales.’”
“The statement says the buyers filed a lawsuit only when other condos in the village went on sale at prices reduced by an average of 30 per cent in February, 2011, as the village’s receiver launched a new marketing campaign for the village. As well, the legal response notes that the units are now used, not new, so they could never ‘be resold for as much as if they had never been occupied.’”
“Lawyer Bryan Baynham said he’s now representing 70 buyers out of the 263 who bought before September, 2010, who claim they should be allowed out of their purchases and they also are expecting a tough fight. ‘I didn’t start this battle expecting the city would settle,’ said Mr. Baynham, who has represented groups of unhappy purchasers at other condo projects over the years.”
“Mr. Baynham produced a video to accompany the lawsuit last month that showed water coming in through ceiling lights, water pooling in parking garages, cracks in ceilings, doors that wouldn’t close properly and more. Ms. Ballem said that all the buyers got a chance to inspect their units before they moved in. As well, she said, since the village went into receivership last November, receiver Ernst & Young has been scrambling to fix deficiencies that accumulated in the previous months as Peter and Shahram Malek of Millennium Development Corp. struggled to make their first $200-million mortgage payment.”
“Mr. Baynham said in an interview this week that the buyers got only an hour to look at the units. Ultimately, he said, buyers are also stuck because, once all the units are sold, there will be no developer they can go to if future problems arise, the way most projects work.”
